On 3 December 2015, the plenary session of the Chamber of Representatives adopted the draft act "amending the Act of 21 March 1991 regarding the reform of some economic State-owned enterprises". The adopted act provides for new rules which will primarily be applicable to Proximus and bpost. The legislator aims to bring the framework applicable to these enterprises closer to that of private companies. In addition, the new act creates a framework which allows the majority participation of the State in Proximus and bpost to be given up. Finally, it authorises the centralisation of certain participations in State-owned enterprises within the Federal Holding and Investment Company.
Introduction
In its policy agreement of 10 October 2014, the Michel government set out ambitious goals regarding federal State-owned enterprises ("SOEs"). The act adopted on 3 December 2015 fits within these objectives.
This new legislation covers three main areas.
In the first place, certain restrictive rules are loosened for SOEs active in competitive industries. Secondly, the rules regarding corporate governance for listed SOEs are aligned more closely with those applicable to private listed companies. Thirdly, it will be possible temporarily (until 31 December 2018) to lower the State participation in listed SOEs below the current legal minimum of "50% plus one share", without any new amendment of the act being required. These changes are mainly implemented through amendments to the act of 21 March 1991 regarding the reform of some economic State-owned enterprises (the "Act of 21 March 1991"). In practice, when the act enters into force, the modifications will only be applicable to Proximus and bpost.
Finally, the new act creates a legal basis for selling the shares of SOEs to the Federal Holding and Investment Company ("FHIC") or transferring the shares to the FHIC by way of a contribution in kind. This initiates the realisation of another ambition of the policy agreement – the centralisation of State participations within the FHIC.
Suppler rules for market-oriented SOEs
The Act of 21 March 1991 provides for several organisational constraints which are increasingly considered as suffocating by strongly market-oriented SOEs. This is the reason why the new act aims to release SOEs "which are primarily active in sectors open to competition" from a number of these specific restrictions. This should lead to a more level playing field with their private competitors.
To this end, a new chapter is added to the Act of 21 March 1991 with specific provisions for SOEs in sectors open to competition. When does an SOE qualify for this category? The new act provides no general definition. In the first place, it covers the enterprises which are explicitly mentioned in the new article 54/1, i.e. Proximus and bpost. In addition, it will cover – starting as of the date determined by the King by decree after deliberation by the Council of Ministers – all other SOEs which have generated more than 75% of their annual turnover (excluding VAT) from activities which are open to competition (without the company benefitting from exclusive legal rights), for at least two consecutive years. The quantitative criterion is not however stipulated as the starting point for determining the scope of the new chapter. Proximus and bpost are – and (subject to amendments to the act) will continue to be – mentioned nominatim in the new chapter, without any reference to any quantitative criterion. It can, of course, be accepted that, de facto, these two companies currently meet the quantitative criterion.
The increased flexibility provided for by the new rules for market-oriented SOEs relates to three main aspects.
In the first place, the existing restrictions for participations in affiliated companies are removed. These constraints had led to discussion, in particular for affiliated companies which were involved in the execution of public services. The fact that the new act, strictly speaking, also removes the requirement for constitutive approval to acquire participations (article 13, § 1 of the Act of 21 March 1991) should not cause problems, given the other authorisations provided for by the Act of 21 March 1991, as well as the clearly emancipatory objective of the new act.
Secondly, the new act liberalises the recruitment of contractual staff. The rule of statutory hiring except in certain limitatively enumerated cases had led to much discussion, and it will no longer be applicable to Proximus and bpost. Practice had already moved in that direction, as the explanatory memorandum for the draft act confirms.
Finally, the act now explicitly states that the SOEs within its scope may have recourse to sub-contracting and cooperation with self-employed third parties, provided that all applicable rules are complied with (including the rules regarding false self-employment and, as the case may be, legislation regarding tenders). According to the explanatory memorandum, the latter modification was introduced "in the interests of legal certainty". With this specification, the legislator rightly indicates that these practices were not prohibited per se for SOEs. Therefore, the new rule should not lead SOEs other than Proximus and bpost to adopt a contrario reasoning, although some will undoubtedly be tempted to do so.
