The merger and acquisition field has been slow for three years but did start again in the second half of 1994. A large number of companies were declared bankrupt in 1993 and 1994, which gave the remaining ones the opportunity to increase in value, and to develop their market and their products or services. The legal developments have been quite important in 1993 and 1994. The Belgian Companies Act was amended by the Law of June 19 1993. This recent modification introduced a complete new set of rules concerning the mergers and split ups of companies. Secondly, it fixed a statute of limitation of six months for the filing of any court action against a resolution of a General Meeting of Shareholders. Moreover, the law has also extended the authority of the Superior Council of auditors to include the control of chartered accountants. Articles of the Income Tax Code relating to mergers and split ups have been substantially amended. Such a transaction is not taxable and is considered 'neutral' if certain conditions are fulfilled. The absorbing company is authorised to deduct the losses of the disappearing company if certain thresholds are respected.

A new trend has developed concerning the appointment of a temporary judiciary administrator by the Commerce Courts. Such an appointment occurs most often when the company is in difficulty and when there are disputes between the shareholders and/or the directors concerning the organisation, the management or the restructuring of the company. The appointment blocks the authority of the Board of Directors and generally forces the parties to negotiate.

A very important court decision has been pronounced by the Commerce Court of Namur on September 12 1994, concerning the validity of put options and the application of the principle that a shareholder cannot be exonerated from the risk of loss in a company. Such an argument was invoked by four banks in order to avoid making a payment pursuant to a first demand bank guarantee. The court held that such put option with interest added to the price is not contrary to the principle of Belgian company law. In a very recent decision of June 17 1994, the Cour de Cassation (Supreme Court of Belgium) decided that a company in liquidation which cannot pay its exigible debts, and pay them after a short delay, is in a state of suspension of payments and must be declared bankrupt if its creditors refuse to grant delays of payment. Before that Supreme Court case there were controversial decisions by the various Courts of Appeal as to the possibility and timing to declare bankrupt a company in liquidation.

A new tax regime applies to distribution centres which can be located in Belgium by international and multinational companies. This is important for any company looking for an acquisition in the distribution business in Europe. The Distribution Centre shall be included within a group of companies for the service of such group. The special tax regime has been improved by a circular of November 30 1994, in order to be more attractive to companies. Interested companies have to file an application with the Ministry of Finance in order to benefit from this special tax regime.

Important legal modifications to the Companies Act have been adopted by the Chamber but are still under discussion in the Senate. Such modifications relate to conflict of interest of directors, first refusal rights, shareholders agreements, establishment of a branch and exclusion of shareholders in all types of companies.

The Competition Council has issued its first report concerning the application of the law of August 5 1991 on the protection of economical competition. The Competition Council has to authorise any acquisition, merger or joint venture in which one of the parties has, on a consolidated basis, a turnover of one bnBEF, and when the operation involves a market share of at least 20% of the relevant market. The council has dealt with 55 applications in the field of mergers and acquisitions. Concerning investment funds, several regulations have been passed in order to adapt the Belgian legislation on accountings and taxation concerning the investment funds with variable equity and shareholding.

The Cour de Cassation (Supreme Court of Belgium) confirmed on March 10 1994 in the Wagons-Lits case that the ACCOR Group had to pay to the shareholders an increase in price for the acquisition of the listed company.

Cedric Guyot, Partner, Hanotiau & Bruyns

For further information please contact Cedric Guyot on +322 640 3525 or enter text search "DSH Hanotiau & Bruyns".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.