The cross-border restructuring law (mobility directive)
The cross-border restructuring law (mobility directive)
The Act of 25 May 2023 transposes the European Mobility Directive (Directive (EU) 2019/2121 on cross-border conversions, mergers and divisions. This law brings Belgian company law in line with the European Mobility Directive.
Sister merger via silent procedure. It is now possible to carry out a merger between sister companies via the silent merger procedure, implying that no new shares are issued and no reporting is required. Whereas previously the silent merger was only possible if the acquiring company held 100% of the shares of the subsidiary, the silent merger procedure is now also open if the shares of the merging companies are held directly or indirectly by one person or are held in the same proportion by the same persons.
Disproportionate partial demerger. From now on, there is also the possibility of a disproportionate partial demerger. This means that in a partial demerger, shares in the demerged company can also be issued to the shareholders of the demerged company. A partial demerger may thus opt to issue to the shareholders of the demerged company shares in (i) the acquiring company(ies) (ii) the demerged company or (iii) both the acquiring company(ies) and the demerged company.
Cross-border demerger by separation. Finally, the law provides for a new form of restructuring, the cross-border demerger by separation. Unlike the 2 previous restructuring options, it only applies to the cross-border context. Under this form of restructuring, part of the assets of a company are transferred without being dissolved to one or more acquiring or newly incorporated companies in return for issuing to the demerged company shares in the acquiring or newly incorporated companies. The new shares to be issued in connection with the aforementioned transaction will therefore belong to the demerged company itself (and not to its shareholders, as is the case with a partial demerger).
In this context, the definitions of restructuring operations for tax purposes will also be adjusted in the near future. The tax definitions of restructuring operations have an autonomous character. To avoid any dispute regarding the tax neutrality of the new authorised restructuring operations, they should best be aligned with the adjusted definitions used in the Companies and Associations Code (CAC). From a prudence perspective we therefore do not recommend using the aforementioned new restructuring operations until the tax definitions are aligned with the CAC.
In each company involved in the transaction, the managing body prepares, in addition to the proposal, a detailed written report intended for shareholders and profit certificate holders and employees explaining and justifying the legal and economic aspects of the cross-border transaction. One has the option of splitting the report into 2 separate reports, one containing the information to be compulsorily communicated to the shareholders and holders of profit-sharing certificates and the other containing the information to be communicated to the employees.
To obtain a certificate, the company concerned must submit an application to the notary public, after which the notary public has a period of 2 months to carry out his investigation and deliver the attestation (if everything is correct). During this investigation, the notary public can request the necessary information from the company and any relevant government agency as well as call on an independent expert.
If one decides to exit, the shares will be destroyed and one will receive a separation fee. The size of this separation fee is already explained by the managing body in the transaction proposal. The holder of shares and profit-sharing certificates who would not be satisfied with the monetary compensation offered by the company may, within one month from the date of the general meeting deciding on the cross-border merger/division/conversion, contest it and submit it to the president of the corporate court.
Current Belgian legislation already includes procedures of information and consultation of employee representatives, applicable in the event of restructuring. As its scope is sufficiently broad, it can be relied upon to fulfil the obligations of information and consultation. Therefore, the Act of 25 May 2023 merely inserts some concrete modalities of information and consultation of employee representatives in case of such cross-border structural changes. For example, in relation to the cross-border operation, the proposal must indicate the likely effects on employment and contain information on the procedures for involving employees in the definition of their co-determination rights in the company resulting from the operation.
New forms of restructuring:
The legislature has introduced 3 new forms of restructuring:Sister merger via silent procedure. It is now possible to carry out a merger between sister companies via the silent merger procedure, implying that no new shares are issued and no reporting is required. Whereas previously the silent merger was only possible if the acquiring company held 100% of the shares of the subsidiary, the silent merger procedure is now also open if the shares of the merging companies are held directly or indirectly by one person or are held in the same proportion by the same persons.
Disproportionate partial demerger. From now on, there is also the possibility of a disproportionate partial demerger. This means that in a partial demerger, shares in the demerged company can also be issued to the shareholders of the demerged company. A partial demerger may thus opt to issue to the shareholders of the demerged company shares in (i) the acquiring company(ies) (ii) the demerged company or (iii) both the acquiring company(ies) and the demerged company.
Cross-border demerger by separation. Finally, the law provides for a new form of restructuring, the cross-border demerger by separation. Unlike the 2 previous restructuring options, it only applies to the cross-border context. Under this form of restructuring, part of the assets of a company are transferred without being dissolved to one or more acquiring or newly incorporated companies in return for issuing to the demerged company shares in the acquiring or newly incorporated companies. The new shares to be issued in connection with the aforementioned transaction will therefore belong to the demerged company itself (and not to its shareholders, as is the case with a partial demerger).
