Transactions Blog

The Belgian Official Gazette of 18 January 2012 includes the publication of the Act of 8 January 2012 modifying the Companies Code pursuant to Directive 2009/109/EG regarding reporting and documentation requirements in case of mergers and demergers (the “Act”). This Act modifies the procedure applicable for merger and demergers.

Intervention independent expert

Until now, the following reports of an independent expert (i.e. the company’s statutory auditor or an external auditor or accountant) were required:

•  For mergers: a report on the merger proposal (the “merger report”), but this merger report could be waived by unanimous decision of the shareholders. Based upon unclear drafting of the law, there was however some discussion in legal practice as to whether in case of such waiver, it was required to provide for a report on the capital increase by contribution in kind at the level of the acquiring company (the “contribution report”)
•  For demergers: a report on the demerger proposal (the “demerger report”), which could be waived by unanimous decision of the shareholders and a report regarding the capital increase by contribution in kind in the receiving companies (the “contribution report”), which could not be waived.

The requirements for both mergers and demergers have now been aligned and clarified.

For both mergers and demergers:

• The (de)merger reports can be waived by unanimous decision of the shareholders.
• In case of such a waiver, a contribution report at the level of the acquiring company / receiving companies will be required.

In other words: the intervention of an independent expert will be required both for mergers and for demergers, either to draft a (de)merger report on the (de)merger proposal or to draft a contribution report on the contribution in kind.

It is to be noted that the foregoing does not apply to simplified mergers (between a parent company and its 100% subsidiary). There, the situation remains unchanged: no expert’s report at all is required.

Other important changes

Besides the above, other important changes are made to the company law procedure applicable for mergers and demergers, such as:

• if all shareholders agree, the special report of the board of directors on the merger can be waived;
• if all shareholders agree, no intermediary statement of assets and liabilities is required anymore;
• if all shareholders agree, the intermediary information duty (in case of important changes to the assets and liabilities of the companies involved between the date of the (de)merger proposal and the extraordinary general shareholders meeting) can be waived;
• an extract of the (de)merger proposal must be published in the Belgian Official Gazette (instead of a mere notification) or a hyperlink to the website of the company where the full text can be found.

Entry into force

The new procedure applies for all (de)mergers for which the (de)merger proposal is filed after 28 January 2012.

For more information, please contact:

Karin Winters                                              
Partner                                                               
+ 32 2 710 74 04               
karin.winters@pwc.be  

Bart Vanstaen
Legal Counsel
+ 32 2 710 43 10
bart.vanstaen@pwc.be
       

If your company is confronted with:

• the need for additional money in order to realise its growth ambitions …
• an acquisition process in which the legal risks related to the target’s business are complex …
• a transaction without clarification and control of the tax accounting issues of the target upon acquisition …

You may be interested to learn more about some of the following client success stories which we are glad to share with you:

• Corporate Finance: Assist an enterpreneur to attract new investors for his company
• Legal due diligence, structuring & documentation: Assessment of the legal position of a target prior to an acquisition
• Compliance in a transactions environment: Tax reporting of a cross-border acquisition

If you are confronted with:

• a complex company structure that is no longer adapted to the current market environment…
• covenant breaches and uncertainty about the magnitude of the impact of the crisis on the business of your company..
• significant drops in the value of your equity incentive arrangements…

You may be interested to learn more about some of the following client success stories which we are glad to share with you:

• Tax modelling: International Group Simplification
• Independent Business Review: Restructuring office for Deceuninck
• Management participations: tax structuring of a CEO equity incentive

If you are confronted with

• Potential tax issues in the context of cross-border acquisitions …
• Uncertainty about market conditions and projected performance of the company you intend to acquire …
• Excessive debts or poor liquidity and potential breach of convenants …

You may be interested to learn more about some of the following client success stories which we are glad to share with you:

• Tax structuring: Tax structuring in a cross-border context
• Commercial due diligence : Not knowing what you buy is always expensive!
• Business Recovery & Restructuring services: Assessment of the financial position and outlook of a company in distress

Today, more than ever, effective tax management is key in case you are dealing with situations such as:

-        determining a bid price in an acquisition process;

-        reallocation of existing bank debt and intercompany debt;

-        reorganizing your current group structure;

-        understanding  the impact of taxes on your cash position;

-        a complex supply chain with multiple countries and entities;

-        valuation of deferred tax assets;

Effective tax management can result in decreasing the effective tax rate, maximising the use of available tax assets, optimising the existing leverage, improving the cash flow and reducing compliance costs.

Modelling your taxes helps you to better understand, anticipate and further optimise your direct and indirect tax charges and to obtain an improvement of your working capital based on your business plan.

Depending on your needs, such tax model can provide you a fair and better understanding of the tax impact of maintaining your current group/financing structure as opposed to implementing alternative scenarios, allowing you to decide on such restructuring/refinancing scenarios in a more informed manner.

…Hence, tax modelling is an indispensable aspect of financial management.

In today’s world, regulatory and compliance demands on businesses are many and varied. The need for accurate accounting and tax records that comply with the multitude of rules and regulations applied in different jurisdictions by different authorities can place a great pressure on limited in-house resources.

Very often, companies are confronted with compliance issues (such as late or non-filing of statutory accounts or tax returns leading to penalties and additional taxes, etc.) during the due diligence phase or the post-deal integration.

If e.g. a purchaser carrying out a due diligence discovers that the target has fallen behind and regulatory returns are not fully up-to-date, then the entire deal can be at risk. The purchaser may want a discount on the purchase price to reflect the risk element of the uncertain tax position or require warranties, etc.

Whatever the outcome, it is likely that the vendor’s position will be worse than if the compliance had been up to date.

If, on the other hand, you as buyer discover these issues during the post-implementation phase of the target, time and money will be wasted to remedy the situation.

In summary, when you are planning a deal, it is not an option not to be in control of your compliance.