Corporate M&A 2021

Last Updated April 20, 2021


Law and Practice


Van Bael & Bellis is a leading independent law firm based in Brussels, with offices in London and Geneva. Alongside its strong corporate and commercial offering, the firm is highly regarded for its extensive expertise in EU competition, EU and international trade, and EU regulatory law. The firm has a corporate M&A team recognised as one of the leading independent M&A practices in Belgium. Its lawyers have in-depth experience in providing advice to clients in complex Belgian and cross-border transactions, regularly advising international clients active in highly regulated industries. The team’s expertise extends to all aspects of corporate law, including private M&A, public M&A and capital markets (debt and equity), insolvency and restructuring, private equity and venture capital transactions, corporate real estate transactions, corporate governance and corporate litigation, and acquisition finance.

Whereas the first quarter of 2020 started strongly, the fall-out from COVID-19 has had a significant negative impact on economic growth and deal activity in Belgium, in particularly in the second quarter of 2020. As a result of the pandemic, most M&A transactions were put on hold at the end of the first quarter of 2020 and deal activity dropped significantly. However, the M&A market recovered well in the second half of 2020 and deal activity renewed after the first wave of COVID-19.

As a result of the above-mentioned recovery, and despite the drop in deal activity in the second quarter of the year, 2020 turned out to be a relatively normal year in terms of M&A volume.

Against expectations, the number of bankruptcies and insolvencies was not higher in 2020 as compared to previous years, and we may even conclude that fewer companies went into bankruptcy than under normal circumstances. This is likely to be due to the financial support measures made available by the governmental authorities as well as the fact that a moratorium on bankruptcies was put in place for part of 2020. Although fewer companies were forced into bankruptcy, many firms, particularly in the sectors most affected by COVID-19 and the restrictive measures imposed in response to it, were forced to take measures to ensure liquidity, including (re)financing.

It remains to be seen what the impact of COVID-19 will be on the Belgian M&A market and what the number of bankruptcies will be in the longer term. In any case, it can be expected that the impact of the COVID-19 crisis on certain companies will create new market opportunities. In general, private equity firms with sufficient cash at hand were very active in the M&A market in Belgium in 2020, and it is expected that this trend will continue in 2021.

As is usual in Belgium, the smaller and medium-sized enterprises segment of the market accounted for the majority of deals. There has been continued interest from international private equity players in the Belgian market and buy-and-build strategies continue to be many investors’ preferred route.

See also 1.1 M&A Market for more information on the top trends in 2020.

As mentioned (see 1.2 Key Trends), the Belgian M&A landscape is marked by a majority of smaller and medium-sized transactions, in relation to which publicly available information is rather limited. Overall, the pharmaceutical, (bio)technology, (renewable) energy and healthcare industries remain highly valued in Belgium and experienced significant M&A activity in the past 12 months.

Furthermore, industries such as (non-food) retail, leisure facilities and tourism, hospitality and aviation were hit hardest by the COVID-19 pandemic and the restrictive measures imposed by the government.

The acquisition of a company may be structured as a share deal or an asset deal. Tax considerations play an important role when considering the acquisition of a business through a transfer of shares or a transfer of assets.

Share Deal

A share deal is the most straightforward structure used to acquire a business as formalities for transferring shares are fairly limited. However, a share deal implies that all the underlying assets and liabilities of the acquired business are also (indirectly) transferred. The acquirer cannot pick and choose certain assets and liabilities of the business, unless those assets and liabilities were to be transferred from the target company prior to the closing of the share transfer (through an asset deal, a demerger, a transfer of a branch of activities, or any other similar operation).

Asset Deal

By contrast, an asset deal does allow the acquirer to pick and choose the assets and liabilities it deems useful or necessary. The other assets and liabilities remain with the business. This is often the preferred route for deals involving distressed companies, where potential tax and bankruptcy liability issues may be at stake.

In the case of an asset deal, the assets may be purchased individually (ut singuli), or as a "universality of goods" (ut universali) or a "branch of activities". 

In the case of a transfer of individual assets and liabilities, all legal formalities required to transfer such individual assets and liabilities must be complied with. For example, the transfer of an agreement requires the consent of the other contracting party. In addition, specific, rather onerous and time-consuming formalities apply to the transfer of intellectual property rights and real property.

In the case of a transfer of a universality of goods or a branch of activities in accordance with the procedure set out in the Belgian Companies and Associations’ Code (the BCAC), all assets and liabilities that are part of the universality of goods or branch of activities are automatically transferred by operation of law, provided that the specific requirements for these procedures have been fulfilled. As a result, the acquirer has less flexibility to cherry-pick the assets and liabilities of the business.

In addition, the BCAC contains a regime for mergers through the acquisition of an existing company or the incorporation of a new company. The BCAC also contains provisions on demergers into an existing company or a newly incorporated company, as well as mixed demergers.

Private M&A transactions typically do not require the involvement of a primary regulator. Public M&A transactions (such as public takeovers, IPOs, secondary offerings and bond issues) require the involvement of the Financial Services and Markets Authority (FSMA).

For more information, see 2.3 Restrictions on Foreign Investments, 2.4 Antitrust Regulations and 2.6 National Security Review.

Belgium’s open economy usually welcomes foreign investors and is typically considered to be one of the most flexible countries for foreign investment in Europe. However, in certain regulated industries (such as financial institutions and insurance, maritime ports, energy, pharmaceuticals, broadcasting, telecoms and postal services), a notification to, or the authorisation of, the relevant regulator may be required. For more information on national security review of acquisition, see 2.6 National Security Review.

National Merger Control

Provided that the business combination is not subject to EU merger control and the turnover thresholds in Belgium are reached, mergers, acquisitions and joint ventures that result in a sustainable change in the control over the companies concerned must be notified to, and approved by, the Belgian Competition Authority before implementation.

Business combinations are subject to Belgian merger control if they meet the following two turnover thresholds:

  • the undertakings concerned have a combined turnover in Belgium of more than EUR100 million; and
  • at least two of the undertakings concerned each have a turnover in Belgium of at least EUR40 million.

Whether any involved company has its registered office or owns assets in Belgium is irrelevant. As a result, foreign-to-foreign combinations of companies that have substantial sales in Belgium and that do not exceed the EU thresholds may be subject to Belgian merger control.

The approval must be obtained before the implementation of the proposed combination. So-called gun-jumping must be avoided, especially in view of the fact that competition authorities throughout Europe have made this a focal point of attention. As a result, merger approval is typically construed as a condition precedent to closing, and no business combination may be implemented before then (which may raise questions in relation to pre-closing covenants or anti-leakage provisions, which are typically included in acquisition agreements). Upon notification, the Belgian Competition Authority will assess whether the transaction could significantly impede effective competition in the relevant market. This may be the case when the proposed concentration could create or strengthen a dominant position in the market for the company involved.

EU Merger Control

Transactions between companies active on an EU or worldwide scale are likely to meet the European turnover thresholds. In that case, the parties must notify the proposed concentration to, and obtain approval from, the European Commission, which is exclusively competent to deal with concentrations with an EU dimension.

Information and Consultation

The employer must inform (and under certain circumstances also consult) the works council or, in its absence, the trade union delegation, or in its absence, the committee for prevention and protection at work, prior to any publication of the decision regarding a merger, demerger, transfer or acquisition of all shares in the company or its assets. Failing the presence of an employee representative body, the employees should be directly informed about most transactions (for example a merger or demerger). In the case of a transfer of a minority of shares, an information obligation may apply towards the employee representative body if that decision has an important impact on the company.

