Corporate law - Difficulties in structuring leveraged deals in Belgium

Most acquisitions of companies are nowadays structured as leveraged deals, whereby a portion of the purchase price for the assets or for the shares to be purchased is obtained through loan financing. In such a leveraged transaction, the buyer specifically intends to use the assets and cash flow of the acquired company in order to reimburse or secure the loan financing.

Under Belgian law, this technique is sometimes impaired by article 52 ter of the Company Laws, which provides that a Belgian limited liability company ("societe anonyme / naamloze vennootschap") may not advance funds, grant loans or provide suretyships with a view to the acquisition by a third party of its own shares. A breach of article 52 ter entails the nullity of the transaction at hand (e.g., the nullity of the loan, the nullity of the suretyship, etc.) and may result in criminal sanctions and fines.