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#Restructuring #Directorships #Merger #Company

Restructuring? Think about your directorships

Monday 24/06/2019

The restructuring of a company involves many aspects. An element that is often forgotten is the directorship positions held by the acquired company in a number of other companies. The question is what will happen with these directorships once the company holding them disappears as a result of a merger or division. In many cases, the intention is that these directorships will continue uninterrupted because they will be taken over by the acquiring company. However, from a legal perspective, this is not as obvious as many people think.

People often assume continuity: in case of mergers and divisions carried out according to company law procedure, the transfer of assets and liabilities takes place at a general level. No separate transfer formalities are required for each element to be transferred.

However, this continuity does not automatically apply to the directorships held by the acquired company. For each of these directorships, a specific resolution must be included in the deed of merger or division, stating either its termination or its transfer to the acquiring company. In practice, this is often forgotten, and this has consequences. First of all, the acquired company will still be, erroneously, mentioned in the company's records and hence in the Crossroads Bank for Enterprises. Secondly, the acquiring company, which continues the directorship in good faith, is not an agent of the company for which it carries out these duties. The actions it takes in its capacity of director may not be binding. This does not change the fact that in many cases the acquiring company is considered to be an actual director as long as it shows the outside world that it is active in this capacity.

Finally, there is the risk that the Board no longer complies with the rules, because, as there is in fact one less director, it no longer meets the minimum number of members required by the Articles of Association or by law. In such cases, the law provides for a double sanction: director liability and any stakeholder may demand that the decisions taken by the Board that does not meet the requirements be null and void.

Regularise company’s registration

If you do want to regularise your company's registration, which is obviously highly recommendable, the Board will first need to establish what has happened with the directorship of the acquired company as a result of the restructuring. An extract from these minutes must then be published in the Appendices to the Belgian Official Journal, after which the court registry will update the registration. The same applies to companies which have completed the liquidation or bankruptcy process. From a legal perspective, these companies no longer exist; as a result, it is often wrongly assumed that the directorships held by them automatically end. Here as well, the Board will need to establish the situation and publish it in the Appendices to the Belgian Official Journal if it wants to have the director correctly removed from the company's records and, hence, from the Crossroads Bank for Enterprises.

You can easily avoid all this additional administration and the corresponding costs by immediately including the succession of the directorships in the deed.

Contact one of our experts
Bert Lutin
Bert Lutin
Partner Tax & Legal Services
Julie De Roy
Julie De Roy
Manager Tax & Legal Services