However, the consent of the employees’ representatives is not required. The employees' representatives cannot change the employer's decision or obstruct the negotiations or the transaction.

The information (and consultation) must relate to the economic, financial or technical factors of the proposed transaction and the economic, financial and social implications thereof for the company and its employees and the envisaged measures in relation to the employees (ie, repercussions on their employment), the organisation of their employment, and the employment in general. A consultation involves an exchange of views between the management and the employees’ representatives, on the occasion of which the representatives may ask questions and voice any criticism, suggestions or objections. 

Violation of these information and consultation rights may lead to administrative or criminal sanctions.

Protection of Employees against Dismissal

In the case of a share deal, the employees' situation is not affected since the employer remains unchanged. Consequently, the general employment termination rules should be complied with, in case of a dismissal of one or more employees.

However, this is different in the case of an asset deal which qualifies as a transfer of a going concern (for example, in the case of a transfer of a branch of activities or a “universality of goods”). Pursuant to the Collective Bargaining Agreement (CBA) No 32bis, the rights and obligations of the transferred employees arising from the employment agreements or arrangements entered into by the employer are automatically transferred to the transferee. This implies that, on the date of the transfer of a business, all employees of the target will be automatically transferred from the transferring employer to the acquiring company, with preservation of all rights (exceptions for pension rights may apply) and obligations resulting from the employment contract.

In principle, all employees belonging to the transferred business will automatically transfer to the acquiring company. The acquirer cannot choose which employees will be transferred and the transfer of a business, as such, does not constitute justified grounds for dismissal. In the event of a dismissal, damages for manifestly unfair dismissal of up to 17 weeks’ gross salary may be due on top of severance pay. However, a dismissal remains permitted for serious cause; or for economic, technical or organisational reasons entailing changes in the employment in general.

In addition, the acquiring company may not unilaterally alter the working conditions to the detriment of the transferred employees. If the working conditions are amended unilaterally, the employee can, amongst other things, claim that the acquiring company has terminated the employment contract. In such cases, the acquiring company will be liable for the payment of a severance pay and damages resulting from the termination of up to 17 weeks’ gross salary.

The acquiring company and the transferred employees are, however, free to negotiate a new employment agreement or new terms of employment (as long as these are in line with the terms of employment resulting from applicable collective bargaining agreements).

Moreover, the transferring employer and the acquiring company are jointly and severally liable, vis-à-vis the employees concerned, for the payment of any debts resulting from the employment relationship and existing at the time of the transfer.

Belgium does not currently have a foreign direct investment (FDI) screening mechanism at federal level. However, the federal government is reportedly preparing a draft bill establishing such a federal FDI screening mechanism. The proposed mechanism would be general in scope, whereby foreign investors would be required to notify transactions relating to a broad range of sectors – including energy, transport, water, health, communication, media, data management, critical infrastructure (physical and virtual), aerospace, defence, electoral institutions and financial infrastructure – prior to implementation, to the Investment Screening Committee (ISC). The ISC would inform the notifying parties within 40 days whether an investment screening procedure will be launched. As part of the screening, the ISC would issue a recommendation to the federal Minister of Economy and the federal government would then take a decision on whether to approve or reject the envisaged investment. The final text of this bill is not yet available so the specific characteristics of the FDI screening mechanism remain to be confirmed.

While Belgium does not currently have a federal FDI screening mechanism, the region of Flanders introduced a safeguard mechanism which entered into force on 1 January 2019. This mechanism allows for the annulment of foreign investments in certain Flemish public authorities and institutions for the protection of public security.

SR Directive II

On 16 April 2020, the Belgian federal Parliament adopted a law regarding the encouragement of long-term shareholder engagement, implementing EU Directive 2017/828, also known as the Shareholder Rights Directive II (the SR Directive II), into Belgian law. The SR Directive II and the implementing Belgian law seek to:

  • encourage effective and sustainable shareholder engagement;
  • enhance transparency regarding the remuneration of various corporate officers; and
  • promote discussions and interaction between issuers and investors, in order to improve the financial and non-financial performance of listed companies in the EU (see also, 11.1 Shareholder Activism).

New Rules on Remote Participation and Voting at Shareholders’ Meeting

Further, a law was adopted on 20 December 2020 which introduces a series of measures to facilitate the remote participation of, and voting by, the shareholders or members of limited liability companies, private limited liability companies, co-operative companies and (international) non-profit associations in meetings of the shareholders or members (see 6.9 Voting by Proxy).

Temporary Protection Measures for Companies Affected by the COVID-19 Crisis

In response to the COVID-19 pandemic, temporary measures were introduced to protect companies affected by the COVID-19 crisis against:

  • bankruptcy, judicial dissolution and transfers under judicial authority;
  • attachment and enforcement measures; and
  • the termination of contracts for failure to pay.

These measures have subsequently expired. However, following their expiry, the Belgian legislature has adopted a new law amending Book XX (on bankruptcy and insolvency procedures) of the Code of Economic Law to better satisfy the needs of companies to the context of the economic crises caused by the COVID-19 pandemic. The main novelty of this law is that it introduces a pre-packaged insolvency procedure and adopts a few measures that aim at making the judicial reorganisation procedure more accessible. Most provisions of this law are in principle only applicable until 30 June 2021, but this term can be extended by royal decree.

New Directive on Restructuring and Insolvency

On 16 July 2019, Directive (EU) 2019/1023 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132 (the Restructuring Directive) entered into force. The Restructuring Directive introduces minimum standards among EU Member States for effective preventive restructurings, including measures to increase the efficiency of insolvency procedures in general. Belgium must implement the Directive into its national laws by 17 July 2021.

New Directive on Cross-Border Conversions, Mergers and Demergers

On 1 January 2020, Directive (EU) 2019/2121 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions (the Directive) entered into force. The Directive aims at removing barriers to the freedom of establishment of EU limited liability companies by facilitating cross-border conversions, mergers and demergers within the EU. At the same time, the Directive aims at safeguarding the interests and rights of employees, creditors and minority shareholders. Belgium must implement the Directive into its national laws by 31 January 2023.

New Belgian Companies and Associations’ Code

In terms of policymaking, the Belgian federal government has undertaken several changes to increase the attractiveness of the Belgian investment climate in the past few years. The most noteworthy legal reform, from an M&A perspective, is the introduction in 2019 of the BCAC, aimed at simplifying company law and making it more flexible. The BCAC introduced several innovations, including a reduction of the number of company types and the acceptance of the "incorporation theory". In addition, the Belgian legislature has reinvented the private limited liability company (now a besloten vennootschap/société à responsabilité limitée) as a more modern flexible company type, in line with foreign examples such as the Dutch "Flex-BV" and the English “Limited”, but with the particularity that the concept of capital has been abolished.

On 1 May 2019, the BCAC entered into force and applied to all new companies and associations, as well as to existing companies and associations that decided to opt in. Since 1 January 2020, the mandatory provisions of the BCAC have applied to all companies and associations. In addition, the supplementary provisions apply, unless the articles of association contain contradictory provisions. By 1 January 2024, all companies and associations should bring their articles of association in line with the BCAC.

Below are a few examples of how the BCAC will have an impact on M&A transactions under Belgian law:

  • the articles of association of private limited liability companies can now provide for free transferability of the shares – such a provision would then also make it possible for shareholders to grant a pledge on their shares without needing the consent of the other shareholders;
  • the articles of association can provide for multiple voting rights – this creates new opportunities, such as having minority shareholders with full control over the company as the voting power of a shareholder is not linked to the amount of their contribution anymore; and
  • whitewash procedures for financial assistance are more flexible. 

