Takeover Tactics | Belgium | Global Public M&A Guide

6. Takeover Tactics

[Last updated: 1 January 2025, unless otherwise noted]

6.1 Stake building

One tactic a potential bidder may consider is to build up a stake in the target company. This would have a number of potential benefits, including indicating to the target's board the seriousness of the bidder's intentions, lowering the overall cost of acquiring the shares in the target and potentially deterring competing bidders. However, before deciding to acquire any interests in the securities of the target, the bidder should consider (amongst other things) the following issues and implications:

The bidder should not acquire any interest in target securities at a time when to do so would constitute market abuse or insider dealing (see 6.2). This is likely to be the case if the bidder is in possession of non-public due diligence information which includes inside information and the bid has not yet been made. The bidder could also be subject to challenge by investors that may have sold shares of the target company at the time at which the public takeover bid has not yet been made public, but the bidder has decided for itself to start preparing for a public takeover bid.
Any acquisition (even of one share) may be prohibited or may result in a requirement for a mandatory bid to be made for the target if that acquisition takes the shareholder's aggregate holding to 30% or more (see 4.3).
Any dealing by the bidder (or anyone acting in concert with it) may be publicly disclosed prior to or as of the start of the offer period (see 3.5).
An acquisition may impact on the nature and level of consideration that the bidder may then offer in a takeover bid. Notably, in the event of a mandatory takeover bid, if the bidder (or any person acting in concert with it) acquired any shares during the period of 12 months preceding the announcement of the takeover bid, the price offered in the mandatory takeover bid cannot be lower than the highest price paid by the bidder (or such person with whom the bidder acts in concert) for shares during such 12-month period. Furthermore, when the bidder in a mandatory takeover bid offers securities, it must also offer a cash alternative if during the term of 12 months prior to the announcement of the mandatory public takeover bid or during the takeover bid period the bidder (or a person acting in concert) acquired securities in consideration of a payment in cash (or agreed to make such cash payment).

6.2 Insider dealing and market abuse

All parties involved in a potential takeover bid must be aware of and comply with the rules and regulations on insider dealing and market abuse.

The rules relating to insider dealing are set out in the EU Market Abuse Regulation, and related EU and Belgian legislation. These rules make it a criminal offense for a person who has inside information to deal or to encourage others to deal on the basis of inside information or to disclose inside information.

In summary, inside information is:

information of a precise nature;
which has not been made public;
relating to a particular company or particular securities;
but which, if it were made public, would be likely to have a significant effect on the price of the securities.

Information will be deemed to be of a "precise nature" if it indicates a set of circumstances which exists or may reasonably be expected to come into existence, or an event which has occurred or may reasonably be expected to occur and if it is specific enough to enable a conclusion to be drawn as to the possible effect of that set of circumstances or event on the prices of financial instruments or related derivative financial instruments. "Information which, if it were made public, would be likely to have a significant effect on the prices of financial instruments or related derivative financial instruments" shall mean information a reasonable investor would be likely to use as part of the basis of their investment decisions.

The EU Market Abuse Regulation (and related rules) has a direct effect in Belgium, as in all EEA jurisdictions, and contains a civil prohibition on market abuse. The FSMA is empowered to decide that certain conduct constitutes market abuse. It can then impose fines and/or other penalties. Given that the rules relating to market abuse are based on the EU Market Abuse Regulation, the position on market abuse in Belgium will be similar to that in other EEA jurisdictions. In addition, Belgian national legislation contains criminal sanctions for insider dealing and market abuse.

In principle, a Belgian company has the obligation to immediately disclose to the public all "inside information" that relates to it, including all material changes in information that has already been disclosed to the public. It is up to the company to determine if certain information qualifies as "inside information". This will be, in many circumstances, a difficult exercise, and a large grey area will exist as to whether certain events will need to be disclosed or not.

6.3 Deal protection

The Belgian takeover bid rules do not provide for a prohibition or regulation of inducement fee agreements exclusivity/ "no-shop" agreements, or other arrangements aimed at increasing deal protection for bidders.

In the context of a friendly takeover bid, potential bidders often try to obtain support for the bid by the target company, including exclusivity undertakings and break fee arrangements. While there are no strict legal prohibitions to such undertakings, their value and enforceability can be limited, given that the board of a Belgian company has a general obligation to act in the corporate interest, which includes the interest of all of its shareholders, and to treat all of its shareholders in an equal manner. That being said, potential bidders can take some comfort from the fact that the powers of the board of a target company are restricted pending a takeover bid, which reduces the scope for frustrating actions (see 6.5).

As a general principle, all security holders of the same class must be offered equivalent treatment by a bidder in the context of a takeover bid. Special deals for certain shareholders are in principle not possible, but depending on specific circumstances different arrangements could be implemented for management, e.g., to incentivize management, or for certain shareholders of the target company reinvesting into the target company after the takeover.

