The EU Directive 2006/68/EC of the European Parliament and of the Council of 6 September 2006 amending the famous second company law Council Directive 77/91/EEC regarding the formation of public limited liability companies and the maintenance and alteration of their share capital, has been implemented in Belgian law by the Royal Decree of 8 October 2008 (published in the Belgian State Gazette of 30 October 2008 p. 57491 – p. 57503).
For what concerns financial assistance, this Royal Decree tends to meet the requirements of economic operators as it organizes and regulates the granting of financial assistance by public limited liability companies with a view to the acquisition of their shares by a third party.
Thus, this Royal Decree allows private companies with limited liability (BVBA – SPRL new article 329 of the Companies Code), cooperative companies with limited liability (CVBA – SCRL new article 430 of the Companies Code) and public limited liability companies (NV – SA new article 629 of the Companies Code) to either directly or indirectly advance funds or make loans or provide security with a view to the acquisition of its shares by a third party, provided the following conditions are met:
- The transaction takes place under the responsibility/liability of the Board of Directors at fair market conditions, notably in respect of interest rates and securities received for the loan, it being understood that the financial situation (“credit standing“) of the parties involved in the transaction must be investigated.
- The Board of Directors must gather the prior approval from the General Meeting deciding with a majority of 75% of the votes, provided that at least 50% of the share capital is represented.
- The Board of Directors must justify the transaction in a special written report indicating the reasons for the transaction, its interest for the company, the contractual conditions of the transaction, the risks involved for the liquidity and solvency of the company and the price at which the third party will acquire the shares. Such report must be filed for publication. In addition, in case members of the Board of Directors of the company or of its parent company are beneficiaries of the transaction, the special written report will include a specific justification as to the reasons of the transaction taking into account the quality of the beneficiary and the financial consequences for the company.
- The total allocated amount for the transaction may not result in reducing the net assets below the total of the paid-up share capital and the non-distributable reserves. In addition, a special reserve, unavailable for distribution, amounting to the total financial assistance, must be created.
- If a third party benefiting from financial assistance from a company acquires shares of that company itself or subscribes for shares pursuant to an increase of the share capital, the acquisition or subscription must be made at a fair price.
The provisions of this Royal Decree will come into force as of 1 January 2009 and should simplify transactions and avoid these often encountered sophisticated structures with subsidiaries, mergers, transfers, etc., the only purpose of which was to circumvent the prohibition of financial assistance.