Despite a downturn in the international M&A market, the Belgian market has shown surprising resilience in 2022. This is mainly due to the smaller and strategic transactions. The market has demonstrated greater durability in the segment of deals worth less than EUR5 million, primarily due to decreased reliance on external financing. However, the mid-sized segment (EUR5 to EUR50 million) has experienced a decline in activity, as reported by half of the respondents in the Vlerick Business School M&A Monitor of May 2023. This decline can be attributed to the significant increase in the cost of borrowing money throughout 2022.

The average transaction price across all size segments remains at an all-time high. In 2022, Belgium witnessed its second-strongest year for dealmaking since 2018, with a total value of EUR13.5 billion, despite a slower second half marked by interest rate hikes and prolonged macroeconomic and geopolitical uncertainty. This trend continued in the first half of 2023 due to geopolitical tensions, rising inflation, surging interest rates, pressure on profit margins, supply chain disruption and an energy crisis.

Although inflation is showing glimpses of cooling down and energy prices appear to be under greater control than was the case in the second half of 2022, it is unlikely that interest rates will drop in the near future. As a result, highly leveraged financial transactions will continue to face pressure. The persisting economic uncertainty has led to an increased use of deferred payments. Interestingly, businesses are leveraging the current economic turbulence as an opportunity to enhance their competitiveness. Strategic buyers are taking advantage of this environment, whereas financial buyers tend to lose market share during periods of high interest rates, as their transactions rely heavily on debt financing.

Environmental, Social and Governance (ESG) considerations

Formerly considered a risk to be avoided, ESG is currently recognised as one of the most substantial opportunities for value creation and transformative industry shifts in our era. With sustainability considerations becoming more influential, Belgian companies are facing greater pressure to align their operations with these principles. This marks a clear shift towards integrating sustainability values into the core of business strategies and decision-making processes. Demonstrating a proactive stance in sustainability not only sets companies apart, but acts as a pivotal factor in fostering long-term goals such as establishing valuable supplier relationships, meeting rising customer expectations and attracting acquirers seeking to bolster their ESG profiles. Forging partnerships across the value chain is crucial, enabling the scaling of progress, resource combination, and the enhancement of data gathering and protocols in the pursuit of sustainable initiatives. Such partnerships can be forged through strategic M&A transactions to further increase customer penetration and accelerate growth.

Artificial Intelligence (AI)

One of the key cornerstones for a successful deployment of an AI ecosystem is the access to human capital in AI. Consequently, some target companies have been early-stage enterprises with no revenue or have been acquired for the sake of adding skilled talent. Belgium, known for its human capital, stands as a pivotal hub attracting global attention, not only for its innovative advancements but also as an increasingly attractive destination for M&A within the realms of technology and life sciences, fostering a dynamic environment that consistently fuels growth, collaboration and investment opportunities.

One of the current trends in the AI industry is the increasing use of AI in healthcare, particularly in areas such as disease diagnosis, drug development and personalised medicine. Thanks to fertile cross-pollination between biotech, medtech, pharmaceuticals and healthcare, Belgium offers a unique life sciences ecosystem that is underpinned by a robust financing landscape as well as a supportive government. The 2022 global market downturn significantly impacted listed companies across the world. Amid these formidable challenges, the Belgian life sciences sector faced its share of difficulties. Nevertheless, the resilience shown by Argenx and privately funded biotech firms supported the industry, enabling it to withstand the turmoil. Presently, the biotech landscape in Belgium has rebounded, reaffirming its standing as Europe’s second-largest biotech market, only trailing behind Denmark.

New start-up companies are typically incorporated in Belgium as a private limited liability company (besloten vennootschap (BV)/société à responsabilité limitée (SRL)). Belgian corporate law provides a flexible corporate framework for the organisation of companies. There is no initial capital requirement for incorporation of a private limited liability company, but it requires a sufficient equity for the first three years to perform the envisaged activities, as shown in a financial plan that is filed with the notary at incorporation. To establish a limited liability company in Belgium, the primary time-consuming tasks involve obtaining a bank account and crafting a financial plan. Once these prerequisites are fulfilled, the incorporation process necessitates the execution of a notarial deed before a Belgian notary, typically taking approximately two weeks.

Entrepreneurs are commonly encouraged to opt for a private limited liability company (besloten vennootschap (BV)/société à responsabilité limitée (SRL)). This business structure is specifically crafted to offer flexibility, allowing entrepreneurs to customise incorporation documents according to their specific requirements. In contrast to the public limited liability company (naamloze vennootschap (NV)/société anonyme (SA)), there is no requirement of a minimum capital, but the assets must be sufficient in the light of the activity envisaged. A contribution of assets without the issuance of new shares in the private limited liability company can proceed simply by a decision by simple majority taken by the shareholders. Nonetheless, any choice of business structure should be considered from a tax perspective. It is advisable to consult a legal and tax adviser for more detailed advice on which company structure is best suited to specific needs.

Early-stage financing, also known as seed investment, for start-ups can be sourced from various channels, each with its own unique characteristics. Here are some of the key providers and their respective documentation processes:

Using Your Own Funds

• Provider: Entrepreneurs themselves.
• Documentation: No formal documentation required, but keeping clear records of personal investments is advisable.

Involving Family, Friends and Fans

• Provider: Individuals in the entrepreneur’s personal network.
• Documentation:
1. Co-shareholders: Formal agreements outlining the terms of co-ownership.
2. Borrowing: Clear loan agreements specifying terms and conditions.
3. Win-win loans: Documented loan agreements with specific conditions; government support involves annual tax discounts.

Crowdfunding

• Provider: General public or private investors through online platforms.
• Documentation: Varies by platform; typically involves detailed project descriptions, financial plans, and rewards or equity distribution. Regulation (EU) 2020/1503, effective from 10 November 2021, establishes a unified framework for crowdfunding service providers (CSPs) operating digital platforms, facilitating connections between investors and businesses seeking funding by way of loans (lending-based crowdfunding) or acquisition of transferable securities (investment-based crowdfunding). To operate under the Regulation, CSPs must be authorised by their national competent authority and can then extend their services across EU member states. Additionally, the Regulation imposes operational requirements, including restrictions on inducements, credit risk assessments, due diligence on Project Owners, and investor protection measures such as fair marketing, entry knowledge tests, a reflection period, and the involvement of a licensed payment service provider.

Venture Capital

• Provider: Public and private venture capitalists, business angels.
• Documentation: Comprehensive investment agreements outlining terms, conditions and expected returns.

