A Belgian lawyer in New York

Transcription

1 E LAW YER Issue 2013 HVG Advocaten-Avocats A Belgian lawyer in New York Jan De Monie: Our model of a Multidisciplinary Practice really appeals to clients Corporate Cross- Border Mobility BE-LAWYER JUNE

2 Contents Established position in the Belgian Legal Services Market 4 New general anti-abuse measure in Belgian tax law 6 A Belgian lawyer in New York 8 Legal Entity Reduction 10 Corporate Cross-Border Mobility 13 Concordia De Keizer in top 10 insurance brokers 16 New rules on transfers of family businesses in Flanders 18 Multidisciplinairy practice appeals to clients 20 Disappearance of financial anonymity BE-LAWYER JUNE 2012 Market Abuse Regulation and Directive 24

3 Holland Van Gijzen Advocaten-Avocats: clearly different Sometimes what seems obvious is not obvious at all. Within Europe, the taboo surrounding alliances between lawyers and other professionals is steadily decreasing. Clients are demanding assistance or advice from the best professionals who work in multidisciplinary teams to find the best solution. From the market s perspective, the separation of different areas of professional expertise is an irrelevance. In some jurisdictions, lawyers can already work in multidisciplinary teams with other professionals, such as tax consultants or auditors. In other countries, including Belgium, the rules and regulations are more restrictive. As a new player on the Belgian market for legal services, we became involved in the debate with the regulators, and that has brought us recognition and the confidence to use our multidisciplinary approach in our work. Our success in this area is reflected in the results we have achieved, and it also earned us the title of Highest Potential Law Firm of the Year 2012 at the prestigious Belgian Legal Awards. The fact that we publish this magazine was just one of the positive aspects highlighted by the jury. In this issue of Be Lawyer you can read more about this, as well as our approach, our ambition to be more than just a traditional law firm, and the opportunities we offer enterprising lawyers. As the Managing Partner of Holland Van Gijzen Advocaten- Avocats in Belgium, I am also a member of the board of Holland Van Gijzen at a Belgo-Dutch level. Holland Van Gijzen has been active as a law firm on the Dutch market for many years, and this background has proved to be invaluable for the process we are currently going through in Belgium. From the outset, Holland Van Gijzen has propagated a multidisciplinary approach. This is for an obvious reason: corporate law, commercial law and tax advice share much common ground. Many problems involve tax aspects as well as aspects of law. To us, and certainly from the client s perspective, it is logical that lawyers and tax advisors should work together when solving problems. The results so far have been very positive. In tough economic times, we have managed to secure an established position in a market that is mature. But we can still achieve a great deal more. The market has picked up on our multidisciplinary approach, and our clients have told us that they appreciate it. We will therefore continue full steam ahead. If you would like to find out more about us and our approach, we would be happy to arrange a meeting with you at our office or pay you a visit. Jan De Monie Managing Partner Belgium Holland Van Gijzen Advocaten-Avocats BE-LAWYER ISSUE

4 An established position in the Belgian legal services market in just a few years Jan De Monie Holland Van Gijzen had to complete a formal process before it could operate as a law firm with multidisciplinary activities on the Belgian market. Jan De Monie, the current managing partner of Holland Van Gijzen, explained: Our business model is different from the model traditionally used in the legal profession. This was a conscious decision. Our multidisciplinary approach offers people opportunities to grow, both in terms of breadth (working with different disciplines) and as a specialist in a specific area of the law. This creates opportunities for enterprising people, a fact that is reflected in the high level of interest the market has shown in working for our firm. The wishes of the market Equally important, if not more so, is the fact that this approach is in keeping with international market developments and the wishes of clients, who increasingly want to have a single point of contact. Market developments often anticipate Belgian Legal Awards 2012 Holland Van Gijzen is the proud winner of the prestigious award for the Highest Potential Law Firm of the Year 2012, which was conferred at the 7th edition of the Belgian Legal Awards. In reaching its decision, the jury took the following into consideration: Multidisciplinary approach Impressive growth figures Interesting communication materials, including this magazine Women present at the top Full service firm covering all business needs Strong corporate culture Innovative positioning on the market developments in the area of rules and regulations, Dick Weiffenbach, partner at Holland Van Gijzen, said. This is the situation in Belgium, too. Our approach and our strategic links to Ernst & Young Tax Advisors in the Netherlands did not fit in with the frameworks provided by the national rules of professional practice at that time. We eventually managed to work things out by conferring with the Netherlands Bar Association. In Belgium, we also decided to enter into talks with the relevant authorities and go through the official channels, in order to obtain the recognized status we required and earn the trust of the regulators (the Dutch Bar Association and the Belgian Institute of Accountants and Tax Consultants, respectively). We have achieved that, and we can see that other players are following our example. We paved the way. The board of Holland Van Gijzen in the Netherlands gave Dick Weiffenbach the specific task of setting up a Belgian branch of Holland Van Gijzen. I was already registered at the Brussels Bar as a Dutch lawyer so that I could handle European matters for clients. This turned out to be an advantage during the talks. Clients should know where they are with us While other firms have chosen not to make much of the fact that they have a group of lawyers, that is exactly the image we want to present. Clients should know where they are with us, that we are a law firm. This was one of the areas for improvement that was picked up on during a review by the regulator: signs needed to be placed next to and in front of the office building to indicate clearly that both Holland Van Gijzen and Ernst & Young are established there. Once the firm had obtained official recognized status, there was nothing to stop it entering the market. As the first officially recognized firm, 4 - BE-LAWYER ISSUE 2013

