The new Code of Companies and Associations enters into force as from tomorrow

The new Code, which was published in the Official Journal on 4 April 2019, will gradually come into force as from tomorrow.

The date of entry into force of the new Code is 1 May 2019. As from this date, each newly incorporated entity will have to comply with all the provisions of the new Code.

For existing companies and associations, the general rule is that the new Code will come into force on 1 January 2020, with a final deadline for adapting the articles of association on 1 January 2024. However, existing entities may choose an early opt-in and thus, through an amendment to their articles of associations, render the new Code fully applicable as from 1 May 2019.

Also to note: the Royal Decree dated 29 April 2019 implementing the new Code has been published today. This Royal Decree merges into a single text the regulatory provisions of various existing Royal Decrees. It contains nine books and is available here.

For any query, do not hesitate to contact a member of our corporate team.

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A step towards a harmonised EU insolvency framework

On 19 December 2018, the Council of the EU and the Parliament reached an agreement on the proposal for a directive on “preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures”. The main objective of the directive is to enhance the rescue culture across the EU. To do so, each Member State will be required to introduce into its substantive law effective preventive restructuring frameworks in order to help debtors experiencing financial difficulties to restructure at an early stage, with the objective to avoid insolvency and to improve the return for the creditors. 

Moratorium

Debtors who negotiate a restructuring plan with their creditors will benefit from a stay of individual enforcement actions. National laws may organise a full moratorium suspending all enforcement actions against the debtors by all its creditors or a moratorium limited to one or more individual creditors, for a period of up to four months, which can be extended to up to 12 months by a judicial or administrative court’s decision provided certain conditions are met. Judicial or administrative authorities will have the right to lift the stay if it becomes apparent that the majority creditors do not support the continuation of the negotiations or at the request of the debtor or the restructuring practitioner.

During the moratorium period, the debtor’s obligation to file for insolvency will be suspended, and the creditors shall equally be prevented to file for the opening of insolvency procedures against the debtor. In addition, the creditors will be prevented to refuse to perform, terminate, accelerate or amend in any other way the contractual agreement to the detriment of the debtor.

Restructuring plans and cram-down mechanisms

A majority of creditors in all creditor classes must vote in favour of the plan in order for the plan to be adopted and to bind dissenting creditors (cram-down). Member States may determine the majority voting requirements for the adoption of a restructuring plan, which may not be higher than 75 per cent in the amount of claims or interests in each class.

If the necessary majority is not reached in all classes of creditors, the plan may still be adopted by a judicial or administrative authority if certain conditions are met. The plan must be supported by at least one affected class of creditors, and the dissenting classes must not be unfairly prejudiced under the plan (cross-class cram-down). In particular, the plan must comply with the so-called “absolute priority rule”, i.e. the requirement that a dissenting class of creditors is paid in full before a more junior class to a subordinate class receiving anything under the plan.

Workers’ rights may not be affected by the preventive restructuring procedure.

Restructuring privilege and super senior financing

The directive offers strong protection to new and interim financing. These financings may not be declared null and void in a subsequent insolvency proceeding, except in case of fraud and their grantors will be immune from any civil, administrative and criminal liability in the context of subsequent insolvency. Also, the Member States may grant a priority right of payment to the grantors of new or interim financing that will rank at least senior to ordinary unsecured claims (super senior financing).

Court order and appointment of a restructuring practitioner

It will not be necessary to have a court order to open the restructuring process which may remain informal as long as the rights of third parties are not affected. The directive tends to limit the involvement of judicial or administrative authorities where it is necessary and proportionate. Also, the appointment of a restructuring practitioner will not be mandatory in all cases, but only in limited situations determined by national law such as situations where the debtor benefits from a general stay of individual enforcement actions and where the restructuring plan needs to be confirmed by a judicial or administrative authority by means of a cross-class cram down (see below).

As long as no restructuring practitioner is appointed, the debtor will remain in control of its assets, at least partially, and of the day-to-day operation of the business.

Duties of companies’ directors

Member States will be required to implement rules on duties of directors in insolvency proceedings that will be taken into account to assess their potential liability. It concerns the requirement to take immediate steps to minimise the loss for creditors, workers, shareholders and other stakeholders, to have due regards to the interests of creditors and stakeholders, to take reasonable steps to avoid insolvency and to avoid deliberate or grossly negligent conduct that threatens the viability of the business.

Second chance

The directive contains measures that promote a second chance for entrepreneurs acting in good faith, including the right to be fully discharged of their debts. In the Member States where full discharge is conditional upon a partial repayment of debt, such repayment obligation will need to be based on the individual situation of the entrepreneur and proportionate to his or her disposable income over the discharge period which shall not be longer than three years.

