This corporate e-bulletin contains a summary of recent developments in Belgian and EU corporate and financial law.

1. New measures to counter money laundering

Transparency obligations

The law of 18 January 2010 amending the law of 11 January 1993 on the prevention of the use of the financial system for the purpose of money laundering and the financing of terrorism, and the Belgian Company Code (the “Law”) introduced new measures to limit the risk of money laundering. Pursuant to anti-money laundering legislation, financial institutions are, among others, required to identify their clients. If a client is a legal entity, financial institutions must also verify the identity of the legal entity’s ultimate beneficial owner(s), i.e. (a) person(s) holding a participation representing more than 25% of the total voting rights or (a) person(s) exercising control over the company. To this end, the Law introduced a new Article 515bis of the Belgian Company Code (the “BCC”), effective as of 5 February 2010. Pursuant to this Article, a holder of voting securities in a non-listed limited liability company (“naamloze vennootschap/société anonyme”) which has issued bearer shares or dematerialised shares, must notify the company’s board of directors if such securities holder acquires a participation representing 25% or more of the total voting rights. The notification must be sent within 5 business days following the date of the acquisition of the securities. If the participation falls below the 25% threshold following a transfer of voting securities, a new notification shall be required.

At the request of any holder of voting securities or of the company itself, the chairman of the Commercial Court in whose jurisdiction the company’s registered office is located can impose sanctions to a holder of voting securities who has not complied with these notification obligations (Article 516 BCC). The chairman of the board of directors may also suspend all or part of the voting rights attached to the securities or suspend a general meeting that has been convened, or impose a sale of the non-reported voting securities to a third party which is not affiliated to the defaulting shareholder. Further, a holder of voting securities who has not notified its securities at the latest 20 days prior to a shareholders’ meeting, cannot exercise the voting rights attached to these securities at such meeting pursuant to Article 545 BCC. However, pursuant to Article 534 BCC, the board of directors can decide to postpone a shareholders’ meeting for a period of three weeks, if it has received a notification less than 20 days prior to the shareholders’ meeting or if it has knowledge that such notification should have been or must be made.

Transitional regime

All holders of voting securities holding a participation of 25% or more of the total voting rights per 5 February 2010 in a non-listed limited liability company which has issued bearer shares or dematerialised shares, must notify the company hereof within a term of 6 months (i.e. before 5 August 2010). The notification must even be made earlier “in function of the risk”. The Law does not explicitly specify what is meant by this qualification, but from the Law’s general purpose it could be derived that an assessment should be made taking into account the risk of money laundering. If there is an increased risk of money laundering, a financial institution could require the company to provide the information with respect to its beneficial owners prior to 5 August 2010. How the company can acquire this information if it has no knowledge of its beneficial owners, or in which events there is an increased risk of money laundering, is not specified by the Law.

The Law does not specify which sanctions apply if one does not comply with the abovementioned transitional provisions. Although there is no explicit legal basis for applying the sanctions provided for in Article 516 BCC (see Section 1 above), it cannot be excluded that a third party having an interest in doing so argues that such sanctions must also be applied in case of non-compliance with the transitional provisions of the Law.

2. The BVBA/SPRL “STARTER”

The law of 26 January 2010 has introduced the BVBA/SPRL “STARTER”. This new company type offers the same advantages as a regular closed limited liability company (besloten vennootschap met beperkte aansprakelijkheid / société privée à responsabilité limitée), i.e. protection of private and family property against business risks as well as a more favorable tax regime as compared to the one applicable to physical persons, however without immediately requiring a minimum capital amount at the time of incorporation of the company.