No significant changes have been made in the past 12 months, or are expected in the coming 12 months, to takeover laws in Belgium.

Prospective acquirers will typically try to build a stake in the target prior to the announcement of a public offer. The main goal of stakebuilding is to deter a third party from launching a competitive counterbid. One textbook example is Gilead Sciences’ gradual stakebuilding in Galapagos, which increased from about 10% to almost 30%.

Pursuant to Section 6 of the Law of 2 May 2007 on public disclosure of important participations of the issuer of which the shares are admitted to trading on a regulated market (the Law on public disclosure of important participations), the FSMA and the issuer must be notified every time:

  • an acquirer of securities with voting rights holds (directly or indirectly), as a consequence of the transaction, 5% or more of the total existing voting rights;
  • a shareholder acquires securities with voting rights and, as a result of such acquisition, the total number of voting rights it holds (directly or indirectly) exceeds any other multiple of 5% of the total existing voting rights; and
  • securities with voting rights are transferred, directly or indirectly, as a result of which the total number of voting rights held by the transferor drops below one of the above-mentioned thresholds.

Furthermore, private individuals and legal entities are considered to act in concert when they co-operate with an offeror, the offeree company or with other persons on the basis of an agreement, aimed either at obtaining control over the offeree company, frustrating the successful outcome of a bid or maintaining control over the offeree company.

Companies can also introduce additional hurdles to stakebuilding. One of the more common hurdles is the inclusion of a provision in the target’s articles of association for additional reporting thresholds. Pursuant to Section 18 of the Law on public disclosure of important participations, such thresholds can only be set at 1%, 2%, 3%, 4% and 7.5% of the voting rights.

In addition, the articles of association may permit the board to take various defensive measures making takeovers more difficult; for example, to increase the capital of the company within certain limits or purchase shares in the company without prior shareholders' approval.

Dealings in derivatives are allowed under Belgian law. Regulation (EU) No 648/2012 on over-the-counter (OTC) derivatives, central counterparties and trade repositories, which is directly applicable in Belgium, is the most relevant source in relation to these dealings. This Regulation includes provisions on exchange traded derivatives, but mainly provides a legal framework for OTC derivatives, which account for almost 95% of the derivatives markets within the EU.

Pursuant to Section 6, paragraph 6 of the Law on public disclosure of important participations, financial instruments linked to securities conferring voting rights, where the exercise of those instruments might lead to the acquisition of voting rights, are subject to the same reporting regime as the voting securities themselves (see 4.2 Material Shareholding Disclosure Threshold). Examples of financial instruments that could meet these requirements are warrants, futures and swaps.

If such financial instruments are exercised, resulting in the acquisition of the shares the financial instrument was linked to, the same rules apply once again.

When bidders acquire shares, they are generally not under an obligation to disclose the purpose of their acquisition, nor their intention regarding control of the company (if they were to have such an intention).

There is, however, an exception to this rule, which applies if a bidder intends to acquire portfolio management and investment advice companies, management companies of undertakings for collective investment and management companies of public alternative investment funds.

The bidder shall have an obligation to notify the FSMA of a decision to acquire shares or shareholder rights in the entity if the bidder would, as a result of the intended acquisition:

  • acquire a "qualifying holding"; or
  • increase an existing qualifying holding so that the proportion of the voting rights, or of the capital held, will cross the thresholds of 20%, 30% or 50%, or so that the target would become its subsidiary.

The Public Takeover Law also contains a "put up or shut up" rule, allowing the FSMA to require a potential bidder to disclose its intention to launch a bid following market rumours. If no intention to launch a bid is announced, this person will be precluded from making a bid on the same target company for six months (save in exceptional circumstances).

In the case of an acquisition of a private company, there is no obligation to disclose the deal. As parties are frequently bound by non-disclosure agreements, the acquisition is often only announced as soon as signing or closing has taken place (assuming the parties wish to disclose the deal).

If a company intends to acquire a listed company, the Public Takeover Law provides for several notification and publication requirements (see also 6.1 Length of Process for Acquisition/Sale). Companies that are submitting a public takeover bid must notify this to the FSMA, who will release a public announcement before the bidder does so. In view of this, bidders are encouraged to reach out to the FSMA early in the process to discuss the envisaged timeline. The FSMA may also require the parties involved in a potential takeover bid to issue a press release.

In the case of a public takeover bid, the Royal Decree of 27 April 2007 on public takeovers (the Takeover Decree) requires that the same information be provided to all competing bidders. The bidder must also avoid receiving insider information.

If the bidder nevertheless obtains insider information, it must disclose this in the prospectus. Regulation 596/2014 on market abuse defines insider information as “all information that relates, directly or indirectly, to particular instruments or issuers, is of a precise nature, has not been made public, and if it were made public, would be likely to have a significant effect on the price of those instruments”.

Finally, there are some employee information and consultation obligations (see 2.5 Labour Law Regulations).

Market practice on the timing of disclosure does not typically differ from legal requirements. In general, the acquirer and the target often prepare a common announcement and agree in advance on the content and timing of announcements. The most common market practices are to disclose the deal after signing or after closing (or both).

However, the timing of the announcement may vary depending on the factual circumstances of the deal. The parties may sometimes consider it more useful or appropriate to already communicate information of a potential forthcoming deal during the due diligence process or upon execution of a memorandum of understanding.

The scope of due diligence depends on the activities of the target and the timeframe within which the due diligence has to be conducted.

Although conducting due diligence is not compulsory, prospective buyers typically conduct operational, legal, financial and tax (including pensions and social security) due diligence over the target. Sometimes, technical and environmental due diligence may be undertaken, as well as an insurance audit. At the outset and throughout the due diligence process, management presentations and specific documents and information are made available to the potential acquirer, and its advisors, through a (typically virtual) data room.

Impact of COVID-19 on Due Diligence

The due diligence process has not been significantly affected by COVID-19. In terms of the scope of due diligence, most prospective buyers will now also look into the impact of COVID-19 on the target’s business and turnover and the prospects thereof in the short and longer term. In addition, as part of due diligence, potential acquirers will assess whether the target was forced to take measures to mitigate the effects of the COVID-19 pandemic on its business and activities and whether the target company had to make use of the financial support measures made available by governmental authorities. Furthermore, the compliance with COVID-19 restrictions and policies will be assessed as well as part of due diligence.

Standstill provisions are frequently included in non-disclosure agreements and are fairly common in hostile takeovers. In private M&A transactions, standstill provisions are rather rare.

It is common for potential buyers to request exclusivity for a relatively short period of one to three months. Such exclusivity clauses are typically inserted in the offer letter or letter of intent, but parties may also enter into separate agreements on exclusivity. In public M&A, exclusivity is, however, not often granted (also in view of the target’s statutory obligations in case of competing bids).

In principle, the completion of a transaction in breach of an exclusivity clause or agreement will only result in the unwinding of the transaction if it has been established that the third-party acquirer acted in bad faith (ie, that party was aware that the transfer would be a breach of the exclusivity agreement). In that case, the third-party acquirer may also be held liable for damages. In all other cases of a transaction in breach of an exclusivity clause or agreement, the seller will, in principle, be exposed to damages incurred by the potential acquirer that had obtained exclusivity.

While allowed, tender offer terms and conditions are rarely documented in a definitive agreement. Such agreements would potentially risk being qualified as behaviour of different potential acquirers acting in concert and therefore be subject to sanctions (for the definition of acting in concert, see 4.2 Material Shareholding Disclosure Threshold).

