Merger procedure for Belgian companies: a practical guide

Mergers, demergers, contributions: the forms of restructuring

The Companies Code offers several tools to combine or separate activities.

• Absorption: one company transfers its entire estate to an existing company.
• Incorporation of a new company: several companies set it up together and transfer their estates to it.
• Demerger: one company splits its estate among several companies, then disappears.
• Partial demerger: one company transfers part of its estate without disappearing.

Absorption remains the most common form. It often simplifies a group, for example when a parent absorbs its subsidiary. This guide therefore follows the merger procedure for absorption. You can read the Code on the Belgian Official Gazette website.

What the merger procedure changes

The merger procedure has three effects.

• The absorbed company's estate passes as a whole, assets and liabilities, to the absorbing company.
• The absorbed company disappears without liquidation.
• Its shareholders receive shares in the absorbing company, sometimes with a cash adjustment.

Contracts normally continue with the absorbing company. Employees move across too, keeping their acquired rights. Collective Agreement No. 32bis governs that transfer. Still, check change-of-control clauses and licences tied to the absorbed company.

The eight steps of the merger procedure

Here is the typical timeline, driven by the boards.

1. Draft the joint proposal

The boards of both companies draw up a joint proposal. It notably states:

• The legal form, name, purpose and registered office of each company.
• The share exchange ratio and any cash adjustment.
• How the new shares reach the shareholders.
• The date from which those shares carry profit rights.
• The accounting date of the operation.
• Any special rights and particular benefits granted.

2. File and publish the proposal

The proposal goes to the registry of the enterprise court. Publication in the Belgian Official Gazette must happen at least six weeks before the general meeting. That deadline shapes the whole merger procedure.

3. The board's report

Each board writes a detailed report. It justifies the operation in legal and economic terms, especially the exchange ratio.

4. The statutory auditor's report

A statutory auditor or registered auditor reviews the proposal. They assess whether the exchange ratio is relevant and reasonable. Good to know: shareholders can unanimously waive these reports.

5. Make the documents available

Before the meeting, shareholders can consult the key documents at the registered office. These include the proposal, the reports and three years of annual accounts. A recent accounting statement completes the file if the latest accounts are more than six months old.

6. Vote at the general meeting

Each company holds its meeting before a notary. Quorum and majority follow the rules for amending the articles:

• At least half of the shares present at a first call.
• A three-quarters majority of the votes.

7. Sign the deed and publish

The notary records the operation in an authentic deed. They then file the extract for publication in the Belgian Official Gazette. From that point, third parties must take the operation into account.

8. Complete the formalities

The merger procedure ends with practical tasks.

• Update the CBE and remove the absorbed company from it.
• Transfer the VAT file and bank accounts.
• Inform customers, suppliers and employees.
• Integrate the accounts at the date set in the proposal.

Silent mergers: when the parent owns 100%

If the absorbing company already holds all the shares, the merger procedure becomes lighter. The Code then speaks of an operation assimilated to a merger. The parent issues no new shares, since it already owns the entire capital. Reports on the exchange ratio therefore become unnecessary.

Creditor protection

Creditors do not vote during the merger procedure. They still keep protection. Those whose claim existed before publication can demand security within a legal deadline.

Tax treatment of the merger procedure

Two taxes deserve attention: corporate income tax and VAT.

Tax neutrality

The operation can qualify for a favourable tax regime. Latent capital gains then escape tax at the time of the transaction. Depreciation continues on the existing tax values. Tax losses only carry over in part, under a statutory formula.

The key condition: the operation must meet legitimate financial or economic needs. If tax avoidance drives it, the tax authorities can refuse neutrality.

VAT

The contribution of a universality of assets does not count as a supply subject to VAT. The absorbing company takes over the absorbed company's rights and obligations. The absorbed company's VAT number then lapses.

Mistakes that delay the merger procedure

These are the pitfalls we see most often.

• Underestimating the six-week gap between publication and the meeting.
• Setting an exchange ratio without a documented valuation.
• Overlooking change-of-control clauses in key contracts.
• Ignoring licences attached to the absorbed company.
• Preparing the human integration too late.

Preparing the merger procedure with a forecast

Decide on a combination using consolidated figures. Build a financial forecast that combines both companies. With Juristelo, you compare the position before and after the merger procedure. You also quantify the expected savings and the cost of the project. For a simple change of legal form, read our guide to legal form conversion. If selling is the real goal, see our article on company sales.