February 2018 - Issue 7
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 seventh dashboard for Belgian listed companies, covering the second half of 2017.
Two particularly relevant developments in the past six months which will impact listed companies are the (discussions regarding the) reform of the Belgian Company Code and the new act on the disclosure of non-financial information.
We would also like to draw your attention to our upcoming initiatives relating to the reform of the Belgian Company Code.
Reform of the Belgian Company Code
The Belgian Company Code will soon be overhauled. A bill in this respect was approved by the Council of Ministers on 20 July 2017 and has been submitted to the Council of State. It is expected to be approved in the course of 2018, with effect as from 2020.
The reform will substantially change the Belgian corporate landscape by reducing the number of corporate forms and introducing greater flexibility and non-mandatory rules.
Please find below a brief overview of the most important changes in the new Company Code for listed companies. This overview is based on the bill submitted to the Council of Ministers in July 2017. Further changes can thus be expected.
1. Preliminary considerations
Concept of listed company: the decisive criterion is shares/certificates listed on a regulated market (with possible extension by royal decree to MTFs); if only bonds are listed, the issuer will not be considered a listed company.
SRL/BV (the vehicle replacing the SPRL/BVBA) can request listing on a regulated market/MTF.
SCA/CVA is abolished but the same structure can be achieved using an SA/NV with a sole director (appointed in the articles).
Possibility to have a one-tier (board of directors) or a two-tier (supervisory board and executive board) board structure.
Possibility to have a sole director. The removal of directors ad nutum is no longer of
mandatory application. Concept of day-to-day management is defined. Concept of directiecomite/comit de direction is
Permanent representative (of a legal-entity director) must be a natural person who cannot hold a separate seat on the board in his or her own name.
Independent directors may not be granted variable remuneration.
New conflict-of-interest procedure for directors: - A director with a conflict may not participate in deliberations or vote, in both listed and unlisted companies. - Publication of an extract from the board resolution in the annual report is sufficient.
Conflict-of-interest procedure for transactions with affiliates: - Extension to relations with a subsidiary in which the listed company's controlling shareholder holds at least a 25% stake (or is entitled to at least 25% of the profits). - Exclusion of transactions between subsidiaries which are sister companies. - Applicable to transactions with controlling shareholders or affiliates other than subsidiaries (whether legal or natural persons). - Applicable to certain proposals made by the board to the general meeting (i.e. contributions in kind, mergers, divisions and transactions treated as such).
Director's liability - Capped at EUR 12 million in listed companies per act/breach (subject to carve-out). - Prohibition on a "hold harmless" waiver by a company or subsidiary (except by a parent or controlling entity).
3. General meeting of shareholders
Called by shareholders: threshold of 10% (reduced from 20%).
Communication by email possible where an email address has been provided by the shareholder.
Change-of-control clause approval limited to listed companies where there is a substantial impact on the company's assets.
Possibility to grant dual-vote shares to long-term shareholders.
Increased flexibility for non-voting shares (no maximum number and preferential dividend no longer required).
Possibility to issue perpetual bonds. Abolition of the maximum ten-year term for
convertible bonds. Possibility to exclude in the T&C the right to exercise
warrants in the event of a rights issue
5. Capital increases
Rights issue - No changes to the rules on the minimum subscription period and pre-transaction publication requirements. - If there are multiple classes of shares: Preferential right is granted first to the class of shares to which the new shares belong. Preferential right extended to other classes of shares only if shareholders entitled to receive new shares do not exercise their rights. Procedure to amend classes must be followed.
Placement with limitation and cancellation of preferential rights - Public offering or ABB: no important changes. - Placement with "determined persons" Abolition of the minimum price rule (30-day average) Conflict-of-interest rules: if a given investor is a shareholder (holding 10% of the voting rights), it cannot vote on the decision (same rule applies at board level if the shareholder has a board representative). Carve-out for members of "personnel", now defined to also include board members and self-employed persons.
Authorised capital - Issue price below par is now possible. - No issuance of new classes of shares. - Supervisory board is the competent body in the two-tier system.