5 In a short space of time Holland Van Gijzen Advocaten-Avocats has managed to make a name for itself in Belgium s legal services market. Its multidisciplinary approach is distinctive and has great appeal. This is demonstrated by the fact that Holland Van Gijzen won the prestigious award for Highest Potential Law Firm of the Year at the Belgian Legal Awards It therefore has good reason to continue full steam ahead. The firm employed 30 lawyers as of 1 July 2012, and this figure is set to double in future. Dick Weiffenbach we also had the right momentum, Jan De Monie explained. We were able to go ahead and take our multidisciplinary approach to the market, which has embraced this business model. Our formula is perceived as being highly innovative and powerful. The fact that we won the award for Highest Potential Law Firm of the Year is testimony to this. Access to a large international network Impressive growth figures have been achieved despite the maturity of the market and the unfavourable economic conditions. The outlook is positive, too. Thanks to Holland Van Gijzen in the Netherlands, we have quickly gained access to a large international network, and that is important to a certain group of clients, Dick Weiffenbach explained. It is something many smaller firms do not have. Contacts with Ernst & Young s tax advisors have also proved to add value. Corporate law, commercial law, intellectual property law, IT law and real estate law frequently touch on tax matters. We have also identified good opportunities in the areas of employment law and tax, particularly in the area of litigation. Start-ups, SMEs and public sector Besides large multinationals, Holland Van Gijzen wants to be an excellent legal counterpart for start-ups, SMEs, Belgian subsidiaries of foreign companies, Belgian businesses with interests abroad and public sector organizations. In addition to specialising in specific aspects of law, its lawyers also specialize in a number of specific market sectors, such as finance and banking, private equity, real estate, energy, telecoms, ICT and logistics. New specializations are added in response to market demand. Litigation as a growth market Dispute resolution is a growth market. Holland Van Gijzen has noticed that tax auditors are now taking a much harder line, especially in areas where the recently introduced new anti-abuse provisions had not yet been tested against financial statements published by companies. These, naturally, still need to be checked. There is therefore currently a sharp rise in demand for assistance from clients involved in tax disputes. We re ready, Jan De Monie affirmed. We have created a team of five lawyers who are specialized in dealing with matters of this kind. This was absolutely vital since the procedural aspects of a dispute contain many hidden pitfalls. Wallonia Holland Van Gijzen believes that a large number of opportunities also exist in Wallonia. There are many smaller firms operating in that part of our country, Jan De Monie explained. Having achieved a critical mass, we now have quite a few French-speaking lawyers with various specializations. Their number will only increase as our firm continues to grow. Doubling in size Continued growth is an important objective. A doubling of the size of the firm, from 30 to 60 lawyers, is considered realistic. More specializations, such as employment law and EU law, are to be added to the package of services, although this will have to be done in stages. Our MDP culture is something that we cherish. And of course, we keep a close eye on quality. Furthermore, our formula has to appeal to people, and new colleagues need to fit in with our culture. In any event, we are enjoying strong interest from the labour market, from new law graduates and experienced lawyers alike. I Jan De Monie T +32 (0) E jan.de.monie@hvglaw.be BE-LAWYER ISSUE

6 The new general anti-abuse measure in Belgian tax law: what are the innovations? free choice of the least taxed route On 6 April 2012, the Program Law of 29 March 2012 was published in the Belgian State Gazette. This Program Law contains the final version of the new general anti-abuse measure both for income tax and for registration and inheritance tax purposes. What is the purview of this new measure? 6 - BE-LAWYER ISSUE 2013

7 The general anti-abuse measure for income tax purposes can be found in article of the Belgian Income Tax Code 1992 (BITC92). The old article 344 BITC92 was introduced in The application of this article has given and still gives rise to much debate. Currently, it is generally accepted that the tax authorities may only re-qualify certain transactions on the basis of the old article 344 BITC92 in the case a taxpayer has concluded a legal transaction with the sole purpose of evading income taxes. Indeed, the taxpayer has the right to prove the existence of legitimate financial or economical needs. This doctrine of this free choice of the least taxed route, as developed in the Brepols case of the Court of Cassation, has always been a thorn in the tax authorities side. After all, it is very difficult if not impossible for the tax authorities to re-qualify given that the re-characterization is required to have consequences similar to that of the requalified transaction. Hence, in the past, various attempts have been made in order to amend the article. Nevertheless, none of these legislative proposals made it past the Parliament. Until the Program Law of 29 March Articles 167 and 168 of the Program Law of 29 March 2012 contain a brand new anti-abuse measure for income tax and registration and inheritance tax law purposes. The purpose of the amendment is to mitigate the requirement of the tax authorities to demonstrate that their re-characterization of the legal act established by the taxpayer results in legal consequences similar to the re-qualified legal act. Below, we discuss the new key elements of article BITC92. Non opposability of transaction Under the old article, the tax authorities had the right to dispute the legal qualification given by the parties to an act or to separate acts constituting a single transaction if the qualification given had the aim of evading taxes. The new article no longer makes mention of acts, but of the more general term, transactions or the series of transaction leading to a combined transaction. Definition of tax abuse Contrary to the old article, the new article contains an explicit definition of tax abuse. Tax abuse exists when the taxpayer carries out: a transaction whereby he puts himself in violation of the objective of a provision of the Belgian Income Tax Code or decrees implementing the latter - outside of the scope of application of a tax provision of the Income Tax Code or its related decrees; or a transaction whereby a claim is made to a tax benefit as provided in a provision of the Belgian Income Tax Code or its implementing decrees and whereby the granting of such tax benefit would be in violation of the objective of the latter provisions and which is merely carried out in order to obtain the tax benefit. As a consequence of this definition, the new article may only be used in respect to transactions with the objective of avoiding Belgian income tax (as well as registration duties and inheritance tax). Therefore, it is not aimed at tackling avoidance of foreign taxes or other Belgian taxes. Other specific anti-abuse measures should be used in this regard. Burden of proof In order to apply the new article, it is up to the tax authorities to prove that tax abuse exists. To provide this proof, the tax authorities may use all legal means of evidence as applicable in tax law, which includes presumptions but excludes the oath. Once the existence of tax abuse is established, it is up to the taxpayer to prove that the choice of its transaction is justified by other motives than tax evasion. This means that the new article can only be applied when: the only reason a transaction is carried out is to obtain a tax advantage; non-tax objectives exist but these are so general that they exist for any similar legal act and hence, are not specifically related to the transaction; the non-tax objectives are specifically related to the performed transaction, but are of such minor importance that no reasonable person would have performed the transaction concerned solely for this non-tax objective. Consequences If the tax authorities are able to prove the existence of tax abuse and the taxpayer fails to prove sufficient or specific non-tax motives for its transaction, the tax authorities have the right to re-qualify the transaction in such way that is complies with the objectives of the tax rule that was avoided or the tax benefit that was unlawfully obtained. I Philippe Renier T +32 (0) E philippe.renier@hvglaw.be The limits of this requalification, however, are now clearly indicated by the law: the tax authorities are required to repair the taxable basis and the tax calculation in accordance with the objectives of the tax provision as if the abuse of tax law would not have taken place. This means that it is no longer required that the new tax be imposed on a transaction with similar consequences. Entry into force The new article will be applicable as from tax year 2013, i.e. income year or accounting year Moreover, it also applies to transactions of the series of transactions conducted during a taxable period which have closed at the publication date of the provision at the earliest, and which are related to tax year Consequently, article BITC92 can be applied to transactions performed in the course of calendar year 2011 which implies a retroactive effect. For registration duties and inheritance tax purposes, the new provision will become applicable as from the first day of the second month after publication of the law, i.e. 1 June Extensive use It is expected that the tax authorities will make extensive use of the new article BITC92. In this respect, the specialized tax controversy team of Holland van Gijzen LLP has the necessary expertise and capacity at hand to assist clients in the development of their defence strategy. I Tom Engelen T +32 (0) E tom.engelen@hvglaw.be BE-LAWYER ISSUE

