FAQ
Article 74 of the Law on takeover bids - Exemption for existing shareholdings

The new rules on takeover bids come into force on 1 September 2007. The legislators have provided transitional rules for holders of existing shareholdings in listed companies, provided the shareholdings are disclosed to the CBFA in due time.

With a view to a smooth entry into force of the new legislation, the CBFA has deemed it necessary to draw attention to a series of legal provisions that can have far-reaching consequences. The provisions in question concern the situation of existing holders of voting securities of a listed company and of persons wishing to buy such securities.

The answers below are meant to be short and general. They are given solely for information purposes and have no legal consequences. Finally, each individual situation should be assessed on the basis of the provisions of the law, and where their application raises an issue, a legal opinion should be sought.

I. The legislation and the rules on mandatory takeover bids

1. Where can the legislation be found?
2. When does the new legislation come into force?
3. What is the basic rule on mandatory bids?
4. What companies are subject to these new rules?

II. Rules on disclosure of existing shareholdings

5. Is disclosure mandatory?
6. For whom is this intended?
7. What are the consequences of disclosure?
8. Who can benefit from the exemption?
9. In what cases does an exemption expire?
10. What are the consequences of no longer benefiting from the exemption?

III. Practical details for disclosing existing shareholdings

11. To whom should disclosure be made, and how?
12. Which situation should be disclosed?
13. What is the deadline for disclosure?
14. What data should the disclosure include?
15. Should any data also be communicated to the BLC?
16. What happens after the disclosure?

I. The legislation and the rules on mandatory takeover bids

1. Where can the legislation be found?

The Law of 1 April 2007 on takeover bids (French - Dutch) was published in the Official Gazette of 26 April 2007.

The two implementing decrees of 27 April 2007, namely the Royal Decree on takeover bids (French - Dutch) and the Royal Decree on squeeze-out bids (French - Dutch), were published in the Official Gazette of 23 May 2007.

2. When does the new legislation come into force?

The Law of 1 April 2007 on takeover bids and its implementing decrees of 27 April 2007 come into force on 1 September 2007.

3. What is the basic rule on mandatory bids?

Any person which, either individually or in concert, holds more than 30% of the voting securities in the target company shall, by way of a mandatory bid, offer the other shareholders the possibility to dispose of their voting securities. The obligation to initiate a bid does not follow from mere possession, but rather from the acquisition of securities whereby a threshold of 30% of the voting securities in the target company is exceeded.

On the other hand, the acquisition of control over a legal person or similar construction that itself holds more than 30% of the voting securities in the target company shall in certain circumstances be assimilated with directly exceeding the threshold.

4. What companies are subject to these new rules?

The rules on mandatory takeover bids apply to any company whose registered office is situated in Belgium and of which at least part of the voting securities are admitted to trading on the regulated market or on the Alternext market and Free Market organized by Euronext Brussels. (For the purposes of this text, such a company will be referred to as a “Belgian listed company” or BLC.)

II. Rules on disclosure of existing shareholdings

5. Is disclosure mandatory?

Based on Article 74 of the Law on takeover bids, disclosure of existing shareholdings is not mandatory. Holders of existing shareholdings are given the choice. If they or any other potential beneficiaries of the rules (see No 8) wish to benefit in the future from an exemption from mandatory disclosure, they have to disclose their shareholdings at this stage.

6. For whom is this intended?

Natural or legal persons who, either individually or in concert, hold more than 30% of the voting securities in a Belgian listed company can disclose their shareholding.

The Law on takeover bids specifies that “persons acting in concert” are: “a) natural or legal persons who … cooperate with other persons, based on an agreement, whether formal or tacit, oral or written, with the intention of obtaining control of the target company, frustrating a bid or maintaining control of the target company; and b) natural or legal persons who have entered into an agreement to exercise their voting rights in concert, for the purpose of pursuing a long-term common policy with respect to the [BLC]”. Persons acting in concert who make a disclosure shall have to demonstrate that they meet the definition above.

Additionally, there is a legal presumption that persons who are affiliated in the sense of Article 11 of the Code on Companies are also persons acting in concert.

7. What are the consequences of disclosure?

Persons who make a disclosure in due time and according to the rules will, provided certain conditions are complied with, be exempted from the obligation to initiate a bid in the cases in which such an obligation would arise on the basis of the implementing provisions.

Provided that certain conditions are fulfilled, this exemption also applies to persons acquiring disclosed securities if they are among the close relatives of the persons who initially disclosed them.

Therefore beneficiaries of the exemption rules can acquire additional securities of the BLC. Third parties can adhere to an existing agreement to act in concert, without being subject to the obligation to initiate a bid, and acquire securities, provided that the beneficiaries of the exemption rules continue to hold more than 30% of the voting securities of the BLC.

In addition, the exemption from the obligation to initiate a bid is maintained where the 30% threshold is exceeded after a limited, temporary downward crossing. Such a downward crossing has to remain limited to 2% and must be terminated within 12 months.

