BELGIUM Law and Practice Contributed by: Steven De Schrijver and Carl Dotremont, Allegiance Law
If any of the above-mentioned conditions are not ful- filled, corporate entities pay a 25% capital gains tax. Consideration for asset transactions usually arises when there are significant tax advantages, if share- holders prefer to sell specific assets exclusively, or if the acquiring party has concerns about potential legacy liabilities within the company. Prospective bid- ders may propose that active founders continue their involvement in the company for a specified duration, often linked to the inclusion of a deferred considera- tion element, such as an earn-out. 4.3 Liquidity Event: Form of Consideration Transactions primarily involve cash considerations – although there are instances where a minor portion of the consideration is settled in stock (ie, the company’s shareholders receive shares of the acquiring entity). Complete stock-for-stock transactions are rare. 4.4 Liquidity Event: Certain Transaction Terms Founders and venture capital investors are typically tasked with supporting representations, warranties and a comprehensive tax indemnity. This responsibil- ity extends to specific indemnities concerning signifi- cant liabilities unearthed during due diligence, such as those related to pensions, litigation and environmental matters. Investors and venture capitalists, however, often seek to shift this responsibility onto the selling founders or management of the company. The use of an escrow account is typical, being used in around 28% of all transactions. The warranty and indemnity (W&I) insurance mechanism bypasses the need to block part of the purchase price as a secu- rity for potential liability claims. Mainly owing to the involvement of larger and more sophisticated foreign investors and private equity funds, W&I insurance is present in more than one in four cases for Belgian transactions with a value of more than EUR100 mil- lion. In contrast, only a small percentage of transac- tions with a deal value up to EUR10 million adopt W&I insurance, as the cost thereof may be too high. Where sellers are in a strong position (eg, competitive auc- tions), the use of W&I insurance is more likely. W&I insurance may be used more frequently in tech M&A because private equity funds and financial investors do not want to assume long-lasting representations
and warranties for IP, privacy and cyber-risks, and also may be used to preserve relations with the founder who sold their equity and the management that rolled over a portion of their equity.
5. Spin-Offs 5.1 Trends: Spin-Offs
Spin-offs thrive across various domains, including uni- versities, research institutes and government entities. IMEC, an esteemed international research and devel- opment organisation headquartered in Belgium, spe- cialises in nanoelectronics and digital technologies. With a rich history, IMEC has consistently fostered the emergence of innovative start-ups through spin-offs within these domains. Corporate spin-offs are a strategic tool frequently employed by large corporations to divest non-core businesses. Although they may not be the predomi- nant restructuring method, certain spin-offs have gar- nered substantial public attention. A notable example is the Euronext Brussels-listed chemical company Solvay, which announced plans to undergo a separa- tion into two distinct independent public companies in December 2023. This strategic move involves estab- lishing one entity for its traditional chemicals business and another dedicated to its high-technology materi- als and solutions. 5.2 Tax Consequences In Belgium, spin-off transactions can be structured as tax-free transactions. For a movable pre-tax dividend in the form of shares of a new or existing company following the transfer of a business division, the fol- lowing requirements must be met. • State resident – the transferee of the dividend must be a state resident, meaning that the exemption is intended for taxpayers subject to personal income tax. • Listed shares – the shares of the distributing company must be listed on a stock exchange of an EU member state under the conditions of Direc- tive 2001/34/EC or of a third state with equivalent conditions of admission.
18 CHAMBERS.COM
Powered by FlippingBook