Corporate Loans

• Provider: Regional public institutions that support economic investment initiatives in Flanders, Brussels and Wallonia and provide corporate loans tailored to small and medium-sized enterprises (SMEs) and large companies that do not involve bank loans.
• Documentation: Detailed loan agreements specifying amounts, terms and conditions; can be subordinated or non-subordinated.

Bank Financing

• Provider: Various banks offering government-supported options.
• Documentation:
1. Investment loans EIB: Agreement with the European Investment Bank and partner banks. This investment credit scheme includes (in)tangible investments within the EU of less than EUR25 million. It aims to support investment projects of European SMEs of fewer than 250 employees, as well as mid-sized enterprises of fewer than 3,000 employees.
2. Guarantee schemes: Detailed agreements outlining guaranteed amounts by the government and conditions.

Non-bank Financing (Leasing)

• Provider: Accredited leasing companies.
• Documentation: Formal leasing agreements, with on-balance and off-balance leasing options.

Each financing option has its specific requirements and documentation procedures. Entrepreneurs should carefully consider the terms and conditions of each source and engage legal and financial professionals to ensure clarity and compliance with financial regulations.

Venture capital funds secure their funding predominantly from family offices, private funds and individual angel investors. While less common, additional investors in venture capital funds may include government-backed institutions and investment companies, such as Noshaq, Participatiemaatschappij Vlaanderen NV, Limburgse Reconversiemaatschappij NV, Federale Participatie-en Investeringsmaatschappij NV and Belgian Growth Fund Comm V.

Belgium does not have specific nationwide regulations or standards governing venture capital documentation. The structuring and documentation of venture capital deals must be in line with general contractual and corporate law and typically depends on negotiations between the parties involved – investors, start-ups and legal professionals.

Belgian corporate law offers a highly flexible framework for organising companies, eliminating the necessity for start-ups to undergo changes in their corporate structure as they progress in development. Notably, even a private limited liability company (besloten vennootschap (BV)/société à responsabilité limitée (SRL)) can be listed on a securities exchange, enhancing the versatility of Belgium’s corporate landscape. Given Belgium’s appeal as a conducive home for companies across all developmental phases, the need to migrate to another jurisdiction is infrequent. Only if a start-up plans significant international expansion might it explore options that facilitate global operations such as setting up subsidiaries in other jurisdictions.

Belgium primarily emphasises its support for SMEs, a sector that may not find significant advantages in initial public offerings (IPOs). Consequently, Belgian companies often turn to private equity (PE) transactions or other funds as a means to secure funding and enhance their financial standing. IPOs are notably infrequent as an exit strategy in Belgium.

While the IPO is widely acknowledged as a prestigious and lucrative way to gather funds, secondary sales and trade sales are frequently favoured for achieving a complete exit by shareholders. In contrast to the IPO, where shareholders often retain their positions, secondary sales and trade sales tend to result in a complete exit for shareholders.

Dual-track processes are typically adopted by investors seeking optimal flexibility and fostering competitive tension between the M&A and IPO paths. Due to the substantial internal resources required, dual-track processes are generally reserved for companies exceeding a certain minimum size threshold.

Euronext Brussels

Euronext is a pan-European exchange that combines the stock exchanges of Amsterdam, Brussels, Lisbon and Paris into a single market. Euronext also has representatives in Germany, Switzerland, Spain and Italy. From young, growth-oriented companies to long-established enterprises, Euronext offers various types of markets with multiple entry points to provide issuers with a tailor-made listing offer.

Euronext Brussels is cited as a centre of excellence in biotech and has distinguished itself in regulated real estate companies. If the company is active in these sectors, listing on Euronext Brussels may be strategic because of the knowledge and investor community present. If the company already operates in Belgium, it may be familiar with local regulations and Euronext Brussels listing requirements. This can ease the process of an IPO compared to exploring a foreign exchange.

Euronext has recently invested in new technologies to automate the trading of financial products and has indicated its desire to grow by attracting new companies to list their shares on the exchange. Although there are challenges, such as regulatory issues and growing competition from other exchanges, Euronext Brussels has a strong position as a major player in the Belgian economy and as part of the European stock exchange.

Primary Equity Markets on Euronext Brussels

Euronext Brussels classifies issuers into three compartments based on their market capitalisation:

• Compartment A (Large Capitalisations): Issuers with a market capitalisation exceeding EUR1 billion.
• Compartment B (Medium Capitalisations): Issuers with a market capitalisation ranging from EUR150 million to EUR1 billion.
• Compartment C (Small Capitalisations): Issuers with a market capitalisation less than EUR150 million.

Alternative Trading Platforms

Euronext Growth (Formerly Alternext): Designed for mid-cap companies, offering a less stringent regulatory environment to avoid IFRS publication requirements. Maintains rules for investor transparency and protection.

Euronext Access (Formerly Free Market): A non-regulated trading facility with significantly relaxed requirements for SMEs, such as on free float and transparency.

Foreign Listings in Belgium

While listings of foreign companies in Belgium are limited, exceptions include notable companies like argenx (BEL 20 index member), Shurgard Self-Storage, Brederode and Acacia Pharma. Some foreign companies also have secondary listings on Euronext Brussels, including Ahold Delhaize, Aperam (BEL 20 index constituent), ENGIE, Euronext, ING Groep, Saint-Gobain, Suez and Total. These foreign listings constitute less than 15% of the total listed companies.

The decision to list on a foreign exchange does not impede the possibility of a future sale. Belgian corporate law and financial law will still govern minority squeeze-out rules and other corporate restructuring measures, regardless of a foreign listing. Nevertheless, managing transactions across two or more jurisdictions does introduce additional complexities to the process of a future sale.

The sale of a company held by venture capital (VC) is often orchestrated as an auction, strategically harnessing competitive tension to its maximum potential. A positive correlation can be established between the use of competitive auctions and the transaction value. More than three out of four transactions with values exceeding EUR100 million are preceded by a competitive auction. In contrast, only one in three transactions for transactions between EUR10 million and EUR100 million involve such auctions, and for transactions below EUR10 million, competitive auctions occur in less than one in five cases. In the present market landscape, initiating bilateral negotiations from the outset is the exception rather than the rule. It is important to note, however, that not every auction maintains its competitive intensity until the final phase. In numerous instances, only a handful of bidders remain actively engaged until the closing stages, and occasionally, certain bidders successfully secure exclusivity.

The typical structure for the sale of a privately held technology company involves the sale of shares since corporate capital gains on shares are 100% tax exempt as long as these conditions are met:

• Subject-to-tax condition: The shares in question from which the dividends derive must fulfil the dividends-received deduction conditions.
• One-year holding period: The company must hold the shares for an uninterrupted period of at least one year.
• Participation condition: An implied minimum participation threshold of at least 10% or an acquisition value of at least EUR2.5 million in the share capital is required.

