When does financial distress close the door on prospectus exemptions in Belgium?

The EU's Listing Act (2024/2809 of 23 October 2024) introduced a series of meaningful amendments to the Prospectus Regulation (2017/1129), aimed at making EU capital markets more attractive and improving access to capital for smaller companies.

Among the changes are new exemptions from the obligation to publish a prospectus. These exemptions are, however, subject to a number of conditions, one of which is that an issuer must not be subject to restructuring or insolvency proceedings in order to benefit from them. For Belgian issuers and their advisers, this raises a practical question: which Belgian procedures fall within the scope of these concepts under EU law?

The regulatory framework

The Listing Act introduced new prospectus exemptions relevant to listed issuers. Under article 1(4)(da) of the Prospectus Regulation, no prospectus is required for an offer of securities to be admitted to trading on a regulated market or a small to medium-sized enterprise (SME) growth market that are fungible with securities already admitted to the same market, provided that: the new securities represent less than 30% of those already admitted over a 12-month period, the issuer is not subject to restructuring or insolvency proceedings, and an annex IX document is filed and made available.

Article 1(4)(db) provides a broader exemption – with no 30% cap – for offers of securities fungible with securities admitted to trading on a regulated market or an SME growth market continuously for at least 18 months preceding the offer, provided that: the securities are not issued in connection with a takeover, merger or division and the issuer is not in restructuring or insolvency proceedings. Article 1(5)(ba) mirrors this for admissions to trading, but is limited to securities fungible with securities continuously admitted on a regulated market for at least 18 months, on the same three conditions.

In each case, the annex IX document – capped at 11 A4 pages and filed but not approved by the competent authority (in Belgium, the Financial Services and Markets Authority (FSMA)) – must be made available to the public simultaneously.

The Prospectus Regulation cross-references two distinct pieces of European legislation to define the relevant terms. "Restructuring" is defined by reference to article 2(1)(1) of the Restructuring Directive (2019/1023); "insolvency proceedings" is defined by reference to article 2(4) of the Insolvency Regulation (2015/848).

These definitions operate at the EU level and their articulation within national laws has not received a definitive answer. In particular, the concept of "restructuring" is defined in fairly broad terms in the Restructuring Directive, giving rise to a risk that it may be interpreted too widely, which would go against the objective of the Listing Act to reduce burdensome disclosure requirements for seeking admission to trading on public markets.

The Restructuring Directive defines "restructuring" as "measures aimed at restructuring the debtor's business that include changing the composition, conditions or structure of a debtor's assets and liabilities or any other part of the debtor's capital structure, such as sales of assets or parts of the business and, where so provided under national law, the sale of the business as a going concern, as well as any necessary operational changes, or a combination of those elements".

Several questions are pending before ESMA in relation to the meaning of "restructuring" and the use of the prospectus exemptions and Annex IX. Pending ESMA's response, the FSMA published its own interpretive position on 24 February, providing a mapping of Belgian restructuring and insolvency procedures against each of the two European concepts.

Insolvency proceedings

Under annex A of the Insolvency Regulation, the following Belgian procedures are treated as insolvency proceedings for the purposes of the Prospectus Regulation:

• Debt collective settlement (articles 1675/2 et seq. of the Judicial Code).
• Judicial reorganisation by transfer under judicial authority (articles XX.84 et seq. of the Code of Economic Law (CEL)), including the appointment of a provisional administrator in cases of serious and manifest debtor misconduct (article XX.49/1 CEL).
• Private preparation of bankruptcy (articles XX.97/1 et seq. CEL).
• Bankruptcy (articles XX.98 et seq. CEL).
• Voluntary or judicial liquidation (articles 2:70 et seq. of the Code on Companies and Associations).

Restructuring proceedings

The following Belgian procedures fall within the concept of restructuring as defined under the Restructuring Directive:

• Proceedings before the chamber for companies in difficulties including creditor agreements (article XX.29/1 CEL), enterprise mediation by a reorganisation practitioner (article XX.29/2 CEL), and the appointment of a reorganisation practitioner under interim measures (articles XX.30 et seq. CEL) – provided the debtor faces a risk of insolvency.
• Appointment of a provisional administrator where there are serious, precise and consistent indications that the conditions for bankruptcy are met (articles XX.32 et seq. CEL).
• Out-of-court amicable agreements (articles XX.37 et seq. CEL).
• Private judicial reorganisation, covering both amicable agreements (articles XX.83/22 et seq. CEL) and collective agreements (articles XX.83/31 et seq. CEL).
• Public judicial reorganisation, covering amicable agreements (articles XX.64 et seq. CEL) and collective agreements for SMEs (articles XX.66/1 et seq. CEL) and large enterprises (articles XX.83/1 et seq. CEL), including, in this context, the appointment of a provisional administrator in cases of serious debtor misconduct (article XX.49/1 CEL).

Practical considerations

There are several areas that deserve attention when assessing the impact of this framework.

The FSMA's interpretive position provides welcome clarity, addressing a number of uncertainties that had arisen in practice in relation to one of the key changes introduced by the Listing Act.

A number of questions may still arise for issuers seeking to rely on exemptions set out in articles 1.4 (da), (db) and 1.5 (ba) of the Prospectus Regulation that are not addressed in the interpretive position of the FSMA, including when restructuring proceedings are deemed terminated or the impact of restructuring or insolvency proceedings elsewhere within the issuer's group.

The range of Belgian procedures captured under either category is wide. It encompasses measures that may be engaged at a very early stage of financial difficulty – well before any formal insolvency – which means that issuers in a fragile financial position should exercise considerable caution before assuming they can rely on a Listing Act exemption.

Determining whether the conditions for a prospectus exemption are met remains the issuer's own responsibility. ESMA may refine or complement the current understanding of these concepts at the EU level and the Belgian interpretation may in turn need to be revisited in light of that guidance or subsequent case law developments. Issuers are therefore advised to closely monitor any new guidance issued by ESMA in this regard.

Osborne Clarke comment

Mapping Belgian restructuring and insolvency procedures onto the Prospectus Regulation's exemption conditions is a nuanced exercise with real consequences for issuers contemplating capital market transactions.

As the regulatory landscape continues to take shape at both the Belgian and European levels, careful upfront analysis – and ongoing monitoring – will be essential for any issuer seeking to rely on the new Listing Act exemptions.

For further information or tailored advice on the implications of this framework for your specific situation, please do not hesitate to contact David Haex and Shahine Rezaei Kalantari.