Reporting requirements - Enhanced reporting requirements (e.g. also for rights issues). - Nihil obstat from the FSMA: Only required for warrants/convertible bonds issued in favour of determined persons. No longer required for SOP warrants and convertible bonds placed via ABB or public offering.
Capital increase in kind - No major changes.
7. Bondholders' meeting
T&C can now derogate from the Company Code (except for proxies).
Possibility to appoint a bondholders' representative or a security agent (in the T&C).
Judicial confirmation no longer required. Possibility to take decisions electronically (without an
8. Capital reduction
A limited number of terminology clarifications but rules substantially similar.
9. Dividend distributions
Main changes relate to interim dividends. Now also possible to use profits from previous
financial year, provided the annual accounts for that year have not yet been approved. Can be distributed throughout the entire financial year (not only in the second half). No minimum period between two interim dividends.
10. Treasury shares
Buyback - Prior authorisation by GM with 75% majority (instead of 80%). - Abolition of 20% maximum threshold. - No right to dividends (i.e. suspension of dividend no longer possible). - Buyback by subsidiaries Dividends are granted to subsidiary Extension to indirect subsidiaries of the equal treatment rules for buybacks and transfers - Abolition of the rules on cross-shareholdings
Sale/transfer - Prior authorisation of GM not necessary but equal treatment required. Transfer authorised only: on a stock exchange; outside a stock exchange, at market price or higher (no discount allowed); if there is an express authorisation in the articles, to one or more determined persons other than members of personnel (if purchaser has a board representative, it cannot take part in the board decision); to the personnel, for treasury shares acquired in view thereof.
As from the tenth day following publication of the new Company Code in the Belgian State Gazette: no further incorporation of or conversion into an SCA/CVA is possible.
Listed SCA/CVAs remain governed by previous Company Code until conversion into an SA/NV, however mandatory provisions relating to the SA/NV (other than those pertaining to management) are applicable as from the effective date of the new Company Code.
If not converted into an SCA/CVA 10 years following publication of the Company Code in the MB/BS, automatic conversion into an SA/NV with a sole director
Disclosure of non-financial and diversity information in the annual report
The act on the disclosure of non-financial and diversity information by certain large undertakings and groups (the "Act") was adopted on 3 September 2017 and published in the Belgian State Gazette on 11 September 2017.
The Act implements - with some delay - 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 non-financial and diversity information by certain large undertakings and groups. See our previous dashboard for more information.
The Act enters into effect for financial years starting on 1 January 2017 or in the course of 2017.
The Act requires large listed companies to include specific information about their diversity policy in their corporate governance statement.
The Act applies to listed companies that meet more than one of the following criteria, on an individual basis, unless the company is a parent company:
250 employees on average during the last financial year;
turnover of EUR 34 million (excluding VAT); balance sheet total of EUR 17 million.
Such companies shall include in their corporate governance statement a description of:
the diversity policy applied by the company's board members, executive committee members, other executives and persons entrusted with daily management;
the goals of the diversity policy; the implementing terms of the policy; and the results of the policy during the financial year.
If no diversity policy is applied, the statement shall contain an explanation as to why this is the case.
Additional information must also be included in the annual report (unless the company is a subsidiary covered by the consolidated non-financial report of its parent company) if the company:
exceeded on its last balance sheet date 500 employees on average for the financial year and either a balance sheet total of EUR 17 million or turnover of EUR 34 million, on an individual basis, unless the company is a parent company;
is a parent company whose last balance sheet indicated more than 500 employees on average for the financial year on a consolidated basis.
To the extent necessary to understand the evolution of the company's affairs, performance, situation and impact on at least environmental, social and employment matters, as well as respect for human rights, anti-corruption and bribery issues, the company must include in its corporate governance statement a declaration that includes:
a brief description of the company's activities; a description of the policies applied by the
company to these matters, including reasonable diligence procedures that have been implemented; the results of these policies; the principal risks associated with these questions relating to the company's activities, including where relevant and proportionate, the business relationships, products or services of the company that are likely to lead to a negative impact on these matters and how the company manages these risks; and the key non-financial performance indicators with respect to these activities.
If the company does not apply a policy with respect to one or more of these matters, the non-financial declaration shall explain why this is the case.