If any of the above conditions are not fulfilled, corporate entities pay a 25% capital gains tax.

Consideration for asset transactions usually arises when there are significant tax advantages, if shareholders prefer to sell specific assets exclusively, or if the acquiring party has concerns about potential legacy liabilities within the company. Prospective bidders may propose that active founders continue their involvement in the company for a specified duration, often linked to the inclusion of a deferred consideration element, such as an earn-out.

Transactions primarily involve cash considerations, although there are instances where a minor portion of the consideration is settled in stock (ie, the company’s shareholders receive shares of the acquiring entity). Complete stock-for-stock transactions are rare.

Founders and VC investors are typically tasked with supporting representations, warranties and a comprehensive tax indemnity. This responsibility extends to specific indemnities concerning significant liabilities unearthed during due diligence, such as those related to pensions, litigation and environmental matters. Investors and VC, however, often seek to shift this responsibility onto the selling founders or management of the company.

The use of an escrow account is typical, being used in around 28% of all transactions. The warranty and indemnity (W&I) insurance mechanism bypasses the need to block part of the purchase price as a security for potential liability claims. Mainly due to the involvement of larger and more sophisticated foreign investors and PEs, W&I insurance is present in more than one in four cases for Belgian transactions with a value over EUR100 million. In contrast, only a small percentage of transactions with a deal value up to EUR10 million adopt W&I insurance, as the cost thereof may be too high. Where sellers are in a strong position (eg, competitive auctions), the use of W&I insurance is more likely. W&I insurance may be used more frequently in tech M&A because PEs and financial investors do not want to assume long-lasting representations and warranties for IP, privacy and cyber risks and to preserve relations with the founder who sold their equity and the management that rolled over a portion of their equity.

Spin-offs thrive across various domains, including universities, research institutes and government entities. IMEC, an esteemed international research and development organisation headquartered in Belgium, specialises in nanoelectronics and digital technologies. With a rich history, IMEC has consistently fostered the emergence of innovative start-ups through spin-offs within these domains.

Corporate spin-offs are a strategic tool frequently employed by large corporations to divest non-core businesses. Although they may not be the predominant restructuring method, certain spin-offs have garnered substantial public attention. A notable example is the Euronext Brussels-listed chemical company Solvay, which announced plans to undergo a separation into two distinct independent public companies in December 2023. This strategic move involves establishing one entity for its traditional chemicals business and another dedicated to its high-technology materials and solutions.

In Belgium, spin-off transactions can be structured as tax-free transactions. For a movable pre-tax dividend in the form of shares of a new or existing company following the transfer of a business division, the following requirements must be met:

• State resident: The transferee of the dividend must be a state resident, meaning that the exemption is intended for taxpayers subject to personal income tax.
• Listed shares: The shares of the distributing company must be listed on a stock exchange of an EU member state under the conditions of Directive 2001/34/EC or of a third state with equivalent conditions of admission.
• Dividend in the form of listed shares: The dividend must be paid in the form of shares of the acquiring company of the branch’s contribution, which are also listed on a stock exchange.
• Contribution of a branch of activity: The company being restructured must have transferred part of its assets as part of a contribution of a branch of activity to a newly formed company or an existing company, against the issue of shares issued by the acquiring company of the contribution.
• One and the same restructuring operation: The contribution of a branch of activity and the issue of shares must be the subject of one and the same restructuring operation.
• Double taxation agreement: The transaction must take place in a state with which Belgium has concluded an agreement or convention for the avoidance of double taxation that allows the exchange of information regarding tax matters.
• Tax neutral or exempt: The restructuring operation must be considered tax neutral or exempt in the state where it takes place.

While a spin-off followed by a business combination is technically permissible under Belgian law, it is important to note that such a sequence of transactions is not a standard practice in Belgium.

The execution of spin-offs necessitates meticulous preparation, encompassing operational, business, tax and legal considerations to ensure day-one readiness. As a result, the entire spin-off process typically extends over a minimum of one year. While obtaining a ruling from the Belgian tax authorities is not mandatory before finalising a spin-off, such a ruling offers a level of assurance regarding the tax implications of a transaction that has not yet incurred fiscal consequences.

A strategic approach for a potential bidder involves accumulating a stake in the target company, offering various advantages such as signalling the seriousness of intentions to the target’s board, reducing overall share acquisition costs and potentially discouraging rival bidders. Any transactions by the bidder or those acting in concert may be publicly disclosed before or at the start of the offer period, with general rules for significant shareholding disclosure applying throughout a public takeover bid.

If a potential bidder begins accumulating a stake, disclosure is mandatory once voting rights exceed specified thresholds, typically at 5% and multiples thereof (10%, 15%, etc), though some listed companies may have lower thresholds (often 3%). Consideration must also be given to voting securities held by parties in concert, including affiliates and existing shareholders with specific arrangements. Upon announcing the public takeover bid, the bidder must disclose its existing voting securities in the target. Subsequent disclosures are required by the target, bidder, parties in concert and others involved, with daily updates during the takeover bid period submitted to the Belgian Financial Services and Markets Authority (FSMA) regarding the acquisition or disposal of relevant securities.

Under the authority of the FSMA, individuals who make statements, directly or through intermediaries, that raise questions about their intent for a public takeover bid can be compelled to make an announcement within a maximum period of ten business days (“Put up or shut up”). Those confirming their intention must launch the bid within an agreed-upon timeframe with the FSMA. Failure to confirm within the set period bars both the individual and those acting in concert from initiating a takeover bid for the target company’s securities for six months following the announcement’s publication or the expiry of the FSMA-imposed declaration deadline, whichever is later.

Any acquisition, regardless of the quantity (even a single share), may be subject to prohibition or necessitate a mandatory bid for the target if it increases the shareholder’s aggregate holding to 30% or more. Nevertheless, the Belgian takeover rules outline specific circumstances where there is no obligation for a mandatory bid, even if a person passes the 30% threshold in outstanding voting securities. It is crucial to note that a mandatory bid, being a legal requirement, cannot be made conditional and is irrevocable once initiated. The procedural rules for a mandatory public takeover bid align with those for a voluntary bid, except in terms of conditionality and price considerations.

