Belgium: Corporate Focus Points in Coronavirus Times

Leading companies through the coronavirus (COVID-19) pandemic: that is the current additional task that companies’ boards have on their plate. Under Belgian law, directors are generally responsible to manage the company, which includes bearing the risk for management decisions responding to the pandemic and its economic and social consequences.

When exercising their mandates, directors and shareholders need to be sure to make decisions in the best interest of the company, and in the interest of all shareholders, employees, customers, creditors and suppliers, as careful and diligent directors in the same circumstances.

It is important to mitigate damage, respond to and proactively reassess situations on a regular basis, in considering the newest Belgian National Security Councils’ measures. We therefore recommend taking into account the following attention points when battling the current challenges:

1. (Un)Employment – Health and Safety at Work
2. Financial – Liquidity and Going Concern
3. Commercial and Financial Agreements
4. Corporate Transactions
5. Corporate Organization

 

1. (Un)Employment – Health and Safety at Work

Employers are obliged to take measures to protect the health and safety of their employees as much as possible and to offer them a safe workplace. These days, this entails employers’ taking measures to reduce the risk of a coronavirus infection by following the Belgian National Security Council measures: Under mandatory closure are shops and stores other than (pet) food stores, pharmacies, newsagents, petrol stations and fuel suppliers. All other companies work from home.

For the period between 13 March and 30 June 2020 companies can request temporary unemployment because of force majeure when they are temporarily unable to provide work for (some of) their employees (e.g. because production has stopped due to a lack of resources or for employees who have been quarantined). The distinction between full and partial closure is no longer made and the distinction between economic and force majeure unemployment is removed. All applications for temporary force majeure unemployment are therefore accepted automatically. The employer will no longer have to justify his application in detail, but will only have to give COVID-19 as the reason. During the suspension of the employment agreement, no salary is due and the employees are entitled to unemployment benefits.

The Belgian ruling commission also provides the possibility to grant a monthly tax-free compensation to employees working from home, irrespective of their function, which serves as a reimbursement for the costs related to working from home

2. Financial – Liquidity and Going Concern

Potential business interruptions caused by the coronavirus require many companies to take drastic measures to address potential liquidity issues and going concern. One side of this challenge is reducing expenditures and debt; the other is ensuring finance keeps flowing to be sure inevitable costs are covered.

Besides the measures related to employment listed above, the Belgian government, and a number of regional instances, have taken actions to focus on the latter. Directors should inform themselves and assess whether the company qualifies for one or more of these policies, which are still being developed. However, the following federal measures can be applied for at this moment, subject to conditions and motivation:

• A premium because of coronavirus nuisance when they have a physical location and are mandatorily closed down. Conditions in application for this premium depend on the sector and specific region where the company is located.
• Flexibility in executing a federal public contract. The federal government will not impose any fines or sanctions if a federal public contract incurs delays or cannot be executed because of the coronavirus.
• Tax and social security measures:
  • Payment by installments for social security contributions (monthly installments over a maximum period of 24 months) can be requested for those due for the 1st and 2nd quarters of 2020.
  • Payment arrangements for wage withholding taxes, VAT, personal income tax and corporate tax can be requested for those due for the 1st and 2nd quarters of 2020. These payment arrangements are the following:
    • by installments;
    • exemption of late payment interest; and
    • remission of fines due to non-payment.

Companies should however still comply with the filing deadline of their tax return. If not possible, filing for an extension needs to be evaluated on a case-by-case basis with the local tax inspector.

• Specifically for self-employed individuals:
  • Deferral or exemption from payment of social security contributions without late payment surcharges. The contributions for the 1st quarter of 2020 must be paid before 31 March 2021 and the contributions for the 2nd quarter of 2020 before 30 June 2021;
  • Compensation for closure of business for at least seven subsequent days because of the coronavirus crisis. This measure concerns self-employed individuals and serves as replacement income.