The time taken to acquire/sell a business in Belgium may vary from a few weeks to several months.

Private M&A Transactions

With respect to private M&A transactions, the length of the transactional process will depend on the specific circumstances of the case. For instance, prior consents from regulatory authorities or the duration of the due diligence process may impact the flow of a transaction. The transaction process may also take longer when it is structured by way of an auction process, instead of a bilateral negotiation process (although it is not uncommon to pre-empt the auction process by requesting bilateral negotiations). The higher the deal value, the more likely it is that the transaction will be organised through an auction.

Public M&A Transactions

For public M&A transactions, the timing of the takeover process is strictly regulated. The overall procedure of a voluntary takeover bid is similar to a mandatory takeover bid: 

  • the bidder must first make an initial confidential notification (including an offer notice, a draft prospectus, a draft press release and any relevant documents) to the FSMA;
  • at the latest on the day after having received the initial notification, the FSMA publishes it and makes an official announcement to the bidder, the target, the public and the relevant stock exchange;
  • after having received the draft prospectus from the FSMA, the target’s management body must notify the FSMA and the bidder within five business days of any potential missing or misleading information in the draft prospectus;
  • as soon as the FSMA receives a complete file for examination, it has ten business days to approve the prospectus – if the FSMA has not taken a decision in this respect at the end of this period, the bidder can urge it to do so, if the FSMA does not react within ten business days after having received this reminder, the prospectus is deemed to be denied;
  • within five business days after receiving the approved prospectus by the FSMA, the target’s management body must file a response memorandum with the FSMA for approval;
  • if complete, the FSMA must decide on the approval of the response memorandum within five business days;
  • the acceptance period during which the securities holder can accept the offer commences at the earliest after five business days following the approval of the prospectus or of the response memorandum (if this approval is made before the approval of the prospectus), the bid must remain open for a minimum of two weeks and a maximum of ten weeks (with a possible extension of two weeks under certain conditions);
  • no later than five business days from the closure of the acceptance period, the bidder must publicly announce the results of the bid; and
  • if the bid is successful, the bidder pays the price within ten business days from the publication of the results of the bid (or requests to be listed within one month following the end of the bid procedure in the case of an exchange offer).

Because of the limited size of the Belgian stock market, the number of private M&A transactions outweighs the number and total value of public M&A transactions by far.

Impact of COVID-19 on the Transaction Process

Delays in the transaction process, if any, have overall been rather limited. As mentioned in 1.1 M&A Market, a significant number of transactions were put on hold upon the outbreak of COVID-19 and some of them were restarted later in the year. However, apart from that, no significant delays were experienced in the timing of the transaction process, both in terms of due diligence, co-operation and negotiation between the parties and obtaining the necessary regulatory approvals, as a result of the governmental measures imposed to address the pandemic.

Belgium has a mandatory offer threshold in the case of an acquisition of securities with voting rights in a Belgian listed company on the one hand and a sell-out right for remaining securities holders following a public takeover bid on the other. 

A mandatory takeover bid for all remaining shares of the company must be launched when a person, as a result of its own acquisition or the acquisition by persons acting in concert with it, holds directly or indirectly more than 30% of the securities with voting rights in a Belgian company whose securities are admitted to trading on a regulated market. 

A mandatory bid is not required when the 30% threshold is exceeded within the context of a voluntary takeover bid, a transfer between affiliated companies, or a share capital increase with preferential subscription right.

Furthermore, the obligation to launch a mandatory offer does not apply where a third party controls the target or owns a larger stake than the person(s) acquiring 30% of the voting rights securities. This exception is subject to a standstill period of three years after the acquisition.

Finally, temporarily exceeding the threshold by a maximum of 2% is allowed, provided that the buyer (i) sells the excess within 12 months, and (ii) does not exercise its voting power relating to the excess.

In relation to squeeze-out thresholds, see 6.10 Squeeze-Out Mechanisms.

In principle and subject to certain exceptions, consideration offered within the framework of both private and public acquisitions can consist of cash, securities, or a combination of both. Consideration in cash is almost exclusively used for both private and public M&A transactions in Belgium. Exchange bids are extremely rare on the Belgian market, and are more common in private M&A transactions. In the case of mandatory takeover bids, a cash alternative must, in some circumstances, be offered to the security holders. If the consideration offered by the bidder does not consist of liquid securities listed on a regulated market or if the bidder, alone or acting in concert, has acquired securities of the target in cash during the 12 months prior to the announcement of the bid or during the offer period, the bidder must foresee a consideration in cash as an alternative.

The most common tool used to bridge value gaps is an earnout mechanism. Furthermore, warranty and indemnity insurance is now more frequently used to bridge more general negotiation gaps, including to resolve valuation discussions on certain issues. 

A mandatory takeover bid must be unconditional, whereas a voluntary takeover bid can be subject to certain specific conditions, which need to be pre-approved by the FSMA. 

If the conditions of the voluntary takeover bid are not met, the bidder may modify the offer or notify the FSMA of an intention to withdraw the offer. An offer may, for instance, be subject to:

  • a minimum acceptance threshold to ensure that the bidder can control the target company after the bidding process (eg, the obtaining of 60% of the shares);
  • the non-occurrence of an event beyond the bidder’s control; or
  • amendments to the target company’s articles of association.

In any case, the bid should normally allow the offeror to achieve the intended result. In practice, the FSMA is reluctant to approve any specific conditions that are likely to limit the success of the bid.

Furthermore, a bidder may withdraw its voluntary offer if the European Commission and/or of the relevant national competition authority decide that the takeover would constitute a concentration which is incompatible with applicable competition law.

A voluntary tender offer can be subject to conditions (see 6.4 Common Conditions for a Takeover Offer). One of the most common conditions included by the bidder in its offer, is a minimum level of acceptance in order to ensure that the bidder can control the target company after the bidding process. Thresholds have varied between 50% and 95%. In practice, the FSMA is reluctant to approve any specific conditions, such as minimum acceptance, that are likely to limit the success of the bid.

In public M&A transactions, a bid cannot be conditional on obtaining the necessary financing. The funding must be entirely committed before the bid is announced. The bidder must provide evidence to the FSMA that it has the necessary funding to pay in full the bid price, either in the form of an unconditional and irrevocable bank credit facility concluded with a Belgian credit institution, or in a special bank account opened with a Belgian credit institution. In exchange offers, the bidder must provide evidence to the FSMA that the securities to be offered in exchange are available to it, or that it has the power to issue or acquire these securities from another person (for example, an affiliate).

In private M&A transactions, it is possible to include the obtaining of financing as a condition precedent in the acquisition agreement. While it is not uncommon, the seller will always try to avoid a financing condition precedent. If unavoidable (including, for instance, when the purchaser is a private equity player, the seller may sometimes try to negotiate thresholds for obtaining the financing (ie, a sufficiently high interest rate and leverage ratio).

In principle, a non-solicitation clause pursuant to which the company undertakes not to solicit any additional offers from other bidders is valid. However, the validity of (other) deal security measures is debated under Belgian law as it could be argued that they are not in the corporate interest of either the bidder or the target company. Therefore, deal protection measures such as match rights, force-the-vote provisions or break-up fees are rare, and it may be delicate to enforce such measures under Belgian law.

However, break-up fees are included from time to time in documentation regarding M&A transactions, in particular in competitive auction processes or in larger transactions, where the parties are already committed, or will commit, to each other between signing and closing.

