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This memorandum was prepared as a service to clients and other friends of Cleary Gottlieb to report on recent developments that may be of interest to them. The information in it is therefore
general, and should not be considered or relied on as legal advic
ALERT MEMORANDUM
Belgium Implements the EU Mobility
Directive
June 13, 2023
On June 6, the Belgian law transposing the EU Mobility Directive
1
Belgian Mobility
Lawwas published.
2
This new law introduces a number of notable changes to the rules
on cross-border mergers, de-mergers and conversions involving a Belgian company.
Significantly delayed beyond the European transposition deadline of January 31, 2023,
most provisions of the Belgian Mobility Law will enter into effect on June 16, 2023 with
the other provisions entering into effect on June 30, 2023, or December 15, 2023.
In the absence of harmonized rules on cross-border reorganizations, the Court of
Justice of the European Union (CJEU) had developed case-law based on the
freedom of establishment protected under the Treaty on the Functioning of the
European Union (TFEU) which intended to enable cross-border mobility for EU
companies. However, cross-border mobility for EU companies has remained
difficult in practice as rules differed between Member States, making the process
burdensome and complex to navigate. With the Mobility Directive, the European
legislator adopted harmonized rules to facilitate cross-border movement in the
EU, while being attentive to the interests of (minority) shareholders, creditors
and employees.
1
Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU)
2017/1132 as regards cross-border conversions, mergers and de-mergers.
2
Available at http://www.ejustice.just.fgov.be/eli/wet/2023/05/25/2023042154/staatsblad. The most extensive changes are to
Books 12 and 14 of the Belgian Code of Companies and AssociBCCA, with more limited changes to Books 5 and 7
of the BCCA, the Code of Private International Law (on conflicts of laws rules) and the Judicial Code.
If you have any questions
concerning this
memorandum, please reach
out to your regular firm
contact or the following
authors
Brus sels
Marijke Spooren
+32 2 2872075
Jan-Frederik Keustermans
+32 2 287 2187
Kasper Theunissen
+32 2 287 2108
Lene Verhaegen
+32 2 287 2051
ALERT MEMORA ND UM
2
Overview of selected key changes
⎯ Shareholders opposing the cross-border reorganization are granted a cash out right. In essence, this
gives dissenting shareholders the right to exit the company in return for a cash compensation.
⎯ Shareholders are given additional tools to challenge the exchange ratio of the reorganization.
⎯ Sufficient creditor protection becomes a condition to completion of the reorganization and a minimum
three month waiting period applies between announcement and completion of the reorganization to
ensure creditors have sufficient time to exercise their rights.
⎯ The reorganization proposal may be published on the company website.
⎯ Cross-border and domestic conversions are approved with a 75% majority (lowered from 80%).
⎯ The notary is entrusted with a strengthened gatekeeper function, involving additional checks to be
performed and broader investigation rights.
⎯ A sister-sister merger and de-merger by separation are introduced, two new types of reorganization
transactions.
⎯ Employees will benefit from increased protection, including a standstill obligation in respect of
existing employee participation rights.
I. RECAP OF THE MOBILITY DIRECTIVE
AND MAIN REORGANIZATION
TRANSACTIONS
A. Mobility Directive
3
3
First by Directive (EU) 2005/56/EC of the European Parliament and of the Council of October 26, 2005 on cross-border
mergers and then by Directive (EU) 2017/1132 of the of the European Parliament and of the Council of June 14, 2017 relating
to certain aspects of company law.
B. Typology of reorganization transactions
i.e.
See
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3
A possible variation to this, is a cross-border partial de-
merger, pursuant to which only part of the assets and
liabilities of the de-merged company transfer to one or
more acquiring companies (in exchange for which the
of the de-merged company receive shares
in the acquiring company or companies and possibly a
limited cash payment) and the de-merged company
continues to exist.
In a reorganization through cross-border conversion, a
company will essentially move its seat to another
jurisdiction. This will result in a conversion of the legal
form under which the company is registered. The
relevant company will continuously retain its legal
personality in the process.
II. SCOPE OF APPLICATION OF BELGIAN
MOBILITY LAW
4
See new Artt. 12:116/1 BCCA (cross-border merger), 12:137 BCCA (cross-border de-merger) and 14:25/1 BCCA (cross-
border conversion).
