Greater Flexibility Slated For Equity Financing In Belgium Mr Matthieu Duplat, Aurélie Cautaerts and Roxane de Giey

Author:Mr Matthieu Duplat, Aurélie Cautaerts and Roxane de Giey
Profession:Jones Day

In Short

The Situation: A draft law designed to reform the Belgian Companies Code ("New Company Code") received a green light from Parliament's Justice Commission on 23 October 2018. Pending final approval, the New Company Code is expected to enter into force as of 1 May 2019.

The Result: The New Company Code will make it easier for listed companies to proceed with capital increases in cash reserved to investors specified in advance.

Looking Ahead: The law reform will benefit Belgian companies by enhancing flexibility and simplification in relation to equity financing and other key areas.

The Belgian government's proposal for a New Company Code is highly anticipated in the legal and business sectors, given its focus on enabling greater adaptability and competitiveness for companies.

Among the most scrutinized changes: The modification of Article 598 of the current Belgian Company Code on the limitation of preferential subscription rights.

Capital Increase in Cash with Suppression of Preferential Rights - a Small Revolution in Belgium

In the context of a capital increase in cash, certain conditions must be fulfilled when the preferential subscription right is cancelled in favor of one or more specific persons.

The current Belgian Company Code requires the following three conditions for listed companies: (i) The identity of the beneficiary(ies) of the suppression of the preferential subscription right must be disclosed; (ii) The issue price must not be lower than the average market price over the 30 calendar days preceding the day of issuance; and (iii) The company's board of directors and auditor must produce comprehensive reports on both the proposed transaction's impact on the current shareholders' situation and the issue price of the shares, as well as its justification.

The New Company Code would introduce several changes to these three conditions. The first condition would be maintained, the second would be eliminated, and the third would be strengthened. Furthermore, an additional requirement would prohibit any significant shareholder (≥ 10 percent) beneficiary of the capital increase from voting on such a decision at the shareholders' meeting or through its representatives at the board of directors.

This shift in the treatment of preferential subscription rights is a key innovation in the New Company Code, which will provide greater transparency and maneuverability when such rights are suppressed in relation to a capital increase in...

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