Impact of COVID-19 on Deal Security Measures

The impact of COVID-19 on deal security measures has been fairly limited so far. In general, the pandemic has mainly resulted in a particular focus on the impact of COVID-19 on the business and its turnover during operational due diligence. The (expected) impact of COVID-19 is therefore mainly reflected in the valuation of targets. However, on certain occasions, parties have agreed to include a material adverse change clause, dealing with the impact of COVID-19 on the business, between signing and closing as a condition precedent in the transaction documents.

Where a bidder does not seek to acquire 100% ownership of a target company, it may choose to strengthen its governance rights by entering, for instance, into a shareholders’ agreement with the remaining principal shareholder(s) of the target. Shareholders’ agreements will typically include clauses regarding governance at the level of the board of directors and the shareholders’ meeting (including quorum, majority and/or voting requirements, or providing veto rights for certain essential decisions). They also typically include share transfer restrictions (pre-emption rights, tag-along rights, drag-along rights, call and put options).

For listed companies, a shareholders’ agreement concluded between shareholders may qualify as a concerted action within the meaning of Belgian takeover legislation, and therefore trigger the obligation to launch a mandatory takeover offer if the mandatory offer threshold of 30% would be met.

Shareholders may vote by proxy. The shareholder may specify precise voting instructions or leave the voting up to the discretion of the proxyholder. The articles of association may not suppress a shareholder’s right to appoint a proxyholder, but it is possible to modulate this right (eg, a proxy can only be granted to other shareholders, and only one proxy per shareholder). Furthermore, the articles of association may impose a registration procedure on shareholders represented by proxy. This will, in particular, be the case for listed companies.

In addition, and driven by the need for more flexibility for remote participation and voting at shareholders’ meetings, a new law has been adopted containing more flexible rules for companies that wish to organise their shareholders’ meetings virtually (see 3.1 Significant Court Decisions or Legal Developments). Such virtual shareholders’ meetings are still subject to certain conditions on security and identity verification and simultaneous participation.

Within the framework of a takeover bid, if the bidder holds at least 95% of the share capital conferring voting rights and 95% of the voting securities in the target as a result of the tender offer (and provided that the bidder acquired 90% of the share capital conferring voting rights of the target in the course of the bid), the bidder can squeeze out the remaining security holders under the same conditions as the initial bid. The bidder must reopen the bid within three months as from the closing of the acceptance period. The offer period must be a minimum of 15 business days. Any securities not tendered to the reopened bid are considered transferred to the bidder by operation of law.

Furthermore, the BCAC also provides for a squeeze-out mechanism outside the framework of a public takeover bid. The security holders of listed limited liability companies which, acting alone or in concert, hold 95% of the securities conferring voting rights are, subject to certain conditions, entitled to require that all the remaining minority security holders sell their securities at an equitable price. The securities not offered at the end of the acceptance period of the offer are transferred automatically to the offeror. 

Finally, the BCAC provides for a squeeze-out mechanism for non-listed companies. Both the majority security holders of limited liability companies which are not listed on a regulated market, as well as the majority security holders of private limited liability companies, have a similar squeeze-out right. However, as opposed to the minority security holders of listed liability companies, the minority security holders who have explicitly confirmed in writing their refusal to sell their securities to the offeror, will not be squeezed out at the end of the acceptance period of the offer.

The validity of other freeze-out mechanisms under Belgian law, such as an asset sale to a special purpose vehicle, will be subject to scrutiny and may result in director’s liability.

Many Belgian companies (both private and listed companies) are characterised by a concentrated (family) shareholder structure. Consequently, a tender offer for a Belgian listed company is often only successful if the majority/significant shareholders of the company have committed to tender their shares to the bidder.

In practice, a bidder will therefore negotiate with the principal shareholders of the target company before submitting its offer. In this respect, it is not uncommon to obtain the irrevocable commitment of the principal shareholder(s) to tender their shares within the context of the offer. However, the validity of such a commitment cannot be fully guaranteed, as a security holder who has accepted within the context of the offer may always withdraw their acceptance at any time during the acceptance period of the offer.

Unlike public takeover bids, bids in the context of negotiated business combinations are not subject to specific disclosure requirements.

Takeover bids on shares of listed companies are subject to strict disclosure requirements. In this case, only the FSMA is allowed to publicly announce a bid following the notification thereof by the bidder. Upon notification of the bid, the bidder should submit the following information to the FSMA:

  • information regarding the bid;
  • any envisaged advertisement or publication;
  • the draft prospectus; and
  • if the bidder controls the target, an independent expert’s report.

The FSMA will subsequently publish the notification the following working day. No public announcements regarding the bid are allowed prior to such publication. 

If the target has voting shares listed on a regulated market in a different EU member state, the bidder must also notify its bid in that EU member state in accordance with local regulations.

Should there be rumours and speculation in the market, the FSMA can instruct a party to make a public announcement clarifying its intentions. Should the party confirm its intentions to launch a bid, it must proceed to notify that bid to the FSMA. If the party rejects the rumours, it is prohibited from launching a bid during the following six months (“put up or shut up” rule).

Non-listed companies must prepare a board report and statutory auditor’s report in order to issue new shares in a business combination. In addition to submitting these reports to the shareholders, they should be filed with the Commercial Court, together with the decision of the shareholders, an extract of which will be subject to publication. 

If shares are issued within the context of a statutory procedure (ie, a (de)merger or contribution of a branch or universality of assets) the companies involved should prepare a proposal, a board report and a (statutory) auditor’s report. These documents should be submitted to the shareholders and filed with the Commercial Court, together with the final decision of the shareholders, an extract of which (and for (de)mergers, also the proposals) will be published. In addition, the shareholders in (de)merger operations must have access to the annual accounts, board reports and statutory auditor’s reports of the (de)merging companies of the past three years, possibly together with recent financial statements should the annual accounts be outdated. 

If a listed company envisages issuing shares, it should in principle, save for certain exceptions, publish a prospectus. Alternatively, the publication of a more limited information memorandum may suffice, should the total value of the issued shares not exceed EUR5 million over a period of 12 months.

In negotiated business combinations, it is unusual for the bidder to produce its financial statements. However, should the business combination be structured as a (de)merger, the bidder should make its annual accounts, or more recent financial statements, available to the shareholders (see 7.2 Type of Disclosure Required). 

Bidders launching a public takeover bid are required to submit the latest annual accounts and/or consolidated annual accounts of the bidder and the target as part of the prospectus. Should the annual accounts be older than nine months or should the company have undergone material changes in the meantime, more recent financial statements must be added to the prospectus. If the annual accounts are not in line with EU law and do not represent a true and fair view, additional information must be submitted. 

Belgian listed consolidating companies must prepare International Financial Reporting Standards (IFRS) consolidated annual accounts. Other Belgian companies should prepare their annual accounts in accordance with Belgian generally accepted accounting principles (GAAP).

In the context of negotiated business combinations, no transaction documents must be published. However, business combinations structured against the background of a statutory procedure (merger, demerger, etc) are subject to certain disclosure and publication requirements (see 7.2 Type of Disclosure Required). 

Within the context of public takeover bids, certain transactional documents should be disclosed and published in full. The prospectus will be published upon its approval by the FSMA. If the bidder controls the target, an independent expert’s report will also be published as an annexe to the prospectus. The target’s board of directors then has five working days following the approval of the prospectus to submit a draft response memorandum to the FSMA. The target should publish the response memorandum upon approval by the FSMA. Finally, the bidder should publish the results of the public takeover bid upon expiry of the acceptance period, together with the amount of the securities it holds following the completion of the bid.

