January 2017 - Issue n5
Belgian Listed Companies Dashboard
NautaDutilh is pleased to provide Belgian listed companies with a dashboard to help them follow up on important regulatory developments at the European and Belgian levels.
This is our fifth dashboard for Belgian listed companies, covering the second half of 2016.
Among the developments in the past six months which will impact the regulatory requirements applicable to listed companies, the audit reform and additional MAR related guidelines are of particular relevance.
2. European implementing measures
In the past two years, several implementing measures and delegated regulations have been published to ensure common approaches and practices as regards MAR. For more information, please refer to ESMA's website.
In the second half of 2016, the following developments are of particular interest:
MAR Guidelines of 10 November 2016 on market soundings applicable in relation to the factors, steps and records that the persons receiving market soundings must consider and implement;
Market Abuse Regulation
Most provisions of the new Market Abuse Regulation (596/2014/EC) (MAR) and its implementing legislation entered into force on 3 July 2016. For more information on the implications of MAR on listed companies, please see our fourth dashboard, available here.
MAR Guidelines of 20 October 2016 on delayed disclosure of inside information, containing a non-exhaustive indicative list of legitimate interests of the issuer that are likely to be prejudiced by immediate disclosure of inside information and situations in which the delay of disclosure is likely to mislead the public (see section 3 below);
Q&A on MAR addressing the following topics:
o prevention and detection of market abuse o managers' transactions o investment recommendations and information recommending
or suggesting an investment strategy
3. Delayed disclosure of inside information
According to MAR, issuers should inform the public as soon as possible of inside information which directly concern them. Issuers may however on their own responsibility, delay disclosure to the public of inside information provided the following conditions are met:
immediate disclosure is likely to prejudice the legitimate interests of the issuer;
delay of disclosure is not likely to mislead the public; and the issuer is able to ensure the confidentiality of that information.
The Guidelines of 20 October 2016 on delayed disclosure of inside information provide a non-exhaustive indicative list of (i) legitimate interests of the issuer that are likely to be prejudiced by immediate disclosure of inside information and (ii) situations in which the delay of disclosure is likely to mislead the public.
According to the Guidelines, situations where immediate disclosure of inside information is likely to prejudice the issuers' legitimate interests include (but are not limited to) the following circumstances:
the issuer is conducting negotiations, where the outcome of such negotiations would likely be jeopardised by immediate public disclosure (such as M&A negotiations for example);
the financial viability of the issuer is in grave and imminent danger, although not within the scope of the applicable insolvency law, and immediate public disclosure of the inside information would seriously prejudice the interests of existing and potential shareholders by jeopardising the conclusion of the negotiations designed to ensure the financial recovery of the issuer;
the inside information relates to decisions taken or contracts entered into by the management body of an issuer which need, pursuant to applicable law or the issuer's bylaws, the approval of another body of the issuer, other than the shareholders' general assembly, in order to become effective, provided that:
a transaction previously announced is subject to a public authority's approval, and such approval is conditional upon additional requirements, where the immediate disclosure of those requirements will likely affect the ability for the issuer to meet them and therefore prevent the final success of the deal or transaction.
According to the Guidelines, the situations in which delay of disclosure of inside information is likely to mislead the public include at least the following circumstances:
the inside information whose disclosure the issuer intends to delay is materially different from the previous public announcement of the issuer on the matter to which the inside information refers to;
the inside information whose disclosure the issuer intends to delay regards the fact that the issuer's financial objectives are not likely to be met, where such objectives were previously publicly announced; or
the inside information whose disclosure the issuer intends to delay is in contrast with the market's expectations, where such expectations are based on signals that the issuer has previously sent to the market, such as interviews, roadshows or any other type of communication organized by the issuer or with its approval.
4. FSMA circular
FSMA Circular FSMA_2016_08 (updated on 13 December 2016) provides practical instructions concerning the notifications and reporting obligations resulting from the market abuse rules and ESMA's guidelines on certain MAR provisions.
The circular addresses topics such as insider lists, market soundings, the notification of managers' transactions and suspicious transactions and orders, the notification of deferred publication of inside information, safe harbours and investment recommendations.
i. immediate public disclosure of that information before such a definitive decision would jeopardise the correct assessment of the information by the public; and
ii. the issuer arranged for the definitive decision to be taken as soon as possible.
the issuer has developed a product or an invention and the immediate public disclosure of that information is likely to jeopardise the intellectual property rights of the issuer;
the issuer is planning to buy or sell a major holding in another entity and the disclosure of such an information would likely jeopardise the implementation of such plan;
Additional requirements under the transparency legislation
make public the documents to be presented at the meeting of shareholders, no later than the date of the convening notice;
In 2016, the Belgian legislature adopted several measures to ensure the implementation of Directive 2013/50/EU 1 (the "Amending Transparency Directive"), including:
the Act of 27 June 2016;2 the Royal Decree of 11 September 2016;3 and updates to the relevant FSMA circulars.