Overall the BVBA/SPRL “STARTER” is subject to the same rules as the regular BVBA/SPRL, it being understood that certain provisions do not or not immediately apply to the BVBA/SPRL “STARTER”, the most important of which are listed below:

- the founder(s) can only be individuals who do not own more than 5% of the voting rights in another limited liability company;

- the company must have less than 5 full-time employees;

- the share capital should amount between EUR 1 and EUR 18,550, it being understood that within 5 years following the incorporation or as of the time the company employs 5 or more employees, the capital must be increased to at least EUR 18,550;

- 25% of the annual net-profit must be reserved;

- the founder(s) need(s) to be assisted by an accredited accountant or an auditor in preparing the financial plan;

- from the third anniversary of the incorporation, the shareholders will be jointly and severally liable for the amount that equals the difference between EUR 18,550 and the amount of the share capital.

3. Simplification of merger / demerger procedure

By law of 15 January 2010, some minor but relevant amendments were introduced in the Belgian Company Code ("BCC"). More specifically articles 695, 708, 731 and 746 BCC on the merger (“fusie/fusion”) and demerger (“splitsing/scission”) have been amended to allow the shareholders and holders of other voting securities to decide by unanimous consent to waive the obligation to prepare an independent expert report in relation to a merger or demerger of a company. These amendments result from the Third and Sixth Company Law Directives and aim at an administrative simplification of the business environment. Whereas the aforementioned Directives merely refer to public limited liability companies, in Belgium these new regulations apply to all company types with legal personality.

4. Restructuring of (international) non-profit associations and foundations

The law of 15 January 2010 provides for a legal basis for the transfer of a universality of assets or a branch of business by non-profit associations, foundations and international non-profit associations, provided that such transfer occurs for free and for the benefit of another non-profit association, foundation or international non-profit association. This possibility is introduced by reference to the procedures already existing for commercial companies, as set forth in article 770 of the Belgian Company Code, which amongst other provides for the transfer by operation of law of all assets and liabilities of the transferring entity (in case of transfer of universality) or all assets and liabilities related to the branch of business (in case of transfer of a branch of business). As a result, the legal uncertainty with regard to this type of legal reorganisations of non-profit associations, foundations and international non-profit associations comes to an end.

5. Reinforcement of corporate governance to restore investor trust

On 11 February 2010, the Belgian Chamber of Representatives (“Kamer van Volksvertegenwoordigers/Chambre des Représentants”) adopted a draft bill (“wetsontwerp/projet de loi”), relating to the reinforcement of corporate governance in listed companies and autonomous public enterprises (“autonome overheidsbedrijven/enterprises publiques autonomes”). This draft bill aims at restoring investor trust in the stock markets and in listed companies and goes beyond the “comply and explain” approach of the Belgian Corporate Governance Code, by introducing enforceable legal provisions concerning corporate governance.

Following the introduction of the mandatory audit committee in December 2008 (see Stibbe's Corporate e-bulletin of April 2009), the draft bill proposes to oblige listed companies to set up a remuneration committee composed of members of the board of directors. Furthermore, listed companies must include an annual declaration on corporate governance as a specific and clearly recognisable item in the annual report. As part of the corporate governance declaration, a remuneration report must be included in the annual report. The current proposal provides that the remuneration report includes very specific data in respect of the compensation policy and the compensation of executive directors, in order to increase transparency towards shareholders. As a result, the individual remuneration package of the CEO is to be made public. For other executive directors a joint disclosure suffices.

Furthermore, the draft bill includes provisions with regard to the remuneration of executive directors in listed companies, on the one hand with regard to golden parachutes, and on the other hand with regard to the criteria for attributing flexible remuneration, which criteria are to be included in the applicable contractual or other provisions, and the dispersion in time of flexible remuneration.

How the final law will relate to the Belgian Corporate Governance Code is not yet entirely certain; the current draft bill mainly repeats “comply or explain” provisions from the Corporate Governance Code, but goes further on a number of points. For example, according to the current wording of the draft bill, the remuneration report needs to be submitted to the shareholders meeting for approval. In addition, the draft bill makes an explicit decision of the shareholders’ meeting compulsory, in case a golden parachute should not be in accordance with the applicable provisions of the Corporate Governance Code. Explain under the “comply or explain”-provisions is thus not sufficient in this case.

Expectations are that the draft bill on corporate governance will enter into force later this year.