Consultation on the Corporate Governance Code
On 19 December 2017, the Corporate Governance Committee launched a public consultation on the revised Corporate Governance Code. Stakeholders may submit comments on the proposed revision until 28 February 2018.
The reform primarily aims to:
return to the basics of corporate governance and remove certain more detailed provisions and guidelines;
enhance directors' awareness of how to act in the performance of their office, bearing in mind longterm value creation;
enhance directors' independence and integrity; and
ensure periodic evaluation of compliance with the code in light of changes to the business environment.
The objective is for the new Corporate Governance Code to enter into force on the same date as the revised Company Code (namely, 1 January 2020).
More information about the public consultation can be found here.
IFRS priorities in 2017 annual financial reports
On 27 October 2017, ESMA published the priorities to be considered by listed companies and their auditors when establishing and auditing their 2017 financial statements
These priorities relate to:
disclosure of the expected impact of the implementation of major new standards in the period of their initial application (IFRS 9 and IFRS 15); and
specific issues relating to IFRS 3 and IAS 7.
Legal Entity Identifier (LEI)
Since 3 January 2018, every issuer of financial instruments listed and/or traded on a trading venue is identifiable by a Legal Entity Identifier (LEI), i.e. a 20-digit alpha-numeric code that enables identification of legal entities participating in financial transactions. This is a MiFID II requirement.
The concept and purpose of the LEI and the procedure to obtain one are described at the ESMA library.
In addition, the priorities stress the importance of measurement and disclosure of non-performing loans by credit institutions, the ongoing relevance of the fair presentation of financial performance, the disclosure of the impact of Brexit and the importance of non-financial disclosure further to the application of 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 non-financial and diversity information by certain large undertakings and groups (see above).
The European Common Enforcement Priorities setting out ESMA's IFRS priorities for 2017 financial reports are available on the ESMA website.
Update of ESMA Q&As on alternative performance measures, market abuse and the prospectus rules
Amended REIT rules
On 22 October 2017, the Belgian legislature adopted an act amending the Regulated Real Estate Companies Act of 12 May 2014 (the "RREC Act") (Loi du 12 mai 2014 relative aux Socits Immobilires Rglementes (SIR)/Wet van 12mei 2014 betreffende de Gereglementeerde vastgoedvennootschappen (GVV)) (the "Amending RREC Act"). The Amending RREC Act was published on 9 November 2017 in the Belgian State Gazette.
The Amending RREC Act introduces three main changes to the RREC legislation.
1. Extended scope of permissible investments
The Amending RREC Act extends the scope of activities an RREC is allowed to pursue to all activities relating to the infrastructure sector (including DBFM contracts, concessions and other types of public private partnerships, energy and networks, public services, etc.).
2. Greater flexibility for co-investment
Currently, an RREC is required to have sole or joint control of the companies in which it holds shares. The Amending RREC Act relaxes this rule to require a minimum shareholding of 25%, it being understood that the fair value of holdings in companies over which the RREC does not have sole or joint control or for which it does not hold at least 50% of the shares is limited to 50% of the fair value of its consolidated assets. This will make partnerships and joint ventures with other companies more attractive.
3. The RREC with a social purpose
The Amending RREC Act introduces a new type of RREC, the so-called social RREC.
The social RREC must be active in real estate infrastructure required by the social services sector, such as childcare, senior housing, disabled care, and education in general. Such vehicles will be subject to different and lighter regulation compared to the classic RREC. As such, a social RREC cannot be listed and will be required to take the form of a cooperative company with a social purpose, meaning the return on investment is subordinate to its social purpose.
In the second half of 2017, ESMA updated its Q&As on alternative performance measures, market abuse and the prospectus rules.
As regards alternative performance measures, the Q&A now provides additional information on:
the application of the APM Guidelines to quarterly financial figures;
the concept of prominence; the limits for compliance by reference principle; the definition of APM; the scope of the APM Guidelines; the application of the scope exemption; the definition of the "organic growth" APM; how to carry out reconciliation; and the application of the fair review principle.