8 Fatiha El-Boubsi A Belgian lawyer in New York Fatiha El-Boubsi, who specialises in corporate law, has been seconded to New York. There, she joined forces with the Dutch and Belgian Legal Desks at Donahue & Partners LLP, the firm Holland Van Gijzen acquired in Fatiha El-Boubsi is the first Belgian lawyer to join the team. Over the years, Holland Van Gijzen LLP established a Dutch Legal Desk in New York, the city that never sleeps. The desk is part of Donahue & Partners LLP. The practice consists of two important units: the corporate law practice and the coordination of large international projects involving several jurisdictions. Operations are successful in both markets. What are the main characteristics? Fatiha: A major part of our practice is that we are active in niche markets and therefore, cooperate intensively with specialists from Ernst & Young International Tax Services, Advisory, VAT, etc. Through this multidisciplinary cooperation, we have a unique position in the market. We meet with Ernst & Young and allied law firms from all over the world. They swiftly provide the right solutions and answers to complex matters. We are a one-stop shop. The attorneys at Donahue & Partners are the main contact for the US clients. What do the main activities in New York consist of? Fatiha: At a corporate level, they consist of providing legal assistance in international restructurings, reorganisations, dealing with the legal issues of pre- and post-merger trajectories and solving international corporate law issues, as well as the implementation of international equity plans (stocks, options) for US clients. Traditionally, Donahue & Partners is strong in advising on inter national legal issues, in particular, just as providing legal advice on project management is also our core business. Whenever useful, of course, we reach out to the lawyers within our network, in particular in Europe. If, for any reason, an enterprise decides to restructure its business, the The close cooperation with specialists from Ernst & Young is what differentiates our work from that of other firms. tax and legal effects of such an operation reach all the countries in which the enterprise has a branch or an interest. For example, in order to create more shareholdervalue, by shedding certain business units or activities or because times are difficult, this can involve dozens of countries and thus, also dozens of legal systems, languages and cultures. Since Donahue & Partners has a strong international network, we are engaged to handle the legal international coordination, the requests of advice from our network of local legal counsels, ensuring consistency and that it is processed in an advice for our American clients. The same applies to the international implementation of a multinational s stock option plan. Also in that connection, we continuously face differences in rules and regulations and differences in culture. You are the first Belgian to be assigned to Donahue & Partners LLP. How important is that and why you? Fatiha: I personally took the initiative of requesting to join the team in New York. For a corporate lawyer, New York is the place to be. It is still the financial hub of the world. It is all up and happening here. The major companies are established in or operate from 8 - BE-LAWYER ISSUE 2013

9 New York. I wanted to be in the thick of things. That is fantastic for my professional experience. This is a real challenge. What is it like working with the Dutch colleagues at Donahue & Partners? Fatiha: We are a tight team. The lines are short and contacts close. The cooperation with my Belgian and Dutch colleagues at Holland Van Gijzen both in Belgium and The Netherlands is also especially pleasant. They know where to find me, to find us, with respect to the joint coordination and streamlining of cross-border projects. Do you have a special interest in certain sectors? Fatiha : I really find everything interesting in the area of corporate law. It is so varied and the matters and issues are always different. After all, each company has its own profile. One sells T-shirts; the other is engaged in ICT. That implies that each time, you have to study your clients anew. Legal steps have to fit in with the business reality of each client. That makes the work so enjoyable; that is our work! I Fatiha El-Boubsi T +32 (0) E fatiha.el-boubsi@hvglaw.be BE-LAWYER ISSUE

10 Simplification of Group structures Legal Entity Reduction The crisis global businesses are currently undergoing inevitably raises the issue of cost reduction. At the same time, groups are looking ahead and developing strategies for the upturn. In that context, many multinational groups are having a close look at their corporate structure and considering a thorough simplification. As a result, legal entity reduction is high on the agenda BE-LAWYER ISSUE 2013