In Belgium, most transactions are share deals, mostly for tax reasons (on the absence of a capital gains tax, see 4.2 Liquidity Event: Transaction Structure). In 90% of all transactions, the purchase price is entirely paid in cash. Payment in shares or loan stock is very uncommon. On the other hand, a deferral of the payment of the purchase price is quite usual, being applied in 57% of all transactions. On average, around 22% of the purchase price is deferred for around 24 months. The use of an escrow account is also typical, being used in around 28% of all transactions.

In certain cases, a takeover may take the form of a corporate merger, wherein the merger becomes effective upon approval by the general shareholders’ meeting of the companies involved. This structure involves either merging both companies into a new entity or absorbing one company into the other. Opting for a corporate merger offers advantages over a takeover bid, allowing the merging companies to compel all shareholders to participate and become shareholders in the surviving entity. However, drawbacks include the need for co-operation from the target company’s board and limitations on a cash portion of the merger consideration, capped at 10%. Corporate mergers are often preferred when the consideration comprises exclusively new shares in the surviving entity, or post-takeover when the bidder aims to squeeze out minority shareholders of the target company by making them shareholders of the bidder, leveraging a previously acquired significant shareholding in the target company.

Consideration for a bid could be in cash, shares, other securities, or a combination. In voluntary bids offering shares or securities, the bidder must provide a cash alternative under certain conditions, such as if the bidder or a party acting with them acquired over 1% of the target’s securities in cash within the preceding 12 months. There is also a requirement for the consideration to include liquid securities listed on a regulated market. For voluntary bids, there is no minimum consideration set by regulations, but the FSMA mandates that the bid terms allow for a reasonable success rate. Equal consideration for all shareholders is essential, and if shares outside the bid are acquired at a higher price, the bid price automatically increases. In a counterbid, the consideration must be at least 5% higher than the previous offer.

Mandatory bids must offer consideration at least equal to the higher of the highest price paid for the securities by the bidder in the 12 months preceding the bid’s announcement or the weighted average market price during the 30 days before the triggering event. The FSMA can impose additional conditions or adjustments if these rules are violated.

Controlling shareholders’ bids require consideration review by an independent expert appointed by the target’s independent directors. If no independent directors exist, the target’s governance body appoints the expert with FSMA approval. The expert evaluates whether the consideration is fair compared to a bid in a competitive market.

The Belgian Takeover Act mandates that a bid must encompass all securities issued by the target and possess terms ensuring its viability and irrevocability. While bids can be contingent on competition or regulatory approvals, the FSMA can also approve other objective conditions, including acceptance thresholds, the absence of material adverse events beyond the bidder’s control, restrictions on dividends, and no amendments to the target’s articles of association. However, in practice, the FSMA tends to be cautious about imposing conditions that might hinder the bid’s success.

Agreements With Shareholders

In the context of recommended takeovers, it is customary for bidders to establish a memorandum of understanding (MOU) with key shareholders, and this practice is particularly pronounced given the prevalent ownership structure in many listed Belgian companies. Prior to publicly announcing the bid, bidders engage in negotiations to formalise these agreements. The MOU serves as a comprehensive document, specifying commitments from key shareholders, which typically include their agreement to accept the bid and commit to tendering their securities. Additionally, key shareholders agree not to transfer or dispose of their securities before the bid’s closure, unless it is part of accepting the bid, and they pledge not to solicit or engage in discussions related to any third-party bid. Importantly, these specific undertakings are mandated to be disclosed in the prospectus, a crucial step that enhances transparency throughout the entire takeover process.

Agreements in Recommended Bids

In the event of a recommended bid, the bidder and the target, if endorsed by the target’s board, can mutually agree on various bid-related matters. These agreements, encompassing non-solicitation, exclusivity, break-up fees, treasury share tendering and standstill obligations, must be disclosed in the prospectus. While comfort letters and letters of intent are typically favoured over formal agreements, it is advised that the target’s board, even if favourably disposed towards the bidder, maintains a neutral stance to avoid discouraging potential counterbidders who might present superior prospects or a better price for the target’s security holders. The board’s neutrality is emphasised in letters of intent. The target’s board, adhering to the general rule of acting in the target’s best interest, must objectively assess any counterbid in the response memorandum, considering the overall welfare of the target, its security holders, creditors and employees.

The Takeover Decree mandates that a bid encompasses all securities issued by the target and possesses terms ensuring its viability and irrevocability. While bids can be contingent on competition authority or other regulatory approvals, the FSMA may approve additional objective conditions, such as an acceptance threshold, the absence of a material adverse event beyond the bidder’s control, the withholding of dividends, and no amendments to the target’s articles of association. However, it is noteworthy that the FSMA tends to hesitate in imposing conditions that could potentially impede the success of the bid in practice.

A holder possessing 95% of a company’s voting securities has the authority to compel all other holders of voting securities to tender their securities through a squeeze-out bid. This bid can be initiated independently by a person already holding 95% of voting securities or as part of a public takeover bid, voluntary or mandatory, where the bidder secures 95% of outstanding voting securities. In the context of a public takeover bid, specific conditions must be met, including the bidder holding 95% of the share capital with voting rights and voting securities, and acquiring at least 90% of the relevant share capital through the bid. If these conditions are met, the bid is reopened for at least 15 business days, commencing within three months after the initial acceptance period. Any untendered securities automatically transfer to the bidder. In a standalone squeeze-out bid, an independent expert must assess the offered price, which can only be in cash. In the event of a summarised squeeze-out bid, non-accepting securities holders have the right to demand acquisition on the same terms. Post-takeover bid, for one year, the bidder and those acting in concert are prohibited from acquiring applicable securities on more favourable terms without compensating all previous tendering security holders for the price difference.

Before initiating a public takeover bid, a bidder is required to formally notify the FSMA of their intention and secure the FSMA’s authorisation to proceed with the announcement. Simultaneously, the bidder must complete the essential paperwork for the actual commencement of the public takeover bid. Because once the public takeover bid is announced, withdrawal is typically not permitted, except in specific circumstances. This entails submitting pertinent documents, such as a draft prospectus and evidence of fund certainty if the offer involves cash. The latter can take the form of an unconditional and irrevocable bank credit facility or funds held in a bank account with a credit institution licensed in Belgium. For exchange offers, the bidder must demonstrate to the FSMA the availability of securities for the exchange, either through ownership, immediate access or the ability to procure these securities within the stipulated timeframe, potentially from an affiliated entity.

