Two companies, same shareholders: the simplified merger is for you

Corporate Law

Simplified merger – what is it?
The simplified merger, or its true name “transaction treated as a merger by absorption” (une opération assimilée à fusion par absorption / een met fusie gelijkgestelde verrichting) under Belgian law was created in order to allow parent companies to absorb their subsidiaries by way of dissolution without liquidation of the absorbed company, while avoiding some obligations and formalities imposed for ‘ordinary mergers’, hence the name ‘simplified merger’. Until recently, this possibility was however limited to parent companies that owned 100% of the shares of their subsidiaries.

Differences between ‘ordinary merger’ and simplified merger
The differences between the simplified merger and the ‘ordinary merger’ hold mainly in the amount of information that need to be included in the merger proposal drawn up by the board of directors of the absorbed and the absorbing companies, as well as the other documents that need to be presented to the shareholders.

  • Consequently the simplified merger provisions do not require the following information to be included in the merger proposal:share exchange ratio and the amount of the balancing payment;
  • terms of surrender of the acquiring company’s shares;
  • date upon which the shares give rights to the profits.

Furthermore, the simplified merger procedure does not require the board of directors to draft a report justifying the merger, nor does the statutory auditor or the certified accountant need to draft a report on the merger, which sensitively reduces the costs of the merger process.

Finally, the simplified merger procedure allows, under specific circumstances, that the merger be approved by the board of directors of the absorbing and the absorbed companies (instead of their respective general meeting of shareholders), which allows for a significant decrease in the administrative burden incurred by merger proceedings.

Evolution of the scope of the simplified merger
The simplified merger, although very interesting in its principle, had a very limited scope, insofar as only parent companies could make use of it.

However, the Companies and Associations Code has been amended with effect from June 16, 2023, in that it is now possible for companies owned directly or indirectly by the same sole shareholder, or companies where the shareholders in the merging companies retain the same proportion of shares in all the merging companies, to make use of the simplified merger (that is sister companies).

The possibility for sister companies of benefiting from the tax neutrality of such a transaction had not, however, been provided for at the same time. This omission was corrected by a law of 28 December 2023, but some questions remain as to how the tax neutrality actually works.

Simplified merger of sister companies
The legal innovations that have come into force open up the possibility for groups of companies with identical shareholdings to carry out mergers in a simplified and low-cost manner, which can prove interesting in the context of cost rationalization or in-depth restructuring of the activities of various companies. Such a procedure nevertheless requires to be carried out with caution to ensure compliance with the legislation in force.

Should you have any questions on this topic, please do not hesitate to contact our experts!

Pierre Willemart & Thibault Grégoire