BELGIUM Law and Practice Contributed by: Wim Aerts, Dorothée Vermeiren and Stijn Van Walleghem, Clifford Chance
5.4 Restrictions on the Target Belgian law has financial assistance restrictions in place for most types of companies. These restrictions prevent a company from granting loans, guarantees or security with a view to facilitate the acquisition of its own shares, sub - ject to certain limited exceptions not commonly used. There is no whitewash procedure, and any acquisition debt would generally need to be excluded from the guarantee given by the target, unless other structural solutions are available. 5.5 Other Restrictions Mortgage and Mortgage Mandate Mortgage security is very expensive in Belgium, which is one of the reasons it is not commonly used in private debt transactions. As an alter - native to actual mortgage security, a mortgage mandate exists which is an irrevocable power of attorney granted by the obligor to certain per - sons pursuant to which they may, in their dis - cretion, register an actual mortgage. This allows parties to postpone the incurrence of mortgage expenses until the moment the credit position requires the mortgage to be granted. Note, how - ever, that prior to the actual grant of the mort - gage, the mandate is not a security interest, and hardening periods will apply upon grant of the actual mortgage. While a mortgage mandate is much less expensive than an actual mortgage, a notary will still need to be involved. Hardening Periods Belgian insolvency laws have a so-called sus - pect period that may have a duration of up to six months prior to a company being declared bankrupt. The bankruptcy liquidator may scru - tinise transactions during this period and in certain cases, such as security granted without adequate consideration, security granted for pre-existing indebtedness and other transac - tions detrimental to the creditors, these will not
be opposable towards the bankrupt estate. The hardening periods may affect additional secu - rity that is granted in the context of amendment processes or restructurings, release-and-retake arrangements and/or the conversion of mort - gage mandates into actual mortgages. Retention of Title Both retention of title and certain forms of extended retention of title regimes are available and/or recognised under Belgian law. Assignment Restrictions There is no absolute prohibition on clauses restricting transfers of receivables, although the Belgian pledge law considers them not oppos - able against the pledgee provided the underlying receivable relates to the payment of money and the pledgee is acting in good faith. 5.6 Release of Typical Forms of Security Security documents drafted for a financing between professional parties will typically per - mit the holder of the security to terminate the security by a simple notice. This allows for a very straightforward release document with only some perfection actions to be taken, although in practice we see (often unnecessarily) complex combinations of terminations and waivers. The timing of the release of security can be more complicated in case of an exit by the sponsor and the purchaser obtaining new financing. It is recommended to notify the release of secu - rity over receivables and/or bank accounts to the debtors, although this is not always done in practice. The release of security over shares should be recorded in the relevant shareholder register. The release of security of real estate should be registered with the relevant office of legal certainty by the notary.
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