8. Who can benefit from the exemption?

The exemption can apply to the following, provided they have made a disclosure in due time and according to the rules:

1° natural or legal persons who, either individually or in concert, hold at 1 September 2007 more than 30% of the voting securities in a BLC;

2° if the voting securities in the BLC are held at 1 September 2007 by a company, a legal person other than a company or a similar construction, the natural or legal persons controlling such entities;

3° the spouse or relatives by blood or marriage up to the fourth degree, of a natural person as referred to in 1° to 2°, who, through a transfer among living persons or as a result of death, acquire voting securities that had been disclosed and that may remain subject to a disclosed agreement to act in concert;

4° the companies whose voting securities are held for a minimum of 95% by people as referred to in 1° to 3°, as well as the other legal persons or constructions whose control is owned by the persons referred to in 1° to 3°, which acquire voting securities that had been disclosed and that may remain subject to a disclosed agreement to act in concert.

9. In what cases does an exemption expire?

To put it simply, an exemption will expire if the disclosing party or parties ‑ or the affiliated persons and other beneficiaries of the rules ‑ no longer exceed the threshold. Where disclosure is made by parties acting in concert, the exemption for each of the parties will expire if said parties no longer jointly hold more than 30% of the voting securities of the BLC, e.g. because one of the parties has disposed of securities or that party’s securities have been inherited by persons who cannot themselves benefit from the exemption (see No 8, 3°).

Where disclosure is made by parties acting in concert, the exemption will also expire for any party which, jointly with affiliated persons, exceeds the threshold of 30% of the voting securities as a result of a purchase of securities.

Where a company or another legal person holds voting securities in a BLC, the exemption will expire if control of that company or legal person is transferred. A specific rule applies where a construction similar to a company or other legal person holds voting securities in the BLC.

10. What are the consequences of no longer benefiting from the exemption?

The fact that the exemption no longer applies does not necessarily entail an obligation to initiate a bid. Such obligation will arise in the cases determined in the implementing decree and more specifically in Articles 50 and 51 of the Royal Decree of 27 April 2007 on takeover bids. In addition, a number of derogation from the obligation to initiate a bid are possible on the basis of Article 52 of the same Decree.

III. Practical details for disclosing existing shareholdings

11. To whom should disclosure be made, and how?

Disclosure should be made by registered letter with recorded delivery to the CBFA:

CBFA
Supervision of Financial Information division
Rue du Congrès/Congresstraat 12‑14
1000 Brussels

12. Which situation should be disclosed?

You should disclose the situation as at 1 September 2007.

13. What is the deadline for disclosure?

Disclosures must be made by 21 February 2008 at the latest.

14. What data should the disclosure include?

A disclosure by a direct holder of securities shall mention:

1. the identity of the holder of securities;
2. whether or not he is acting in concert;
3. the importance of the shareholding;
4. where the holder of securities is a company, a legal person or a similar construction, the controlling natural or legal persons;
5. in the case of persons acting in concert, the parties to and provisions of the agreement to act in concert.

If the voting securities in the BLC are held by a company, a legal person other than a company or a similar construction, the natural or legal persons controlling such entities shall also make a disclosure.

15. Should any data also be communicated to the BLC?

The disclosing party shall also address a registered letter with recorded delivery to the BLC by 21 February 2008.

The letter shall include the data that have been disclosed to the CBFA. However, it need not mention the names of the natural persons ‑ and of the controlling natural persons, where the securities are held by a company, a legal person other than a company or a similar construction ‑ who directly or indirectly have a shareholding in the BLC up to less than 3% of the voting securities.

This communication shall be made public by the BLC. If the BLC uses its web site for making its financial information available to the public, it may publish this communication by, for example, placing it on its web site. If the BLC does not have a web site or does not use it for making its financial information available to the public, it is recommended that it proceeds to publish the communication by inserting a notice, in one or several newspapers with national or wide distribution in Belgium, announcing that the communication has been made and indicating where it may be obtained upon request. It shall also be reported in the BLC’s annual report as long as it remains relevant.

16. What happens after the disclosure?

After an initial disclosure, the disclosing parties and any authorized parties to whom their securities have been transferred shall, before 1 September, disclose to the CBFA:

• any transfer of voting securities of the BLC;
• any change in the shareholding held by the controlling natural or legal person in a company, legal person other than a company or similar construction holding securities of the BLC.

If neither of these situations arises, then no disclosure to the CBFA is necessary.

A disclosure of "every transfer of voting securities of the BLC in question" must provide details of all acquisitions and all transfers (date of transaction and number of shares acquired or transferred), in order that the transfers may be interpreted correctly by the CBFA.

The form of the disclosure is not specified: a simple letter is thus sufficient.

These data shall also be communicated with the same frequency to the BLC.

The BLC in question publishes the updated information in any case in its annual report, given that the communication under the terms of Article 74 must be published in the annual report as long as it continues to be relevant.

The CBFA recommends that the data communicated to the BLC in question, just like the initial communication, be made public by other means too. This can be done, for instance, via the BLC's web site or by means of a notice (see no. 15).

When the BLC publishes the data, it should ensure that the information made public is useful to the investors. The BLC can usually just provide a chart showing the shareholdings of the initial declarants (or authorized transferees) on the date of updating, without such details as all the transfers that have taken place since 1 September of the preceding year. It is also particularly useful to know whether or not the shareholders in question will, after the updating, continue to benefit from the exemption.