In the context of friendly takeover bids, potential bidders typically strive to secure the support of the target company through tactics such as exclusivity commitments and break fee agreements. However, in the Belgian market, the prevalence of break fees is limited, given the difficulty in convincing the target’s board to compensate the initial bidder for incurred costs in the event of a bid failure. Although there are no strict legal prohibitions on such commitments, their value and enforceability may be restricted due to the overarching obligation of a Belgian company’s board to act in the corporate interest, ensuring equal treatment of all shareholders. Notably, potential bidders can derive reassurance from the fact that the authority of the target company’s board is restricted during a takeover bid, reducing the potential for obstructive actions.

If a bidder cannot obtain 100% ownership over a target company but possesses 95% of the share capital of the target (and 90% in case of a voluntary takeover), they can resort to squeeze-out mechanisms (see 6.8 Squeeze-Out Mechanisms).

If a bidder does not seek to acquire 100% ownership over a target company or fails to obtain the necessary share capital to resort to squeeze-out mechanisms, contractual agreements to strengthen governance rights are possible. This may involve engaging with other reference shareholders to secure specific privileges in a shareholders’ agreement, such as the ability to nominate individuals for director positions within the target company. Given the distinctive context of listed companies, obtaining robust protective rights such as veto powers or control over reserved matters could prove to be a formidable challenge, if not an outright impossibility. However, it must be noted that a partial tender offer (seeking less than 100%) is not permitted in a public takeover bid, except in the case of a self-tender by a company to acquire its own shares.

In addition to break fees, no-shop clauses and the authorised capital principle, Belgian M&A transactions frequently incorporate non-competition and non-solicitation clauses extending for a period of two to three years following the transaction’s closure. Given that a substantial number of Belgian listed companies are under the control of one or more shareholders, irrevocable commitments are commonly employed in Belgium. It is important to note, however, that shareholders retain the ability to withdraw such commitments at any point in time.

In Belgium, before initiating a takeover bid, the bidder must inform the FSMA, which reviews compliance with takeover rules. Once publicly announced, the bid cannot be withdrawn, except in specific circumstances. The FSMA provides the target company’s board with the bidder’s prospectus, a process taking four to six weeks, or potentially longer with antitrust or market controversies. The target’s board has five days to flag issues in the draft.

After FSMA approval of the prospectus, the board submits a response memorandum within five days, subject to FSMA review. In friendly bids, this may coincide with prospectus review. The acceptance period begins five business days after the FSMA approves the prospectus or immediately after response memorandum approval if earlier. Counterbids and higher bids must be FSMA-announced at least two days before the last bid’s acceptance period expires. This framework ensures transparency and regulatory oversight in Belgian takeover processes.

The takeover process spans approximately ten to 12 weeks, commencing with the preparatory stage ahead of the first approach and concluding with the settlement, subject to regulatory approvals and specific timelines for each step.

Regulatory approvals, including competition clearance, play a crucial role in the takeover process. In Belgium, these approvals are sought after the public bid announcement. The competition clearance process involves a simplified or standard procedure, with timelines ranging from 15 to 60 business days, depending on the complexity. Serious concerns may trigger an in-depth investigation (Phase II). Notably, transactions cannot be closed until merger clearance is granted, making regulatory approval a prerequisite for the completion of the bid.

The ability to extend the takeover offer period hinges on regulatory approvals, notably competition clearance. If approvals are not obtained before the offer period expires, parties may consider an extension. The terms for extension align with the regulatory framework. The process involves a simplified or standard procedure, with the Belgian Competition Authority aiming to approve the transaction within specified timelines. Until competition clearance is secured, transactions cannot be finalised, making bids conditional on obtaining regulatory approval.

Beyond adhering to general commercial and corporate law and overarching regulations such as the GDPR, technology companies may need specialised permits and approvals, particularly in highly regulated sectors such as financial services, gambling and telecommunications.

Financial Services

Financial services generally require a licence if offered in Belgium (either directly or on a cross-border basis). These licences depend on the type of service offered, for example banking services, investment services, payment services, electronic money issuance, credit services, etc. Whether the provision and marketing of financial services to Belgian clients trigger the applicability of Belgian law should be analysed on a case-by-case basis.

Gambling

Obtaining a licence is mandatory for all forms of gambling, whether online or land-based. The licensing framework is structured, with a limited number of licences per category. Online licences are exclusively available to providers already holding a land-based licence. These procedures are very specific and can be time-consuming.

Telecommunications

Subject to a few exceptions, telecommunications providers in Belgium are required to notify the BIPT (Belgian Institute for Postal Services and Telecommunications) about the commencement of their activities in Belgium.

The FSMA is the principal securities regulator for public M&A transactions in Belgium bids.

The Belgian foreign direct investment (FDI) screening mechanism became effective as of 1 July 2023. The FDI screening mechanism distinguishes between three types of foreign investors:

• Each natural person having his or her main residence outside the EU;
• Each undertaking having its registered seat outside the EU and/or incorporated under the law of a non-EU state; and
• Each undertaking whose ultimate beneficial owner(s) (as identified under Belgian law) has his or her residence outside the EU.

Every type of investment by a foreign investor aimed at establishing or maintaining lasting direct relationships with the target company in a certain sector, including through the effective participation in the management or control of the company (eg, through ownership of shares or by acquiring voting rights), is envisaged by the FDI screening mechanism. While this definition seems very broad, it only applies to (i) foreign investments in (ii) Belgian companies operating in sensitive industries that may affect security and public order, or those that may affect the strategic interests of the communities and regions, (iii) that seek to gain control over a Belgium undertaking or fall above a certain threshold, will fall within the scope of the FDI screening mechanism (10% or 25% of the voting rights in the target company) depending on the sector of the target company).

The FDI screening mechanism has two to three phases:

• Notification phase: The parties involved in the investment must submit transaction documents to the Interfederal Screening Commission (ISC) secretariat for review. If information is missing, the ISC will notify the parties. The notification must include certain required information on the investment.
• Assessment phase: The ISC members will review the file on a preliminary basis and determine whether there is a risk to public order, security or strategic interests. If no risks are identified, the parties can proceed with the closing of the transaction. If no answer is provided by the ISC to the notifying parties within 30 days following their notification of a complete file, the investment is deemed to have been approved and a screening phase can no longer take place.
• Screening phase: If any risks to public order, security or strategic interests are identified, the ISC members will further analyse the transaction and draft an advice to each government involved. It should at least include a specific risk analysis. The duration of this phase varies based on the complexity of the transaction and the number of governments involved. If a competent ISC member deems an FDI to have potential implications, they notify other ISC members and prepare a draft opinion shared with the foreign investor and target companies. The parties involved can provide comments within 30 days, followed by a hearing within ten days. Each ISC member drafts a final opinion, positive or negative, potentially including mitigating measures. Negotiations occur, leading to a binding agreement. Competent ministers and college members make preliminary decisions based on ISC opinions. These decisions are conveyed to the ISC Secretariat, which combines them into a final decision: approval, approval with mitigating measures, or refusal if the impact is non-remediable and at least one competent authority provides a negative advice. Certain actions suspend time periods, and complex investments can extend the ISC advice period to two months.