Entry into force and impact on current Belgian insolvency law

The directive will be formally adopted after the pending linguistic review and published in the Official Journal. It will enter into force on the 20th day following its publication on the Official Journal. The Member States will have two years to implement the directive from the date of its entry into force.

The directive will be of minimum harmonisation. The Member States will have extensive flexibility to adapt the new framework to their domestic insolvency regulation which may go further than the new EU rules.

It is interesting to note that in the draft bill of 20 July 2017 (which became the law of 11 August 2017 which added a new book XX in the Belgian Economic Code), the Belgian legislator had intended to implement a “pre-pack bankruptcy”, which was supposed to give the debtor the opportunity to “prepare” its bankruptcy out of court, with discretion and no publicity. The objective was to allow him to find better alternatives to the bankruptcy (notably via the transfer of his activities with the assistance of a “pre-trustee”). However, this part of the reform has eventually been abandoned.

One can notice that Belgian insolvency procedures are currently characterised by a high level of intervention of the courts, which usually appoint judicial representatives to assist the debtor in the different stages of the procedure. Yet, one of the objectives of the directive is precisely to promote out of court solutions and to limit the involvement of judicial and administrative authorities.

Therefore, and even if the directive gives the Member States large flexibility for its implementation, the Belgian legislator will likely need to noticeably amend not only its insolvency regulation but also its general philosophy. One can thus expect another significant reform of the subject matter in the next two years. We will, of course, monitor this closely.

Finally, the directive will let an important part of substantive law untouched, including the ranking of claims. It is, therefore, only a first step towards a harmonised EU insolvency framework.


*     *     *

Vanessa Marquette and Fanny Laune

For any question, please contact the authors:
vanessa.marquette@simontbraun.eu – +32 2 533 17 41
fanny.laune@simontbraun.eu – +32 2 533 17 62

New rules on public offerings and takeover bids – The law of 11 July 2018 and the Royal Decree of 23 September 2018

Introduction

The public offer of investment instruments and their admission to trading on a regulated market used to be governed by the law of 16 June 2006 implementing the Directive 2003/71/EC of 4 November 2003 (the “Law of 2006”).

While mandatory disclosure of information is vital to protect investors and constitutes a necessary step towards completion of the so-called ‘EU Capital Markets Union’[1], the rules laid down in the Directive 2003/17/EC led to divergent approaches across Europe and resulted in significant impediments to cross-border offers of securities, multiple listings on regulated markets and to EU consumer protection rules.

Therefore, the EU legislator repealed the Directive 2003/71/EC and adopted the Regulation 2017/1129 of the European Parliament and of the Council dated 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (the “Prospectus Regulation”). The Prospectus Regulation imposes obligations having a direct effect on persons involved in the offering or listing of securities.

As a result, only a few provisions contained in the Prospectus Regulation required implementation in the Member States’ legal system. The questions relating to the prospectus exemption, the approval process and the international cooperation are, for instance, addressed directly in the Prospectus Regulation.

That being said, the New Prospectus Law[2] modifies certain key elements relating to the public offerings of investment securities (such as the thresholds imposing the issue of a prospectus) while keeping unchanged certain aspects which were covered by the Law of 2006, falling out of the Prospectus Regulation’s scope (Section 2).

The New Prospectus Law also introduces certain amendments to the Belgian law relating to takeover bids (Section 3).

Finally, the New Prospectus Law implements the Regulation (EU) 2017/1131 of the European Parliament and of the Council of 14 June 2017 on money market funds and makes various amendments to the Belgian financial legislation. These amendments are not commented in this news.

The New Prospectus Law contained a large delegation to the King, notably to specify the MTF which would benefit from a specific regime in case of public offerings.

This has been done by the Royal Decree of 23 September 2018 on the publication of a prospectus in case of a public offer or admission to trading on an MTF and containing various financial provisions[3] (the “Royal Decree”) which specifies that the concerned MTF are (i) Alternext (Euronext Growth) and (ii) Marché Libre (Euronext Access).

Implementation of the Prospectus Regulation with respect to public offerings

a. Scope of the regime

In line with the Directive 2003/71/EC, the Prospectus Regulation only applies to public offers and admission to trading on regulated markets of moveable securities.

The Law of 2006 had, however, a broader scope. Indeed, it did not refer to the concept of “security” but of “investment instrument”, which is much broader. This approach is maintained in the New Prospectus Law which makes no changes to the definition of “investment instrument”.

Therefore, the New Prospectus Law shall also apply to public offers and admission to trading of investment instruments other than moveable securities. Public offers of new instruments such as cryptocurrency will thus notably be subject to the New Prospectus Law.

b. Thresholds for the application of the prospectus requirement

As allowed by the Prospectus Regulation[4], the New Prospectus Law implements three separate regimes for the application of the prospectus requirement, depending on whether or not the investment instruments are admitted (or will be admitted) on a regulated market or on the abovementioned MTF.

