BELGIUM Law and Practice Contributed by: Steven De Schrijver, Allegiance Law
If any of the above-mentioned conditions are not fulfilled, corporate entities pay a 25% capi- tal gains tax. Consideration for asset transactions usually arises when there are significant tax advantag- es, if shareholders prefer to sell specific assets exclusively, or if the acquiring party has con- cerns about potential legacy liabilities within the company. Prospective bidders may propose that active founders continue their involvement in the company for a specified duration, often linked to the inclusion of a deferred consideration ele- ment, such as an earn-out. 4.3 Liquidity Event: Form of Consideration Transactions primarily involve cash considera- tions – 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 typi- cally tasked with supporting representations, warranties, and a comprehensive tax indemnity. This responsibility extends to specific indemni- ties concerning significant 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 war- ranty and indemnity (W&I) insurance mechanism bypasses the need to block part of the purchase price as a security for potential liability claims.
Mainly owing to the involvement of larger and more sophisticated foreign investors and pri- vate equity funds, W&I insurance is present in more than one in four cases for Belgian transac- tions with a value of more than EUR100 million. In contrast, only a small percentage of trans- actions 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 posi- tion (eg, competitive auctions), the use of W&I insurance is more likely. W&I insurance may be used more frequently in tech M&A because pri- vate 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 manage- ment that rolled over a portion of their equity. Spin-offs thrive across various domains, includ- ing universities, research institutes and govern- ment entities. The Interuniversity Microelectron- ics Centre (IMEC), an esteemed international research and development organisation head- quartered in Belgium, specialises in nanoelec- tronics and digital technologies. With a rich history, IMEC has consistently fostered the emergence of innovative start-ups through spin- offs within these domains. 5. Spin-Offs 5.1 Trends: Spin-Offs Corporate spin-offs are a strategic tool frequent- ly employed by large corporations to divest non- core businesses. Although they may not be the predominant restructuring method, certain spin- offs have garnered substantial public attention. A notable example is the Euronext Brussels-list- ed chemical company Solvay, which announced plans to undergo a separation into two distinct
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