In this context, the definitions of restructuring operations for tax purposes will also be adjusted in the near future. The tax definitions of restructuring operations have an autonomous character. To avoid any dispute regarding the tax neutrality of the new authorised restructuring operations, they should best be aligned with the adjusted definitions used in the Companies and Associations Code (CAC). From a prudence perspective we therefore do not recommend using the aforementioned new restructuring operations until the tax definitions are aligned with the CAC.
Other changes on domestic level
Companies wishing to merge or demerge can now opt to publish the proposal to this effect on their website instead of depositing the proposal with the corporate court. In that case, only the following information needs to be published via the Belgian Official Gazette:- for each of the companies to be merged or divided, the legal form, company number, name, object, registered office and the court of the registered office of the company;
- a hyperlink to the company website where the proposal for the merger/division is available online and free of charge.
Cross-border restructuring
The Act of 25 May 2023 has foremost an impact on restructurings in a cross-border context. As a result of the transposition of the Mobility Directive, there is now a European harmonised framework and Belgian procedures for cross-border restructuring are aligned with the provisions of the Mobility Directive. The minimum period between the submission of the proposal and the decision on cross-border mergers, demergers or conversions was therefore increased to 3 months, where previously it was 6 weeks for cross-border mergers and demergers and 2 months for cross-border conversions. The procedures for cross-border restructuring include safeguards for shareholders, employees and creditors alike. In addition, the role of the notary public is strengthened.Informing stakeholders
A cross-border transaction always requires a prior proposal prepared by the management bodies of the companies concerned. In the event of a planned cross-border merger, demerger or conversion, the shareholders, creditors and employees of the company must be informed by means of a proposal. This proposal must be published (via the Belgian Official Gazette or the company website) together with a notice to shareholders, holders of profit-sharing certificates, employee representatives (or, in absence thereof, the employees themselves) and creditors that they may submit comments on the proposal at least five working days before the general meeting which decides on the cross-border transaction.In each company involved in the transaction, the managing body prepares, in addition to the proposal, a detailed written report intended for shareholders and profit certificate holders and employees explaining and justifying the legal and economic aspects of the cross-border transaction. One has the option of splitting the report into 2 separate reports, one containing the information to be compulsorily communicated to the shareholders and holders of profit-sharing certificates and the other containing the information to be communicated to the employees.
Notary public role reinforced
A notable change compared to the current regime, is the enhanced role of the notary public who has to perform a preventive check on the internal and external legality of the preparatory legal acts and formalities prior to any cross-border restructuring. In this context, the notary public is required to issue a certificate prior to the cross-border operation attesting to the correct completion of the preliminary acts and formalities.To obtain a certificate, the company concerned must submit an application to the notary public, after which the notary public has a period of 2 months to carry out his investigation and deliver the attestation (if everything is correct). During this investigation, the notary public can request the necessary information from the company and any relevant government agency as well as call on an independent expert.
Exit option for shareholders and profit certificate holders
Shareholders and holders of profit-sharing certificates who, pursuant to the cross-border transaction, acquire shares in a foreign company enjoy an exit right. The exit right is reserved for holders of shares and profit-sharing certificates. Other security holders will not be entitled to redemption of their securities. If necessary, however, they will be able to invoke their right as creditors.If one decides to exit, the shares will be destroyed and one will receive a separation fee. The size of this separation fee is already explained by the managing body in the transaction proposal. The holder of shares and profit-sharing certificates who would not be satisfied with the monetary compensation offered by the company may, within one month from the date of the general meeting deciding on the cross-border merger/division/conversion, contest it and submit it to the president of the corporate court.
Creditor protection
To protect creditors, the cross-border transaction proposal must state the safeguards offered to creditors. This concerns creditors whose claims are certain but not yet due at the time of the publication of the proposal as well as claims in respect of which an action has been brought against the company in court or in arbitration. During the 3-month waiting period, which starts at the time of publication of the transaction proposal, creditors who are not satisfied with the guarantees offered in the proposal may also make a written request to the company to provide an additional guarantee. It is then the company's responsibility to give the appropriate follow-up. If the creditor and the company do not reach an agreement, the dispute may be referred to the president of the corporate court.Protection of employees
In the context of employee protection modalities, the law provides for only a partial transposition of the Mobility Directive, as the points on worker information and consultation during and after the cross-border operation and employee co-determination were already partly captured through other regulations.Current Belgian legislation already includes procedures of information and consultation of employee representatives, applicable in the event of restructuring. As its scope is sufficiently broad, it can be relied upon to fulfil the obligations of information and consultation. Therefore, the Act of 25 May 2023 merely inserts some concrete modalities of information and consultation of employee representatives in case of such cross-border structural changes. For example, in relation to the cross-border operation, the proposal must indicate the likely effects on employment and contain information on the procedures for involving employees in the definition of their co-determination rights in the company resulting from the operation.