Restructuring
In addition to opting for an asset deal or share deal, a company may consider a form of takeover through one of the possible statutory restructurings in Book 12 of the WVV. The term ‘restructuring’ in the WVV refers to any lasting and significant change to the structure of a company. More specifically, the legislator uses the term ‘restructuring’ to refer to the following legal acts:
Mergers and divisions within Europe are legally strictly defined transactions. This is absolutely not the case in the AngloSaxon practice from which M&A has grown. There, the word “merger” has an economic meaning. It refers to any form in
which companies work more closely together, regardless of how this cooperation’s is legal shape. We understand the merger as a strictly specific legal fact with little room to manoeuvre.
One of the characteristics of such a merger and demerger is that they are, by definition, share transactions. They are transactions that affect a company’s existence. Companies disappear and companies arise. This means that if a company disappears, its shares are inherently destroyed as well. The shareholders of the disappearing company will be compensated by issuing new shares.
The decision to merge or demerge is one that must always be taken by the extraordinary general meetings of all the companies involved in the operation. Belgian law requires a majority of 75% of the votes with at least 50% attendance. This means that even those who vote against the merger, which can be up to 25% of the shareholders, are obliged to endure it. This could explain why mergers between independent companies are not so popular. The great advantage of such a fixed and highly regulated operation is that, by definition, all shareholders within each company will be treated equally. It is a process that leaves very little room for unequal treatment of shareholders and thus
a very democratic operation, of course, once the majority has decided.
In addition, mergers and/or demergers are relatively complex procedures. You should count that a standard merger takes at least six weeks, and in Belgium three months is a rather realistic period. The complexity lies in the legal guidance that is needed in order to follow the detailed rules imposed by Europe.
Typically for a merger where you will bring companies together, or for a demerger where you will separate companies, the acquired company will be dissolved. By dissolving, we mean that the company will cease to exist as a legal entity. Normally, a dissolution is always followed by a liquidation in which the remaining assets are disposed of (by a receiver) in order to pay the underlying debts. The remaining’s goes to the shareholders. That is not what is happening here. The acquired company will dissolve itself but there will be no liquidation. The assets and liabilities still present in the company will be transferred as a whole, in the condition they are in, to one or more other companies.
This transfer takes place by universal title. As a result, all
assets and liabilities of the acquired company will pass into the hands of the acquiring or newly formed companies without the completion of the formalities of opposability required by common law. This means, among other things, that the consent of the creditors of the acquired company is not required. They will have to undergo the merger and accept, by the mere fact of publication of the merger, that they are now creditors of another company. There is thus complete continuity between the company being acquired and the acquiring company. The shareholders of the company being acquired automatically become shareholders of the acquiring company.
Once the merger has been decided, it is not easy to reverse it. Normally, decisions of the general meeting are contestable on a number of grounds of nullity. These are limited in the context of mergers and demergers. The law limits the possibilities of reversing the merger because in practice it’s simply too difficult. Once a merger has been implemented, it is rarely possible to reverse it. The WVV provides remedies other than nullity.