1. The Act of 27 June 2016
As explained in our fourth dashboard, the Act of 27 June 2016 was adopted to partially implement the Amended Transparency Directive by amending the Act of 2 August 2002, 4 the Transparency Act, 5 and the Prospectus Act. 6 For more information on the Act of 27 June 2016, please refer to our fourth dashboard, which is available here.
2. The Royal Decree of 11 September 2016
In addition to the Act of 27 June 2016, the Royal Decree of 11 September 2016 was adopted to further implement the Amending Transparency Directive.
Amongst other things, the Royal Decree extends the definition of regulated information, to cover voluntarily provided quarterly information, special reports on capital increases within the framework of the authorised capital, and the minutes of general meetings of shareholders. This information should thus be published and kept in accordance with the requirements of the transparency regulation.
make public the special reports drawn up for a capital increase within the framework of the authorised capital as soon as possible and in any case no later than the date of the capital increase;
make public the minutes of meetings of shareholders within 15 days from the meeting.
Annual and half-yearly financial reports should now be made available to the public for a period of ten years (rather than five years).
The Royal Decree entered into force on 1 October 2016.
3. FSMA Circulars
Following the amendments introduced by the Act of 27 Jun 2016 and the Royal Decree of 11 September 2016, the FSMA updated the following circulars :
Practical Guide FSMA_2011_08 - instructions for making transparency notifications;
Circular FSMA_2012_01 - obligations of issuers listed on a regulated market;
Circular FSMA_2011_06 - obligations of issuers listed on Alternext Brussels;
Circular FSMA_2013_16 - eCorporate: transmission of documents.
In addition, the Royal Decree provides that, without prejudice to the Company Code, Belgian issuers shall, in accordance with the publication and conservation requirements of the transparency regulation applicable to regulated information:
The automatic delisting following a squeeze-out has been extended to issuers listed on an MTF (Alternext, Free Market) (thus not only issuers listed on the regulated market Euronext Brussels).
1 Directive 2013/50/EU of the European Parliament and of the Council of 22 October 2013 amending Directive 2004/109/EC of the European Parliament and of the Council on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, Directive 2003/71/EC of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading and Commission Directive 2007/14/EC laying down detailed rules for the implementation of certain provisions of Directive 2004/109/EC.
2 Act of 27 June 2016 on the transposition of Directive 2013/50/EU and the implementation of Regulation (EC) No 596/2014 and amending the Act of 2 August 2002 on the supervision of the financial sector and on financial services, the Act of 16 June 2006 on public offerings of securities and the admission of securities to trading on a regulated market, and the Act of 2 May 2007 on the disclosure of major holdings in issuers whose shares are admitted to trading on a regulated market and containing miscellaneous provisions, BS/MB 1 July 2016.
3 Royal Decree of 11 September 2016 amending the Royal Decree of 14 November 2007 on the obligations of issuers of financial instruments admitted to trading on a regulated market, the Royal Decree of 14 February 2008 on disclosure of major shareholdings, the Royal Decrees of 27 April 2007 on takeover bids and squeeze-out bids, and the Royal Decree of 21 August 2008 on rules applicable to multilateral trading facilities, BS/MB 27 September 2016.
4 Act of 2 August 2002 on the supervision of the financial sector and financial services, BS/MB 4 September 2002.
5 Act of 2 May 2007 on the disclosure of major holdings in issuers whose shares are admitted to trading on a regulated market and containing miscellaneous provisions, BS/MB 12 June 2007.
6 Act of 16 June 2006 on public offerings of securities and the admission of securities to trading on a regulated market, BS/MB 21 June 2006.
Expected update of the Belgian Corporate Governance Code in 2017
In the course of 2017, the Corporate Governance Committee intends to review the 2009 Corporate Governance Code in light of practice, legislative developments and international standards.
The Committee will align the 2009 Code to new national and international regulations, taking into account the fact that Belgium is currently reviewing its Company Code. Consequently and since it's important for listed companies to have compatible reference frameworks, the Committee will endeavour to time the review of the 2009 Code to coincide, insofar as possible, with the revision of the Company Code. Finally, the 2009 Code will also take into account international trends and best practices. There is, for example, a trend towards greater reliance on the behaviour of board members and executive management as well as on corporate culture, in particular that of the board of directors.