As a general rule, directors are required to act in the best interest of the company. The interest of the company is determined by the collective profit interest of the current and future shareholders of the company. This remains, however, a highly factual (rather than purely legal) assessment and may include (or better, overlap with) the interests of other stakeholders (such as employees or creditors). 

However, within the context of a takeover bid on listed shares, the target’s board of directors should take into account the (broader) overall interests of the target and its security holders, as well as its creditors and employees, when explaining the board of directors’ position with regard to the bid in the response memorandum and its possible consequences regarding employment. 

The Belgian (soft law) Corporate Governance Codes for listed companies (2020 Belgian Code on Corporate Governance) and non-listed companies (Code Buysse III) provide that the board of directors may create specialised committees to advise on specific matters and strategic decisions, without delegating such decisions. In addition, the articles of association or internal rules of the board of directors could explicitly provide for the creation of specialised committees.

It is, however, rather uncommon for a board of directors to formally create a special or ad hoc committee to advise on business combinations. It is more common to set up informal specific ad hoc working groups tasked with advising and monitoring business combinations. The composition and functioning of these groups is flexible and will depend on the specific needs of the business combination. Other committees, such as an audit committee, may also be involved to perform their specific role vis-à-vis the business combination.

While the creation of a special committee might be recommended in the event of certain conflicts of interest, this is not required under Belgian law. Mandatory statutory conflict of interest procedures require the conflicted directors to disclose their conflict and to abstain from the decision-making process (both the deliberation and the vote). The remaining directors can subsequently proceed with the deliberation and decision. Should all directors be conflicted, they are required to submit the envisaged decision or transaction to the general meeting of the shareholders for their approval. However, the board of directors of a listed company is required to create a special committee for every decision or transaction of the company or its non-listed subsidiaries relating to an affiliated individual or company that is not a subsidiary. This special committee, composed of three independent directors and one or more independent experts, prepares a written and motivated report to advise the board of directors on the envisaged decision or transaction.

Belgian courts may not substitute directors’ decisions with their own personal judgement when those decisions lie within the discretionary powers of the directors. Courts can only review such decisions under a marginal test – ie, whether the decision falls outside of the margin of possible decisions that a careful, diligent and reasonable director placed in similar circumstances would take.

Depending on the size and scope of the business combination, directors will often appoint independent outside advisers to consult on financial, legal and tax aspects of the business combination and assist with the due diligence and valuation of the target. 

Independent expert advice may be required in certain circumstances; for example, within the context of (de)mergers or the takeover bid of a controlling bidder on shares of a listed company.

As a preliminary remark, relatively few judgments of Belgian courts are published and, as a result, not many judicial decisions are publicly available.

That being said, conflicts of interest of directors of a target company in a public takeover context have been the subject of judicial scrutiny in two notable cases before the Brussels Commercial Court and Brussels Court of Appeal. The case law has established that the mandatory statutory conflict of interest procedure is not applicable in the mere context of a public takeover bid whereby conflicted directors of the target do not abstain themselves from the preparation of the response memorandum, even where those directors are also directors in the bidder. 

Within the context of a public takeover bid, the prospectus should mention the intention of the bidder regarding the (mandate of the) directors of the target. This should allow the target’s shareholders to accordingly weigh the response memorandum, should it be overwhelmingly positive or negative.

Hostile tender offers are allowed, yet sporadic, in Belgium. Recommended takeovers are by far the most frequently occurring type of takeover. This is mainly due to the nature of Belgian listed companies, which are often family-owned or controlled by one or several shareholders. Consequently, in such cases, irrevocable commitments by the controlling shareholders will typically be required. This, in turn, makes hostile tender offers rather unusual.

Directors can take defensive measures as long as these are in the interest of the company as a whole. Specifically, for public takeovers, Section 9, 3° of the Public Takeover Law reflects this principle. Generally, directors must always exercise their powers in the company’s best interest.

Shareholders can, however, include restrictions in the articles of association on the directors’ freedom to frustrate a hostile takeover. For instance, the articles of association may include (i) a requirement for the prior authorisation of the shareholders’ meeting before the directors can take any action susceptible to frustrate a bid, or (ii) a provision making restrictions on the transfer of securities with voting rights unenforceable during the bid. In addition, the shareholders could also make certain voting and other rights, provided for in the articles of association or in contractual agreements between the target and the target's shareholders, unenforceable during the bid (the “breakthrough rule”).

Companies can also link the above to a reciprocity condition, meaning that the implementation of these restrictions can be subject to the same rules being applied by the bidder.

The most common defensive measures taken by the board to frustrate takeovers are the increase of the share capital under the authorised capital procedure (ie, the delegation of the powers needed to increase the share capital by the shareholders’ meeting to the board of directors), the issuance of warrants or bonds that become convertible in the case of a hostile takeover, and the buy-back of shares without the prior approval of the shareholders’ meeting. For all these measures, however, the prior approval of the shareholders’ meeting is needed, and such approval may only be granted for a renewable period of, at most, five years.

Shareholders frequently protect their interests from a hostile takeover by including restrictions on the transfer of shares in the articles of association and shareholders' agreements. Common examples are the inclusion of a pre-emption right, a right of first refusal or approval, standstill provisions and tag-along rights. Under the BCAC, shareholders can also protect their interests by granting multiple voting rights to certain shares in the articles of association. Besides the above, shareholders can also adopt a disposal-of-assets measure prior to the offer period and make this conditional upon an offer being launched.

Additionally, the inclusion of change-of-control clauses in important agreements is another common possible measure. While it is not a measure specific to tackling a potential hostile takeover, it could have a dissuasive effect for any potential buyer. In the case of a private company, the board of directors needs to approve such change-of-control clauses. For listed companies, the shareholders’ meeting needs to approve them as well.

The COVID-19 pandemic has not had an impact on the prevalence of defensive measures.

At the risk of being held personally liable, directors should always act in the best interest of the company. This also applies when taking defensive measures.

Directors can combine a refusal to negotiate with an unwillingness to waive defensive measures, but only if this in the best interest of the company. As this is usually hard to assess upon receipt of a first offer, it is recommended for directors to have at least initial talks regarding the offer to avoid any personal liability.

The directors of the target do, however, need to draft a memorandum in reply to the takeover offer. If directors take a different position, in this memorandum, to the shareholders, this could influence the shareholders’ positions. Regardless of the position of the directors, the shareholders make their own assessment of the offer and decide on the offer independently.

As court judgments in Belgium are not published, it is hard to assess the frequency of litigation in connection with M&A deals. The trend, however, seems to be that litigation is becoming increasingly common. If the deal concerns a hostile takeover (which does not occur often), litigation is a common strategy to frustrate or delay the bid.

Pre-closing litigation is rather common in the event of a hostile takeover (see also 10.1 Frequency of Litigation).

In the case of private M&A deals, the vast majority of litigation proceedings occur in the post-closing stage. In such cases, purchasers often seek damages for breaches of representations, warranties or specific indemnities.

As mentioned in 10.1 Frequency of Litigation, court judgments in Belgium are in general not published, and if decisions are published, there is often a delay. "Broken-deal" disputes, and information about them, are therefore rare.

In general, despite the fact that the COVID-19 pandemic has had a significant impact on the organisation of businesses, the (M&A) market has shown itself to be remarkably resilient (mainly due to the digital tools and solutions available). Despite the drop in M&A activity at the beginning of the pandemic, we can conclude that it has been business as usual in 2020. As a result, it is still recommended to enter into a detailed term sheet before entering into more detailed negotiations to avoid misunderstandings as to the general terms and conditions of the transaction at a later stage.