The obligation to issue a prospectus applies to:

1) public offerings of investment instruments that are not admitted to trading on the two MTF designated by the Royal Decree, the aggregate amount of which exceeds EUR 5 million calculated over a period of 12 months;

2) for public offerings of investment instruments admitted or to be admitted to trading on the two MTF designated by the Royal Decree the aggregate amount of which exceeds EUR 8 million[5] calculated over a period of 12 months.

3) admission to trading on a regulated market, regardless of the amount relating thereto.

As in the previous regime, the admission on an MTF without a public offer of investment instruments does not give rise to the application of the prospectus requirement.

c. Regime for offers below the thresholds

1) Principles

The New Prospectus Law requires the preparation of an information document which is not a prospectus:

– for public offers for an amount of less than or equal to EUR 5 million over a twelve-month period; and

– for public offers for an amount of less than or equal to EUR 8 million over a twelve-month period provided that the investment instruments are admitted or to be admitted to trading on the two MTF designated by the Royal Decree.

This information document regime also applies – subject to certain exceptions –  for the admission of investment instruments on such MTF.

2) Exceptions

The New Prospectus Law provides for a ‘de minimis’ regime for public offers the amount of which is less than or equal to EUR 500,000 calculated over a period of 12 months and specifies that the maximum consideration per investor is capped at EUR 5,000[6]. These public offers do not require the publication of a specific document (i.e. prospectus or information document) nor a notification to the FSMA.

The obligation to draw up an information document for public offers for an amount of less than or equal to respectively EUR 5 million or EUR 8 million does not apply either:

  • to public offers for investment instruments, other than moveable securities, which qualify as forward agreements and do not require any investment at the time of their conclusion;
  • if the issuer or the offeror is already required to provide investors with a key information document under the PRIIPs Regulation (« Packaged Retail and Insurance-based Investment Products ») or another information document considered equivalent by royal decree;
  • when the issuer or the offeror voluntarily draws up a prospectus;
  • to public offers for which the Prospectus Regulation provides for prospectus exemption, i.e. for example, an offer to less than 150 persons other than qualified investors or an offer of securities addressed solely to qualified investors[7].

The exemptions provided for by the Law of 2006 for (i) offers of shares in cooperative companies, (ii) offers of securities to employees under incentive plans and (iii) crowdfunding offers have been repealed in the New Prospectus Law. As a result, these offers will now give rise to the obligation to draw up an information document, unless they fall within the scope of the ‘de minimis’ rule.

3) Content of the information document

The information document, which only contains significant information for the investor, is a much more concise document than the prospectus (maximum 15 pages). This new regime aims to facilitate access to financing for small enterprises while providing sufficient information to investors.

The information document contains a brief description of the following:

– the key risks of the issuer and the offered investment instruments, specific to the offer or the admission to trading concerned;

– information regarding the issuer and the offeror of the investment instruments, including the issuer’s annual accounts for the last two financial years;

– information regarding the conditions and the reasons for the offer or admission to trading of the investment instruments;

– information regarding the characteristics of the investment instruments offered or to be admitted.

The schema according to which the information document must be written and the contents thereof are specified in Annex I (for the public offer) and Annex II (for the admission on an MTF) of the  Royal Decree.

The information document must be deposited with the FSMA at the latest at the time it is made available to the public. It is therefore not subject to prior approval of the FSMA, contrary to the prospectus. The FSMA may control a posteriori the contents of the information document and take administrative measures or sanctions if it appears that the information document does not meet the requirements provided for by or under the law.

Amendments to the takeover bids  and squeeze-out regulations

The New Prospectus Law and the Royal Decree have also implemented certain amendments to the law of 1 April 2007 on takeover bids (the “Takeover Law”) and the Royal Decree of 27 April 2007 on takeover bids (the “Takeover Royal Decree”). In accordance with the rationale of the Prospectus Regulation, these amendments aim to facilitate access to capital markets for small and medium enterprises.

