Mandatory transparency about the ultimate beneficial owner(s) of the enterprise
The new legally required transparency as to the ultimate beneficial owners of an enterprise is an important additional action point in the M&A practice after completion of an acquisition (“post-closing action”). What? Belgian Companies, (international) non-profit organisations, foundations, trusts and legal entities that are comparable to trusts, have the following new obligations under the Belgian “Law of 18 September 2017 on the prevention of money laundering and terrorism financing and on the restriction of the use of cash”: The Law adds to the Belgian Companies Code (Articles 14/1 and 14/2) and to the Belgian NPO and Foundations Law[1] (Articles 58/11 and 58/12) the obligation to obtain and hold adequate, accurate and current information about the so-called “ultimate beneficial owners” of the enterprise. The Law also provides for the creation of a central register of ultimate beneficial owners (UBO register). The aforementioned enterprises must record in this UBO register information about their ultimate beneficial owners, and inform the ultimate beneficial owners
The new Belgian CAC also introduces a new governance model for public limited companies (‘NV’)
The draft of the new Companies and Associations Code (CAC) includes a new governance model for public limited companies (‘naamloze vennootschappen’, abbreviated into ‘NVs’). Henceforth, companies will have the choice between three governance models: the already existing monistic model; the sole director model; and the dualistic model consisting of a management board and a supervisory board. The new CAC also broadens the possibilities for appointing the managing director and defining his/her/its powers. Monistic governance model – weakening of the ad nutum withdrawal Publicly listed companies governed in accordance with the monistic model are managed by a traditional board comprising at least 3 directors (2 if the company has fewer than 3 shareholders). The rule stating that these directors may be removed ad nutum (i.e. immediately) by the shareholders’ meeting continues to apply in principle, but it will no longer be a public policy decision. According to the new CAC, the shareholders’ meeting may grant a notice period or severance pay.
My resignation as director has not been published yet in the Belgian Official Gazette: can I still be held liable?
The acquisition of a company often implies that the transferor must resign from his office as (managing) director of the company/companies he is transferring. This resignation must be published in the Annexes of the Belgian Official Gazette, but this fact is sometimes overlooked by the company (under control of the buyer), which may lead to an important time gap between the resignation and its official publication. The bill on the new Companies and Associations Code provides an answer by allowing the former directors themselves to publish their resignation in the Annexes of the Belgian Official Gazette. Even if the company (or in the future the director) would proceed immediately to the publication, it will still take a few weeks before the resignation will effectively be published. So, transferors wish to know whether they can still be held liable as director in the meantime. In fact, the resignation becomes enforceable against third parties by being published. It is for this very
Surety in a takeover contract – do the evidence regulations of article 1326 of the Civil Code have to be applied?
A takeover contract often goes hand-in-hand with surety from a third party to guarantee a specific commitment by the vendor or buyer (e.g. deferred payment of the price by the buyer, indemnification obligations of vendor, etc.). Because the commitment is created in relation to the guarantor and not in relation to the creditor, the surety guarantee is a unilateral contract. Precisely because of its unilateral nature, this surety is subject to the evidence regulations of article 1326 of the Civil Code (unless the surety relates to traders, artisans or farmers). The surety instrument must be written by the guarantor himself or must contain the statement ‘good for’ and the amount of the debt, in full, in letters, followed by his signature. This legal requirement applies in order to avoid, within the unilateral contract, the creditor, who shall have the only copy of the instrument, abusing a blank document signed by the debtor or modifying the figures fraudulently. Non-compliance with article
What happens with contract clauses for the price-setting of shares in the context of forced sale proceedings?
The “geschillenregeling” (forced sale proceeding) is a special procedure in corporate law in which a shareholder can oblige another shareholder to sell shares (i.e. a put obligation) or purchase shares (i.e. a call obligation) if there are ‘justified reasons’. Although in practice this procedure is often used when a (serious) conflict between shareholders has arisen, there are some flaws in its practical application. Perhaps one of the greatest shortcomings is the setting of the price of the shares concerned, in particular the low predictive value of the valuation exercises that are normally carried out by a court expert under supervision of the court. In fact, various experts often make (very) different valuations. The reason for this is obvious, as the result of the valuation exercise depends on the valuation method(s) used, the respective weight of the various valuation methods, the parameters used, and their concrete interpretation. In addition, there is often discussion on whether a minority discount or a control
Claim notification periods under representations and warranties: don’t just agree on them – also remember them and communicate them!
An acquisition agreement often obligates the buyer of the shares to notify the sellers of any claims against the sellers arising from an infringement of the provided representations and warranties within a certain term (e.g. 2 months) after becoming aware of the fact causing the infringement. The reason behind this is that timely notification enables the sellers to take action to restrict the damage. A second purpose of imposing a term is to establish legal certainty between parties. Terms of 30 days, 2 months, etc., which at the time of the negotiations may have seemed long enough for the buyer, in practice often prove (too) short. Very often it takes an organization more time than originally anticipated to establish a damaging fact, link it to an infringement of the representations and warranties and subsequently proceed towards notifying the sellers. In this context it is essential to inform the employees of the organization who are in charge of the daily operation