11 By Legal Entity Reduction, we refer to the process of reducing the number of separate corporate entities, having separate legal personality, which results in regrouping and concentrating the activities of several entities within one single corporate entity (or a limited number of entities). Sometimes, entity reduction will logically follow changes to the group s business or operational structure, e.g. where it has been decided to set up one shared service centre or one European warehouse, or to organize the group by business units or by functions. A shift in the organization of the group s business or operations is, however, not a prerequisite: significant savings can be made by simply reducing the number of entities. As is discussed below, various legal techniques are available to achieve this purpose, such as mergers or demergers, plain liquidations, or (in some jurisdictions) accretion (e.g. Germany: Anwachsung ). As a preliminary step, a transfer of assets (and liabilities) or shares, or other restructuring may be required or advisable. Traditionally, the concept of entity reduction is encompassed at a domestic level. Increasingly, however, it is being considered at a cross-border level (e.g. EU-wide or throughout the entire European Economic Area (EEA)). Opportunities Reducing the number of legal entities (corporate entities) usually allows a group of companies to reduce costs significantly. At a domestic level At a domestic level, simplifying the group structure by reducing the number of entities will certainly reduce costs. Merging all local operational entities into the domestic holding company, or into one of the operational companies, allows the group to have only one set of annual accounts and one audit, reduces annual compliance workload and costs and potentially even avoids having to prepare and publish consolidated accounts. The single entity may have several operational units without incurring material costs. Some of the existing entities may even be dormant and useless. In an international context In an international context, eliminating the corporate entity (or even all entities) within a certain jurisdiction, e.g. through a cross-border merger or a liquidation, typically leads to the creation of a branch (in French: succursale ; in Dutch: bijkantoor ), i.e. an official permanent legal presence of a foreign corporation allowing the latter to perform its business and make legally binding arrangements through its legal representative. A branch, as opposed to a subsidiary (in French filiale ; in Dutch: dochtervennootschap ), is not a legal entity, it does not have legal personality. Typically, a branch is subject to far less and far less stringent requirements and formalities than a subsidiary, amongst others: No obligation to establish and publish own annual accounts (although many jurisdictions require the branch to publish the annual accounts of the foreign (parent) company No need for a domestic audit of domestic annual accounts; hence no need to (re-)appoint or replace an auditor, to publish its identity, to pay audit fees, etc. Reduced annual compliance requirements: no annual accounts to be drawn up and adopted by a domestic board of directors and approved by a domestic general meeting of shareholders. No need for separate domestic general shareholders meetings, board meetings, etc. No need to (re-)appoint, replace, revoke, dismiss, nor to record resignations of domestic board members, nor to publish any of these (although many jurisdictions require the branch to publish all changes to the board of the foreign (parent) company). No need for a domestic entity s bylaws or articles of association, nor any amendments to them, including capital increases or decreases, in all jurisdictions (although many jurisdictions require the branch to publish the bylaws or articles of association of the foreign (parent) company and all amendments thereto). No (minimum) capital and net equity requirements to be complied with at a domestic level. Other advantages In addition, simplifying the group structure to a single entity with local branches may have other advantages. Aligning of decision-making and structure. Important decisions are often made at group level, the parent company inviting (or dictating) the local board and management to merely implement decisions already made. However, from a legal point of view, in many jurisdictions, local board members are required to serve their entity s corporate interest. In that respect, it is not always acceptable to give priority to the (so-called or genuine) group interest (or the parent company s interest). Moreover, local board members may incur liability by formally adopting and implementing decisions at the domestic level, even though they were made at the parent company level and imposed upon them. By legally integrating the various entities into one surviving entity (former parent), the decision powers and the responsibilities (and potential liabilities) are aligned. They are at the same level, i.e. with the single company s board members and management. The entity reduction may create opportunities to optimize the group s IP structure, its sales model, its supply chain, etc. Possible downsides Entity reduction can also have a number of downsides. Loss of risk segregation An advantage of having separate corporate entities is the benefit of risk segregation. As a rule, each corporate entity is liable for its own corporate debts and not for those of another entity. As a rule, the shareholders of limited liability companies (which include the vast majority of group subsidiaries) cannot be held liable for the debts of the corporate entity. In that respect, giving up the risk segregation by joining all operations under one single entity may seem unwise at first sight. However, segregation of liabilities is often more in theory than in practice. In some instances and subject to certain conditions, > parent companies have been held liable for imposing certain decisions upon their subsidiaries, disregarding the subsidiary s individual BE-LAWYER ISSUE

