Merger of companies: what is transferred automatically (and what not)?

A merger between companies: more than just a legal procedure

There are various reasons why businesses consider a merger between companies. For example:

• achieving economies of scale

• optimizing cost structures

• combining complementary activities

• simplifying a group structure

The Belgian Code of Companies and Associations outlines the steps of a legal merger procedure. When this procedure is followed correctly, the entire estate of the company being acquired (both rights and obligations) automatically transfers to the acquiring company.

In practice, however, a merger involves more than simply following corporate law formalities. Several elements require additional attention to ensure a smooth and complete transition.

Below, we discuss some key points of attention.

Contracts

Ongoing contracts of the company being acquired generally transfer automatically in the event of a merger.

However, certain contractual provisions may complicate this transfer. For example, contracts may:

• include a change-of-control clause allowing the other party to terminate the agreement;

• require prior consent from the counterparty for the transfer;

• be strongly linked to the identity of the original company, making transfer less straightforward.

Credit agreements deserve particular attention as well. They often contain clauses that are triggered by a merger, such as renegotiation of credit terms or even early repayment obligations.

Real estate

When real estate is transferred as part of a merger, additional documentation is often required.

For properties located in Flanders, for instance, you must take into account soil certificates and asbestos certificates (for buildings constructed before 2001).

It is also important to verify whether any pre-emption rights exist. Authorities or certain third parties may hold such rights, which can delay the transfer or, in some cases, prevent it altogether.

Employees

Does the company being acquired employ staff? If so, specific labor law rules must be taken into account.

In a merger, employment contracts transfer automatically, but particular attention must be paid to collective bargaining agreements (CBAs) and employee representative bodies.

Information obligation under CBA no. 32bis

Under CBA No. 32bis, as an employer you must inform and consult your employee representative bodies in a timely manner about the transfer, such as:

• the works council,

• the Committee for Prevention and Protection at Work (CPPW),

• or the trade union delegation

If no such bodies are in place, employees must be informed directly.

Impact on CBAs and representative bodies

Collective bargaining agreements that applied to the acquired company do not automatically continue to apply within the new structure. This may affect employment conditions.

In addition, a merger impacts existing works councils and CPPWs. These bodies generally remain in place until the next social elections, when the nature of the technical business unit is reassessed.

Intellectual property rights

Does the acquired company hold intellectual property rights, such as trademarks, patents, or designs? If so, the transfer often needs to be formally registered with the competent authorities. Without such registration, the rights may not legally transfer correctly to the new company.

Permits and licenses

Many permits and licenses are linked to a specific legal entity. As a result, a merger often requires explicit notification to the relevant authority, or even a new approval.

This applies, for example, to:

• environmental permits

• building permits

• operating licenses (e.g. hospitality sector)

• sector-specific licenses

The transfer of permits in the context of a merger is therefore rarely fully automatic.