III. KEY CHANGES
A. Cash-out right dissenting shareholders
4
i. Scope of application
The cash-out right only applies in the context of
cross-border reorganizations where the acquiring
company is incorporated outside of Belgium and
where it concerns not a purely Belgian domestic
reorganization.
The cash-out right only applies to dissenting
shareholders or holders of profit sharing
ALERT MEMORA ND UM
4
certificates.
5
Holders of other types of securities
(e.g., holders of subscription rights or bondholders)
are not granted a cash-out right.
6
ii. How to exercise the cash-out right
First, the dissenting shareholder needs to pre-notify
the company of its intention to exercise the cash out
right. This should enable the merged, de-merged or
converting company to calculate the maximum
cash-out costs of the cross-border reorganization, as
they will have been made aware of the possible
maximum number of shareholders to be cashed out
in case the reorganization proceeds. This also
means that shareholders who have not pre-notified
their intention to cash-out cannot change their mind
later on.
Second, the dissenting shareholder must vote
against (in person or by proxy) the proposal for the
cross-border reorganization at the relevant
A shareholder who has not
voted or who has abstained from voting on the
cross-border reorganization cannot cash out.
Third, the dissenting shareholder must, during the
relevant formally re-
confirm the exercise of its cash-out right.
5
In this Alert Memorandum, , for these purposes, includes holders of profit sharing certificates
unless expressly indicated otherwise.
6
Dissenting bondholders are treated as third-party creditors who fall within the scope of the revised creditor protection
mechanism (see section III.C below). Subscription rights holders should rely on the protection offered by article 5:59 or 7:71
BCCA, respectively, unless otherwise provided in the terms and conditions governing the subscription rights.
iii. Valuation and implementation
a. Process
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Focus – Possibility to challenge valuation
Shareholders who wish to make use of their cash-
out right, but do not agree with the cash
compensation offered by the company, can
challenge the proposed cash compensation in
front of the President of the Enterprise Court in
summary proceedings. The claim must be
launched against the company within one month
after the vote on the reorganization. If the
litigating shareholders are successful, they may
obtain an additional cash compensation. The
additional compensation will not be available to
shareholders who did not join the litigation.
b. Cash-out funded by the company
Nevertheless, the typical net asset and liquidity
tests
7
and share buyback rules
8
do not apply to the
possible cash outflow in connection with the cash-
7
For instance, Artt. 5:142, 5:143 and 7:212 BCCA.
8
For instance, Artt. 5:145 and 7:215 BCCA.
9
Art. 5:154 BCCA.
10
More fundamentally, the cash-out right provided for by the Belgian Mobility Law indeed stems from EU law (the Mobility
Directive) and the Belgian procedure of exit and exclusion
rules. Interesting questions may arise in practice however, for instance if a cross-border reorganization is announced while a
procedure for exit or exclusion of certain shareholders of a BV/SRL is already separately on-going.
out right. In the BV/SRL, the default rules on exit
and exclusion
9
are
also excluded in the context of a cross-border
reorganization. Although neither the Belgian
Mobility Law, nor the explanatory memorandum
clarify the reasoning for such exclusion, this has
presumably been done to avoid conflicting
outcomes depending on the procedural avenue
chosen by individual dissenting shareholders or the
company (i.e., in the context of a cross-border
reorganization, neither the shareholders, nor the
company can claim to rely on default procedures for
association of a BV/SRL may provide for).
10
To mitigate possible adverse consequences for the
he Belgian Mobility Law
specifies that there can be no payment towards the
exiting shareholders as long as the creditors who
have requested additional security or another form
of guarantee have not received such assurances
(unless their claim has been paid or rejected in
court, see section III.C below). The creditors are,
however, not automatically notified of shareholders
intending to exercise their cash-out right. Creditors
may therefore not be fully aware of the potential
adverse impact of the cash-out right on their
position, although diligent creditors should request
the relevant information from the company.
To address liquidity concerns, the company benefits
from a payment term of up to two months as of the
completion of the cross-border reorganization to
pay the cash compensation to exiting shareholders.