Shareholder activism in Belgium is a rather limited occurrence as minority shareholders within large Belgian companies often lack an incentive to take such action. Large shareholders usually own sufficient shares to control the company and can, therefore, often significantly impact the appointment of directors and the strategy of the company. In view of this, it is very difficult for minority shareholders to have any influence on the corporate decision-making process given the existence of larger shareholders. However, with respect to certain topics, such as director remuneration, shareholder activism has increased.

Generally, shareholders in Belgian companies tend to limit their activism to reacting to the behaviour of the company to protect their own interests. It is unusual for a shareholder in a Belgian company to try to actively impact the corporate policies pursued by a company.

Reactive (and, less commonly, proactive) activism can be aimed at both financial and non-financial aspects of the running of a company. In relation to M&A in particular, activist shareholders have questioned the financial and strategic motivation of certain boards. The COVID-19 pandemic had no particular impact on this in 2020.

Activist shareholders in Belgian companies have, on occasion, tried to interfere with the completion of announced transactions. A failed example of such interference was the exercise of the right to ask questions during the annual general meeting, in relation to a proposed merger, and the questioning of the independence of the independent directors, by the minority shareholders of Immobel. An example of successful interference was the shareholder activism in relation to the proposed merger between Picanol and Tessenderlo.

Van Bael & Bellis

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Willkie Farr & Gallagher LLP is an elite international law firm that delivers superior client service across a broad spectrum of practice areas. In addition to the firm's primary areas of corporate/M&A, private equity, business reorganisation and restructuring, complex litigation, compliance, investigations and enforcement, antitrust and competition, asset management, insurance and reinsurance, the firm’s approximately 750 attorneys collaborate to provide multidisciplinary advice across the areas of capital markets, communications and media, cybersecurity and privacy, environment, health and safety, executive compensation and employee benefits, finance, global trade and investment, intellectual property, private client, real estate, special committee, structured finance and derivatives, and tax. Willkie Farr & Gallagher LLP brings together multidisciplinary capabilities to deliver comprehensive advice in an integrated manner, leveraging the firm’s resources to create value for clients.


The COVID-19 pandemic has had a significant impact on M&A practice in a variety of ways:

  • difficulties in the valuation of the target company since its historical financial figures may not be representative of its future performance and, consequently, the related need to draft earn-out clauses and avoid locked-box mechanisms;
  • the growing need to negotiate material adverse change (MAC) clauses;
  • a more cautious approach to due diligence (risk-based approach);
  • difficulties in the process of negotiation and due diligence investigation in a remote working environment, and delays from regulatory bodies and within financing processes; and
  • increased state interventionism (eg, foreign direct investment (FDI) control).

The current crisis might also provide new opportunities for investors. There is, for example, strong interest from investors, whether private or institutional, in life sciences and biotech companies, as well as in the TMT sector). There are also opportunities to invest in distressed companies (eg, in the context of bankruptcy or judicial reorganisation proceedings).

On the other hand, the pandemic has also revitalised classical legal concepts allowing, under certain conditions, for the acquiring party to either walk away from the transaction or to renegotiate some of its conditions (force majeure, hardship, MAC clauses, good faith renegotiation clauses, etc).

All these consequences of the coronavirus are global and not particular to the Belgian M&A market. Regarding Belgium specifically, a few recent legal developments might influence Belgian M&A transactions, in particular, some questions arising from the entry into force in 2020 of a new Belgian Company Code and from a new set of rules on unfair or prohibited B2B contract clauses.

Transition Period of the New Belgian Company Law: Some Questions Raised in Due Diligence


In Belgium, the switch since 2020 from former to new company law inevitably raises questions and uncertainties as to which rules should apply to M&A situations which overlap the two regimes.

The Belgian law introducing the new Belgian Code on Companies and Associations (or BCCA) expressly solves many questions concerning the transition period. Other situations, however, are not explicitly discussed and therefore remain debatable.

For instance, when performing due diligence, one could wonder whether a contractual change of control clause, which used to be invalid, could now become valid thanks to the new legislation. Another example is the sale of shares in a Belgian private limited liability company (SRL/BV) where the transferred shares have not been fully paid-up. Under former case-law, the main position consisted in releasing the seller from any duty to pay up, whereas the new company law creates joint and several liability of the seller and buyer to pay up the unpaid shares.

These two examples, which will be focused on hereafter, must be analysed in the light of the Belgian (general) principles governing transition periods.

Belgian transitional law principles

Under Belgian (common) law, Article 1 of the Belgian Civil Code states that the law only applies for the future and has no retroactive effect.

The Belgian Supreme Court has nuanced this rule. Indeed, it has envisaged the case where a situation was created under the former regime but the future effects of which would occur or continue to occur under the new legal regime. In such a case, as far as the application of the new law does not affect rights which were already irrevocably fixed, then the new law applies to these future effects.

By way of derogation thereto, with respect to the future effects of contracts specifically, the former law remains applicable, except to the extent that the new law would (i) concern the public order, (ii) have mandatory provisions, or (iii) expressly mention that it applies to ongoing contracts. In the latter three events, the new law would apply, but would it only apply to the extent it does not affect irrevocably fixed rights (as mentioned above)? There is no clear answer to this question, which leads to legal uncertainty (see  the discussion under Applied to the transfer of unpaid shares below).

Applied to contractual change of control clauses

When performing due diligence, one of the key questions is whether one of the many contracts entered into by the target company – with its banks, suppliers, customers, landlords or other contractors – contains a change of control clause or not. As a reminder, a change of control clause is, basically, a provision in an agreement giving a party certain rights (such as consent, payment or even termination) upon a change in ownership or management of the other contractual party.

Experience shows that many credit or commercial contracts to which a target company is a party, contain a change of control clause, albeit in their general terms and conditions, but that most of them have not been approved by the company’s shareholders.

Before Belgian's 2020 company law reform, the absence of shareholders’ prior consent to a change of control clause could render this clause invalid, and thus deemed unwritten. Since 2020, however, such prior approval is no longer required in non-listed companies.

This raises a very important question in due diligence, in particular, when the data room includes contracts concluded by the target company before 2020 but still in force today. May a change of control clause contained therein, which was considered invalid prior to 2020, suddenly become valid (since 2020)? The answer can be yes, although there is no clear-cut position on this.

Given the possible positive answer to this question, attention should, more than ever, be paid to the identification of change of control clauses, even if they were never approved by the target company’s shareholders. These clauses must be addressed timely, before closing the M&A transaction, by taking the appropriate measures.

Such measures could include, as the case may be, a mere notification of the transaction to the counter-party, its approval prior to the transaction, or even a re-negotiation of the (continuation of the) contract, etc.

Applied to the transfer of unpaid shares

To be granted new shares in a Belgian limited liability company, and thus to become a shareholder in this way, the founder or subscriber must (commit to) bring a contribution to the company. If this contribution consists in an amount of money (ie, a cash contribution) it does not necessarily have to be paid up in its entirety immediately. Even if not fully paid up, the shares can be transferred.

In this case, it is crucial to know who, of the seller and the purchaser, will be held liable towards the company and third parties for paying up the unpaid shares after their transfer.                   

Imagine, for instance, that the company goes bankrupt a few months after the share transfer because of poor management by the purchaser. Would the bankruptcy administrator be entitled to require the seller to pay up the unpaid shares, when that seller (former shareholder) was obviously no longer involved in the company?