6.4 Irrevocable undertakings

An irrevocable undertaking is an undertaking given by a shareholder of the target company to a bidder where they undertake to accept the bidder’s bid for the target company when it is made. Irrevocable undertakings are used so that bidders do not need to purchase the shares directly, but at the same time have comfort that the shares (subject to the terms of the undertaking) will be tendered to the bidder in the takeover bid. The effect and enforceability of irrevocable undertakings depend to a large extent on their terms and drafting. This is because the Belgian takeover bid rules provide that the terms of a takeover bid must include that a security holder that accepted a bid in the context of a takeover bid can withdraw their acceptance at any time during the acceptance period. In line with practice in other jurisdictions, notably the United Kingdom, irrevocable undertakings can be “hard” (meaning that they remain binding even in case of a counter bid) or “soft” (meaning that, depending on the circumstances, the shareholder that provided the undertaking is released from its commitment). Depending on the terms of the undertaking, the shareholders concerned could be deemed to be acting in concert with the bidder.

6.5 Target board responsibilities and prohibition on frustrating actions

The powers of the target company (and in particular the powers of its board) are limited during the public takeover bid period. Notably:

When the board of directors of a target company has been granted the power to increase the share capital through a contribution in kind or through contributions in cash with disapplication (cancellation or limitation) of the preferential subscription right of the existing shareholders, this power will be suspended during a takeover bid unless the general shareholders' meeting expressly approved that these powers can also be exercised in case of a public takeover bid.
During the period as of the receipt by the target company of the notification by the FSMA of a public takeover bid for the securities of the target company and until the end of the takeover bid, only the general shareholders' meeting of the target company can decide upon or carry out transactions that could entail a significant change in the composition of the assets or liabilities of the target company, or assume obligations without effective consideration. The performance of operations or transactions that have started before the receipt by the target company of the aforementioned notification by the FSMA can continue, provided the performance has had sufficient progress.
Existing obligations of the target company (for example, convertible rights and options to acquire assets) remain in place and must be performed. However, when contracts contain clauses that can be accelerated or triggered as a result of a change of control or public takeover bid, e.g., a termination right in a loan agreement in the event of a change of control, and such acceleration or trigger has a significant effect on the assets or liabilities of the company, or either a significant debt or obligation for the company, such clauses may not be effective unless they have previously been approved by the general shareholders' meeting of the target company and unless the decision of the general shareholders' meeting has been filed with the local company registrar.

This entails that potential defense strategies or mechanisms could be limited or restricted (see 6.6).

The Belgian takeover bid rules allow for additional restrictions on the powers of the board or shareholders of the target company, but these are rarely put in place.

6.6 Common anti-takeover defense mechanisms

The table below contains a summarized overview of the mechanisms that can be used by a target company as a defense against a takeover bid. These take into account the restrictions that apply to the board and general shareholders' meeting of the target company pending a takeover bid.

