Share Buybacks in Belgium: Legal Framework and Strategies

What Is a Share Buyback?

A share buyback is the operation by which a company acquires its own shares from its shareholders. In Belgium, this operation is governed by the Code of Companies and Associations (CCA).

Legal Conditions

For the SRL (Articles 5:145 et seq. CCA)

• Authorization by the general meeting by simple majority
• Maximum authorization duration: 5 years (renewable)
• Compliance with the balance sheet test: net assets may not become negative
• Compliance with the liquidity test: the company must be able to pay its debts as they fall due for 12 months
• Repurchased shares must be fully paid up

For the SA (Articles 7:215 et seq. CCA)

• Authorization by the general meeting (simple majority)
• Maximum 20% of the total number of shares issued
• Maximum duration: 5 years
• Financing from distributable profits only
• No buyback during mandatory takeover bid period

Comparative Table

Procedure in 5 Steps

1. Management Body Proposal

The management body proposes the buyback, justifying:

• Number of shares to repurchase
• Price or price range
• Purpose of the buyback
• Source of financing

2. General Meeting Decision

The general meeting authorizes the buyback, setting:

• Maximum number of shares
• Duration of authorization (max. 5 years)
• Price conditions (minimum and maximum)

3. Preliminary Tests (SRL)

The management body performs:

• The balance sheet test: net asset verification
• The liquidity test: 12-month cash flow projection

4. Executing the Buyback

The buyback is carried out under the conditions set by the general meeting, respecting the principle of equal treatment of shareholders.

5. Fate of Repurchased Shares

Repurchased shares may be:

• Held in portfolio (voting rights and dividends suspended)
• Cancelled (reducing the total number of shares)
• Resold at a later date

Taxation of Buybacks

For the Company

• The buyback is treated as a dividend distribution for the portion exceeding the fiscal paid-up capital
• 30% withholding tax on this portion (except VVPRbis exceptions)
• The portion corresponding to fiscal capital is refunded tax-free

For the Individual Shareholder

Numerical Example

A shareholder subscribed 100 shares at €100 (fiscal capital: €10,000). The company buys back the shares at €250 each (total: €25,000):

• Capital repayment: €10,000 (exempt)
• Buyback bonus: €15,000 (subject to 30% WHT = €4,500)
• Net received by shareholder: €20,500

Strategic Uses

1. Exit of a Minority Shareholder

The buyback allows a shareholder to exit the capital without others having to personally finance the purchase.

2. Relution of Remaining Shareholders

If the repurchased shares are cancelled, the relative stake of remaining shareholders automatically increases.

3. Distribution Optimization

The buyback may be more tax-efficient than a classic dividend distribution, depending on the capital structure.

4. Anti-Takeover Defense

For listed SAs, share buybacks can serve as a defense mechanism against hostile takeover bids.

5. Incentive Plans

Repurchased shares can be used for stock option plans or free share grants to employees.

Points of Vigilance

• Abuse of rights: the buyback must not be used to circumvent distribution rules
• Equal treatment: all shareholders must be treated identically
• Solvency: the buyback must not jeopardize business continuity
• Transparency: publication and reporting obligations
• Mandatory cancellation in certain cases (CCA)

Conclusion

Considering a share buyback? LegalBelgique supports you through the legal and tax analysis, drafting general meeting resolutions, and operational execution of the buyback.