The following measures by the Flemish, Brussels and Walloon regions can be applied for by companies as well:

• Flemish region:
  • Flexibility and possible prolongation in deadlines for Flemish region grants;
  • Flexibility in repayment plans;
  • Employment and start-up subsidies made more flexible to avoid/limit redundancies;
  • Payment deferral of three months for companies with loans with the Flemish region credit instances;
  • Payment deferral of real estate withholding tax for enterprises until November 2020;
  • Payment deferral of road taxes for enterprises of four months; and
  • Extension of time limits to meet tax obligations for inheritance tax and registration tax.
• Walloon region:
  • Payment deferral of taxes;
  • Payment deferral and guarantees for companies with loans with the Walloon region credit instances; and
  • Administrative fines related to the mileage tax will be moderated.
• Brussels region:
  • Suspension of payment of the tax on tourist accommodations for the 1st quarter of 2020.

The above and a number of sector- and region-specific measures are and will be taken in the short future. Please do not hesitate to let us know should you like us to look into your specific situation

3. Commercial and Financial Agreements

The coronavirus and related economic crisis impact current agreements. It is therefore important for directors to carefully and proactively review the company’s contractual financing and commercial documentation to assess whether certain current events could lead to an event of force majeure, default, material adverse changes or events or otherwise impact its agreements. Boards will have to carefully assess the risks related thereto and possible mitigation strategies.

Assessment and mitigation of contractual risks always need to be assessed on a case-by-case basis. Please do not hesitate to let us know should you like us to review certain specific contracts or situations.

4. Corporate Transactions

Many deals are disrupted or put on hold due to market uncertainty and volatility caused by the coronavirus. Purchasers may also seek to renegotiate the terms of the transactions, for example by arguing material adverse changes or events, or by reopening discussions on purchase price where the value of the target has (or is about to) decrease(d).

The risk of directors’ liability needs to be avoided in this case. Directors should therefore carefully assess the risks for their companies, their legal rights and obligations, and proactively bring an appropriate corporate response to these risks, while ensuring business continuity as much as possible.

For corporate transactions that require a notary deed, notaries are available. In this case following conditions apply:

• Proof of urgency. This includes changes in capital, mergers or acquisitions, change of articles of association or operations for which the documents have already been prepared and for which the period of validity is limited (such as a statement of assets and liabilities, reports, convening a general meeting, etc.).
• Physical contact needs to be avoided. This is usually done by working with powers of attorney, phone or videoconference. The latter also serves as a medium for advising clients.

Notary offices may work differently to address the above conditions or even be closed due to lack of employees. The notary office we work with stays open and available. So please do not hesitate to let us know should you like to plan corporate actions that require a notary deed.

5. Corporate Organization

The current circumstances tend to make corporate organization, such as convocation of boards and general meetings, very difficult. Depending on the form of the company (usually NV/SA or BV/SRL), related law and articles of association set forth who (each, 1, 2, multiple directors, daily management) can take required actions internally and externally, with or without deliberation. When convocation is difficult, possible measures to address these difficulties are:

• Daily management
  
  The persons entrusted with the daily management can take all actions and decisions limited to the day-to-day affairs of the company, as well as the actions and decisions that because of their minor importance or because of their urgency do not require the intervention of the board. This last possibility can be used if urgent decisions need to be made and related documents signed. It is however recommended, as a matter of best practice, to have these decisions afterwards confirmed or ratified by the board.
  
  NV/SA or BV/SRL that do not have a daily management installed yet can entrust the daily management to one or more persons (director or not) under the new Belgian Companies Code. If this option is pursued, it is up to the board, not the shareholders, to appoint daily managers.

• Powers of attorney 
  
  When wanting to make use of this possibility, certain restrictions need to be taken into account:
  • A power of attorney to represent a director on the board can only be granted to other board members, not to third parties.
  • The articles of association often limit the number of powers of attorney that can be given to one director.
  • A board always requires at least the possibility of deliberation and should therefore always consist of a minimum of two directors. It is thus not possible for all directors to grant a power of attorney to one director to hold a board meeting by him- or herself.
• Written resolutions 
  
  The new Belgian Companies Code made decision making by the board via written resolutions in both the NV/SA and the BV/SRL possible without the need for an explicit provision in the articles of association. However, the following restrictions apply:
  • The resolutions need to be unanimous. Each director should approve and sign the resolutions and if one or more directors object to certain decisions, a meeting will be required, even when a large majority is in favor of the resolutions.
  • The articles of association can exclude certain topics from the application of written resolutions. It is therefore important to verify the articles of association before applying the written resolution procedure. If the articles of association are not yet updated in light of the BCAC, it is possible that the previous legal regime has been included in the text and that the articles of association still require the exceptional circumstances and urgency or exclude for example the adoption of the annual accounts.
• Conference calls 
  
  When circumstances do not allow for written resolutions, board meetings by conference or video calls can offer a good alternative for a physical meeting. In this case technology needs to be provided to be able to allow directors to properly deliberate, interact and discuss live and simultaneously.
• Electronic signatures 
  
  As confinement has become mandatory in many countries, it has become quite difficult to gather signatures for written resolutions, minutes, powers of attorney and other documents. 
  
