In the course of 2023, the European Mobility Directive was transposed into Belgian law. As a result, a number of new restructuring operations were introduced, including the simplified sister merger.

Below we set out the key features:

What are sister companies and simplified sister mergers?

“Sister companies” are companies held by one and the same shareholder, or held by the same shareholders in the same proportions.

From the definition in Article 12:7, second paragraph of the Belgian Code of Companies and Associations (Wetboek van vennootschappen en verenigingen, “CCA”) [1], the following conditions can be derived in order to qualify as a simplified sister merger:

• there is a transfer of the entire assets and liabilities (the entire estate) of the absorbed company(ies);

• that transfer results in the dissolution without liquidation of the absorbed company(ies);

• the transfer is made to another company whose shares (and other securities carrying voting rights) are held by one and the same shareholder, or held in the same proportions by the same shareholders, as those of the absorbed company(ies);

• without any shares being issued by the acquiring company.

The simplified sister merger is possible both cross-border and domestically.

A simplified procedure

Even before the transposition of the European Mobility Directive, a merger between sister companies was possible. In that case, however, the acquiring sister company was required to issue shares to the shareholder(s) of the absorbed sister company(ies), who are therefore the same as those of the acquiring sister company.

The outcome of such mergers was invariably that the shareholders of the sister companies continued to participate in the acquiring company in the same proportions as before.

Moreover, every merger takes place under accounting continuity, so that in a sister merger—when determining the valuation method applied—there is, in any event, no exchange ratio risk of prejudice to the existing shareholders. The board report and the audit report by a statutory auditor (company auditor) or external accountant therefore proved to be reports that, in the context of sister mergers, rarely had significant added value.

As a result of the European Mobility Directive, this restructuring operation has now been simplified and the procedure has been aligned with that of the already well-known parent-subsidiary merger (often referred to in jargon as a “silent merger”), in which—apart from the merger proposal—no additional reporting is required. In our view, this is a logical decision in light of the limited usefulness of such additional reporting.

Overview of the procedure

The procedure can be summarised as follows:

• drafting of a joint merger proposal by the management bodies of the sister companies;

• filing of this merger proposal with the registry of the competent Enterprise Court(s) and publication thereof in the Annexes to the Belgian Official Gazette;

• compliance with a waiting period of six weeks, calculated from the date of filing of the merger proposal;

• execution of the notarial deeds whereby the general meetings of the companies concerned resolve upon the merger;

• filing and publication of the merger resolutions in the Annexes to the Belgian Official Gazette;

• post-merger administrative formalities (cancellation of the VAT registration of the absorbed company, amendments to registration in the Crossroads Bank for Enterprises, etc.).

What about tax neutrality?

Provided that sufficient valid business reasons exist for a restructuring operation under the CCA, such as a merger, it may be carried out under an exemption from income taxes.

The Belgian Income Tax Code (WIB 92) nevertheless contains autonomous tax definitions of the restructuring operations that qualify for tax neutrality. The simplified sister merger described above did not, however, fall within any of these tax definitions. The legislator therefore intervened by expanding the tax definition of a transaction assimilated to a merger to include simplified sister mergers without share issuance, so that such sister mergers can henceforth be carried out in a tax-neutral manner.