The main amendments can be summarised as follow:

  • For companies whose securities are exclusively admitted to trading on Euronext Growth and Euronext Access, the threshold at which a mandatory offer must be launched is raised from 30% to 50%.
  • The obligation to publish a prospectus has been removed for takeover bids for debt securities launched by the issuer of such securities. This obligation has been replaced by the obligation to publish a press release approved by the FSMA and the other rules applicable to such type of takeover bids have also been softened.
  • The Takeover Law currently assimilates to advertising documents the “other documents and opinion relating to a public offer”. As a consequence, the FSMA has to approve this type of documents even if they have no advertising purpose (for example social documents of a company). This assimilation is deleted so that the prior approval by the FSMA of “other documents and opinion relating to a public offer” is no longer applicable in the event of a takeover bid.
  • The provisions relating to the publication of the prospectus and the incorporation of documents by reference are aligned with the regime provided for in the Prospectus Regulation.
  • The definition of “credit institution” and “stockbroking firm” have been widened to cover entities governed by the law of a Member State of the European Economic Area, and no longer only those established in Belgium.
  • The reporting rules to the FSMA applicable during the bid period have been eased (for example, the reporting obligation regarding (i) securities lending and (ii) persons who hold voting securities in the offeror have been deleted).
  • The Royal Decree has also entirely updated and amended the squeeze-out Royal Decree in order to take into account the case law regarding squeeze-outs since 2007. The main purpose of these amendments is to ensure that the offered price does not infringe the interests of the securities holders and to grant the FSMA the power to control the conditions in which the transaction takes place.

Furthermore, the rules in the Takeover Royal Decree that govern the takeover bids issued by an offeror that controls the target company have been harmonised with the amendments made to the corresponding provisions of the squeeze-out Royal Decree.

Entry into force and transitory regime

The New Prospectus Law provides for an entry into force in successive phases:

  • a first category of provisions has entered into force 10 days after the publication of the New Prospectus Law, i.e. as from 30 July 2018. In particular, this category includes the amendments to the Takeover bids legislation;
  • the provisions relating to the new thresholds for the application of the prospectus requirement and the information document regime are into force since 21 July 2018. The ongoing offers on that date remain however governed by the previous regime. An exception regime is however provided for offers of shares in cooperative companies and offers of securities to employees under incentive plans: if such offers are pending on 21 July 2018, they, however, fall under the new rules as from 21 October 2018;
  • the other provisions, which constitute the implementation of the Prospectus Regulation, will enter into force on 21 July 2019.

The Royal Decree entered into force on 15 October 2018. Ongoing offers on that date remain subject to the previous regime.

*      *      *

Sandrine Hirsch and Vanessa Marquette 

For any question or assistance, please contact the authors:
Sandrine Hirsch: sh@simontbraun.eu
Vanessa Marquette: vma@simontbraun.eu
+32 (0)2 543 70 80

 

[1] As set out in the EU Commission communication of 30 September 2015, the building of the ‘Capital Markets Union’ aims at helping businesses tap into more diverse sources of financing from across Europe. It also seeks to make markets work more efficiently and offer investors additional opportunities to put their money to work and therefore enhance growth and jobs creation in the European Union.

[2] The Law of 11 July 2018 on public offers of investment instruments and admission to trading of investment instruments on a regulated market – Belgian Official Journal 20.07.2018. See the Communication of the FSMA dated 22.06.2018.

[3] Belgian Official Journal 05.10.2018.

[4] Article 3, §2. which gave to the Member States the flexibility to fix the threshold(s) requiring the issue of a prospectus between EUR 1 million and 8 million.

[5] The preparatory works of the New Prospectus Law specify that the distinction between investment instruments that are admitted or not on an MTF is justified in view of the specific rules that apply in the event of admission to an MTF.

In addition, the thresholds of EUR 5 million and EUR 8 million are also those chosen in Netherlands and France. Therefore, the proposed regime allows, in the opinion of the Government, a “level playing field” vis-a-vis neighboring countries.

[6] According to the Law of 2006 the prospectus requirement did not apply to public offers of investment instruments the amount of which was less than EUR 300,000 calculated over a period of 12 months and provided that the maximum consideration per investor was capped at EUR 1,000 (Article 18, j).

[7] See articles 1 §§ 1 and 4 of the Prospectus Regulation and 10 § 2 and 3, 1° of the New Prospectus Law.

The new Prospectus Law and amendments to the Law on Takeover Bids – The law of 11 July 2018

1.     Introduction

The public offer of investment instruments and their admission to trading on a regulated market used to be governed by the law of 16 June 2006 implementing the Directive 2003/71/EC of 4 November 2003 (the Law of 2006).

While mandatory disclosure of information is vital to protect investors and constitutes a necessary step towards completion of the so-called ‘EU Capital Markets Union’[1], the rules laid down in Directive 2003/17/EC led to divergent approaches across Europe and resulted in significant impediments to cross-border offers of securities, multiple listings on regulated markets and to EU consumer protection rules.

Therefore, the EU legislator repealed the Directive 2003/71/EC and adopted the Regulation 2017/1129 of the European Parliament and of the Council dated 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (the “Prospectus Regulation”). The Prospectus Regulation imposes obligations having a direct effect on persons involved in the offering or listing of securities.

