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CHANGES TO COMPANIES ACT EASE THE RULES FOR CONTRIBUTIONS

March 2009 - Corporate & Commercial. Legal Developments by Cruyplants Eloy Wagemans & Partners .

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The Belgian Royal Decree of October 8, 2008 has introduced several changes to the Companies Act that will make it easier for shareholders to make contributions in kind or sell assets to their companies or for companies to acquire and hold their own shares or to provide financial assistance to purchasers of their shares. The changes relate to the most common types of company: NV/SA, BVBA/SPRL and CVBA/SCRL. They are the implementation in Belgian law of EU Directive 2006/86/EC amending the Second Company Law Directive and they became effective as of January, 1, 2009.

The first change concerns contributions in kind. Whereas till now every contribution in kind required the prior and written assessment by an external auditor of the value of the contribution, this will no longer be required under the following conditions:

- for a contribution of stocks or shares, if they are valued at their average weighted price on any regulated market where they are traded during three months preceding the date of the contribution; - for a contribution in kind of any other assets, if they have been valued by an external auditor less than 6 months before the date of the contribution, using generally accepted standards and principles;

- for a contribution in kind of any other assets which are valued on the basis of the statutory annual accounts of the previous book year, on the condition that these accounts have been subject to control by a statutory auditor, whose opinion is not qualified.

Shareholders jointly holding at least 5% of the issued capital on the day the decision to increase the capital against a contribution in kind is taken can still demand an external auditor’s valuation up to the date that the actual contribution in kind is made.

Contributions in kind without prior and written assessment by an external auditor (subject to the above conditions) are also allowed when the capital increase is decided on by the Board of Directors within the limits of the authorised capital. In this case additional information obligations apply.

Belgian company law treats any purchase by a company, within two years of its incorporation, of assets worth 10% or more of its subscribed capital from a founding shareholder or a director as a contribution in kind (“quasi-contributions”). Such purchases are subject to rules which are very similar to the rules which apply to contributions in kind and from January, 1, 2009 they will benefit from the same exceptions.

The rules for the acquisition by a company of its own shares has also been relaxed:

- acquisitions of own shares require the prior approval of the general meeting of shareholders. Whereas previously this approval was valid only for 18 months, this has now been extended to 5 years;

- the number of own shares that can be held has been increased from 10% to 20% of the capital shares.

Finally, the Companies Act will from now on allow “financial assistance” (loans, advances, guarantees) given by the company to third parties for the acquisition of its own shares. This financial assistance will be allowed subject to the following conditions:

- the financial assistance must be provided at fair market conditions, especially with regard to any interest rate and the required solvency;

- fair market conditions also must apply (to the acquisition price) if the third party acquires the shares directly from the company itself or as a result of a capital increase;

- the Board of Directors must prepare a report justifying the transaction;

- a prior decision of the shareholders meeting is required, deciding with a 3/4th majority and a quorum of 50%;

- the advances or loans can only be granted using capital which is freely available for distribution; in addition a frozen reserve equal to the amount of the aggregated financial assistance must be set up.

Luc Van Caneghem

luc.vancaneghem@cew-law.be

www.cew-law.be