Besides the screening of foreign investments listed in 7.3 Restrictions on Foreign Investments, Belgium enforces EU regulations on export controls, applicable at both federal and regional levels, including the Flemish, Walloon and Brussels-Capital Regions. The country is part of international regimes such as the Wassenaar Arrangement, Nuclear Suppliers Group, Australia Group, Missile Technology Control Regime, and Zangger Committee. Dual-use goods, military items and cultural goods are subject to export controls. The regulatory framework involves various laws, such as the EU Dual-Use Regulation, and regional decrees. The application process for export licences varies by region, and denial decisions can be appealed administratively. Violations incur civil or criminal penalties, including fines, imprisonment and licence revocation. Mitigation is possible under certain conditions. Belgium lacks a specific procedure for voluntary self-disclosure but considers it when determining penalties. Specific restrictions on exports to countries such as China, Israel, Turkey, Pakistan, Saudi Arabia and the UAE are maintained, each subject to particular conditions and considerations. Authorities do not publish public lists of denied entities, but some regions have specific policies regarding certain export restrictions.

The relevant legislation governing merger control in Belgium is found in Book IV of the Code of Economic Law, the Royal Decree of 30 August 2013 on the notification of concentrations and the EU Merger Regulation. The scope of legislation covers mergers where independent undertakings merge, acquire control over another undertaking or form full-function joint ventures. The definition of ‘control’ is broad, including the acquisition of minority shareholdings. The jurisdictional thresholds for notification require an aggregate Belgian turnover exceeding EUR100 million and individual turnovers of at least EUR40 million for at least two parties. The Belgian Competition Authority may investigate non-notifiable mergers if they potentially constitute an abuse of a dominant position. Book IV of the Code of Economic Law does not apply to concentrations falling under the EU Merger Regulation, except for specified cases. Mandatory filing is required for concentrations that surpass the turnover thresholds. Notification of concentrations must be submitted to the Competition Prosecutor General before the transaction is finalised, with no exceptions to this rule.

Acquirers should primarily be cautious about the following topics in an M&A transaction:

Approval or Information/Consultation Requirements

In an asset sale

In the event of an asset deal, whether through a transfer ut singuli or a transfer under a BCCA procedure, meeting the criteria for a transfer of undertaking as defined by CBA No 32bis triggers the obligation to inform and engage employees.

In a share sale

The duty to inform and consult employees, among other responsibilities, materialises when a share transfer results in a concentration or implies a significant structural change under negotiation by the company. Concentration is recognised when a transfer of shares confers control upon the buyer over a formerly autonomous company, triggering the obligation for both the acquiring entity (buyer) and the target company (subject to control acquisition) to inform and consult.

Parties to be informed

The determination of who should be informed and/or consulted hinges on the presence of employee representation bodies within the company in question.

At the national level, the key employee representation bodies include the Works Council (Ondernemingsraad/Conseil d’entreprise), the trade union delegation (syndicale afvaardiging/délégation syndicale), and the Committee for Prevention and Protection at Work (Comité voor Preventie en Bescherming op het Werk/Comité pour la Prévention et la Protection au Travail). In the absence of a Works Council, social dialogue occurs at the level of the trade union delegation. If neither of these bodies exists within the company, the Committee for Prevention and Protection at Work becomes the designated employee representation body that must be informed and consulted regarding the transaction.

If, however, there are no employee representation bodies at the company (or companies) in question, the obligation to inform and consult individual employees about the (contemplated) transaction does not apply unless the transaction qualifies as a transfer of undertaking within the meaning of CBA No 32bis.

Timing and procedure in an asset and share sale

Employees have the right to be informed, obligating employers to share transaction details for employees to understand the company’s socio-economic context. Timing-wise, employee representative bodies should receive information before any public announcement of a concrete proposal for a transaction decision, typically just before finalising the acquisition agreement. Regardless, the information provision and consultation process must be concluded before the final decision on the transaction.

Consultation aims to foster dialogue between employee representatives and the employer on the transaction, sparking debate on whether this duty applies only to employment-impacting transactions.

For transfers under CBA No 32bis, in the absence of representative bodies, individual employees must be informed about the transfer’s date, rationale, legal and economic implications, and proposed measures. In cross-border transactions, the European Works Council must be informed and consulted as required.

Protection Against Dismissal

If CBA 32bis applies, employees cannot be dismissed due to the transfer, whether initiated by the buyer or the seller. Violating this prohibition may lead terminated employees to seek damages, in addition to severance indemnity, ranging from three to 17 weeks’ salary. These considerations underscore the importance of a comprehensive understanding of local legal intricacies for acquirers engaging in M&A transactions.

Prohibited Practices: Sham Self-employment and Posting of Workers

Two prohibited practices that can regularly be found during the due diligence of a technology company are set out below. Engaging in sham self-employment in Belgium, where individuals assume the status of self-employed while working under an employer’s authority, can lead to significant consequences. Authorities may re-qualify such individuals as employees, demanding both employer and employee contributions, potentially increased with interest and surcharges. Clients/employers cannot recover these contributions. The re-qualified employee may also claim retroactive payment for salary elements, such as end-of-year premiums and holiday pay. The deemed employer is obligated to pay double holiday pay and end-of-year premiums within a five-year statute of limitations. Additionally, other aspects of Belgian employment law, including termination regulations, apply. The Social Security Authorities have a three-year period (up to seven years in cases of fraud) to make claims, while employees have five years to assert their claims.

The posting of workers in Belgium involves a situation where a worker, typically employed in countries other than Belgium, is loaned to a Belgian user by their employer, who exercises authority over the worker. The employment relationship between the foreign undertaking and the posted worker should exist prior to posting and be maintained during the posting period. Employers posting workers to Belgium must adhere to Belgian working conditions, including pay, as mandated by legal and regulatory provisions, sanctioned under criminal law. These provisions cover various aspects, including working time, remuneration, leave, worker welfare and non-discrimination, among others. Violations can result in legal consequences. These issues should in general be covered in the representations and warranties, whereas concrete risks established during the due diligence should be covered by specific indemnities. They may also require post-closing actions.