As a result, only a few provisions contained in the Prospectus Regulation required implementation in the Member States’ legal system. The questions relating to the prospectus exemption, the approval process and the international cooperation are, for instance, addressed directly in the Prospectus Regulation.

That being said, the New Prospectus Law[2] modifies certain key elements relating to the public offerings of investment securities (such as the thresholds imposing the issue of a prospectus) while keeping unchanged certain aspects which were covered by the Law of 2006, falling out of the Prospectus Regulation’s scope (Section 2).

The New Prospectus Law also introduces certain amendments to the Belgian law relating to takeover bids (Section 3).

Finally, the New Prospectus Law implements Regulation (EU) 2017/1131 of the European Parliament and of the Council of 14 June 2017 on money market funds and makes various amendments to Belgian financial legislation. However, these amendments are not commented in this news.

2.     Implementation of the Prospectus Regulation with respect to public offerings

     a.   Scope of the regime

In line with Directive 2003/71/EC, the Prospectus Regulation only applies to public offers and admission to trading on regulated markets of moveable securities.

The Law of 2006 had, however, a broader scope. Indeed, it did not refer to the concept of “security” but of “investment instrument”, which is much broader. This approach is maintained in the New Prospectus Law which makes no changes to the definition of “investment instrument”.

The New Prospectus Law shall therefore also apply to public offers and admission to trading of investment instruments other than moveable securities. Public offers of new instruments such as cryptocurrency will thus notably be subject to the New Prospectus Law.

     b.   Thresholds for the application of the prospectus requirement

As allowed by the Prospectus Regulation[3], the New Prospectus Law implements three separate regimes for the application of the prospectus requirement, depending on whether or not the investment instruments are admitted (or will be admitted) on a regulated market or on an MTF designated by a Royal Decree[4].

The obligation to issue a prospectus applies to:

1) public offerings of investment instruments that are not admitted to trading on an MTF to be designated by Royal Decree, the aggregate amount of which exceeds EUR 5 million calculated over a period of 12 months;

2) for public offerings of investment instruments admitted or to be admitted to trading on an MTF to be designated by Royal Decree the aggregate amount of which exceeds EUR 8 million[5] calculated over a period of 12 months.

3) admission to trading on a regulated market, regardless of the amount relating thereto.

As in the previous regime, the admission on an MTF without a public offer of investment instruments does not give rise to the application of the prospectus requirement.

     c.   Regime for offers below the thresholds

1) Principles

The New Prospectus Law requires the preparation of an information document which is not a prospectus:

  • for public offers for an amount of less than or equal to EUR 5 million over a twelve-month period; and
  • for public offers for an amount of less than or equal to EUR 8 million over a twelve-month period provided that the investment instruments are admitted or to be admitted to trading on an MTF designated by Royal Decree.

This information document regime may also be made compulsory by Royal Decree for the admission of investment instruments on certain MTF or MTF segments.

2) Exceptions

The New Prospectus Law provides for a ‘de minimis’ regime for public offers the amount of which is less than or equal to EUR 500,000 calculated over a period of 12 months and specifies that the maximum consideration per investor is capped at EUR 5,000[6]. These public offers do not require the publication of a specific document (i.e. prospectus or information document) nor a notification to the FSMA.

The obligation to draw up an information document for public offers for an amount of less than or equal to respectively EUR 5 million or EUR 8 million does not apply either:

  • to public offers for investment instruments, other than moveable securities, which qualify as forward agreements and do not require any investment at the time of their conclusion;
  • if the issuer or the offeror is already required to provide investors with a key information document under the PRIIPs Regulation (« Packaged Retail and Insurance-based Investment Products ») or another information document considered equivalent by royal decree;
  • when the issuer or the offeror voluntarily draws up a prospectus;
  • to public offers for which the Prospectus Regulation provides for prospectus exemption, i.e. for example, an offer to less than 150 persons other than qualified investors or an offer of securities addressed solely to qualified investors[7].

The exemptions provided for by the Law of 2006 for (i) offers of shares in cooperative companies, (ii) offers of securities to employees under incentive plans and (iii) crowdfunding offers have been repealed in the New Prospectus Law. As a result, these offers will now give rise to the obligation to draw up an information document, unless they fall within the scope of the ‘de minimis’ rule.

3) Content of the information document

The information document, which only contains significant information for the investor, is a much more concise document than the prospectus (maximum 15 pages). This new regime aims to facilitate access to financing for small enterprises while providing sufficient information to investors.

