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Beyond Borders: Eversheds Sutherland's ICR insights series. EU Mobility Directive – Legal Update – Belgium

  • Belgium
  • Corporate
  • Labor law and trade union issues

24-11-2022

Country specific - Belgium

This country specific outline contains further information regarding the implementation of the provisions of the EU Mobility Directive into Belgian law and provides further local insight.

For further information and to access any of our other country-specific briefings that we have prepared, please refer to the bottom section of our general briefings page here.

Cross-border mergers, demergers and conversions

Status of implementation

The Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and demergers (the “Directive”) has not yet been implemented in Belgian law. We are currently unaware of any legislative initiatives to commence the implementation of the Directive. It is not expected that Belgium will therefore implement the Directive into its national legislation before the implementation deadline of 31 January 2023. If not implemented in good time, certain provisions of the Directive – i.e. only those that are unconditional, sufficiently clear and precise – shall have direct legal effect between the relevant individual and EU member state.

Summary of Belgian current and future legal landscape

The current Belgian Companies and Associations Code (the “BCAC”) contains procedures for cross-border mergers, demergers and conversions. This legislature was heavily impacted by the EU case law regarding freedom of establishment and movement (notably, the Luxembourg Court of Justice in Cartesio, Vale and Polbud). Depending on the way in which the future implementation of the Directive will take place, it is possible that two different legal regimes will be applicable: one based on the BCAC, which has in principle a broader scope than the Directive, and one based on the Directive which will be purely applicable in a European context.

Considering the implementation of the Directive, the Belgian legislator will also have to review the current articles in the BCAC regarding cross-border transactions to make them fully compliant with the Directive. For example, the Belgian legislator will have to provide an exit right for the shareholders in case of a cross-border conversion where shareholders voted against the conversion decision. Furthermore, the Belgian legislator will also have to implement a mechanism to block cross-border conversions if a notary public suspects that it is, or could be, motivated by unlawful, fraudulent or criminal purposes.

Some relevant differences between the BCAC and the Directive are further explained below.

Permitted companies and geographic scope

Procedures for cross-border (de)mergers are included in the BCAC and are applicable to all companies having legal personality. It is however required that in these cases foreign law allows for the cross-border merger or demerger with a company governed by Belgian law and that every company needs to comply with any local provisions and formalities of its national legislation applicable to it and its security holders, management and supervisory bodies, employees and creditors.

The legal framework in the BCAC for cross-border conversions is applicable to all companies with legal personality, associations and foundations. Even companies that are involved in an insolvency procedure can make use of these regulations. The BCAC sets out different procedures for the outbound and inbound conversion.

The Directive has a different scope since (i) these cross-border transactions are limited to the traditional limited liability companies (i.e. the “Besloten Vennootschap” (BV) /  “Société à Responsabilité Limitée” (SRL) and the “Naamloze Vennootschap” (NV) / “Société Anonyme” (SA)), and (ii) the geographical scope is limited to companies from EU/EEA Member States. However, the BCAC has a broad geographic scope and is in principle applicable for cross-border mergers, demergers and conversions relating to any third countries regardless of EU/EEA membership.

Timing

Straightforward (de)mergers procedures according to the current legislation in the BCAC typically take around approximately 3 months in practice. However, in a cross-border context, this heavily depends on the applicable foreign laws of the foreign entities involved. From a Belgian law perspective, the above mentioned timing includes a mandatory waiting period of at least 6 weeks between the filing of a mandatory proposal for the cross-border transaction and executing the notary deed after which such transaction has legal effect.

Inbound cross-border conversions in principle take place when the statutory seat of the company is being relocated to Belgium. In this scenario, a conversion to one of the Belgian legal forms is mandatory. The entity will, however maintain legal continuity and will therefore not have to go through a liquidation process with a subsequent Belgian incorporation. Considering the relative clarity of these proceedings, it can be attractive for companies from non-EU/EEA countries to relocate to Belgium through a cross-border conversion if they want to become active in the European Union. As a consequence of the cross-border conversion, these companies will be able to rely on the European freedoms and the benefits of the European common market, allowing them to relocate subsequently to other EU/EEA countries more easily.

The Directive provides for an extensive legal framework and (largely) harmonised legal process for these cross-border transactions and introduces specific safeguards for creditors, employees and (minority) shareholders. For any further guidance and advice on these matters, please do reach out to your local Eversheds Sutherland contact.

Competent authority, pre-transaction certificate and anti-abuse check

As for any domestic conversion, merger or demerger, in Belgium the notary public is the designated competent authority that supervises and executes the Belgian realisation of the cross-border transaction in a notary deed. In that capacity, the notary public must attest, by means of the issuance of a so-called pre-transaction certificate, that all the Belgian requirements for the cross-border transaction have been complied with and that the cross-border transaction has successfully been executed so far.

In case of an outbound cross-border transaction, meaning a transaction whereby a Belgian company converts to or transfers (assets) (in)to a company based in another EU/EEA Member State, the cross-border transaction shall subsequently be finalised in the other Member State involved. Based on the pre-transaction certificates issued by the Belgian notary public, the designated competent authority of the other Member State is able to proceed and legally complete and effect the procedure locally.

In case of an inbound cross-border transaction, meaning a transaction whereby a company (or companies) based in another EU/EEA Member State transfers (assets) (in)to or is converted into a Belgian company, the cross-border transaction shall subsequently be finalised in Belgium. To be able to complete the procedure in Belgium, the Belgian notary public will require a pre-transaction certificate from the designated competent authority of the other Member State(s) involved.

The Belgian notary plays a central role in any Belgian cross-border transaction. Not only do notaries execute the requisite notarial deeds, but they also render advice on all related legal aspects and prepare all relevant/ancillary documents. Our Eversheds Sutherland team in Belgium coordinates with Belgian notaries regularly and reviews all documentation in order to guarantee a smooth completion of your project.

Effective date, method and manner of inbound cross-border transactions

Inbound cross-border transactions (i.e. inbound conversions, mergers and demergers) become effective in the form, manner and on the date as prescribed by Belgian law. Inbound cross-border transactions must be executed in the form of a notarial deed before a Belgian notary public. Upon execution of the notarial deed by operation of Belgian law, the conversion, merger or demerger will become legally effective on the signing date of the notarial deed, unless another specific date is specified in the notary deed. The decisions in the notary deed become opposable towards third parties when an extract of the notary deed is published in the annexes to the Belgian State Gazette. Following completion and publication of the cross-border transaction, the Belgian company register (Crossroads Bank of Enterprises) will update its records accordingly.

Key local contacts

Should you have any questions or in case you require any assistance in this regard, please do not hesitate to contact us.

Other country specific

For reference, please find other country-specific information we prepared as part of this Insight Series here.