Corporate Governance and Compliance Take Center Stage in Belgium

=====================================

Belgium’s corporate governance landscape has undergone significant changes in recent years, with a focus on transparency, accountability, and compliance. But what does this mean for companies operating in the country?

Key Requirements for Board Composition

Under Belgian law, companies must have a minimum of three members, with at least one independent non-executive director. This is designed to ensure that boards have diverse perspectives and expertise.

Minimum board composition: Three members
Independent non-executive director: At least one

Comply or Explain Approach in Belgium

In 2019, the Belgian government introduced a comply or explain rule for listed companies, requiring them to disclose their governance policies and practices. Companies must either demonstrate compliance with these rules or explain why they do not comply.

Compliance requirements: Listed companies must disclose governance policies and practices
Explaination requirement: Companies must explain non-compliance

Management Rules and Authority in Belgian Companies

The CEO is responsible for managing the company’s day-to-day operations, while the board of directors sets strategic direction. However, the CEO has significant autonomy and is ultimately responsible for implementing the board’s decisions.

CEO responsibilities: Managing day-to-day operations
Board responsibilities: Setting strategic direction

Duties and Liabilities of Directors in Belgium

Directors have a fiduciary duty to act in the best interests of the company and its shareholders. They may be held personally liable for any breaches of this duty, including for negligence or misconduct.

Fiduciary duty: Act in best interests of company and shareholders
Personal liability: Directors may be held liable for breaches of fiduciary duty

Transactions with Directors in Belgium

Transactions between companies and their directors are subject to strict disclosure requirements and must be approved by a majority of independent non-executive directors. Companies must also ensure that these transactions are on arm’s length terms and do not create any conflicts of interest.

Disclosure requirements: Strict disclosure for transactions with directors
Approval requirement: Majority approval from independent non-executive directors

Company Meetings in Belgium

Shareholders have the right to attend and participate in general meetings, where they can vote on key issues such as director appointments, dividend payments, and strategic decisions. Companies must also hold annual meetings to report on their financial performance and governance practices.

Shareholder rights: Attend and participate in general meetings
Annual meeting requirements: Report on financial performance and governance practices

Internal Control in Belgian Companies

Internal controls are critical for ensuring that companies operate efficiently and effectively, with robust processes in place to prevent errors, irregularities, and misconduct. Companies must implement adequate internal controls, which are subject to regular review and audit.

Internal control requirements: Implement robust processes to prevent errors and misconduct

Institutional Investors in Corporate Governance in Belgium

Institutional investors, such as pension funds and investment managers, play a significant role in promoting good governance practices among companies. They can influence company behavior through voting, engagement, and activism.

Institutional investor role: Promote good governance practices among companies

Reform Proposals for Corporate Governance Law in Belgium

There are ongoing debates about potential reforms to strengthen corporate governance in Belgium, including stricter disclosure requirements, improved transparency, and increased accountability. These changes would aim to enhance investor confidence and promote sustainable long-term growth.

Reform proposals: Strengthen corporate governance through stricter disclosure requirements and improved transparency