If need be, the company could procure additional
sources of financing during such time. Pending the
two-month period, exiting shareholders are
considered ordinary creditors which may, again,
discourage shareholders from making use of the
ALERT MEMORA ND UM
6
cash-out right.
c. Cancellation of shares of the exiting
shareholder
11
Focus – Minimum cash condition
To avoid excessive cash outflow for the company
in connection with the exercise of the cash-out
right, companies should consider including
(additional) conditions precedent that must be
fulfilled for the reorganization to proceed. One
could for example imagine a condition
stipulating a maximum number of shares that can
be cashed out (so that, in excess of such
threshold, the reorganization will be deemed to
not have been approved) or inversely that the
transaction only proceeds in case the
compan(y)(ies) involved have a minimum level
of liquidity available to them immediately after
paying out all the exiting security holders.
12
A
similar condition has become commonplace in
(U.S.) de-SPAC transactions, referred to as the
11
The relevant provisions (Artt. 12:116/1, §1 in fine, 12:137, §1 in fine, and 14:25/1 in fine) oddly enough do not refer to a
cancellation of profit sharing certificates.
12
In other words, the transaction only proceeds in case (i) shareholders holding in the aggregate less than X% of the shares
exercise their cash-out right or (ii) the company will have at least X amount of available cash after making all the cash-out
payments.
13
Notably, profit sharing certificate holders do not have the option to challenge the exchange ratio proposed by the board of
directors.
14
Only for cross-border mergers and de-mergers because there is, of course, no exchange ratio in the context of a cross-border
conversion.
B. Right to challenge the exchange ratio
13
14
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7
A few takeaways and key questions around “fair” valuation
⎯ cash compensation should be equivalent to the
value of [the] sharesgenerally accepted
valuation methods
15
The appropriate valuation will thus need to be determined on a case-by-case
basis, taking into account the sector, activities and lifecycle stage of the company concerned.
⎯ A company could consider introducing in its articles of association which valuation method should be
used by the board of directors to calculate the cash-out right. For instance, in the context of the general
uitsluiting” / “exclusion uittreding” / “retrait
principle, bound by formulas or other price determination mechanisms set forth in the articles of
association
16
While the Belgian legislator has not replicated these principles in Book 12 and 14 of the BCCA with
respect to the cash-out right, judges might take such formulas or other price determination mechanisms
into account, at least to the extent they are considered
⎯ As mentioned, the reference date for the valuation is the date immediately prior to the announcement of
the transaction. In other words, the valuation of the acquired company should not take the impact of the
reorganization itself into account. Therefore, the company could conceivably
reorganization giving rise to the cash-out right,
may not have had an opportunity to monetize their shares.
17
⎯ If the company is listed, the (unaffected, pre-announcement) stock price will be the most obvious point
of reference to calibrate the cash-out right. That being said, this is also the scenario in which the cash-
out right will be least relevant as shareholders of listed companies usually have ample liquidity
opportunities.
⎯ In most other instances, there will be no independent valuation readily available so that the acquired
company will need to be valued for the specific purpose of the cross-border reorganization, which
implies a significant additional step (and costs) in cross-border reorganizations. Even if the
reorganization is part of a broader sale transaction, the valuation for the cash-out right will probably be
different from the valuation of the overall sale transaction as the latter will most likely be specific to the
transaction (e.g., taking into account expected synergies).
C. Creditor protection mechanism in cross-
border reorganizations
15
The explanatory memorandum mentions that the board could opt for valuation of the shares at book value, but it also
immediately adds the shareholders can object against such valuation.
16
Artt. 2:67 and 2:69 BCCA.
si
18
ALERT MEMORA ND UM
8
i.e.
e.g.
19
17
This -
emptive rights).
18
Under the prior regime for cross-border reorganizations, the creditor protection mechanism came into play post-transaction.
In particular, creditors had the right to request additional security within two months after completion of the transaction, which
is less favorable for creditors for obvious reasons. This has remained the applicable regime for domestic reorganizations as in
such scenario, the rights of creditors are typically less affected.
19
The relevant notary should simultaneously be informed of any such request for additional security.
20
This is tied to the EU Foreign Subsidies Regulation (2022/2560) and the need for disclosure in that regard. On the EU
Foreign Subsidies Regulation, see Cleary Gottlieb Alert Memorandum of July 13, 2022.
Focus – Increased content requirements for
reorganization proposals
The information to be included in proposals
related to cross-border reorganizations has been
expanded. For instance, the proposal must now
refer to the cash compensation offered to
shareholders wishing to cash out, the security
offered to creditors, the expected consequences
of the reorganization for employment and
whether the company has received subsidies or
grants in the five years preceding the
reorganization if the acquiring company is not
governed by Belgian law.
