The new Code of Companies and Associations limits the possibility for the majority shareholder of certain companies to force minority shareholders to sell their securities to him. The majority shareholder still has a few months left to launch a squeeze-out bid under the old Companies Code.
The old Companies Code: minority shareholders are not always forced to sell their securities
The squeeze-out bid is the transaction by means of which a majority shareholder aims to acquire the securities with voting rights or granting access to voting rights of the minority shareholders. To do so, he must, alone or in concert with other persons, hold 95% of the securities conferring voting rights.
Under the old Companies Code, the legal consequences of a squeeze-out bid differ depending on the characteristics of the target company:
- If the squeeze-out bid relates to a company that "has called or calls upon public savings", then the securities will be deemed to have been transferred to the majority shareholder automatically. In this way, all shares, convertible bonds and subscription rights will be transferred to the majority shareholder even if their holders did not react or if they opposed the transfer. This squeeze-out bid is therefore a "forced" squeeze-out bid.
- However, if the squeeze-out bid does not relate to such a company, the securities owned by a shareholder who has indicated expressly and in writing that he refuses to sell them will not be transferred. This means that minority shareholders have the possibility to optout of the squeeze-out bid.
The new Code limits the scope of "forced" squeeze-out bids
The concept of "a company that has called or calls upon public savings" is not used in the new Code of Companies and Associations. The new Code consistently uses the concept of a "listed company". In addition, the latter concept has been limited to companies whose shares or share certificates or profit-sharing certificates relating to such shares are listed.
Furthermore, the new Code refers to this limited concept of a "listed company" to determine the legal effects of a squeeze-out bid: it is only if the squeeze-out bid relates to such a company that the majority shareholder can force minority shareholders to sell their securities to him even if they have opposed such a transfer.
For example, companies of which only the bonds are listed no longer meet the definition of a listed company and therefore fall outside the scope of "forced" squeeze-out bids. This also applies to companies that have called or call upon public savings by way of a public offering for subscription, sale or exchange of bonds or shares, without their shares, share certificates or profit-sharing certificates relating to such shares being listed. Majority shareholders of such companies will therefore no longer be able to force minority shareholders to sell their securities to them.
Launch your squeeze-out bid this year!
The Code of Companies and Associations will apply to existing companies as of 1 January 2020, provided that they have not decided to adopt the new Code earlier (by way of opting in).
As from that date (or as from an earlier date in the event of an opt-in), squeeze-out bids targeting companies that would lose their "public" or "listed" nature under the new Code of Companies and Associations will no longer constitute "forced" squeeze-out bids as they did under the former Companies Code. This means that the majority shareholders of these companies who meet the 95% threshold will no longer be able to force the minority shareholders to sell their securities to them, as, under the new Code, the minority shareholders will have the possibility to opt out of the squeeze-out. Majority shareholders may therefore want to consider launching a squeeze-out bid with a view to acquiring all outstanding securities before the new Code applies to them.
Authors:
Joris De Wolf - joris.dewolf@eubelius.com
Marie Waucquez - marie.waucquez@eubelius.com