12 > corporate interest, even if the objective is to strengthen the group as a whole. Moreover, group companies are often forced into accepting joint liability or providing guarantee within the framework of joint contracts, financing schemes and the like. Parent companies especially are often required to issue letters of support or provide actual security to the benefit of their various subsidiaries. In addition, one group entity s financial difficulties can have a more or less material impact on the other entities financial situation, e.g. causing a reduction of the value of shares they hold in the former, or impossibility to recover any claims or receivables they may have on the former. Changes to distribution structure, inter-company flows of goods, services and payments; TP structures, etc. When and if the entity reduction does not result from changes to the business or operational structure, removing a number of entities will inevitably require more or less important changes to the inter-company flows of goods, services, payments and the like. At first sight, this seems to be a complicating factor. On the other hand, concentrating all goods, services, and moneys within one entity reduces the number of flows and is likely to simplify operations. In addition, on the one hand the impact on the group s tax strategy or planning should be carefully examined such as to avoid (or limit) any adverse consequences. On the other, the new and simplified structure may offer new tax optimization opportunities. Legal entity reduction is high on the agenda Legal techniques including recent developments Among the numerous concentration techniques that are available, the ones that best suit the concept of entity reduction are: (cross-border) mergers and liquidations. Cross-border mergers have been recognized by the Court of Justice of the European Union (the CJ or the Court ) as a technique allowing companies to exercise their freedom of establishment under the EC/EU Treaty in the Court s judgment in the Sevic Systems case (ECJ 13 December 2005, C-411/03). Moreover, cross-border mergers have been explicitly allowed and facilitated by the 10th Directive of 26 October 2005 (2005/56/EC) on cross-border mergers of limited liability companies, which has been implemented into national law provisions by the Member States. The entity resulting from the cross-border merger may, but need not be, a European Company (or Societas Europaea) under Regulation no. 2157/2001 of 8 October Depending on the circumstances, it may be less complex to have one of the pre-existing local entities as the resulting entity in its original legal form. Internal or domestic mergers are regulated in a harmonized way on the basis of the Third Directive (78/855/EC) of 9 October 1978, as subsequently amended. Recently, the laws have been amended in order to simplify merger proceedings, in particular by enabling the companies involved in a merger process to waive several reporting and information requirements (based on Directive 2009/109/ EC of 16 September 2009, e.g. for Belgium, the Act of 8 January 2012). As such waiver requires the anonymous consent of all shareholders, these simplifications are especially suitable for restructurings taking place within a group of companies. As for liquidations, several jurisdictions are familiar with a concept of turboliquidations, allowing a fairly simple and quick liquidation process, especially within a group context. The Belgian Companies Code has just recently been amended by the Act of April 2012 (publication due any day) such to reinstate or reconfirm the lawfulness of an operation through which a liquidation process is opened and closed in one day, even in one (Notarial) deed. To this end, a number of conditions must be met: The company must not appoint a liquidator A recent statement of assets and liabilities must show that the company has no debts outstanding All shareholders must unanimously consent to the simplified liquidation process The remaining assets must be taken back by the shareholders themselves. In a group context, where typically all shares (or all but one) are held by the parent company, these conditions are not expected to be a burden. Prior to or in the framework of the restructuring, a transfer of assets (and liabilities) or of shares held in other (group) companies may be required. Various legal techniques are available, depending on the jurisdiction(s) involved, some of which allow for a transfer of all or certain assets and liabilities as a whole (universal transfer), simplifying the formalities to be complied with, e.g. under Belgian law: transfer or contribution of a branch of activity or of a universality In other words, the statutory context is quite favourable for legal entity reduction processes. Driver s seat Typically, the jurisdiction of the existing or proposed (European) headquarters will be in the driver s seat, leading the process of corporate/ group simplification, even though local assistance in all other jurisdictions will be required. A number of multinational groups have their European headquarters in Belgium, allowing them to centralize the group s European activities within a single entity based in Belgium. Several HVG lawyers have been privileged witnesses of successful Legal Entity Reduction processes, whether assisting a Belgian entity that is driving the process or assisting a Belgian entity that ceases to exist. We should be more than pleased to assist you in making your restructuring process just as successful through an integrated, multidisciplinary and multi-jurisdiction approach, involving the right colleagues or contact at the appropriate location. I Philippe Ernst T +32 (0) E philippe.ernst@hvglaw.be 12 - BE-LAWYER ISSUE 2013

13 Corporate Cross-Border Mobility VALE: the ECJ rules on crossborder company conversions (Seat transfers) > BE-LAWYER ISSUE

14 > Corporate mobility is high on the agenda of multinational corporations and of businesses in general. Cross-border mobility allows the entrepreneurs to grasp business opportunities in jurisdictions that are not their jurisdiction of incorporation. Within the European Union the topic of cross-border mobility across Member States, and potential restrictions Member States are allowed to impose to such mobility, has been heavily debated over several decades. Businesses have tried to claim such cross-border mobility on the basis of the principle of freedom of establishment, as guaranteed by the Treaty (current articles 49 and 54 TFEU; former articles 43 and 48 EC). As a result, the European Court of Justice ( ECJ ) has had the occasion to address mobility and establishment issues in a number of cases. This has allowed the Court to define the scope and boundaries of the freedom of establishment in such cases as Daily Mail (1988), Centros (1999), Überseering (2002), Inspire Art (2003), etc. In the VALE case, the latest chapter in the European saga of the freedom of establishment, the European Court of Justice has recently issued a preliminary ruling on questions referred by the Hungarian Supreme Court regarding cross-border company conversions (seat transfers). Previous case: Cartesio In 2008 the ECJ issued an important ruling in the Cartesio case, which had a factual background very similar to the VALE case, and involved the same EU Member States. Cartesio had been incorporated in accordance with Hungarian legislation and, at the time of its incorporation, had established its seat in Hungary. Then Cartesio transferred its seat (de facto head office) to Italy without winding up in Hungary first, wishing to retain its status as a company governed by Hungarian law. However, the Hungarian courts refused to enter the transfer of the de facto head office in the Hungarian Company Register, on the basis that Hungarian law does not allow a company to transfer its operational headquarters to another Member State while retaining its legal status as a company governed by Hungarian Law. In Cartesio the ECJ ruled that As Community law now stands, articles 43 EC and 48 EC are to be interpreted as not precluding legislation of a Member State under which a company incorporated under the law of that Member State may not transfer its seat to another Member State whilst retaining its status as a company governed by the law of the Member State of incorporation. In other words, the Hungarian law was upheld. However, the ECJ added that freedom of establishment also covers the possibility of a company converting itself into a company governed by the law of another Member State to the extent permitted under that law to do so. Requiring the company s prior winding-up or liquidation would constitute a prohibited restriction on freedom establishment (unless it served overriding requirements in the public interest). In other words: if Cartesio wanted to convert into a company governed by the laws of Italy, Hungary could not prohibit the transfer of registered office to Italy, to the extent such transfer is allowed by the laws of Italy. The Member State of origin could not prevent such crossborder conversion. In its Cartesio judgment the ECJ did not answer the question whether or not the host Member State (in that case: Italy) could disallow foreign companies to convert into a national company. Now this is exactly the question the ECJ got to rule on in the VALE case. VALE judgment An Italian company (Vale Construzioni S.r.l.) intended to transfer its seat to Hungary (host Member State) while closing all of its activities in Italy as well as its legal existence under Italian law (Member State of origin) and becoming a Hungarian company (VALE Epitesi Kft.) governed by Hungarian instead of Italian law, while maintaining the legal personality of the company (i.e. under a continuity regime). However, the Hungarian courts rejected VALE s request to be registered in the commercial register with the Italian company as its predecessor, on the basis that such operation could not be considered as a conversion under Hungarian law, since national law on conversions applied only to domestic situations. The Hungarian Supreme Court filed a preliminary ruling with the ECJ, in order for the latter to determine whether the Hungarian company law that does not allow a company of another Member State to convert into a Hungarian company is compatible with the freedom of 14 - BE-LAWYER ISSUE 2013