Intellectual Property Considerations

The copyright for a creative work is initially vested in the individual who created it. Consequently, the employee-creator retains ownership of the copyrights for works developed within the scope of their employment contract. However, there is provision for the partial transfer of these rights, limited to the property rights of the copyright-protected works, which can be transferred to the employer. It is crucial that any such transfer, whether full or partial, is explicitly outlined in the employment contract or a separate agreement between the employer and employee. Simply remunerating the employee-creator is insufficient for acquiring these rights; the creation of the work must also fall within the parameters of the employment contract.

Furthermore, Belgium does not have a “work for hire” regime, which implies that if you commission someone to create a work for your company, such as a logo or website design, the individual author(s) will automatically hold the copyright to that work. Consequently, proper due diligence should be performed on IP clauses in work rules, employment contracts or other agreements such as consultancy agreements.

In contrast, while the law around intellectual property rights in software, databases and semiconductor topographies (chips) is based on copyright, the issue of software creations in an employment context is regulated completely differently. The basic principle here is that the employer is presumed to acquire the property rights to software, databases and topographies unless the employer and the employee have agreed otherwise. Thus, in these particular contexts, there is a legal presumption of transfer of intellectual economic property rights to the employer. It is up to the employee to provide evidence that the presumption does not apply, for example because the work was not created under the employment contract.

Currency Control

The European Central Bank regulates the euro and keeps inflation under control.

Central Bank Approval

No central bank approval is necessary unless specific cases of mergers and acquisitions arise within the insurance and credit sectors.

Besides the screening of foreign investments listed in 7.3 Restrictions on Foreign Investments, there are multiple legal developments affecting the Belgium M&A landscape.

New Belgian B2B Rules

The Belgian Act of 4 April 2019 entered into force on 1 December 2020, and its effects are not yet fully known. It introduced a set of rules on prohibited business-to-business (B2B) contract clauses that apply to all B2B agreements, except those for financial services. It therefore includes M&A contractual arrangements. The rules include a general fairness principle, a black list of clauses that are deemed always abusive, and a grey list of clauses deemed abusive unless proven to the contrary. A clause may be deemed abusive if it creates on its own, or together with other clauses, a clear imbalance between the rights and obligations of the parties that is of a legal and not an economic nature. The core clauses of agreements, such as those on price, fall outside the scope of this balance test. If a clause is deemed abusive, it will be declared null and void. The new set of rules must be taken into account when drafting M&A agreements. As there is only a little jurisprudence so far, it is currently uncertain how strictly these provisions will be interpreted by courts.

The New Belgian Civil Code

The New Belgian Civil Code with an updated Belgian contract law entered into force on 1 January 2023, thereby impacting M&A agreements. Existing templates must be reviewed with respect to their relevance, whether or not certain clauses may remain in force, and whether others can be changed thanks to new possibilities under the new law.

Cybersecurity

A welcome development is that the EU’s cybersecurity tools will be further developed pursuant to the cybersecurity policy that was unveiled in December 2020. While legislators have focused a lot on data protection, there is certainly still a lot to improve from a legal perspective with respect to cybersecurity in organisations. The revised NIS Directive (NIS 2.0) entered into force on 16 January 2023, and must be transposed by member states by 17 October 2024. Since its text includes fines similar to the General Data Protection Regulation (GDPR), it may be a first step towards forcing essential and important organisations to focus more on cybersecurity. However, the most important innovation is the extension of its scope. This means that it not only applies to ‘critical sectors’, but also to other important sectors, such as digital services and digital infrastructure (telecoms, data centres, cloud services, etc). This means that it will also become more important to review a target’s compliance with NIS 2.0, whenever applicable, during a due diligence. Cybersecurity may be the next hot topic in M&A after privacy became much more relevant in transactions.

New Digital EU Regulation

The impact of the Digital Services Act and the Digital Markets Act will have to be assessed during the due diligence on targets subject to these new regulations.

On Friday 8 December 2023, a political agreement has been reached on the shape and contents of the EU’s AI Act, which is a pioneering initiative for a comprehensive legal framework for the development and use of AI worldwide. The regulation focuses on specific AI applications in particular contexts and categories based on risk to health, safety and fundamental rights. The impact of the AI Act will have to be assessed during the due diligence on targets subject to the new regulation. IP and privacy compliance will vary based on the risk level posed by artificial intelligence, determining the specific obligations for both providers and users.

Public M&A

In the context of a recommended bid, though not mandatory, it is advisable to undertake due diligence before initiating a public takeover bid, particularly to validate the bid price. This process includes releasing an information memorandum on the target, conducting management presentations, and reviewing specific documents accessible through a data room. The target board has the authority to decide when and what information about the target will be disclosed, considering factors such as the corporate interest of the target, confidentiality obligations, equal treatment of shareholders, and considerations related to insider dealing and competition. If the target board is hesitant to disclose sensitive information, it can opt for vendor or third-party due diligence, ensuring that the same information is provided to any competing bidder per the Takeover Decree. Bidders are cautioned against obtaining insider dealing information, and if acquired, it must be disclosed in the prospectus. In the case of a hostile bid, the bidder typically relies on publicly available information to decide whether to proceed with the bid.

Private M&A

Due diligence in technology M&A transactions, particularly concerning intellectual property (IP) assets, privacy and cybersecurity concerns, is crucial for acquiring technology companies. Emphasis is placed on analysing owned and third-party IP, IP disputes and IT assets. The review includes a focus on IP ownership under Belgian copyright law, recognising that software protection is limited to the form and expression of ideas. The due diligence extends beyond ownership to assess transferability, addressing key questions about the technology’s origin, development, inventors, available IP rights, and compliance with obligations. The nature of legal due diligence varies based on whether the transaction involves asset or share purchase, with special attention to IP and data asset transferability in technology M&A. The impact of the AI Act will have to be assessed during the due diligence on targets subject to the new AI Act. IP and privacy compliance will vary based on the risk level posed by artificial intelligence, determining the specific obligations for both providers and users.

Data Protection Considerations During the M&A Process

The due diligence process for technology companies typically involves the transfer of personal data from the seller to the buyer. As a result, these data processing activities must adhere to general data protection requirements. Specifically, compliance with the GDPR necessitates a legal basis. For instance, the release of relevant data can be justified on the grounds of legitimate interests, such as facilitating the M&A transaction. However, certain information may need to be anonymised, including employee names and sensitive personal data such as health information.

