A legislative proposal was tabled in early October 2019 which, if adopted, will have a substantial impact on the new Code of Companies and Associations (CCA). While the proposal is intended primarily to transpose into national law the Shareholder Rights Directive II (Directive 2017/828/EU), it also makes a number of adjustments and clarifications to the CCA.
Directive 2017/828 aims to encourage shareholder involvement in listed companies and promote transparency between listed companies and investors. Given the current political landscape in Belgium, a legislative proposal was used to ensure – faithful – transposition of the directive. The guiding principles of the reform are:
1. Facilitation of the identification by listed companies of their shareholders
The objective is to encourage direct communication between a listed company and its shareholders. In order to achieve this goal, financial intermediaries will be obliged to inform listed companies upon request of the identity of shareholders on whose behalf they hold shares. This identification obligation is limited to shareholders holding more than 0.5% of the voting rights but, in practice, intermediaries may respond to an identification request without first checking if the shareholder in question exceeds this threshold. Moreover, intermediaries will be required to facilitate the exercise of shareholder rights, including voting rights.
The new rules will enter into force on 3 September 2020.
2. Development of a remuneration policy to be submitted to the listed company's general meeting for approval
The general meeting's vote on the remuneration policy will be binding, although a listed company may continue to remunerate its directors in accordance with existing practice in the absence of approval. A revised policy must be submitted to the next general meeting for approval. The remuneration policy must moreover be made public. In exceptional cases, a listed company may derogate from its remuneration policy.
With regard to the remuneration report, which is already required in Belgium for listed companies, it must henceforth indicate the remuneration of directors (and certain member of management) on an individual basis. The legislative proposal confirms furthermore that the general meeting has only an advisory vote on this report.
The existing rules of the CCA concerning the means of remunerating the directors of a listed company (in particular those relating to variable remuneration and the vesting of shares) remain unchanged.
3. A reinforced framework for transactions between a listed company and related parties
The rules provided for by Directive 2017/828 are very close to those already in force in Belgium (better known as the "Article 524 procedure"). There are nonetheless some differences, starting with a much broader scope of application. While the provisions of the CCA apply only to transactions with the controlling shareholder of a listed company, the new rules cover all related parties within the meaning of IAS 24 (including persons exerting a significant influence on the listed company and key personnel of the latter). Decisions concerning the remuneration of directors, however, would fall outside the scope of the rules.
4. Greater transparency on the part of institutional investors and asset managers that are shareholders in listed companies by means of an engagement policy
In the engagement policy, which will have to be made public, institutional investors and assets managers will be obliged to describe how they follow up on the listed companies in which they invest, in particular by specifying the manner in which they exercise their shareholder rights. Transparency obligations will also be imposed on proxy advisors.
Aside from the transposition of Directive 2017/828, the legislative proposal makes a number of corrective adjustments and clarifications to the CCA, concerning in particular harmonisation of the rules on the expulsion and resignation of shareholders of a private limited-liability company (SRL/BV) with those applicable to the cooperative company (SC/CV) (the prohibition on expulsion or resignation by operation of law during the first three financial years is for example abolished), the procedure to be followed in the event of consolidation of the shares of an SRL/BV in the hands of a sole person and deletion of the word "term" (mandat) with reference to a directorship (as this is in fact a service agreement and not – according to the legislative proposal – a term of office within the meaning of the Civil Code).
Although prepared with the support of the (unelected) caretaker government, it remains to be seen if the legislative proposal will be able to garner in the short term a parliament majority necessary for approval.