15 establishment set out in (former) art. 43 and 48 EC (now art. 49 and 54 TFEU). In the VALE judgment the ECJ rules that articles 49 and 54 TFEU are to be interpreted as precluding national legislation which enables companies established under national law to convert, but does not allow, in a general manner, companies governed by the law of another Member State to convert to companies governed by national law by incorporating such a company. The ECJ recognizes that cross-border conversions pose specific problems due to the consecutive application of two separate national sets of laws. However, the Court finds the different treatment of crossborder conversions as compared to domestic conversions likely to deter companies which have their seat in another EU Member State from exercising their freedom of establishment. By generally preventing the operation, even when the interests of creditors, minority shareholders and employees are protected, the effectiveness of fiscal supervision is preserved and the fairness of commercial transactions is guaranteed, the Hungarian law does not pass the proportionality test. In addition, the ECJ accepts that the host Member State is entitled to determine the national law applicable to such cross-border conversions, and thus to apply its national law on conversions, e.g. regarding capital requirements, the drawing up of a statement of assets and liabilities or of property inventories. However, based on the principles of equivalence and effectiveness the host Member State is not entitled, according to the ECJ, to refuse to record the company making the application to convert as the predecessor in law if this is possible for domestic conversions, nor to take due account, when examining a company s application for registration, of documents obtained from the authorities of the Member State of origin. Legislation required? On 10 March 2009 the European Parliament adopted a Resolution requesting the Commission to submit legislative proposal for a Directive on cross-border seat transfers, the so-called 14th Directive. The EP considered that cross-border migration is one of the crucial elements in the completion of the internal market and should not give rise to winding-up or interruption or loss of legal personality. In the VALE judgment the ECJ points out, as it did in SEVIC Systems (2005) regarding cross-border mergers, that the adoption of secondary European Union Law on crossborder conversions (e.g. a Directive on cross-border seat Valerie Dehaeck T +32 (0) E valerie.dehaeck@hvglaw.be transfer) is not a precondition for the implementation of the freedom of establishment laid down in articles 49 and 54 TFEU, even though, as the Court admits, such rules are useful for facilitating cross-border conversions. The 14th Directive will also remain useful for operations that are not covered by the ECJ rulings in Cartesio and VALE. Conclusion The VALE judgment leads to the conclusion that crossborder conversions should as a rule be possible whenever domestic conversions are. In any event, the national laws of each member state involved will be of major importance for the outcome with respect to two central questions: will a cross-border conversion be possible and if so, subject to what conditions and through what procedure? Those national laws will, therefore, have to be closely examined in each and every cross-border mobility project. Our lawyers will be happy to assist you, and to call upon our friends in other jurisdictions (whether within or outside the EU), in order to help you realize your cross-border mobility objectives - be it through a cross-border conversion or any other operation. I Philippe Ernst T +32 (0) E philippe.ernst@hvglaw.be BE-LAWYER ISSUE

16 Concordia De Keizer in The Concordia Group is a major international insurance broker. The business has more than 200 employees and various branches in Europe. Concordia s roots are in Belgium, in Ghent to be precise. In the year 2012, Concordia got off to a brilliant start. The merger between the Netherlands insurance brokers, Concordia Holland and De Keizer means a considerable strengthening of their position in the Netherlands insurance market. Holland Van Gijzen advised on the merger on behalf of Concordia. Its Chairman Tony van Hoek was closely involved in the negotiations. Concordia NV Concordia NV is an independent Belgian insurance broker which was founded by Tony van Hoek in He also has strong family ties with the Netherlands where he spent a large part of his youth and where he completed his studies. The company is a family related company. During the past 50 years, the Concordia Group has expanded to become an independent insurance broker with an annual fee turnover of EUR 30 million. Concordia has branches in Belgium (Ghent, Brussels), the Netherlands (Rotterdam), France (Lille) and Turkey (Istanbul). Internationally, the Concordia Group forms part of the Wells Fargo Broker Network. Traditionally, Concordia has held a strong position in the maritime sector, port activities, transport and logistics. Some of its oldest clients are Stukwerkers Havenbedrijf NV in Ghent and Multraship in Terneuzen with whom they have cooperated for four generations. Another longstanding valuable client is the Belgian WielerFederatie. Concordia assists the Royal Belgian Cyclists Union (the KBWB) in risk management, insurance advice, policy management and claim settlements for races, material, accidents, etc BE-LAWYER ISSUE 2013

