Structuring and documentation consideration – banking law in Belgium

3. Structuring and documentation organisation

3.1 Restrictions on Foreign Lenders Granting Loans

Are foreign lenders restricted in any way from granting loans?

As set forth above, commercial lending on a stand-alone basis does not require a license, nor any filing or registration.

Foreign lenders willing to offer banking services ( a combination of deposit-taking activities and lending) must have all the necessary authorisation to conduct banking business operations in Belgium.  An EU credit institution may provide banking services, for which it has been authorised, across the EU, either through the establishment of a branch or the free provision of services, by a mere notification procedure activating its European passport.

3.2 Restrictions on Foreign Lenders Granting Security

Is the granting of security or guarantees to foreign lenders restricted or impeded in any way?

There are no restrictions on granting security rights to foreign lenders.

3.3 Restrictions and Controls on Foreign Currency Exchange

Are there any restrictions, controls or other concerns on and regarding foreign currency exchange?

There are no foreign exchange limitations on the transfer of capital or profits in Belgium, except in exceptional situations (e.g. UN sanctions). Outbound payments to foreign countries can be subject to disclosure or registration for statistical purposes.

3.4 Restrictions on the Borrower’s Use of Proceeds

Are there any restrictions on the borrower’s use of proceeds from loans or debt securities?

Aside from contractual restrictions on the borrower’s use of proceeds for a specific purpose, borrowers are obliged to use the proceeds from loans and debt securities in accordance with Belgian law, including rules against corruption, money laundering, terrorism financing and the breach of country-specific sanctions and, as the case may be, in accordance with the borrower’s corporate purpose.

3.5 Agent and Trust Concepts

Are the agent and trust concepts recognised in your jurisdiction? Are there any structures commonly used as an alternative to the trust structure?

Belgian law does not recognize the concept of trust. However, it explicitly recognizes the concept of a collateral agent/security agent but only in relation to security taken over financial collateral and movable assets. This allows for the creation of security over such assets for the benefit of the agent (acting as representative of the secured parties), provided that the secured parties are determinable on the basis of the security agreement.

Belgian law does however not recognize the concept of security agent in with respect to security over real estate. Therefore, when a mortgage is being granted to a security agent on behalf of a consortium of lenders, or in a situation where there is only one lender, but where the intention is to subsequently syndicate the facilities, a parallel debt structure can be considered. Although Belgian law does not recognize the concept of parallel debt as such, the use thereof has been common practice and the concept and validity thereof has been supported by Belgian legal authors.

3.6 Loan Transfer Mechanisms

Describe the loan transfer mechanisms that exist in your jurisdiction and how the benefit of the associated security package can be transferred.

The assignment of the rights under the loan agreement can be done by way of agreement between the initial lender and the transferee, and the assignment should be notified to the debtor. In principle, all security rights which have been put in place in connection with the transferred debt are automatically transferred.

Note however that for each transfer of (part of) a loan secured by a mortgage, a marginal note (kantmelding/inscription marginale) in the Mortgage Registry must be made. which will involve the payment of a 1% registration tax (calculated against the secured amount) unless the transfer is made between certain categories of lenders  (such as an EEA-licensed credit institution or mobilization institutions).

Novation can be done by way of agreement between the debtor, the initial lender and the transferee. Novation will result in the successor replacing the initial lender and the creation of a new debt (as between the debtor and transferee). As a result, all security rights relating to the initial debt are extinguished unless explicitly preserved. A clause containing this preservation can be included in the original facility agreement.

Sub-participation is also commonly used among lenders. In such arrangement, the original lender will remain the only creditor of the borrower, and the only beneficiary of the security package. The sub-participant has a contractual right, based on the sub-participation agreement, to amounts received by the principal lender, but no direct in rem right against the borrower nor over the security assets.

3.7 Debt Buy-back

Is debt buy-back by the borrower or sponsor permitted?

Debt buy-back by a borrower or a sponsor is generally permitted under Belgian law, provided that a repayment is either due or early prepayments are permitted on a contractual basis.

3.8 Public Acquisition Finance

What are the rules regarding “certain funds” with respect to public acquisition finance transactions and how standard are these provisions in other acquisition finance transactions? Describe whether short or long form documentation is commonly used and whether any of these are publicly filed.

Under Belgian voluntary takeover rules, the bidder freely sets the price of its offer. The Act of 1 April 2007 on takeover bidsrequires that the conditions of the offer, and in particular the price, must be such that these allow the bidder to achieve the desired result. All the funds representing the full consideration must be blocked in an account with a financial institution registered in Belgium, or an irrevocable and unconditional credit facility must be available from such an institution. In both cases, the funds must be blocked to guarantee the payment. In the case of an exchange offer, the bidder must hold the securities to be offered, be authorized to issue them in a sufficient number within the time prescribed, or have the means to procure their issuance.

The type of documentation used in Belgian financing depends on the circumstances. Short-form documentation is widely used by Belgian banks for purposes of the financing of local businesses or even larger financing where no syndication is envisaged to take place. Syndicated and large-scale financing, on the other hand, are usually documented by long form documentation, often based upon the forms published by the London Loan Market Association (LMA).

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par Anders Noren.

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