Un-informing the informed

On 8 January 2012, Parliament adopted a bill (1) designed to significantly reduce the amount of reports and formalities which usually ought to be established c.q. observed within the framework of merger and demerger procedures. It also allows companies to simplify and modernise the way in which documents are to be placed at the disposal of shareholders. By doing so along with several other amendments, the bill resorts to new possibilities offered under current European legislation to beat back the administrative burden weighing on companies going through a merger or demerger process (2) in order to, as a result, make them more competitive in the long run. The bill shall be applicable to all (de)mergers, the proposal of which is being filed with the clerk’s office after the bill has entered into force on 28 January 2012.

1. An alternative way of publishing the joint merger proposal or demerger proposal

The bill provides for an alternative way to publish the joint merger proposal or, as the case may be, the demerger proposal which must be established by the management body of the companies to be (de)merged. The bill now provides that the actual publication itself may be done either by publishing an extract of the proposal in the Annexes to the Belgian Official Journal, or by publishing a statement containing a hyperlink to the company’s own website, on which the proposal may be examined by any interested party. Before, the proposals had to be deposited at the clerk’s office of the competent Commercial Court which proceeded to the publication of a statement in the Annexes to the Belgian Official Journal mentioning that the proposal had been duly filed.

2. The possibility to waive the management body’s report

As a rule, the management body of each company to be (de)merged must draw up a written report elaborating on, amongst others, the status of assets and liabilities of the companies to be (de)merged, the desirability of the (de)merger, the conditions, method and consequences of such (de)merger, the exchange ratio as well as extensive information on the method used for determining the exchange ratio.

The proposed amendments now offer the possibility to waive the obligation for the management bodies to establish this report should this be decided upon by all shareholders and holders of securities (other than shares) to which voting rights are attached, pertaining to each company involved in the (de)merger process. With regard to the demerger process by the incorporation of new companies, the need to draw up the management body’s report is set aside if the shares of each of the newly incorporated companies are being issued to the shareholders of the demerged company in proportion to their existing rights in the share capital in the latter company.

3. Rationalising the amount of mandatory reports of statutory/external auditors

Within the framework of a (de)merger the external/statutory auditor must establish a report on the joint merger proposal or demerger proposal as prepared by the management bodies involved. The shareholders and holders of securities (other than shares) to which voting rights are attached may, however, decide to waive such report.

If, during a (de)merger procedure, the share capital is increased through a contribution in kind, the bill provides that a separate report in respect of such contribution in kind is no longer necessary if a report on the joint merger proposal or demerger proposal is already being produced. In other words, at least one report is required at all times.

4. The (non-)disclosure of significant events affecting the assets and liabilities

At present, the management bodies of the (de)merging companies ought to inform their shareholders, as well as the management bodies of the other (de)merging companies involved, of any significant changes to the assets and liabilities which occurred between the date on which the joint merger proposal/demerger proposal was established and the date of the last general meeting that will decide on the (de)merger. However, the option is now provided to waive these notifications provided that all shareholders and holders of securities (other than shares) to which voting rights are attached unanimously decide to do so.  

5. Preparation of the extraordinary shareholders’ meeting – documents to be provided to the shareholders

If a company is already required to establish a half-yearly financial report (3), the bill now provides for an exemption from the obligation to establish interim financial statements (not older than three months) in case the last annual accounts relate to a financial year that has been closed for more than six months prior to the date of the joint merger proposal/demerger proposal. Moreover, subject to the consent of all shareholders and holders of securities (other than shares) of the companies involved to which voting rights are attached, the establishment of such interim financial statements may be waived altogether (4).

Current legal provisions determine the way in which each shareholder can obtain a copy of the documents which must be made available. Whereas holders of registered shares must receive a copy of these documents at least one month prior to the extraordinary general meeting, each shareholder should be provided with a complete or partial copy thereof free of charge and upon his simple request. In this respect, the bill contains several amendments as to making such documentation available to shareholders electronically.

6. Whether or not to hold the extraordinary shareholders’ meeting

Current legal provisions stipulate that a (de)merger must be approved by the extraordinary shareholders’ meeting, taking into account certain specific requirements as to quorum and majority.

Depending on the peculiarity of the procedure concerned, the approval by the extraordinary shareholders’ meeting of the absorbing company will no longer be required when the absorbing company, being a limited liability company (‘naamloze vennootschap’ / ‘société anonyme') holds at least 90 % of the shares and other securities to which voting rights are attached in the absorbed company. Nevertheless, one or more shareholders of the absorbing company representing (at least) 5 % of the company’s share capital have the right to request an extraordinary shareholders’ meeting which shall decide on the (de)merger.

7. The squeeze-out procedure in case of a merger through absorption by a limited liability company

Finally, within the framework of a merger through absorption by a limited liability company (‘naamloze vennootschap’ / ‘société anonyme’) holding at least 90 % of the shares and other securities to which voting rights are attached in the absorbed company, the bill also offers a majority shareholder (or a group of shareholders combined) holding at least 90 % the possibility to squeeze out the minority shareholder(s).

Christoph Michiels – Advocaat-vennoot/Avocat associé, Tel.: +32 2 800 71 38, Email: cmichiels@laga.be
Robert Uzieblo – Advocaat/Avocat, Tel.: +32 2 800 70 24, Email: ruzieblo@laga.be

(1) Bill of 8 January 2012 amending the Companies Code with regards to reporting and documenting obligations in case of mergers and demergers, pursuant to Directive 2009/109/EC (“Wet van 8 januari 2012 tot wijziging van het Wetboek van vennootschappen ingevolge Richtlijn 2009/109/EG wat verslaggevings- en documentatieverplichtingen in geval van fusies en splitsingen betreft” / “Loi du 1 janvier 2012 modifiant le Code des sociétés à la suite de la Directive 2009/109/CE en ce qui concerne les obligations en matière de rapports et de documentation en cas de fusions ou de scissions”), published in the Belgian Official Journal on 18 January 2012.

(2) In particular, the reorganisation procedures affected by this bill include mergers through absorption, mergers by the incorporation of a new company, operations assimilated to a merger through absorption (or the so-called ‘simplified mergers’), demergers through absorption, demergers by the incorporation of a new company as well as cross-border mergers. The proposed amendments may depend on the nature of the procedure.

(3) Pursuant to article 13 of the Royal Decree of 14 November 2007 with regard to the obligations of financial instruments allowed to be traded on regulated markets.

(4) Such possibility has not been provided within the framework of a demerger procedure.