17 Holland Van Gijzen assists in Netherlands-Belgian merger of insurance brokers top 10 of insurance brokers The new Rotterdam insurance combination, Concordia De Keizer, with 100 employees and a turnover of more than EUR 17 million, is one of the larger insurance brokers in the Netherlands. Complementarity was the key reason for the merger. Whereas Concordia was traditionally specialised in From left to right: Jan Meijerman, Tony van Hoek and Jaap van der Hoek the maritime sector in the Netherlands, De Keizer was specialised in other markets, particularly in life insurance, pensions and employee benefits. According to CEO Jaap van der Hoek and Tony van Hoek from Concordia, there was a second important reason to join forces: the changed market circumstances. Van der Hoek: If you want to remain a top player as insurance broker, it is essential to expand in scale. In this new combination we can increase our market position in all areas, react better and more flexibly to market developments and to the ongoing changes to laws and regulations. Belgian roots According to Tony van Hoek, the founder of Concordia, this development fits in perfectly with the corporate strategy. It is a very good combination. Traditionally, we have held a strong position in the maritime sector and in transport and logistics, certainly in the Netherlands. By adding a high quality provision of services in the area of life insurance, pensions and employee benefits, we can offer our clients a strong package of services on both sides of the spectrum. The ratio maritime non-maritime in the Netherlands is now Furthermore, the non-maritime market is so much larger. That offers many new opportunities. Negotiations: powerful but fair Before the new combination became fact and the deal was definitely closed, robust negotiations took place. Jan Meijerman advised Concordia as M&A lawyer throughout the entire transaction. They made contact with him during a Netherlands Belgian Gala Dinner of the Willem Elsschot Association in September 2011 at Rotterdam. Jan and I sat at the same table, reminisces Jaap van der Hoek. One thing followed the other. Jan and his team gave us excellent advice during the negotiations and the closing of the deal. Ten months of negotiations The negotiations took ten months in all. Meijerman: Complicating factor on the side of De Keizer was that there were five sellers. True, one of them had been appointed negotiator and was sometimes able to take a direct decision, however, on many other points, he had to keep going back to the other four owners for consultation. All five sellers had to take the same line. The many interim stages took up extra time. The relatively protracted round of meetings did not cause the reciprocal affection to wane. Agreement was reached at the end of 2011 with, as end result, the merger at the beginning of Tony van Hoek: The joining of two businesses and putting the right people in the right places has been a carefully orchestrated process. De Keizer has highly competent employees and that is perfectly in keeping with our tradition. Devoting extra attention to this aspect of the practical joining of both organisations is no more than logical. I Jan Meijerman T +31 (0) E jan.meijerman@hollandlaw.nl Not a straightforward deal The merger between Concordia Holland and De Keizer was certainly not a deal which could be concluded straightforwardly. Apart from the long period of negotiations, the transaction entailed all kinds of purchase price and payment provisions. All these matters meant that many tailor-made arrangements had to be made, with extensive contracts as a consequence; a share purchase agreement, a shareholders agreement and employment agreements. BE-LAWYER ISSUE

18 New tax measures in effect since January 1, 2012 New rules on transfers of family businesses in Flanders The Flemish Parliament has introduced new legislation that includes a major reform of registration tax and inheritance tax for transfers of family-owned businesses. Some aspects of this new legislation were clarified in an administrative circular published on August 23, Under the old version of the Flemish Inheritance Tax Code, the transfer of family-owned businesses and companies was exempt from inheritance tax provided certain conditions were met. Registration tax on gifts of shares in a familyowned business was limited to a flat rate of 2%, again subject to specific conditions. The new tax measures (article 140 bis of the Registration Tax Code and article 60/1 et seq. of the Inheritance Tax Code) provide for an exemption from registration tax on gifts of shares in a family-business as long as certain criteria are met. The inheritance tax exemption has been abolished and replaced by a reduced inheritance tax rate of 3% in the case of the deceased s spouse, legally registered domestic partner, direct ascendants or direct descendants, and 7% in all other cases. These rates apply instead of the usual progressive rate of inheritance tax, which can be as high as 65%. The exemption from registration tax and the favourable inheritance tax rates are both subject to the same rules. The Flemish Parliament wants to encourage families to take a more active approach to planning the transfer of their business or company, and to do so at an earlier stage. The government has deliberately not made any distinction between gifts made to relatives and those made to others. Importantly, the Flemish Parliament has explicitly provided for the possibility of transferring only the bare ownership of shares in a family business, thus allowing the donor to retain control of the family business (voting rights) and remain entitled to profit distributions. Parliament is aware that in some circumstances it is unusual for gifts of shares to be made to a successor (e.g. in the case of young entrepreneurs). The favourable inheritance tax rates should provide protection in such cases. The new legislation applies to all family businesses, not just those that are structured as companies. That said, this article focuses on family-owned companies as they are the most relevant for our practice. Family companies The criteria that need to be met in order to qualify for the exemption from registration tax and the favourable inheritance tax rates are summarised below. The family company s management must be situated within the EEA, and the purpose of the company must be to carry on an industrial, commercial, artisanal or agricultural activity, or a liberal professional activity. In order to determine the existence of such an activity, the first important factor that needs to be considered is the company s objects as stated in the articles of association. Second, it is important to demonstrate that these objects are in fact pursued by the company. In most cases, this will be done using the company s annual accounts, which state, among other things, the company s revenues and staff costs. A company qualifies as a family company for the purpose of the new tax measures if the donor (and his or her family) holds at least 50% of the shares in the company in full ownership. An exception to this participation criterion exists for companies owned by two or three different families. In such cases, the donor or the deceased must hold at least 30% of the shares in full ownership, either alone or in conjunction with his or her family. This exception only applies if the families that own the business jointly hold at least 18 - BE-LAWYER ISSUE 2013

