BELGIUM Law and Practice Contributed by: Michel Bonne, Hannelore Matthys and Virginie Lescot, Van Bael & Bellis
mitments by the controlling shareholders will typically be required. This, in turn, makes hostile tender offers rather unusual. 9.2 Directors’ Use of Defensive Measures Directors can take defensive measures as long as these are in the interest of the company as a whole. Specifically, for public takeovers, Sec - tion 9, 3° of the Public Takeover Law reflects this principle. Generally, directors must always exer - cise their powers in the company’s best interest. Shareholders can, however, include restrictions in the articles of association on the directors’ freedom to frustrate a hostile takeover. For instance, the articles of association may include (i) a requirement for the prior authorisation of the shareholders’ meeting before the directors can take any action susceptible to frustrate a bid, or (ii) a provision making restrictions on the trans - fer of securities with voting rights unenforcea - ble during the bid. In addition, the shareholders could also make certain voting and other rights, provided for in the articles of association or in contractual agreements between the target and the target’s shareholders, unenforceable during the bid (the “breakthrough rule” ). Companies can also link the above to a reciproc - ity condition, meaning that the implementation of these restrictions can be subject to the same rules being applied by the bidder. 9.3 Common Defensive Measures The most common defensive measures taken by the board to frustrate takeovers are the increase of the share capital under the authorised capi - tal procedure (ie, the delegation of the powers needed to increase the share capital by the shareholders’ meeting to the board of directors), the issuance of warrants or bonds that become
convertible in the case of a hostile takeover, and the buyback of shares without the prior approval of the shareholders’ meeting. For all these meas - ures, however, the prior approval of the share - holders’ meeting is needed, and such approval may only be granted for a renewable period of, at most, five years. Shareholders frequently protect their interests from a hostile takeover by including restrictions on the transfer of shares in the articles of asso - ciation and shareholders’ agreements. Common examples are the inclusion of a pre-emption right, a right of first refusal or approval, stand - still provisions and tag-along rights. Under the BCAC, shareholders can also protect their inter - ests by granting multiple voting rights to certain shares in the articles of association. Besides the above, shareholders can also adopt a dispos - al-of-assets measure prior to the offer period and make this conditional upon an offer being launched. Additionally, the inclusion of change-of-control clauses in important agreements is another com - mon possible measure. While it is not a measure specific to tackling a potential hostile takeover, it could have a dissuasive effect for any potential buyer. For listed companies, the shareholders’ meeting needs to approve them as well. 9.4 Directors’ Duties At the risk of being held personally liable, direc - tors should always act in the best interest of the company. This also applies when taking defen - sive measures. 9.5 Directors’ Ability to “Just Say No” Directors can combine a refusal to negotiate with an unwillingness to waive defensive meas - ures, but only if this is in the best interest of the company. As this is usually hard to assess upon
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