The Committee has indicated that it intends to "focus on a clearly readable Code that is suitable for any type of listed company, regardless of its size, its governance model or its shareholder structure". According to the chair, "it is important that the Code regains its added value and is not just viewed by the listed companies as an exercise in compliance".
On 30 June 2016, ESMA published its peer review on the prospectus approval process. This review covered a two-year period from January 2013 to December 2014 and was conducted in order to assess compliance with and supervision of the Prospectus Directive, including the practices and methodologies employed by national regulators in their scrutiny of prospectuses.
The review identified areas that could benefit from greater convergence. The main findings were:
prospectuses are often too complex and difficult to understand for investors, in particular due to their length, the format of the summary and the incorporation of information by reference;
disclosure requirements are interpreted differently by national regulators;
approval time varies amongst national regulators; and concerns are raised as to whether national regulators can handle
peak periods and maintain a high level of scrutiny.
Based on these findings, ESMA intends to ensure greater convergence in the application of the prospectus requirements, especially as regards the intelligibility of prospectuses, the disclosure of risk factors and the interpretation of certain requirements.
Audit reform and accounting rulings
1. Audit reform
Audit reform was introduced by (i) Regulation 537/2014 of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities and repealing Commission Decision 2005/909/EC (the "Audit Regulation") and (ii) Directive 2014/56/EU of 16 April 2014 amending Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts (the "Amending Audit Directive"). The Audit Regulation is directly applicable since 17 June 2016. The Amended Audit Directive should have been implemented by 17 June 2016. Unfortunately, Belgium failed to meet this deadline. The act transposing the Amended Audit Directive (and partially implementing the Audit Regulation) was indeed only adopted on 24 November 2016 and published in the Belgian State Gazette on 13 December 2016. 7 Most provisions of the act, which amends, among others, the Company Code, entered into force on 31 December 2016.
Audit reform impacts both the rules applicable to the auditor's profession and the rules governing the statutory audit of listed companies. The main changes regarding listed companies aim at (i) enhancing the statutory auditor's independence, (ii) reinforcing the role of the audit committee, (iii) improving the content of the audit report, and (iv) extending the list of prohibited non-audit services.
The most important change affecting listed companies concerns the mandatory rotation of auditors. The Audit Regulation provides that the term of office of an auditor must be at least a year and no more than ten years (in combination with any renewed engagements).8 Member States may however provide for stricter terms. As such, under Belgian law, auditors are appointed for a renewable term of three years. However, the Act of 29 June 2016 9 amending Article 132 of the Company Code provides that an auditor may, in principle, not be appointed for more than 3 consecutive terms. The term of office of the statutory auditor should therefore not exceed a maximum period of 9 years (in combination with any renewed engagements). Upon expiry of this nine-year period, a fouryear cooling-off period applies.
In addition, the Audit Regulation provides that the key partners responsible for carrying out the statutory audit shall cease their participation in the audit no later than 7 years after their appointment. Member States may however provide for stricter terms. In this regard, the Belgian Company Code, as amended, provides that the auditor shall replace its permanent representative or, if it is a natural person, transfer its duties to a colleague, no later than 6 years (in combination with any renewed engagements) as from the date of its appointment. Upon expiry of this six-year period, a three-year cooling-off period applies.
7 Act of 7 December 2016 on the profession and supervision of auditors, BS/MB 13 December 2016.
8 Transitional provisions apply to certain long-term audit engagements. 9 Act of 29 June 2016 containing miscellaneous economic provisions, BS/MB 6 July
In accordance with the Audit Regulation, the Act also provides that the auditor shall establish a gradual rotation mechanism of its most senior personnel carrying out the statutory audit.
Another important change introduced by the Amended Audit Directive and now reflected in the Company Code, as amended, is that any contractual clause entered into between a listed company and a third party restricting the choice by the general meeting of shareholders or members of that entity to certain categories or lists of statutory auditors or audit firms, as regards the appointment of a particular statutory auditor or audit firm to carry out the statutory audit of that entity, shall be null and void. Existing arrangements in this respect should therefore be reassessed.
2. Accounting rulings
Aside from the bill implementing the audit reform, another accounting Act was recently adopted and published in the Belgian State Gazette on 20 December 2016.10 The Act entered into force on 30 December 2016.
