Corporate governance rules play an important role for (institutional) investors and the good functioning of the stock markets. The main set of existing Belgian rules on corporate governance in the modern sense is to be found in voluntary codes of conduct, but today this is considered to be insufficient.
Therefore the Belgian government recently proposed detailed modifications to the Companies Code in order to improve the corporate governance of Belgian listed companies. The international financial community should in particular pay attention to the following proposed legislation, which may have a significant impact on investments in Belgian listed companies.
One of the economic objectives of the proposed legislation is to ensure that the own interests of Belgian listed companies that are part of a larger multinational group are not disregarded. As a side effect, this should lead to the disappearance of the under valuation with which the shares of these companies are traded. The legal tools to achieve this are a strengthening of the conflicts of interest rules and the obligatory intervention of independent directors, as well as an increased accountability of directors for decision making within international groups. Other proposed modifications are of a technical nature and should make it easier for institutional investors to participate in shareholders' meetings. The latter include a 30-day convocation period and the possibility to vote based on the shares held on a specific "registration" date, thereby allowing investors to continue to trade in the shares between such date and the day of the shareholders meeting.
Finally, it is proposed to sanction the compliance with the already existing transparency of shareholdings regulations more effectively by: (i) entitling the Commission for Banking and Finance to a copy of the acquisition documents; (ii) suspending by law for one year the voting rights of belatedly declared shareholdings in listed companies; and (iii) allowing the court to order a disinvestment of the belatedly declared securities.
It is expected that parliament will approve these measures this autumn. Once the new rules enter into force, they will lead to better transparency, albeit at with the disadvantage of increased formalities and potential for legal action by minority shareholders.