Exit guarantee for shareholders via put option, buyback of own shares or withdrawal?
Many shareholder agreements contain provisions setting out exit mechanisms allowing shareholders to exit the shareholding in the future, for instance when a shareholder is no longer operationally involved (hereinafter the “departing shareholder”), e.g. a put option (“verkoopoptie”), a withdrawal right (“uittredingsrecht”) or a mechanism of buyback of own shares by the company (“inkoop van eigen aandelen”). In case of a put option, the departing shareholder can oblige the other shareholders to purchase his shares and pay the purchase price. In the event of a withdrawal or buyback of own shares, the buyout will be funded by the company itself. Whether the funds for the buyout are provided by the co-shareholders (put option) or the company (buyback of own shares/withdrawal) will make little difference to the departing shareholder. However, the exit technique used may give rise to different tax consequences for the departing shareholder. In terms of taxation, the capital gain received by the transferring shareholder following the exercise of a
Do good agreements make good friends? About the validity of price determination clauses and good/bad leaver clauses, in particular in the context of the dispute settlement procedure
1. Many shareholders’ agreements (and some articles of association) include exit mechanisms in the form of call and put options. In the case of unlisted companies, these agreements are conceived as a regulation of corporate relationships, and mainly focused on terminating the shareholdership without requiring the intervention of the court or a third party-transferee. Financial investors, for instance, often negotiate for themselves a put option so that they will be able after a given period of time to valorize their investment, potentially at a guaranteed minimum price. Agreements between or with operationally active shareholders also often include options which, according to the agreements made, can be exercised on discretionary basis (i.e., without reason) or, most frequently, in given situations only, for instance in the event of serious shortcomings, a deadlock or the fact that a shareholder is no longer operationally active. In many cases, the option’s exercise price is made subject to the concrete circumstances giving rise to exercising the
Online incorporation of companies and other legal entities & statutory mandate database
Online and remote incorporation of companies and other legal entities On 15 July 2021, the Company Law Digitalisation Act[1] was published in the Belgian Official Gazette. This new act transposes the Directive (EU) 2019/1151 of 20 June 2019[2], which is part of the wider digitalisation process promoted by the European Union. This act is a new step towards the digitalisation and modernisation of company law. After the introduction of the digital mandate allowing to remotely sign and execute authentic deeds such as deeds of amendment to the articles of association, and following the implementation of the articles of association database enabling the online consultation of all the articles of association and amendments that are executed by notary deed since 1 May 2019 (https://statuten.notaris.be), this new act allows since 1 August 2021 to digitally sign the authentic deed of incorporation of a company or other legal entity (such as an international non-profit organisation). The novelty consists in the fact that, from
Pledge on shares – what to check in case of due diligence: the pledge registry or the share register of the company?
After some delay, the new Pledge Act finally came into force on 1 January 2018[1]. This new legal framework introduced the ‘registered pledge’. This kind of pledge becomes valid and opposable without requiring a dispossession. This implies that the pledgor can remain in possession of the pledged goods. To make this pledge opposable to third parties, it needs to be registered in the ‘national pledge registry’ that has been set up for that purpose (https://pangafin.belgium.be/#?lang=NL). The pledge registry is publicly accessible: any person who holds a Belgian electronic identity card is able to conduct searches in the pledge registry. Every consultation requires the payment of a search fee per result, that will be charged before making the possible results available, even if the outcome is negative. In addition, the system will keep track of the identity of the person who performed the searches for a period of 6 months. This enables the pledgors to check who accessed their data. Before
How far does loyalty go? Can a director compete with the company, during his mandate or after the termination thereof?
A director is expected to be “loyal” to the company in which he exercises his mandate. The duty of loyalty of directors[1] emanates from the general ‘good faith’ principle in contract law, which states that agreements must be executed in good faith. It is accepted that this loyalty implies a non-competition obligation, which means that the director is not allowed to exercise activities during the term of his mandate that compete with the company’s (actual) business activities. He may not, for instance, set up a competing company, exercise a mandate or hold an operational position in a competing company, … This non-competition obligation applies even without an express agreement. However, it is possible to derogate from this non-competition principle by mutual agreement. In line with the above, most of the legal doctrine and jurisprudence accept that this non-competition obligation ceases to exist with the termination of the mandate (whatever the reason or the time of this termination may be), unless
Out of sight, but not out of mind: alternatives to physical attendance at general meetings
The need for legal alternatives to physical attendance at general meetings of companies or (international) non-profit organizations (“(I)VZW”), became more relevant than ever the past year. The Company’s Code, respectively the CCA, already included an array of options to address this problem even before it became an issue within the context of the Covid-19 crisis, some of these options only applicable to companies. The Law of 20 December 2020 (Belgian Official Gazette of 24 December 2020) on various temporary and structural provisions on justice in the context of the fight against the spread of the coronavirus COVID-19, introduces a certain number of both temporary and permanent flexibility-enhancing measures, including additional options for (international) non-profit organizations (“(I)VZW”). Below, we list the different options that are currently existing under company and association law, which can be used as an alternative to the traditional default decision-making procedure of a physically held general meeting: The general meeting in writing (“éénparige schriftelijke besluitvorming”) The CCA