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09 January 2018 / article

Welcome changes to Belgian law on SME financing

An amendment to the Belgian law on SME financing introduces very welcome clarifications and changes, especially relevant in the context of financing subsidiaries of corporate groups.

On 8 January 2018 the law amending the Belgian law on SME financing of 21 December 2013 enters into force introducing welcome clarifications and changes with respect to the law’s scope, especially relevant for the financing of group companies.

The aim of the law is protecting small and medium-sized enterprises (SMEs) in the framework of their financing by imposing specific information requirements for lenders, suitability tests, limitations on prepayment indemnities and nullity sanctions on certain termination clauses.

A concern in practice was the ambiguous definition of ‘SME’ which resulted in an application of the law beyond its initial aim of protecting “true SMEs”, impacting for instance financing transactions including local subsidiaries of large corporate groups, as well as SPVs. It was particularly unclear whether the criteria for determining which companies qualify as SMEs were to be applied on an individual or consolidated level. The amended definition of ‘SME’ now confirms that the SME criteria must be applied on a consolidated basis only and consequently the law will often no longer apply to these non-envisaged types of borrowers.

Another remarkable change is a new provision excluding the law’s application in case multiple co-borrowers are involved and at least one of them would not qualify as an SME.

Further changes include the increase of the threshold of the financing from 1 million to 2 million euro in order for the strictest limitation on prepayment indemnities (maximum 6 months of interest) to apply and new information and other duties (e.g. relating to releases) for the lenders in case security interests are granted.



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