19 70% of the shares (if two families hold the majority of the shares), or alternatively 90% of the shares (if three families hold the majority of the shares). Excluded companies The Flemish government explicitly stated its intention to limit the application of the registration tax exemption and the favourable inheritance tax rates to companies that provide added value for the Flemish economy. With this in mind, the legislator introduced two conditions to ensure the new rules do not apply to companies that merely hold property for the private use of shareholders. As such, companies that fulfil the following two conditions are excluded from the application of the new rule: The amount of money spent annually on wages, social insurance charges and pensions does not exceed 1.5% of the company s total assets; The value of the land and buildings owned by the company exceeds 50% of its total assets. Even if both these conditions are met, the taxpayer may still prove that the property owned by the company is used solely for business purposes. Holding companies Given that many holding companies may not meet the activity criterion mentioned above, the legislator has provided for a specific exception for holding structures. With regard to passive holding companies, the new rules only apply if the holding company directly holds at least 30% of the shares of at least one subsidiary located within the EEA that performs a genuine economic activity. If this condition has been met, the sum to which the registration tax exemption or favourable inheritance tax rate applies is limited to the value of the shares of all the active subsidiaries situated within the EEA. As such, the passive holding company s reserves and assets other than shares in active subsidiaries will not qualify for the new rules. If it can be proved that the holding company performs an economic activity itself (e.g. intra-group activities related to bookkeeping, IT or intellectual property) and it does not fulfil the two disqualifying conditions mentioned above, the holding company will cease to be treated as a holding company. With regard to such active holding companies, the total value of the holding company is taken into account for the purpose of the application of the new rules, and no analysis is performed of the holding company s subsidiaries. The Flemish government used to take the view that management companies would automatically be excluded from the application of the preferential tax treatment, but this is no longer the case in the new circular. Management activities and intra-group activities should therefore both result in eligibility. Restrictions Only shares that represent a portion of the capital and to which voting rights are attached qualify for the exemption from registration tax and the reduced inheritance tax rates. In contrast to the situation that used to apply, the new rules will not apply to claims (in the form of debt) that the family has against the company. Nontrading partnerships In the circular, the Flemish government confirmed that certain estate planning constructions do not interfere with the application of the registration tax exemption or the favourable inheritance tax rates. In this context, we would mention the Belgian burgerlijke maatschap, or nontrading partnership. Since these nontrading partnerships are fiscally transparent, the Belgian tax administration will only consider the stakes held by the persons behind the nontrading partnership. The circular confirmed that the rules apply in the case of a gift of shares in a nontrading partnership as well as in the case of a nontrading partnership that is created following the transfer of a family business. Ongoing obligations After shares in a family company are acquired as a gift or on the death of the previous shareholder, a number of criteria still need to be met in order for the benefits of the new rules to continue to apply. The family company must carry on an activity, without interruption, for a period of at least three years following the date of death or the date on which the gift was made. While it need not carry on the same activity as before, it has to carry on an uninterrupted activity for three years. This does not mean that the company cannot be sold during this three-year period. As long as the activity is continued, even by a third party, the rules still apply. During this three-year period, any reduction of capital that takes place is subject to registration tax or inheritance tax at the rate that would have applied if the new rules did not exist. The circular clearly mentions that only gifts made by means I Joost De Zutter T +32 (0) E joost.de.zutter@hvglaw.be of an officially certified deed (executed by a Belgian or foreign notary) will be able to benefit from the tax exemption. All other gifts, including those that are subsequently confirmed by means of an officially certified deed, do not qualify. In the past, registration tax on gifts of shares in a company was often avoided by having the deed executed by a foreign notary, such as a Dutch civil-law notary. The only risk that had to be taken into account was the fact that the gift would become subject to inheritance tax if the donor died within a suspect period of three years. Given that the risk of death within three years could easily be covered by a life insurance policy in most cases, this seemed a good solution. Under the new legislation, this suspect period has changed. As from January 1, 2012, the transfer of family businesses and companies is subject to a seven-year suspect period for the purpose of inheritance tax, creating a risk that is a great deal more expensive to cover with a life insurance policy. Fortunately, the circular clearly states only qualifying companies that could benefit from a registration tax exemption in Belgium are subject to the new seven-year suspect period. Companies that cannot benefit from the exemption because they are not considered to carry on a genuine economic activity should continue to be subject to the usual suspect period of three years. For gifts made prior to January 1, 2012, the suspect period remains three years. I Wouter Coppens T +32 (0) E wouter.coppens@be.ey.com BE-LAWYER ISSUE

20 Jan De Monie, managing partner of Holland Van Gijzen Advocaten-Avocats: Our multidisciplinary practice really appeals to clients You started your career as a lawyer at a firm of tax advisors, rather than at a law firm. This was rather unusual at the time, wasn t it? De Monie: That s right. But 25 years ago positions for new law graduates within tax law were few. I wanted to start working as soon as possible after completing my studies, and Ernst & Young (which at that time was still known as Dillen, Moret & Co.) offered me a job with good terms and conditions of employment. That was what decided it. I was able to continue to develop my expertise in the area of taxation and gain practical experience at the same time. A legal group within Ernst & Young s tax practice - how did that come about? The tax practice has changed a great deal. In the early years it was primarily a compliance practice. Later on, the tax advice function became more and more important, and the level of specialization also increased. Some of my colleagues at Ernst & Young s tax practice were specialized in corporate law. This team came under my responsibility. However, it soon Profile Jan De Monie graduated from the University of Antwerp in 1985 with a master s degree in law. During his studies he developed a strong interest in tax law, and in his final year he began to follow a course in tax law at EHSAL European University College Brussels. After completing his education he joined one of the legal predecessors of Ernst & Young Tax Consultants, where he worked for the tax practice for many years. Within the field of tax law, De Monie specializes in corporate law and international taxation. He became the managing partner of Holland Van Gijzen Advocaten-Avocats in May BE-LAWYER ISSUE 2013