Part 4. of the new Companies and Associations Code (the “CAC”) is devoted to the restructuring and conversion of companies, associations and foundations. This newsletter will focus on Book 12. Restructuring of companies.
The changes introduced by the legislator are rather limited, and are primarily aimed at adapting the procedures to the new or updated company forms, and ironing out some of the ambiguities that existed in practice. Below we will discuss the most important changes with you.
Public limited company (NV) with dual management
To start with, Article 12:1 of the CAC specifies that the competences attributed in Book 12 to the management board of a public limited company with dual management accrue to the supervisory board. It is therefore the latter (and not the board of directors) who have to draw up the merger or demerger proposal in the event of restructuring.
Maximum cash premiums at the acquiring company without capital
The rules governing cash premiums have also been changed. Previously, the maximum cash premium that could be granted to the partners of the dissolved company was limited to one tenth of the nominal value or, in the absence of a nominal value, of the accounting par value of the shares distributed. However, given the phasing-out of the concept of capital in the limited company (BV), an additional criterion had to be introduced for the calculation of the maximum amount of cash premium if the acquiring company is a company without capital.
In this case, the accounting par value, as shown in the annual accounts, of all the contributions in cash or in kind pledged by the partners or shareholders, with the exception of contributions in work, increased, where appropriate, by the reserves which, in accordance with a provision in the articles of association, can only be distributed to the partners or shareholders subject to an amendment to the articles of association, divided by the number of shares.
Clarification of the waiting period for restructurings
In addition, the former Companies Code contained a number of ambiguities and anomalies, which are ironed out in the new CAC.
For example, the former Companies Code stipulated that in the event of a restructuring, the merger or demerger proposal had to be filed at the registrar of the company court at least six weeks before the general meeting that needed to decide on the operation, and published in the Annexes to the Belgian Official Gazette. However, given the way this sentence was worded, there was a lack of clarity about the start of the waiting period of 6 weeks. Did it start when the proposal was filed or published?
The legislator wanted to clarify this and specified that only the filing needed to be done at least six weeks before the decision. The publication obligation is of course maintained, but there no longer needs to be a period of six weeks between the publication of the merger or demerger proposal in the Annexes to the Belgian Official Gazette and the general meeting.
Clarification of reporting obligation for change of purpose
Under the former Companies Code, there was also uncertainty as to whether or not it was necessary to draw up a separate report if, in the context of the restructuring, a change of purpose was also implemented.
The new CAC irons out this ambiguity and now stipulates that the reporting obligation with regard to a change of purpose does not have to be fulfilled if the change of purpose is a direct result of the restructuring.
Proposal for transfer of universality or branch of activity
Furthermore, an important discrepancy between the procedure for a transfer and contribution of a universality or branch of activity has been eliminated.
For example, Article 770 of the Companies Code previously stipulated that both the proposal for transfer and the transfer itself had to be done via an authenticated deed. For a contribution of a universality or branch of activity, this was only the case for the contribution itself, not the proposal. As a result, the procedure for a transfer was more burdensome (and more expensive) than the procedure for a contribution.
The legislator wanted to eliminate this discrepancy. Article 12.103 of the CAC now stipulates that only the deed of transfer has to be drawn up in authenticated form. The proposal to transfer a universality or a branch of activity can now also be made in a private agreement.
Possibility to approve a merger without a general meeting
Under the Companies Code, it was already possible for a public limited company to carry out a merger without the approval of the general meeting of the acquiring company if it held at least 90%, but not all, of the shares and other securities conferring the right to vote at the general meeting of shareholders in the public limited company being absorbed.
Under the new CAC, this possibility is extended to the limited company, the cooperative partnership, the European company and the European cooperative partnership.
Cross-border demerger possible
From now on, not only cross-border mergers, but also cross-border demergers are explicitly included in the new CAC. However, this procedure assumes that the law applicable to the foreign company has a similar demerger procedure.
Every company will have to comply with the specific provisions and formalities applicable to it under national law. In certain cases, however, the Belgian rules will also apply to the foreign company. For example, the creditors of a Belgian demerged company will be able to demand security from a foreign (receiving) company.
The possibility of a partial demerger of the company – which was not explicitly provided for in the former Companies Code but widely accepted in practice – is explicitly confirmed in the new CAC. From now on, partial demergers are included in the definition of a transaction treated as a demerger.
Finally, the new CAC upholds the rules on accounting retroactivity by stipulating that, from an accounting perspective, it is not possible to go back any further than the first day after the end of the financial year for which the annual accounts of the companies involved in the transaction have already been approved.
It goes without saying that the income and costs associated with the transferred assets must also be allocated to the receiving company. However, derogations are possible in this regard, but only if it is taken into account in determining the valuation and the exchange ratio.
The next contribution will examine Book 13: Restructuring of associations and foundations.