Mergers and demergers :
reporting and documentation
requirements lightened

The reporting and documentation requirements in respect to mergers and demergers have recently been simplified by the law of 8 January 2012 (Official Gazette of 18 January 2012), in implementation of the Directive 2009/109/EG on the reporting and documentation requirements
for mergers and divisions.

This law applies to mergers and demergers of which the proposal was filed with the clerk’s office after 28 January 2012.

The purpose of the disclosure and reporting requirements in mergers and demergers is to safeguard the interests of shareholders and other stakeholders (such as employees, creditors,..., public authorities) of the concerned companies by informing them in advance about the imminent merger or demergers.

Therefore, this article will explain the extent of the simplifications regarding the reporting and documentation requirements in mergers and demergers.

1. The announcement of a merger or demerger proposal

The administrative or management bodies of each of the merging or demerging companies are still required to draft a merger or demerger proposition.

The announcement of this merger or division proposition is being simplified. Indeed, the publication of a merger or demerger proposal, which has to be filed by each company involved in the merger or demerger to the Clerk’s Office to the competent Commercial Court, may henceforth not only be published in excerpt in the annexes to the Belgian Gazette, but also by means of an announcement in the Annexes to the Official Gazette with a hyperlink to the website of the company involved. Companies which do not have a website, still have to announce by publishing an excerpt in the annexes to the Belgian Official Gazette.

Both the filing as the announcement have to be done no later than six weeks prior to the date of the general meeting, in which a decision concerning the merger or demerger will be taken. In this context, a literal reading of the law leaves room for doubts about the commencement date of that particular period of six weeks. Prior to the new law, this term began on the moment of the depositing of the merger or demerger proposal to the Clerk’s Office. Now it is not clear whether the moment publication in excerpt or by means of an announcement thereof in the Annexes to the Official Gazette has to be taken in consideration in order to determine the term. As long as this question remains unresolved, and the legislator does not bring clarity, it is recommended to preconcert with your advisor and / or involved notary.

2. Reporting of a merger or demerger

The administrative or management bodies of each of the merging or demerging companies are required to draw up a detailed written report explaining the position of the merger or demerger, as well as providing a statement of assets and liabilities and setting out the legal and economic grounds for the transaction, and the terms, conditions and effects of the transaction.

In case of mergers, the merger report of the management bodies is no longer required if all the shareholders and holders of other securities conferring voting rights of every company involved in the merger, have agreed to do so. For divisions that possibility existed already prior to this law.

Moreover, the legal dispositions concerning the reporting requirement of the auditor and the reporting requirement regarding the contribution in kind have been modified.  The Law now provides that a report of the statutory auditor, an auditor or an independent expert on the capital increase by contribution in kind at the level of the absorbing/receiving company is no longer required, on the condition that a member of one of these professional groups has already examined the merger or demerger proposal and has issued a merger report.

In the context of a formation of a new company by demerger, the management body and the Statutory Auditor are no longer required to write a report if the shares of each of the new companies are allocated to the shareholders of the demerged company in proportion to their rights in the capital of this company.

3. Interim information and availability of documents

n the context of a merger or demerger, the management bodies of each of the companies involved in the merger or demerger have to inform the general meeting of shareholders of their own company and the administrative or management bodies of the other companies involved of every substantial change in the assets and liabilities, which have occurred between the date of the redaction of the actual merger or demerger proposition and the date of the general meeting, on which a decision concerning the merger or demerger has to be taken.

This obligation no longer applies in the context of a merger, provided that all shareholders and other holders of securities conferring voting rights of any company involved in the merger have given their consent.
The same obligation counts for division by formation, given that the shares of each of the new companies are allocated to the shareholders of the divided company in proportion to their rights in the capital of that company. However, regarding the divisions by acquisition, these information obligations in relation to the shareholders are maintained, without any possibility to deviate.
Regarding mergers or divisions, the interim account statements have to be prepared if the last annual accounts relate to a financial year which ended more than six months before the closing date of the merger or demerger proposal. Henceforth, these statements are no longer required on the condition that either the company has published a half-yearly financial report, either all shareholders and the holders of other securities conferring votes of the companies, which are involved in the merger, have agreed to do so. The same rule applies for a demerger by incorporation if the shares of each of the new companies are allocated to the shareholders of the demerged company in proportion to their rights in the capital of this company.
The documents, which in the context of a merger or division have to be made available to the shareholders, may now be sent by electronic mail, when they have consented individually, expressly and in writing that the company may provide the documents by electronic mail.

The aforementioned documents must be made available to the shareholders at the registered office of the companies involved, and this for a continuous period of two months, beginning at least one month before, until one month after the day fixed for the general meeting, in which the shareholders decide on the merger or division, unless the company makes it available on its own website. Nevertheless, all companies involved are still obliged to deliver a free copy if one of the members request so.

Furthermore, if the website gives shareholders the possibility of downloading and printing the documents, the company is exempted from the obligation to send to each shareholder on request full or partial copies free of charge (either by regular or electronic mail). This does not relieve the companies from the requirement to make those documents available at the registered office for consultation by the shareholders.

4. Approval of a merger is not longer always required

In case a merger by acquisition is carried out by a public limited liability company (naamloze vennootschap (Dutch) or sociétés anonyme (French)), which holds at least 90 % of the shares and other securities conferring voting rights of the offeree company, the approval of the merger by the shareholders' meeting of the acquiring company will not be required, provided that the rules applicable to the publication of the merger proposal and the disclosure of the documents are being respected, namely :
1 ° the announcement of the merger proposal for the acquiring company has to be done at least six weeks before the day fixed for the general meeting of the offeree company or the companies which have to decide on the merger proposal;
2 ° every shareholder of the acquiring company has the right to consult the documents at the registered office of the company at least one month before the announcement.

However, one or more shareholders of the acquiring company who hold(s) voting shares which represent at least 5 per cent of the share capital, has the right to request a general meeting of the acquiring company in order to discuss and to decide on the merger proposal.

For division by acquisition, it is now so that the general meeting of the divided company does no longer have to give its approval if all the shares are in the possession of the acquiring companies.

14 May 2012

Leo Peeters - leo.peeters@peeters-law.be

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