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Due diligence requirements
What due diligence is necessary for buyers?
Although not mandatory, it is advisable for prospective buyers to perform due diligence over the target. Typically, parties perform due diligence into both legal and financial (including tax) aspects of the target. In some cases, prospective buyers also prefer to conduct a commercial and environmental due diligence.
The due diligence process usually includes management presentations and the review of specific documents and information through a (mostly virtual) data room. It may also include the disclosure of an information memorandum on the target.
What information is available to buyers?
The following information relating to Belgian companies is in the public domain:
- publications in the annexes to the Belgian Official Journal, including details on the appointments and resignation of directors, persons in charge of daily management, members of the management committee and, in some cases, proxy holders (but not shareholders);
- the company's articles of association, including details on the company's share capital, number of outstanding securities and their nature and the existence of defensive measures (eg, poison pill mechanisms);
- extracts of specific shareholders' meetings and board decisions as imposed by law;
- annual reports;
- annual accounts, including report of the statutory auditor; and
- information on real estate owned by the company.
In relation to listed companies, certain additional information is publicly available:
- information on the reference shareholders (in principle shareholders owning 5% or more of the outstanding securities, although the articles of association may provide for lower thresholds) of the company;
- disclosures on the shareholding of, and trading by, persons assuming managerial responsibilities within the company (e.g., directors of such company and their relatives); and
- half-yearly financial information; and
- under certain conditions, inside information.
What information can and cannot be disclosed when dealing with a public company?
Subject to its statutory information obligations, the target’s board of directors freely determines what information will be disclosed and under what conditions such disclosure will be made. In this context, the board must balance various interests, such as the corporate interest of the company, its contractual and legal confidentiality obligations, the equal treatment of its shareholders, the risk of insider dealing and competition concerns. A target board that is reluctant to disclose sensitive information to the bidder may organise a vendor due diligence or third-party due diligence. In case of a public takeover bid, 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 inside 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”.
How is stakebuilding regulated?
Subject to insider dealing restrictions and transparency requirements, prospective acquirers may accumulate shares in the target before the announcement of a public takeover bid.
The first exception prohibits a bidder that has non-public inside information on the target from acquiring or selling target securities until this information has been made public or until it no longer affects the price of the underlying securities.
The second refers to the disclosure and transparency requirements set out in the Act of May 2 2007 and its implementing royal decrees, as well as in Regulation 596/2014 on market abuse.
An acquisition of voting securities in a listed Belgian company must be disclosed to the Financial Services and Markets Authority and the target when the total stake of the acquirer represents, as a consequence of the transaction, 5% or more of the total voting rights exercisable at the time of the acquisition. Notification is also required when the shareholding crosses the threshold of 5% or any other multiple of 5% of the total voting rights as a result of an acquisition or transfer (including through a sale) of shares, a change of the breakdown of the voting rights (eg, capital increase or decrease) or an agreement to act in concert. Further, the target’s articles of association may provide for additional thresholds (1%, 2%, 3%, 4% and 7.5%).
The shareholdings of affiliates and parties acting in concert with the acquirer are taken into account to determine whether a threshold has been reached. The calculation will also have to take into account financial instruments which, pursuant to a formal agreement, grant the holder either the unconditional right to acquire securities carrying voting rights or the possibility of acquiring such rights but only at the holder's own initiative. Financial instruments with similar economic effect will also have to be taken into account, regardless of whether they result in a physical settlement. There are certain exemptions from the disclosure obligation (eg, for market making and trading book exemptions).
The disclosure notification must be made by the acquirer promptly and in any case no later than four trading days from the date of the event triggering the disclosure obligation. The target must publish the information contained in the notification within three trading days of the day of receipt. Failure to follow the disclosure obligations set out above is a criminal offence and could also result in civil penalties, such as the suspension of the voting rights attached to the relevant securities.
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