The information document contains a brief description of the following :

  • the key risks of the issuer and the offered investment instruments, specific to the offer or the admission to trading concerned;
  • information regarding the issuer and the offeror of the investment instruments, including the issuer’s annual accounts for the last two financial years;
  • information regarding the conditions and the reasons for the offer or admission to trading of the investment instruments;
  • information regarding the characteristics of the investment instruments offered or to be admitted.

The schema according to which the information document must be written and the contents thereof should be specified by Royal Decree.

The information document must be deposited with the FSMA at the latest at the time it is made available to the public. It is therefore not subject to prior approval of the FSMA, contrary to the prospectus. The FSMA may control a posteriori the contents of the information document and take administrative measures or sanctions if it appears that the information document does not meet the requirements provided for by or under the law.

3.     Amendments to the takeover bids legislation

The New Prospectus Law has also implemented certain amendments to the law of 1 April 2007 on takeover bids (the “Takeover Law”). In accordance with the rationale of the Prospectus Regulation, these amendments aim to facilitate access to capital markets for small and medium enterprises.

These amendments can be summarised as follow :

  • For companies whose securities are admitted to trading on an MTF or on an MTF segment, designated by Royal Decree, the threshold at which a mandatory offer must be launched is raised from 30% to 50%.
  • The King may provide for a specific regime regarding takeover bids for debt securities launched by the issuer of such securities. It is considered that such transactions do not require the application of the same regime as takeover bids for securities giving access to voting rights or takeover bids launched by a third party.
  • The Takeover Law currently assimilates to advertising documents the “other documents and opinion relating to a public offer”. As a consequence, the FSMA has to approve this type of documents even if they have no advertising purpose (for example social documents of a company). This assimilation is deleted so that the prior approval by the FSMA of “other documents and opinion relating to a public offer” is no longer applicable in the event of a takeover bid.
  • The provisions relating to the publication of the prospectus and the incorporation of documents by reference are aligned with the regime provided for in the Prospectus Regulation.

4.     Entry into force and transitory regime

The New Prospectus Law provides for an entry into force in successive phases:

  • a first category of provisions has entered into force 10 days after the publication of the New Prospectus Law, i.e. as from 30 July 2018. In particular, this category includes the amendments to the Takeover bids legislation;
  • the provisions relating to the new thresholds for the application of the prospectus requirement and the information document regime are into force since 21 July 2018. The ongoing offers on that date remain however governed by the previous regime. An exception regime is however provided for offers of shares in cooperative companies and offers of securities to employees under incentive plans: if such offers are pending on 21 July 2018, they will fall under the new rules as from 21 October 2018;
  • the rest of the provisions, which constitute the implementation of the Prospectus Regulation, will enter into force on 21 July 2019.

*      *      *

 Sandrine Hirsch, Vanessa Marquette and Aude Vercheval

For any question or assistance, please contact the authors:
Sandrine Hirsch: sh@simontbraun.eu
Vanessa Marquette: vma@simontbraun.eu
+32 (0)2 543 70 80

[1] As set out in the EU Commission communication of 30 September 2015, the building of the ‘Capital Markets Union’ aims at helping businesses tap into more diverse sources of financing from across Europe. It also seeks to make markets work more efficiently and offer investors additional opportunities to put their money to work and therefore enhance growth and jobs creation in the European Union.

[2] The Law of 11 July 2018 on public offers of investment instruments and admission to trading of investment instruments on a regulated market – “Loi relative aux offres au public d’instruments de placement et aux admissions d’instruments de placement à la négociation sur des marchés réglementés” / “Wet op de aanbieding van beleggingsinstrumenten aan het publiek en de toelating van beleggingsinstrumenten tot de verhandeling op een gereglementeerde mark” – Belgian Official Journal 20.07.2018. See the Communication of the FSMA dated 22.06.2018.

[3] Article 3, §2. which gave to the Member States the flexibility to fix the threshold(s) requiring the issue of a prospectus between EUR 1 million and 8 million

[4] Such MTFs will be identified in the new Royal Decree still to be adopted.

[5] The preparatory works of the New Prospectus Law specify that the distinction between investment instruments that are admitted or not on an MTF is justified in view of the specific rules that apply in the event of admission to an MTF.

In addition, the thresholds of EUR 5 million and EUR 8 million are also those chosen in Netherlands and France. Therefore, the proposed regime allows, in the opinion of the Government, a “level playing field” vis-a-vis neighbouring countries.

[6] According to the Law of 2006 the prospectus requirement did not apply to public offers of investment instruments the amount of which was less than EUR 300,000 calculated over a period of 12 months and provided that the maximum consideration per investor was capped at EUR 1,000 (Article 18, j).

[7] See articles 1 §§ 1 and 4 of the Prospectus Regulation and 10 § 2 and 3, 1° of the New Prospectus Law.