As regards the Market Abuse Regulation, the Q&A now provides additional information on:
how the issuer should deal with delayed inside information that is no longer price sensitive;
the concept of persons professionally arranging or executing transactions who are required to detect and report market abuse;
the concept of "closely associated persons"; the concept of "financial instruments" as this term is
used in the scope of market sounding; the subject of the insider list requirements; the issuer's responsibility in the event of delegation as
regards insider lists; how to consider permission to trade in a closed
period, which may be granted in certain circumstances to persons discharging managerial responsibilities; and the types of transactions by persons discharging managerial responsibilities that are prohibited during closed periods.
As regards the prospectus rules, due to the entry into force of certain provisions of the new Prospectus Regulation (EU) 2017/1129 on 20 July 2017, the Q&A now provides additional information on:
the conversion or exchange of non-transferable securities and the exemption from publishing a prospectus;
the exemption for admissions that do not equal or exceed 20% of the issuer's securities of the same class already admitted to trading on the same regulated market over a 12-month period;
the exemptions from the obligation to publish a prospectus in the event of the issuance of new shares as a result of a merger; and
the obligation to publish a prospectus for admission of securities to trading on a regulated market and the possible exemptions therefrom.
Revised Prospectus Act
As indicated in our previous dashboard, the new Prospectus Regulation (EU) 2017/1129 was published on 30 June 2017 in the Official Journal of the European Union. It entered into force on 20 July 2017 and will apply as from 21 July 2019, with the exception of certain provisions which enter (or will enter) into effect earlier.
Under the Prospectus Regulation, certain choices must still be made at the Member State level regarding, for instance, the scope of application and the thresholds for and applicable exemptions from the prospectus requirements.
In this context, the FSMA launched a public consultation in December 2017 on a bill to replace the Prospectus Act of 16 June 2016.
Under the Prospectus Regulation, no prospectus is required for an offer with total consideration of less than EUR 1 million, and Member States are allowed to exempt offers with total consideration of less than EUR 8 million over a twelve-month period. The new bill exempts public offerings with total consideration of less than EUR 5 million over a twelve-month period, provided an information note is published. The note need not be approved by the FSMA. A draft prospectus decree defines the minimum requirements for the information note, which include (i) risk factors regarding the issuer and investment instrument, (ii) information on the issuer, (iii) information on the offer, and (iv) information on the investment instruments.
The main proposed change relates to the prospectus exemption for public offers of limited size.
Useful information - new Prospectus Regulation
The new Prospectus Regulation requires or empowers the Commission or ESMA to develop and adopt delegated acts, implementing acts and regulatory technical standards (RTS), implementing technical standards (ITS) and guidelines.
In this context, ESMA published on 6 July 2017 three consultation papers on the Prospectus Regulation. These papers contain draft technical advice on (i) the format and content of the prospectus, (ii) the content and format of the EU Growth Prospectus, and (iii) scrutiny and approval of the prospectus. The consultation ended on 28 September 2017 and the responses were published on 13 October 2017. These are available here. ESMA must provide its advice to the European Commission by 31 March 2018.
In addition, ESMA launched on 15 December 2017 a consultation on draft RTS which addresses inter alia the following topics:
the key financial information to be included in the summary of the prospectus;
the readability of information; advertisements relating to public offers or
admissions to trading; situations that require the publication of a
supplement to the prospectus; and publication of a prospectus.
The consultation runs until 9 March 2018.
Get ready for the reform of Belgian company law
The reform of Belgian company law, which is intended to introduce greater flexibility and make Belgium more attractive to domestic and foreign investors, will impact most businesses.
The bill is expected to be passed and published early this year and to be applicable as from 1 January 2019. There will be a lengthy transition period of ten years to allow companies, associations and foundations to adapt to the new rules.
A dedicated portal to guide you through the labyrinth of changes
Given the vast number of changes the reform entails, we've created a secure online platform ("the portal") with all relevant information about the new code in a central place.
Our team of specialised lawyers, some of whom were closely involved in preparing the new code, will keep you informed of everything you need to know about the upcoming reform through presentations, articles and biweekly newsletters. As the idea is to create an interactive community, the portal is also a place where users can share their comments and ask questions.
More information on how to register for the portal and how to sign up for our newsletters will be communicated soon!
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 Senior Associate T +32 2 566 82 04 M +32 499 69 84 05 E firstname.lastname@example.org