Company merger in Belgium: procedure and formalities under the CSA

Key takeaways

• A merger transfers the entire estate, assets and liabilities, of one or more companies to another company, which takes them over; the absorbed companies are dissolved without liquidation.
• The merger proposal must be filed with the clerk's office of the business court at least six weeks before the merger decision (art. 12:24 CSA).
• A report from the statutory auditor or a company auditor on the proposal is mandatory, except for a merger with a wholly owned subsidiary or a unanimous waiver by the shareholders.
• Creditors predating the publication of the merger deed have two months to demand security (art. 12:15 CSA).
• The merger becomes enforceable against third parties from its publication in the annexes of the Belgian Official Gazette.

A company merger in Belgium allows two legal structures to be combined into one, without going through a liquidation followed by a contribution. The Companies and Associations Code (CSA), in force since 1 May 2019, governs the operation in its Book 12: content of the proposal, control reports, publication deadlines and creditor protection. This article sets out the procedure, from the first documents to prepare through to the legal effects of the transfer.

What a merger is and what forms it can take

Legally, a merger transfers a company's entire estate to another, by universal transfer, without an intermediate liquidation step. Shareholders of the disappearing company receive in exchange securities of the company that takes over the estate, according to a pre-determined exchange ratio.

The CSA distinguishes two main mechanisms, organised in Book 12 of the Code.

	Merger by absorption	Merger by formation of a new company
Companies that disappear	The absorbed company or companies	All merging companies
Company that survives	The absorbing company, already existing	An entirely new company
Frequency in practice	The most common form	Rare, often for a merger of equals
Legal basis	Art. 12:24 et seq. CSA	Art. 12:36 et seq. CSA

The merger proposal: content and filing deadline

Before any decision, the administrative bodies of the companies due to merge jointly draw up a merger proposal, by notarial deed or private deed (art. 12:24 CSA). This document states in particular the legal form, name, purpose and registered office of the companies concerned, the share exchange ratio, the terms for handing over the securities, and the fee set for the auditor responsible for the review (art. 12:26 CSA).

The proposal must be filed with the clerk's office of the competent business court at least six weeks before the date of the merger decision. This period allows shareholders and creditors to review the operation before it is put to the vote, and it runs from the day of filing, not from publication.

The mandatory reports before the vote

Two reports accompany the merger proposal in principle. The administrative body of each company drafts a written report that explains and justifies the proposal from a legal and economic standpoint, in particular the exchange ratio adopted.

In parallel, the statutory auditor of each company, or failing that a company auditor or certified accountant appointed by the administrative body, draws up a review report on the proposal. This report checks in particular whether the proposed exchange ratio is relevant and reasonable.

The steps of the procedure, from proposal to publication

Once the proposal is filed, the merger follows a precise sequence of steps before becoming enforceable against third parties.

1. 1

   Drafting the merger proposal

   Week 1

   The administrative bodies of the companies concerned jointly draw up the proposal and set the exchange ratio.

2. 2

   Filing with the business court clerk's office

   At least D-42

   The proposal is filed with the competent clerk's office for each of the merging companies, at least six weeks before the merger decision.

3. 3

   Reports from the administrative body and the auditor

   Before the general meeting

   Drafting of the explanatory management report and, unless waived, of the review report by the statutory auditor or company auditor appointed.

4. 4

   Merger decision at the general meeting

   D-Day

   Each merging company, except where waived for a merger with a wholly owned subsidiary, approves the proposal under the quorum and majority conditions for an amendment to the articles of association.

5. 5

   Merger deed and notarial formalities

   D-Day

   The minutes deciding the merger must be recorded by notarial deed, on pain of nullity (art. 12:31 CSA), whether or not the merger comes with a capital increase of the absorbing company.

6. 6

   Publication in the annexes of the Belgian Official Gazette

   A few weeks later

   The merger becomes enforceable against third parties from its publication; it starts the two-month period open to creditors to demand security.

Creditor protection and transfer of assets

A merger carries a radical effect: the absorbed company is dissolved without liquidation, and its entire estate, assets as well as liabilities, passes to the absorbing company through universal transfer. Ongoing contracts, including the employment contracts of staff members, continue automatically with the absorbing company.

This automatic takeover of liabilities justifies specific protection for creditors. Those whose claim predates the publication of the deeds recording the merger can, within two months of that publication, demand security if their claim is not yet due or is already the subject of legal or arbitration proceedings (art. 12:15 CSA). Failing agreement, the president of the business court, ruling as in summary proceedings, sets the security to be provided or decides that none is due.

Steps to anticipate alongside the legal procedure

• Crossroads Bank for Enterprises

  In principle, the disappearance of the absorbed company and the absorbing company taking over its data are reflected after the deeds are published, with no separate filing at the CBE itself; check the processing time with the competent business counter.

• UBO register

  The beneficial owners of the company resulting from the merger must be up to date in the register held by the Federal Public Service Finance.

• Contracts and authorisations

  Check the transferability of key contracts, commercial leases and permits or licences specific to the activity, as some contracts include a change-of-control clause.

• Bank mandates

  Update the authorised signatories on the absorbing company's accounts to reflect the new structure.

• Transferred staff

  Inform the absorbed company's staff of the transfer of their employment contracts and any resulting HR structure changes.

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Going further

A merger is often accompanied by an amendment to the articles of association of the absorbing company, in particular to increase its capital in exchange for the contributions received. It differs from the dissolution and liquidation of an SRL, which ends a company without transferring its estate to another structure. For a group of companies, a merger often completes a broader plan involving a holding company in Belgium.

• Companies and Associations Code, Book 12 (mergers and demergers): consolidated text, Federal Public Service Justice
• Institute of Registered Auditors (IRE): doctrine on review reports for mergers and demergers