BELGIUM Law and Practice Contributed by: Wim Aerts, Dorothée Vermeiren and Stijn Van Walleghem, Clifford Chance
3.3 Restrictions on Foreign Direct Lenders There are no specific restrictions on foreign lend - ers in respect of providing private credit or taking security, other than as set out in 2. Regulatory Environment and 4. Tax Considerations . It is worth noting that the vast majority of private credit providers which are active in Belgium are not Belgian funds. 3.4 Use of Proceeds and Acquisition Financings There are no specific Belgian law restrictions on the use of proceeds from private credit transac - tions by a borrower. The drawdown period for private credit facilities will typically be longer than the drawdown period for bank financing, so that has to be taken into account from a tim - ing perspective. 3.5 Debt Buyback Whether debt buybacks by the borrower or sponsor are permitted will depend on the requirements of the private credit provider and sponsor precedent. A number of private credit providers require that the documentation does not permit debt buybacks. In any event, if debt buybacks are permitted, the documentation would cater for appropriate disenfranchisement. 3.6 Recent Legal and Commercial Developments There are no recent legal or commercial devel - opments that have required major changes to legal documentation for private credit transac - tions. Belgium is, however, in the process of amending its Civil Code; the sections of the new Civil Code that have already entered into force have not so far required amendments to docu - mentation having a commercial impact, but this cannot be excluded for future changes.
3.7 Junior and Hybrid Capital Please see 1.5 Junior and Hybrid Capital . 3.8 Payment in Kind/Amortisation Payment in Kind Typical senior term debt will often cater for a PIK toggle, allowing the borrower to capitalise interest or part of the interest for a period of time (which may or may not be limited), either at a premium or not. Belgian law only allows for capitalisation of interest after one year, which is not in line with market practice for a PIK toggle. Amortisation There are no Belgian law reasons for a private credit provider to require amortisation and most transactions do not have regular amortisation. Transaction documentation may cater for the ability to incur incremental debt in certain cur - rencies with de minimis amortisation. 3.9 Call Protection It is typical in Belgium for senior term debt (initial term debt and delayed draw facilities) to ben - efit from call protection for a period of one to two years, with different mechanisms, including make-whole provisions and fees expressed as a percentage of the amount prepaid. Depending on the nature of the relevant loans, prepayment penalties may need to be limited under Belgian law to six months.
4. Tax Considerations 4.1 Withholding Tax
Interest accounted for by a Belgian company as well as interest accounted for by a non-Belgian company but which is attributable to a Belgian branch, is in theory subject to 30% Belgian with - holding tax. However, several double-tax trea - ties reduce the applicable withholding tax rate to
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