This principle of "financial assistance," as it came to be known in professional jargon, was strictly prohibited. Compliance with Article 629 was—and still is—enforced through criminal sanctions. One notable exception existed: management or employee buyouts (MBOs). In that specific context, providing financial assistance to the parent entity for its own acquisition was permitted.

This prohibition on financial assistance posed numerous practical challenges. M&A advisors and legal professionals devised creative corporate structures designed to bypass Article 629. Certain structural workarounds, having gained court acceptance, became standard practice, enabling dealmakers—by using bridge loans—to access the target company's available liquidity despite the general restriction.

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Under the revised Article 629, financial assistance is permitted subject to compliance with several cumulative conditions:

  • Fair market conditions, particularly regarding the interest earned by the company and the collateral provided to it. The Board of Directors must ensure that the transaction terms (interest rate, duration, guarantees, etc.) align with standard market practice.

  • Detailed Board report outlining:

    • The rationale behind the transaction;

    • The benefit it brings to the company;

    • The terms under which it is conducted;

    • The liquidity and solvency risks involved for the company;

    • The price at which the third party is expected to acquire the shares.

    This report must be filed with the clerk of the commercial court (greffe du tribunal de commerce) and published in the Annexes of the Belgian Official Gazette (Moniteur belge). If a director of the parent company or the parent company itself is a beneficiary of the transaction, the Board report must also explicitly justify the decision taken in light of the beneficiary's status and the financial impact of this decision on the company.

  • Prior approval by the General Meeting of Shareholders, acting by a qualified majority of three-quarters of the votes.

  • Capped exposure: The loan or guarantees provided cannot exceed the target company's distributable reserves as shown in its latest published financial statements. For as long as the financial assistance remains in effect, the target company must record an equal non-distributable reserve on the liability side of its balance sheet.

  • Fair valuation: The transfer of shares must take place at a fair price (juste prix).

  • Easing of Management Buyout (MBO) rules: The MBO regime has been broadened so that employees of entities affiliated with the target company can now also benefit from MBO provisions without requiring a Board report or a shareholder vote.

After nearly 18 months in practice, it is clear that the revised Article 629 has achieved limited traction. From the moment it was published, legal scholars highlighted the weaknesses of the new framework. Indeed, board liability evaluated against criteria as vague as "fair price" or "fair market conditions"—combined with civil and criminal penalties—is enough to deter most directors. Furthermore, publishing the Board report in the Official Gazette means that anyone can access the details of the transaction, including the purchase price, running directly counter to standard deal practice, which relies on maximum confidentiality. Finally, the new framework fails to offer financing options that practitioner workarounds had not already established.

Far from removing legal uncertainty, the revised Article 629 raises numerous questions. Transaction professionals generally prefer sticking to existing structures already validated by case law. However, case law does not cover every scenario, and judicial interpretations can vary significantly. In practice, each lending institution holds its own perspective. Acquirers must navigate these differing opinions to establish a prudent, balanced acquisition structure.

Illustration: Clou