It provides, amongst other things, for the possibility for the Belgian Accounting Standards Board (Commissie voor Boekhoudkundige Normen/Commission des Normes Comptables) to issue formal rulings, as is currently the case for tax-related matters.
3. Enforcement priorities for listed companies' 2016 financial statements
On 28 October 2016, ESMA published its enforcement priorities for listed companies' 2016 financial statements.
The common enforcement priorities are intended to ensure consistent application of IFRS by listed companies across the EU and cover inter alia the following topics:
Issuers of securities admitted to trading on regulated markets and their auditors should also take into account the public statement of ESMA dated 10 November 2016 on the implementation of IFRS 9 (financial instruments), available by clicking here.
On 23 December 2016, the FSMA made available a set of frequently asked questions as regards contributions in kind, mergers, divisions and equivalent transactions. In this FAQ, the FSMA recalls certain fundamental principles applicable to such transactions and addresses several practical questions and good practices. This document will support the decision-making process within listed companies as regards transactions involving conflicts of interest. The FAQ is available by clicking here.
1. At the European level
- In our previous dashboard, we mentioned that the European Commission had introduced a proposal to replace the Prospectus Directive with a regulation to make it easier, quicker and cheaper for businesses to raise money on the markets.
The process is expected to end in early 2017, and the regulation should enter into effect in the course of the year, although there is no fixed implementation date yet.
2. At the Belgian level
presentation of financial performance whereby ESMA stresses the need to provide clear and high quality information;
financial instruments and the distinction between equity instruments and financial liabilities whereby ESMA notes that the general principle for distinguishing liabilities from equity is whether the entity has an unconditional right to avoid delivering cash or another financial asset to settle the contractual obligation;
disclosure of the impact of the new standards on IFRS financial statements whereby ESMA draws issuers' attention to the impact that the new IFRS standards, which come into force at the start of 2018 and 2019, will have on their financial statements; the new standards relate to financial instruments (IFRS 9), revenue from contracts with customers (IFRS 15), and leases (IFRS 16).
- As mentioned in a previous dashboard, Member States had until 6 December 2016 to transpose the rules on non-financial reporting (Directive 2014/95/EU)11 into national law. Unfortunately, Belgium failed to meet this deadline.
On 21 September 2016, the Central Economic Council (Centrale Raad voor het Bedrijfsleven/Conseil Central de l'Economie) published an opinion concerning transposition of the directive in Belgium.12 On 23 December, the Council of Ministers approved a draft bill in that regard. To date, however, no legislative proposal has been formally introduced.
- In previous dashboards we mentioned that the Belgian Company Code will be overhauled. The expected timing is 2018.
In addition, ESMA encourages issuers potentially affected by Brexit to assess and disclose the associated risks and expected impact this event could have on their business.
10 Act of 12 December 2016 amending the Code of Economic Law with regard to the competence of the Accounting Standards Board, B.S./M.B. 20 December 2016
11 Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of nonfinancial and diversity information by certain large undertakings and groups, OJ L 330, 15.11.2014, p. 19. 12 See http://www.ccecrb.fgov.be/txt/nl/doc16-2140.pdf
Innovative semester in debt capital markets transactions
Green bond issuances are currently booming worldwide. Green bonds allow companies to raise capital for new and existing projects with environmentally sustainable benefits.
In the second half of 2016, NautaDutilh was involved in a EUR 55 million issuance of 2.00% green and social bonds by Cofinimmo (a REIT listed on Euronext Brussels). The bonds were placed with institutional investors by a syndicate composed of Belfius, BNP Paribas (which also acted as global coordinator) and Degroof Petercam. The bonds are intended to (re)finance projects that contribute positively to sustainable development and meet the standards for green and social bonds issuances set by the International Capital Market Association (ICMA). Cofinimmo is the first European REIT and Belgian issuer to issue such bonds.
This transaction followed on the heels of Cofinimmo's refinancing in September 2016 of its EUR 190 million convertible bonds (due in June 2018), by way of a public buy-back offer following a reverse bookbuilding process. The buy-back was financed by a new issue of convertible bonds for an amount of EUR 220 million through a public offering following a private placement. NautaDutilh also assisted Cofinimmo with this transaction, which was also the first public buy-back of convertible bonds in Belgium.
Nicolas de Crombrugghe Partner T +32 2 566 81 84 M +32 485 50 67 15 E firstname.lastname@example.org
Elke Janssens Partner T +32 2 566 81 50 M +32 478 99 63 45 E email@example.com
Lorraine Vercauteren Associate T +32 2 566 82 04 M +32 499 69 84 05 E firstname.lastname@example.org