20
Relatedly,
corresponding board and auditor reports will also
have to be more elaborate under the new regime.
D. Corporate formalities
i. Publication of the reorganization proposal
Under the old regime, the company had to file the
reorganization proposal with the registry of the
Enterprise Court for publication in the Belgian Official
Gazette, with a six-week waiting period between the
filing date and the date of the vote on the transaction.
The Belgian Mobility Law allows for an alternative
form of publication of the proposal,
website, together with a publication in the Belgian
Official Gazette of, among others, a hyperlink to the
company website. This change applies to cross-border
and domestic reorganizations alike.
ALERT MEMORA ND UM
9
Focus – Online publication
and
seem intuitively appealing, we question whether this option will be popular in practice, in particular in the
context of domestic transactions. Indeed, in domestic reorganizations, the moment as of when the six-week
waiting period will commence will depend on the method chosen by the company for publication of the
reorganization proposal:
⎯ Full proposal in Belgian Official Gazette: As is currently the case, if the full reorganization proposal
is published in the Belgian Official Gazette, the six-week waiting period starts as of the date of filing
of the proposal with the registry of th
receipt).
⎯ Proposal on company website: By contrast, and oddly enough, if the company decides to make the
proposal available on its website, the company will still need to publish a hyperlink to its website in
the Belgian Official Gazette and the six-week waiting period will only starts as of the date of
publication of the hyperlink in the Belgian Official Gazette. Since one can expect one to two weeks
between filing the registry of the Enterprise Court and actual publication in the Belgian Official
Gazette, this second option represents an additional delay in the timeline towards completion of the
reorganization, in addition to creating uncertainty about the exact start date of the waiting period.
ii. Required majorities at EGMs
21
22
21
Because the Mobility Directive provides that the required majority for approval of a cross-border conversion may not be
higher than the required majority for approval of a cross-border merger (which, under Belgian law, is 75%). The Belgian
legislator then decided to also lower the required majority for domestic conversions to 75%.
22
Artt. 5:47 and 7:57 BCCA.
iii. Strengthened gatekeeper function for
notary in cross-border reorganizations
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10
see Focus –
Entry into force
23
set up for unlawful or
fraudulent purposes leading to or aimed at the
circumvention of EU or national law, or for criminal
purposes.
all relevant facts and circumstances,
including indicative factors
24
23
See The assessment
should also take into account relevant facts and circumstances related to employee participation rights, in particular as regards
negotiations on such rights where those negotiations were triggered by reaching four fifths of the applicable national threshold.
The competent authority may consider that if the cross-border operation were to result in the company having its place of
effective management or place of economic activity in the Member State in which the company or companies are to be
registered after the cross‐border operation, that would be an indication of an absence of circumstances leading to abuse or
fraud.
24
Artt. 12:117, 12:138 and 14:26 BCCA.
25
Art. 160b(4)(c) Mobility Directive; Art. 12:8, 3° BCCA.
aimed at the circumvention of EU or
national law
E. New types of reorganization
i. Cross-border de-merger by separation
25
ALERT MEMORA ND UM
11
i.e.
See
ii. Sister-sister merger
26
26
Art. 119(2)(d) Mobility Directive; Art. 12:7, 2° BCCA.
27
For example, the disclosure in the merger proposal is more limited and the board and statutory auditor of the acquired
company will not have to draw up any reports. In addition,
to vote on the sister-sister merger.
27
See
F. Employee participation rights, information
and consultation
e.g.
ALERT MEMORA ND UM
12
G. T
28
liability claims against directors related to decisions
or conduct prior to the effective date of the cross-
border reorganization (i.e., when the relevant
company had its registered seat in Belgium in
such instances, Belgian law (including the cap on
conduct).
litigation brought by creditors whose debt claim
existed prior to the date of publication of the
proposal on the cross-border reorganization,
provided the litigation is initiated by the creditors
within two years after completion of the cross-
border reorganization.
claims from (former) shareholders and holder of
profit sharing certificates who have exited the
company, using their cash-out right, with respect to
the amount of the cash compensation to be received
28
The Belgian Code of International Private law already contained one exception allowing Belgian judges to resolve on
company is lo
connection with such country.
or with respect to the payment of such cash
compensation.