20180208

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The new Belgian Security Act amended and postponed

The Belgian act of 11 July 2013 with regard to security rights on movable assets (the “Security Act”) is not yet in force. Implementing regulations were expected to organize the pledges register and to correct some inaccuracies and loopholes.

The Belgian Law of 25 December 2016 (the “Law”) amends the Security Act to ensure its effective implementation and postpone (once more) its entry into force. In an effort to harmonize the regime of security rights on movable assets, the Law also amends other regulations such as the Law of 15 December 2004 concerning financial collateral arrangements, the Registration Duties Code and the Law of 3 August 2012 relating to various provisions in order to facilitate the mobilization of receivables in the financial sector.

1.   Main changes to the Security Act

The Law provides for a number of substantial changes to the Security Act which can be summarized as follows:

  • The date of entry into force of the Security Act is postponed the latest to 1 January 2018 (Article 109 Security Act). This measure was necessary because the pledges register, which is the cornerstone of the new regime organized by the Security Act, is not yet effective. To the extent that the pledges register would become operational earlier, the Belgian Government has agreed to bring the Security Act in force before 1 January 2018.                        
  • The Law expressly clarifies that the pledgee benefits from a preferential right equivalent to the lien referred to in Article 12 of the Mortgage law (Article 6 Security Act).
  • Express confirmation is given that a pledge may be created on all movable assets, even if the latter qualify, for civil law purposes, as immovable assets as a result of their intended use (“immeubles par destination / onroerend door bestemming”) (Article 12 Security Act).
  • The possibility for the pledgee to give its pledge in pledge to his own creditor(s) with the consent of the pledgor (“réengagement / herverpanding”), which was no more possible, is reinserted in Article 19 of the Security Act.
  • It will not be possible to register pledges on receivables in the future pledges register (Article 20 Security Act). The Security Act provided for two different ways to ensure the enforceability of pledges on receivables, being (i) the registration in the future pledges register and (ii) the dispossession. Because the Security Act cannot lead to an increase of the required formalities (set out in Article 1690 of the Civil Code), the legislator has decided to suppress the possibility to register pledges on receivables in the pledges register. This change is regrettable. Indeed, the registration was only an option and, in addition, the fact that pledges receivables will not appear in the pledges register will limit the usefulness of such register as it will not list exhaustively all pledges created on the assets of a debtor.
  • The Security Act’s provisions relating to the pledges register (Article 26 of the Security Act) and the registration (Article 29 of the Security Act) have been amended to allow the optional registration of retention of title clauses on moveable assets which became immovable assets through incorporation (“immeubles par incorporation / onroerend door incorporatie”). Such a possibility was provided for in Article 71 of Title XVII of Book III of the Civil Code relating to the registration of retention of title clauses, but the latter had still to be implemented.
  • The information to be mentioned in the pledges register are clarified in Article 36 and 37 of the Security Act. We note in particular :
  1. with respect to the identity of the pledgee and the pledger: (i) in case of a natural person, mention of the name, first surname or two first surnames, country, postal code and commune of principal residence and, if available, enterprise number; in the absence of enterprise number, National Registry number and date of birth; (ii) in case of a legal person, mention of the name, legal form, country, postal code and commune of registered office and, if any, its enterprise number.
  2. the assignments of the registration of pledges (or of a retention of title clauses) and the assignment of the rank relating to a registered pledge will have to be registered (which will trigger the payment of fees).
  • The pledgor should obtain the pledgee’s consent for any withdrawal or change to the data registered in the pledges register. The possibility for the pledgor to contact the Mortgage Service to correct an error appearing in the pledges register has been withdrawn. Any disagreements between pledgor and pledgee relating to erroneous data will have to be brought before the courts.
  • The full access by the public to the pledges register is the cornerstone of the new regulation (Art. 40 Security Act). A similar system of publicity already exists in respect of rights in rem on immovable assets and pledges on business assets though the Mortgage Register (« Registre des Hypothèques/Hypotheekregister »). The Belgian Commission for Protection of Privacy has advised limiting the access to the pledges register to persons with a legitimate interest. In the former version of the Security Act, such an access was therefore exclusively granted to the pledgors, the pledgees and certain categories of persons or institutions to be listed in a Royal Decree. The Law now provides for a general access by the public. However, access will be free only for the pledgors, the pledgees and others categories of persons or institutions to be listed in a Royal Decree. A fee to be fixed in a future Royal Decree will be due by all other persons to access the pledges register.
  • The deadline to bring a dispute concerning the allocation of the proceeds before a court is reduced from one year to one month as of the enforcement notification (Art. 64 Security Act). A one-year statutory deadline was considered too long in view of legal certainty and potential difficulties relating to the burden of proof. Interested persons to whom the enforcement is not notified will have three months as from the end of the enforcement process to file a claim before the court.
  • Article 107 of the Security Act provides for transitory provisions to transfer to the future pledges register, with their rank being maintained, the existing registrations relating to (i) agricultural privileges as registered in accordance with the Law of 15 April 1884 on agricultural loans and (ii) the pledges on business assets registered in accordance with the Law of 25 October 1919, provided that such a registration takes place within a period of twelve months after the entry into force of the Security Act.
  • Similarly, pledges on intangible assets (other than receivables) duly created before the entry into force of the Security Act remain valid. No transfer of registration is organized.