  Belgian law recognizes the following electronic signatures as legal and enforceable, depending on the type of document, and security level:
  • standard electronic signature with a low-security level such as a copy-and-paste of a pdf-embedded scan of a handwritten signature;
  • advanced electronic signature should be uniquely linked to the signatory, allow the identification of the signatory, be created by means which the signatory can keep under his exclusive control and be related to the data to which it is referred so that any later modification of the data can be detected;
  • qualified electronic signature is an advanced electronic signature created based on a qualified certificate which is provided by an accredited, licensed electronic signature-creation service provider, such as a Belgian eID card or “itsme” signature or app.

An electronic signature, regardless of the technology used and the level, may not be refused as evidence in legal proceedings on the sole ground that it is electronic or not qualified. Nevertheless, only the qualified signature is presumed equivalent to a handwritten signature.

This presumption can only be rebutted if proof to the contrary is provided by the disputing counterparty. For standard and advanced electronic signatures there is no such presumption. This entails that, in case of discussion, the burden of proof is: 

- on the person/entity disputing the signature for qualified signatures; and

- on the person/entity relying upon the signature for standard and advanced signatures.

Companies have been reluctant in the past to use electronic signatures, mostly because of the burden of proof and because of the organization of the signing procedure. However, technology has advanced the recent years and it is possible to use electronic signatures for internal board and shareholders resolutions and even for agreements of minor importance.

We would nonetheless recommend to be careful and use a qualified electronic signature or wet ink signature for critical or important documents. Also, note that notary documents, though this may change in the future, and documents filed for publication at the registrar’s office need to be wet ink signatures.

• Shareholders meetings  
  
  Many companies will hold their shareholders’ meeting in the upcoming weeks and months to approve their annual accounts. Since the confinement measures, it will not be possible to hold physical meetings. The government has not yet proposed any temporary procedures to overcome this issue. 
  
  As for the board meetings, the following options are open for the annual shareholders meeting as well: 
  • Unanimous written resolutions: can be used by the shareholders meeting to decide on all matters within its power, with exception of those decisions that require a notarial deed, such as amendments to the articles of association, restructurings or dissolution. Notifications or convening formalities do not apply in this case. A possible difficulty at this time may be that all shareholders need to approve, sign and return the resolutions to have a valid decision.
  • Power of attorney: can be given by a shareholder to another shareholder or to any third party to represent and vote on its behalf. This can be a solution when a physical meeting or a meeting in writing is not possible because of lack of unanimity. Please be aware that the articles of association, or internal rules of procedure, can impose certain limitations on conditions.
    
    Please note that each shareholder that is not represented at the meeting must have been duly invited to the shareholders’ meeting, and the meeting should be held in the place mentioned in the notification, only dealing with the items on the agenda.
  • Video and conference call: can be organized as for the board of directors. It is important to take the following conditions into account:
    • the possibility should be foreseen in the articles of association;
    • the company must be able to verify the capacity and identity of the shareholder via the electronic media that is used or via the method set out in the articles of association; and
    • the shareholder should be able to follow directly, simultaneously and uninterrupted the deliberation, and vote by, for example, voting buttons.

Please note that the articles of association can impose additional conditions, such as being able to actually participate in the deliberations and to ask questions.

• Publications and filings
  
  Publications and filings in the Belgian Official Gazette, Crossroads Bank of Enterprises and with the National Bank, such as for changes in management or annual accounts, are still possible. For these documents, original wet-ink signed documents are still required.
  
  We have good connections with all of the above public service providers. In case a publication or filing is required, please do not hesitate to contact us. The procedure has become a bit more complex and will take longer to complete, but can still be arranged.