Focus – Entry into force
The new rules introduced by the Belgian
Mobility Law will apply to all transactions
(whether domestic or cross-border) for which the
reorganization proposals are filed with the
registry of the Enterprise Court after June 16,
2023, i.e., 10 days after publication of the
Belgian Mobility Law in the Belgian Official
Gazette. For long-planned reorganizations,
which may have been in the works for several
months, this relatively sudden entry into force
may be unsettling (especially for cross-border
reorganizations, where the legal framework is
significantly amended).
As an exception to the above, the requirement
that the company needs to submit a tax and social
security certificate to the notary for purposes of
obtaining the required pre-reorganization
certificate in the context of cross-border
reorganizations will only enter into force on a
later date still to be determined via royal decree
(and at the latest on December 15, 2023).
Finally, certain specific technical rules that
require changes and cross-border integration of
governmental administrative functions (e.g.,
rules relating to communication between the
Belgian Crossroads Bank for Enterprises and
other EU company registers) will enter into force
as of June 30, 2023.
ALERT MEMORA ND UM
13
IV. CONCLUSION AND PRACTICAL
TAKEAWAYS
As mentioned, Belgium already had modern and
detailed rules on cross-border reorganizations on the
books. Implementing cross-border reorganizations in
or out of Belgium will following the Belgian Mobility
Law require more time and will become more
formalistic. The law mostly reinforces the rights of the
various stakeholders (shareholders, employees,
creditors, including the Belgian tax authorities) in the
context of cross-border reorganizations, without
making it easier as such to implement
reorganizations from a purely Belgian perspective.
However, it also remains to be seen whether it will
actually be more difficult for Belgian companies to
engage in cross-border reorganizations in practice. The
Mobility Directive brings uniform rules throughout the
EU for cross-border reorganizations, including
notably in EU member states that did previously not
yet have rules on cross-border reorganizations.
Engaging in cross-border reorganizations may therefore
become easier with respect to certain EU member states
as a result of the Mobility Directive, whereas it may
become more difficult with respect to other EU member
states.
In any event:
The newly introduced cash-out right and right to
challenge the exchange ratio will likely introduce
interesting dynamics in cross-border
reorganizations, especially where the shareholder
base of the disappearing company is vocal.
Dissenting minority shareholders may seek to put
pressure on the board of directors by rallying
support for their position and enticing other
(minority) shareholders to either exercise their
cash-out right or to challenge the exchange ratio
offered. Shareholders now certainly have
strong(er) tools to challenge cross-border
reorganizations they disagree with.
considerably improved. Previously, creditor
protection was an ex-post consideration with
creditors being able to request additional security
only after the transaction had taken place. Now
creditor protection will become a pre-closing
condition in cross-border reorganizations and
creditors will have a period of at least three months
before completion of the transaction to exercise
their rights.
The strengthened gatekeeper function of the notary
in cross-border reorganizations represents a new
and additional hurdle for which a new practice will
need to develop. The criteria to be assessed by the
notary are broadly formulated and if not
interpreted sufficiently narrowly may lead to
increased legal uncertainty.
The Belgian legislator has decided to not fully align
the rules applicable to cross-border reorganizations
with the rules applicable to domestic transactions.
While it is understandable that there should be
different standards applicable to domestic and
cross-border reorganizations (with the former
generally assumed to have a less profound impact
on the position of shareholders, creditors,
employees and other stakeholders), this does mean
that going forward there will be an important
divergence between the respective rules applicable
to domestic and cross-border reorganizations.
As is often the case with a new legal framework, it
remains to be seen how all of these new
requirements and procedures will be used (by
shareholders and their advisors) and interpreted (by
the courts) in practice. Upon a first reading of the
Belgian Mobility Law, there are, however, a few
uncertainties arising from unclear drafting or
apparent missing cross-references that may lead to
uncertainty in practice. When Belgian companies
will effectively engage in cross-border
reorganizations under the new legal framework,
additional questions will undoubtedly arise.
ALERT MEMORA ND UM
14
ANNEX A: SCHEMATICS
SCHEMATIC: CROSS-BORDER MERGER
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SCHEMATIC: CROSS-BORDER DE-MERGER
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16
SCHEMATIC: CROSS-BORDER CONVERSION
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17
SCHEMATIC: CROSS-BORDER DE-MERGER BY SEPARATION
ALERT MEMORA ND UM
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SCHEMATIC: SISTER-SITER MERGER