The Law also provides for certain formal changes which were required as a result of the evolution of the Belgian legislation since the adoption of the Security Act in 2013. For example:

  1. references to the « Law of 6 April 2010 on market practices and consumer protection »[1] are replaced by references to the « Code of economic law »;
  2. in the Collateral Law, references to the « Law of 22 March 1993 concerning the status and financial control of credit institutions »[2] are replaced by references to the « Law of 25 April 2014 concerning the status and financial control of credit institutions »[3];
  3. references to the « Mortgage Loan of 4 August 1992 »[4] are replaced by references to the « Code of economic law »; and
  4. references to the « the Law of 12 June 1991 on Consumer Credit »[5] are replaced by references to the « Code of economic law ».

2.   Changes to the law of 15 December 2004 concerning financial collateral arrangements (the “Collateral Law”)

When adopting (and revising) the Security Act, the Belgian legislator did not intend to impact the regime of security interest resulting from the Collateral Law. The Law therefore mentions expressly that the creation ofpledges on :

  1. financial instruments, cash or bank receivable within the meaning of the Collateral Law;
  2. fungible financial instruments within the meaning of the coordinated Royal Decree nr. 62 of 10 November 1967 relating to the custody of fungible financial instruments and the settlement of transactions in those instruments;
  3. dematerialised securities within the meaning of the Law of 2 January 1991 on the market of public debt securities and monetary policy instruments[6]; and
  4. dematerialised securities within the meaning of the Belgian Company Code[7];

may be made exclusively in compliance with the provisions of the Collateral Law. No registration in the pledges register will, therefore, be possible.

To compensate for the impossibility to register such pledges (and therefore avoiding the dispossession requirement), the Collateral Law will mention expressly that the security documentation may enable the pledgor to dispose of the pledged assets without affecting possession or control. This amendment aims to allow a dynamic management of the pledged assets.

The abovementioned provisions will enter into force on the date of entry into force of the Security Act.

3.   Registration Duties Code

Changes are made to the Registration Duties Code to ensure that, as from the entry into force of the Security Act, the registration of the pledges on business assets and agricultural privileges are exempted from registration duties. The ordinary regime provided by the Security Act will indeed apply to those pledges (Art. 34 Security Act). This amendment will enter into force on the date of entry into force of the Security Act.


[1] Loi du 6 avril 2010 relative aux pratiques du marché et à la protection du consommateur / wet van 6 april 2010 betreffende marktpraktijken en consumentenbescherming.
[2] Loi du 22 mars 1993 relative au statut et au contrôle des établissements de crédit / wet van 22 maart 1993 op het statuut van en het toezicht op kredietinstellingen.
[3] Loi du 25 avril 2014 relative au statut et au contrôle des établissements de crédit / wet van 25 april 2014 op het statuut van en het toezicht op kredietinstellingen.
[4] Loi du 4 août 1992 relative au crédit hypothécaire / wet van 4 augustus 1992 op het hypothecair krediet.
[5] Loi du 12 juin 1991 relative au crédit à la consommation / Wet van 12 juni 1991 op het consumentenkrediet.
[6] Loi du 2 janvier 1991 relative au marché des titres de la dette publique et aux instruments de la politique monétaire / Wet van 2 januari 1991 betreffende de markt van de effecten van de overheidsschuld en het monetair beleidsinstrumentarium.
[7] Code de droit des sociétés / Wetboek van vennootschappen.

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MAR Regulation

ENTRY INTO FORCE, ON 3 JULY 2016, OF THE NEW ADMINISTRATIVE REGIME ON MARKET ABUSE MAR REGULATION

In June 2014, Regulation 596/2014 on market abuse (the so-called MAR Regulation, hereinafter the “Regulation”) and Directive 2014/57/EU on criminal sanctions for market abuse (hereinafter the “Directive”) were published in the Official Journal of the European Union.

The Regulation repeals the former European framework, in particular Directive 2003/6 on insider dealing and market manipulation (market abuse).  The new Directive completes, for its part, the Regulation by requiring the Member States to provide for harmonized criminal sanctions regarding market abuses.

Read more here.