The answer since 2020 is yes in all cases. Indeed, the new Belgian company law embraces joint and several liability of the seller and buyer, towards the company and third parties, to pay up the unpaid shares.

However, before 2020, with respect to the unpaid shares in a Belgian private limited liability company (société (privée) à responsabilité limitée orS(P)RL/besloten venootschap (met beperkte aansprakelijkheid) orBV(BA)) specifically, the main position consisted in releasing the seller from any duty to pay up.

In light of the foregoing, a further important question relates to situations which overlap the previous and new regimes when the target company is a private limited liability company (S(P)RL or BV(BA)).

Indeed, to continue with the same example as above (ie, in a case where a cash contribution for shares has not yet been fully paid up), let’s say that the share deal occurred before 2020 and the bankruptcy in 2020 or later. Will the bankruptcy administrator be entitled to invoke the new legal rules to pursue the seller to pay up the unpaid shares, whereas the share transfer occurred under the former regime according to which the seller was released from any duty to pay up? In other words, while the seller was (definitively) released from a specific obligation as from the transfer, can a future law make them suddenly liable for that same obligation ?

The answer could be no, assuming the new (mandatory) law – in this case the provisions of the BCCA embracing the joint and several liability of both the seller and purchaser to pay up the unpaid shares – only applies to the extent it does not affect irrevocably fixed rights. The (definitive) release from the obligation to pay up would constitute such a fixed right. However, this assumption has so far been neither expressly confirmed, nor rejected, by law or case law (as discussed in the Belgian transactional law principles section above) and could therefore be challenged.

As a result, it is highly recommended to verify whether all the shares in a target company have been fully paid up and, if this is not the case, have them fully paid up prior to the share deal.

If the parties’ intention is not to do so, but rather, for instance, to lower the sale price accordingly, then the seller must be aware that they may, nevertheless, still be held liable in the future, and thus have paid twice in the end. Of course, the seller may afterwards turn against the purchaser, but it might then be too late to recover money from them, for instance in the case of a (group) bankruptcy.

Prohibition of Abusive Clauses in M&A Transactions


The Belgian Act of 4 April 2019 (the Act) which entered into force on 1 December 2020 introduced a set of rules on unfair or prohibited B2B contract clauses which may have an impact on the M&A process.

These rules are inspired by the existing prohibition of abusive clauses in B2C contractual relationships.

This new Act has a broad scope and shall apply to any agreement between any type of enterprise, concluded, renewed, extended or amended as from 1 December 2020, such as, in the M&A context, share purchase agreements, shareholders’ agreements or non-disclosure agreements.

The protection offered by the new rule applies to all enterprises regardless of their size or whether they are in a dependent relationship with their counterpart.

Protection offered

The Act introduces a general “fairness” principle as well as a “black list" and “grey list" of clauses which are deemed abusive.

According to the general principle, a clause is deemed abusive if it creates, alone or in combination with other clauses, a clear imbalance between the rights and obligations of the parties.

This imbalance must be legal and not economic and must be assessed taking into account, inter alia, the general scheme of the agreement or the usual trade practices in the relevant sector. In addition, the Act is not applicable to the core clauses of the agreement, such as the adequacy of the price paid in consideration for the services rendered.

Assessing in each specific case whether such imbalance exists will be challenging as the legislation is quite vague and will raise complex interpretation issues. However, it can be said that the fact that a clause is simply unfavourable to one party will not be sufficient, a clear and manifest imbalance is needed.

To help such assessment, the legislation contains two non-exhaustive lists of clauses.

Firstly, the “black list" which contains clauses that are abusive and prohibited in all cases, no matter the context. This list includes, for example, “potestative” clauses (ie, clauses in which the execution depends solely on the will of one of the parties). This may raise issues in share purchase agreements or shareholders' agreements for put or call options exercisable at the discretion of one of the parties, or earn-out clauses if it can be considered that the earn-out price is decided based on the actions of the purchaser, in each case assuming that such clauses cannot be considered “core” to the agreement.

Other “black list” clauses include clauses giving one party the right to unilaterally interpret any clause of the agreement or clauses requiring one party to waive any means of recourse against the other party in the event of a dispute.

Secondly, the “grey list" contains clauses which are deemed abusive unless proven otherwise. This list includes, for example, clauses giving the right to one party to unilaterally modify terms of the contract, including the price; clauses which place the economic risk on a party when this risk would normally be borne by another party, without counterpart; or clauses that exempt a party from liability for wilful misconduct or gross negligence and, except in cases of force majeure, for any failure to fulfil the essential obligations covered by the contract.

Keeping in mind that, even if a clause is not included in one of the two above-mentioned lists, it may still be considered abusive on the basis of the general principle.


In the event a clause is deemed abusive, that clause shall be declared null and void, meaning that the agreement as a whole will remain enforceable with the exception of the abusive clause (save as otherwise provided in the agreement).

What to do

These rules must be taken into account in the negotiation and drafting of agreements at every step of an M&A transaction.

If the agreement is subject to Belgian law, the Act, as mandatory law, cannot be excluded by the parties; any provision to that effect shall be deemed unenforceable and even if the parties decide to choose the law of another jurisdiction, the control by the Belgian courts of this aspect of the agreement may not be completely excluded.

Accordingly, it may be prudent to document the negotiation and drafting process to be able to prove, in the event of a dispute, that the clause in question is not, in this specific context, abusive and that there is no imbalance in this case.

This may be done by keeping a record of the different drafts of the agreement and keeping track, as far as practicable, of the requests made by each party as well as the concessions made in return. Furthermore, the preamble of the agreement may include an explanation of the motivation of each party, as well as of the general context of the transaction.

While these steps are certainly useful, these rules are still untested and it remains to be seen how these provisions will be applied by Belgian courts and whether it will be sufficient in the event of a dispute. Since this Act creates a lot of uncertainty as to what shall constitute an abusive clause, there is a risk that dispute shall arise with respect to its application and interpretation and that it may be used by parties to try to escape their contractual obligations.

Willkie Farr & Gallagher LLP

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+32 2 290 18 21
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Van Bael & Bellis is a leading independent law firm based in Brussels, with offices in London and Geneva. Alongside its strong corporate and commercial offering, the firm is highly regarded for its extensive expertise in EU competition, EU and international trade, and EU regulatory law. The firm has a corporate M&A team recognised as one of the leading independent M&A practices in Belgium. Its lawyers have in-depth experience in providing advice to clients in complex Belgian and cross-border transactions, regularly advising international clients active in highly regulated industries. The team’s expertise extends to all aspects of corporate law, including private M&A, public M&A and capital markets (debt and equity), insolvency and restructuring, private equity and venture capital transactions, corporate real estate transactions, corporate governance and corporate litigation, and acquisition finance.

Trends and Development


Willkie Farr & Gallagher LLP is an elite international law firm that delivers superior client service across a broad spectrum of practice areas. In addition to the firm's primary areas of corporate/M&A, private equity, business reorganisation and restructuring, complex litigation, compliance, investigations and enforcement, antitrust and competition, asset management, insurance and reinsurance, the firm’s approximately 750 attorneys collaborate to provide multidisciplinary advice across the areas of capital markets, communications and media, cybersecurity and privacy, environment, health and safety, executive compensation and employee benefits, finance, global trade and investment, intellectual property, private client, real estate, special committee, structured finance and derivatives, and tax. Willkie Farr & Gallagher LLP brings together multidisciplinary capabilities to deliver comprehensive advice in an integrated manner, leveraging the firm’s resources to create value for clients.

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