Additional complexities arise when the potential buyer is located outside the EU, as international transfers of personal data require specific privacy safeguards. If the seller has engaged a data room provider to oversee the data room, it is crucial to provide clear instructions in the data processing agreement regarding handling a potential data breach. Furthermore, it is advisable to maintain the data room within Europe to minimise the transfer of EU personal data to non-EEA countries. If the seller is managing the data room internally or through a law firm, although a data processing agreement may not be required, it is essential to implement suitable technical and organisational safeguards. Moreover, contemplate implementing EU Standard Contractual Clauses or alternative transfer tools with potential buyers if there is a potential need to transfer data to a non-EEA country at a later stage in the transaction. If data would have to be transferred to the United States, the EU-US Data Privacy Framework (DPF) could be relied upon since this was approved by the European Commission on 10 July 2023. By doing so, the European Commission confirmed that personal data transferred to the United States under the DPF is adequately protected in line with the rules on international data transfers imposed by the GDPR.

Data Protection Considerations During the Due Diligence of the Target

Buyers, to avoid acquiring non-compliant businesses, must conduct a comprehensive evaluation of the target’s data protection compliance. Identified non-compliance can be addressed before closing or factored into risk assessments, valuations or indemnification mechanisms. Conducting a post-closing data protection audit is suggested to remediate potential breaches quickly. The due diligence process should involve requesting various documents from the seller to assess the target’s data protection compliance status, covering processing activities, relevant documents, IT and security measures, expert assessments, data breach documentation, impact assessments, IT program compliance, cybersecurity policies, legal proceedings, disputes and insurance coverage.

Non-compliance with data protection laws in a target’s data processing activities poses significant risks for buyers, as violations of the GDPR can result in fines of up to EUR20 million or 4% of the total worldwide annual turnover. Recent high-profile data breaches underscore the risks associated with data security, exposing companies to liabilities from shareholder lawsuits, government investigations, remediation costs and reputational damage. Juniper Research predicts that the global cost of data breaches will reach USD5 trillion by 2024. National data protection authorities, including the Belgian Data Protection Authority, have imposed substantial fines, emphasising the GDPR’s importance.

In accordance with Belgian public takeover bid regulations, only the FSMA is authorised to declare a public takeover bid, and prior to the FSMA’s public announcement, no party, including the bidder or the target company, is allowed to disclose the initiation of such a bid. This restriction applies even if the target company is obligated to announce the bid launch under the general disclosure obligations. A bidder intending to declare a public takeover bid must first notify the FSMA of its intention and secure the FSMA’s approval before making the official announcement. Simultaneously, the bidder must complete the requisite filings for the actual initiation of a public takeover bid, which includes providing evidence of funding certainty in the case of a cash offer and submitting a draft prospectus. Once a public takeover bid is announced, withdrawal is typically not permitted, except in specific circumstances. In the event of rumours or leaks concerning a potential bidder’s intentions to launch a public takeover bid, the FSMA has the authority to compel the party concerned to disclose its intentions (early disclosure of the announcement if required for the good functioning of the markets or “Put up or shut up” as described in 6.1 Stakebuilding). Special rules govern self-tenders by the issuer of securities.

The bidder is required to meticulously prepare a prospectus for the takeover bid, detailing the bid’s terms and conditions and incorporating essential information tailored to the characteristics of the bidder, target company and relevant securities. This includes clear presentation for ease of analysis and comprehension. The Belgian public takeover bid rules specify a minimum information checklist for inclusion in the prospectus, which must undergo approval by the FSMA before publication. Any new significant facts, substantial errors or inaccuracies emerging or discovered between FSMA approval and the expiry of the bid’s acceptance period must be promptly addressed in a prospectus supplement, subject to FSMA approval and dissemination in the same manner as the original prospectus. The prospectus itself is required to be prepared in both Dutch and French, unless the bidder demonstrates that the target company customarily publishes financial information in a specific language, in which case the FSMA may accept a prospectus in that language. The summary of the prospectus must be drawn up in both Dutch and French. In cases where takeover bid communications are disseminated in only one Belgian official language, the summary may be limited to that language.

The prospectus for a public takeover bid in Belgium must encompass the bid’s terms, conditions, and all necessary information for the public to conduct a comprehensive assessment. Financial details about the bidder and the target, the bid’s characteristics, the bidder’s objectives and the target board’s response memorandum are essential components.

The draft prospectus has to be filed with the FSMA. Initial verification will be conducted with the FSMA, where informal comments will be sought. Subsequently, a definitive version must be submitted to the FSMA for approval and subsequent publication.

The responsibilities of directors in Belgium, as outlined by both Belgian law and possibly the company’s articles of association, encompass the overall management of the company, formulation of strategic direction, and representation in dealings with external parties. Directors are obligated to exercise reasonable care and diligence, all while upholding confidentiality and prioritising the company’s interests. Specific obligations arise in the context of M&A transactions, especially within corporate restructuring procedures outlined in Chapter 12 of the Belgian Code of Companies and Associations. For publicly traded companies, the Public Takeover Act imposes additional duties on the governing body of the target. This includes a preliminary declaration to verify the draft prospectus for omissions or misleading information and a subsequent memorandum in response to the approved prospectus, addressing various aspects such as comments on the prospectus, statutory clauses affecting securities transferability, opinions on the offer’s consequences, bidder’s strategic plans, and the opportunity for security holders to sell their securities. The company must treat shareholders and certificate holders who are in similar circumstances in the same way. The articles of association may provide that shares of a particular class or designation have special controlling rights in the company under the articles of association. Notably, Belgian law does not prescribe specific duties for controlling shareholders in M&A transactions.

Belgian law does not require the formation of a special committee in respect of a takeover offer.

In general, the initiation of a takeover bid does not necessitate approval from the target’s board. However, the target’s board has the option to provide input on the bid through (i) commenting on the completeness and potentially misleading aspects of the draft prospectus and (ii) formulating a response memorandum that may incorporate dissenting views. Nevertheless, practical considerations often lead the response memorandum to align with the opinions of the (controlling) shareholders due to their substantial representation on the board. Additionally, a defensive tactic employed by the target’s board against (hostile) takeovers involves leveraging the concept of “authorised capital”, granting the board discretionary power to increase the target’s capital as deemed necessary. Directors can take defensive measures as long as these are in the company’s best interest. In this context, the target board must, in particular, take into account the interests of all security holders, as well as those of its employees and creditors.

In the context of a business combination, companies typically enlist the support of investment banks and legal professionals, occasionally seeking guidance from consultants and other experts to provide insights on the proposed transaction. As a standard part of due diligence, the board of directors and supervisory directors often obtain fairness opinions from financial advisers to evaluate the appropriateness of the transaction price. While seeking advice does not absolve directors of their responsibilities, it can be considered a mitigating factor when evaluating their actions in a legal context later on.