Private equity and venture capital in Belgium

Outlook for 2018

Following a very intense 2017, mainly at the mid-market level, Belgian M&A activity is set for a promising start in 2018:

• Several studies and surveys confirmed that M&A in Belgium will continue to be powered by European and US private equity funds.
• We expect that the on-going digital transformation will influence 2018 M&A activity with traditional, industrial, non-tech organisations willing to acquire digital companies and enter the digital era.
• On the exit side, the healthcare and life science sector in Belgium has made an impressive start to the year with two takeovers of Belgian-listed biotech companies announced in the first days of January. Based on recent financial analysis, 6 to 8 of the 14 listed Belgian biotech companies are potential targets for acquisitions by international pharmaceutical groups.

Current market trends

The most active sectors in the Belgian PE/VC scene are the tech, media and comms, manufacturing, retail and life sciences/healthcare sectors. It is expected that this trend will continue in 2018.

FinTech continues to gain momentum in Belgium, with FinTech-specific accelerators being further developed and important international players like Moneygram moving to Belgium as a consequence of Brexit. We expect the FinTech sector to grow further in 2018, especially with the presence of business angels with a professional background in the FinTech sector looking for investment opportunities.

On 18 January, the Belgian Finance Minister announced he was working on a EUR 200M to 400M  new governmental ‘super fund’ that would invest in Belgian venture capital funds to finance local scale-ups. These governmental initiatives could fuel new PE/VC transactions for the coming years.

Legal and regulatory developments

A new Companies Code is expected to be adopted by Parliament in the course of this year (the “New Code“).

The New Code aims at implementing a more simple, modern and flexible Belgian corporate law to enable Belgium to become a more attractive place of business for both national and foreign companies.

The main aspects of this extensive reform include:

• Reducing the number of company forms and structures;
• Creating the possibility of issuing shares with multiple voting rights;
• Modifying the provisions for the distribution of profits (adding, amongst others, a 12-month liquidity requirement to the current net assets test);
• Changing the private limited liability company (SPRL/BVBA) into the preferred investment vehicle:
  • abolishing the capital requirements; and
  • providing a more flexible legal scheme to allow a SPRL/BVBA to be listed, and also to issue warrants and convertible bonds;
• Increasing the mobility of companies:
  • setting up a registered office rule determining the nationality of the company (instead of the current effective management rule their head office or effective place of business conduct);
  • providing new inbound cross-border conversion or demergers (with continuation of legal personality) and outbound cross-border conversion procedures;
• Introducing a general cap on directors’ liability (between EUR 125K and EUR 13M, depending on the company’s turnover and balance sheet total);
• Increasing the flexibility of management :
  • allowing for four different management structures including a two-tier structure with supervisory board in SA/NV; and
  • allowing the removal of directors at will and their appointment in articles of association; and
• Fine-tuning the reorganisation possibilities for Belgian companies.

Given the extensive upcoming changes, the New Code will affect every single Belgian company in various ways. This is a great opportunity to assess the arising challenges and newly-created opportunities.

The New Code should enter into force in the second half of 2018.  Companies will have 5 years to amend their articles of association and 10 years to convert into another company form (if necessary) but the mandatory rule changes will apply immediately.

Tax developments

A major tax reform, announced during the summer of 2017, entered into force as of 1 January 2018. This reform opens opportunities and potential threats. The main aspects relevant for PE/VC are:

• the decrease of the corporate tax rate (in two steps, with the first decrease in 2018-2019 to 29.58%, then another decrease to 25% as from 2020),
• the dividend exemption regime for a Belgian holding, increased from 95% to 100% as from 2018;
• alignment of the 100% participation exemption of realized capital gains on shares with the conditions on the dividend exemption, introducing a new minimum participation threshold on the transferred participation (minimum 10%-shareholding, or acquisition value of 2.5 million euros);
• reinforcment of the R&D and innovation incentives;
• introduction of a tax consolidation mechanism (through group contributions) as of 2019;
• implementation of the ATAD-Directives as of 2019, impacting the tax deduction of net interest charges.

Key deals in 2017

Our team in Brussels acted on the following PE/VC deals in 2017, advising:

• Takeda Ventures on the extended Series A capital round of Univercells, an innovative bio manufacturing business based in Belgium
• Accountable on corporate and tax shelter issues in the framework of its seed financing
• A Belgian pharmaceutical company on the acquisition of a minority interest by PE investors and on its latest capital round
• Investors on their tax treatment of proposed investments in (alternative) funds (real estate, tech, media and comms and pharma sectors)
• An asset management firm on setting up a EUR 2M social impact bond program
• An institutional investor at the exit-stage of an investment and its tax treatment
• A technology company on its acquisition of an independent cybersecurity company
• PE management companies on tax-related issues
• A Belgian animal healthcare company on its new financing round including its issue of bonds redeemable by shares