Mechanism	Assessment and considerations
1. "Loyal" shareholder voting rights Double voting rights for registered shares held by the same shareholder for a term of at least two years.	Requires an express authorization in the articles of association of the target company.⁽¹⁾ The double voting right applies to all shareholders that hold registered shares for at least two years. The two-year term starts as from the date the shares are registered in the share register book even if the registration occurred before the double voting right was introduced in the articles of association, and even if the target company was not yet listed at the time. A bidder who, following a public takeover bid, holds at least two-thirds of the securities with voting rights, can convene a shareholders' meeting to cancel the double voting rights, without any financial compensation being due to such shareholders.
2. Capital increase (poison pill) Capital increase by the board of the target company (authorized capital) without preferential subscription rights of the shareholders.	Requires an express authorization in the articles of association.(2) The authorization is valid for three years only, but can be renewed. The capital increase may not exceed 10% of the existing share capital or the amount remaining available under the authorized capital. The issue price of the new shares may not be less than the price offered in the takeover bid. The shares are to be fully paid up upon issuance. As relevant, the applicable conflicts of interest rules must be applied within the board of directors.
3. Share buyback Share buyback by the target company.	Requires an express authorization by the general shareholders' meeting.⁽²⁾ The authorization is valid for a maximum of five years or three years only (in case the buyback powers were granted with a view to avoid an imminent and serious harm to the company), but can be renewed. The amount that can be used to finance the share buyback is capped at the amount of available distributable profits and reserves of the target company.
4. Sale of crown jewels An arrangement significantly affecting the assets of, or creating a liability for, the target company which is triggered by a change in control or the launch of a takeover bid.	Requires a prior approval by the general shareholders' meeting if the arrangement significantly affects the assets or liabilities of the target company or gives rise to a significant debt or obligation for the target company.⁽³⁾
5. Limitations on director dismissals Payment of termination fee or granting of a notice period upon dismissal of a director.	The articles of association of the target company can provide that the mandate of a director can only be terminated subject to the payment of a termination fee or the granting of a prior notice period. This requires an express authorization by the general shareholders' meeting.⁽²⁾ The general shareholders' meeting can always terminate the mandate of a director, without termination fee or notice period, for legal reasons.(3) As director mandates have a limited term (which can be renewed), the effect of such termination fee or notice period may be limited in time. It does not prevent the appointment of new directors in addition to the directors to be dismissed (unless the articles of association contain restrictions regarding the size of the board).
6. Subscription rights for new shares Subscription rights (warrants) are issued prior to the takeover bid in favor of "friendly person(s)" (without preferential subscription rights of the shareholders) who can exercise the subscription rights at their option and subscribe for new shares	Requires a prior approval by the general shareholders' meeting.⁽²⁾ The subscription rights have a maximum duration of five years. The identity of beneficiaries must be disclosed to the shareholders' meeting approving the issue of the subscription rights. No authority is available under the authorized capital to issue subscription rights in favor of specified persons only (other than employees) without preferential subscription right of the shareholders.
7. Frustrating actions Actions by the target company such as significant acquisitions, disposals, changes in indebtedness, etc.	From the moment the target receives a notice from the FSMA concerning the takeover bid until the bid closes, only the general meeting of shareholders may take decisions, or carry out transactions, that would significantly alter the composition of the company's assets or liabilities, or incur obligations without real consideration. These decisions or transactions may not be taken or carried out subject to the success or failure of the takeover bid. Only transactions which have already sufficiently progressed prior to the receipt of the notification of a takeover bid may be implemented by the target company's board.
8. Shareholders' agreements Shareholders of the target company undertake to (consult with a view to) vote their shares in accordance with terms agreed among them.	Voting agreements must be limited in time, and cannot be against the corporate interest. Shareholders cannot commit to vote upon instruction of the board. The shareholders could be considered as "acting in concert". In that event, the arrangement may need to be disclosed. If the parties acting in concert hold more than 30% of voting rights, any subsequent acquisition of shares within the next three years will trigger an obligation to launch a mandatory takeover bid. Assumes a stable shareholder base or reference shareholders. The articles of association can, however, contain a provision indicating that, at a general shareholders' meeting, convened during the bidding period and where protective measures are to be discussed, voting restrictions set out in the articles of association and shareholders' agreements will not apply, and that securities with multiple voting rights will only have one vote
9. Limitation of voting rights Clause in the articles of association of the target company providing for a proportional restriction of voting rights (applying to all shareholders equally).	Requires an express authorization in the articles of association.⁽²⁾ The limitation must apply to all shareholders equally. The articles of association can, however, contain a provision indicating that, at a general shareholders' meeting, convened during the bidding period and where protective measures are to be discussed, voting restrictions set out in the articles of association and shareholders' agreements will not apply, and that securities with multiple voting rights will only have one vote.
10. Veto rights for certain shareholders Clauses providing for nomination rights by a reference shareholder or similar governance mechanisms.	Requires an express authorization in the articles of association.⁽²⁾ Requires reference shareholder(s).
11. Limitations on share transfers Board approval or pre-emptive rights clauses in the articles of association or in agreements between shareholders.	Requires an express authorization in the articles of association.⁽²⁾ Shareholder agreements can also provide for pre-emptive rights. Non-transferability clauses must be justified by a legitimate interest, in particular as to their duration. Non-transferability clauses for an indefinite period can always be terminated subject to a reasonable prior notice. Limitations consisting of a prior approval right or a pre-emptive right cannot result into a transfer restriction that is longer than 6 months as of the request for approval or the invitation to exercise the pre-emptive rights. If the articles of association contain approval clauses or pre-emptive rights, the board of the target company must indicate in its response memorandum whether these clauses or rights apply vis-à-vis the bidder and, as the case may be, whether it will grant an approval or not, or whether the board will demand the application of the pre-emptive rights. If the approval is not granted or if pre-emptive rights are exercised, the shares must be acquired by a person that is approved or with respect to which pre-emptive rights are not exercised within five days after closing of the takeover bid for a price at least equal to the bid price. Prior approval clauses can only be invoked against a bidder provided that a refusal or approval is motivated on the basis of a permanent or non- discriminating application of approval rules that have been approved by the board and which are notified to the FSMA after the receipt by the target company of the announcement of the takeover bid. Shareholders could be considered as "acting in concert". If so, see "Shareholders' agreements" above. Exceptional for listed companies (listed securities are in principle freely transferable, impact on share liquidity).

Notes:

The matter requires a majority approval of two thirds of the votes cast at a general shareholders' meeting at which at least 50% of the share capital is present or represented (the 50% attendance quorum does not apply to the second meeting that is convened if the 50% attendance quorum was not reached at the first meeting).
The matter requires a majority approval of 75% of the votes cast at a general shareholders' meeting at which at least 50% of the share capital is present or represented (the 50% attendance quorum does not apply to the second meeting that is convened if the 50% attendance quorum was not reached at the first meeting).
The matter requires a simple majority (no attendance quorum and simple majority of the votes cast). Note that a decision to transfer three quarters or more of the assets of the company will in any event require a vote of the general shareholders’ meeting.

Global Public M&A Guide

Belgium

Select a Topic