Corporate governance rules closer to rules for listed companies in general
A second series of articles in the act meets the government's ambition to make SOEs examples of good governance. This entails that the government will use its powers through the common channels and rules of companies, and that derogating "privileges of public law" are to be reduced as much as possible. Inspiration was sought in the new draft OECD guidelines for SOEs (published as OECD Guidelines on Corporate Governance of State-Owned Enterprises – 2015 Edition, consultation: http://www.oecd.org/daf/ca/OECD-Guidelines-Corporate-Governance-SOEs-2015.pdf)
For the time being, the new act limits this ambition to listed SOEs – currently only Proximus and bpost. To this end, another new chapter is added to the act, with "specific provisions for listed SOEs". This time, the act provides a general definition of the scope: the scope of the new chapter is limited to SOEs, the shares of which have been admitted for trading on a regulated market.
The alignment of the rules for listed SOEs with the rules that are applicable to private listed companies is achieved by the disapplication of a considerable number of derogations from "common" company law provided by the Act of 21 March 1991 for listed SOEs.
The first changes relate to the basic rules regarding the nomination, composition and powers of the managing bodies. The presentation and nomination of directors, of the chair of the Board of Directors and of the CEO ("delegated director") will take place in accordance with general rules of common company law. Presentation and nomination of directors by the King by decree after deliberation by the Council of Ministers will no longer apply to Proximus and bpost. This – ironically – limits the rights of the private shareholders in the short term regarding the presentation and nomination of directors. Notwithstanding the negative rhetoric regarding the "privileges of public law" in the Act of 21 March 1991, the derogating system of proportional nomination of government directors by royal decree, followed by the proportional nomination of the other directors by the "other shareholders", is more favourable to minority shareholders than in private companies. The non-State shareholders benefited (even if no contractual representation rights had been negotiated) from guaranteed proportional representation, whereas in private companies the majority rule applies fully to the appointment of directors. The companies that fall within the scope of the new rule will therefore have to make sure that this modification is not perceived as a step backwards.
Regarding the management of SOEs, not all of the derogations provided for in the Act of 21 March 1991 have been removed. The obligations regarding language balance and the specific rules regarding incompatibilities with certain "public" mandates, such as Minister or Member of Parliament, remain applicable. Also, the fact that the boards of directors of SOEs already need to comply with the requirement to be composed of at least one-third of directors of the other sex is not changed.
Secondly, certain unilateral intervention rights of the government in SOEs are abrogated for Proximus and bpost. This concerns most of the provisions regarding administrative surveillance and control (lato sensu), such as the possibility to subject certain transactions to the prior approval of the Minister, control through the government's commissioner, the competence to force corporate bodies to deliberate on a specific subject, and the separate submission of the annual accounts to the Minister responsible for the SOE, the Minister for the Budget and the Audit Court ("Rekenhof"/"Cour des Comptes"). A limited number of derogations remain applicable, such as the control by a college of four auditors, two of which are appointed by the Audit Court, or the drawing up of an annual business plan, with the parts relating to the execution of public services having to be submitted to the Minister responsible for the SOE for prior approval.
More generally speaking, despite the politically inspired rhetoric in the Chamber Commission, it should be emphasised that the status of the two companies does not change with the adoption of this new act, and that both companies remain SOEs falling within the scope of the Act of 21 March 1991 which have adopted the form of a public limited liability company under administrative law and to which common company law applies as long as no derogations have been provided for by specific legislation. However, in addition to abrogating a considerable number of derogating provisions as analysed, the new act also creates a framework for giving up the majority State participation in Proximus and bpost and, in doing so, achieving conversion to a fully private company by government decision, without the need for another amendment of the act.
Authorisation to reduce the State participation in listed SOEs and conversion to a public limited liability company under private law
A third series of articles, also included in the new chapter of the Act of 21 March 1991 for listed SOEs, gives the King the authority to effect the further privatisation of these SOEs by decree, determined after deliberation by the Council of Ministers. Since royal decrees have legislative value (and hence can amend, supplement, replace or abrogate legal provisions), this authority is limited in time, and is valid only until 31 December 2018.
On the basis of this authority, the King can, first and foremost, determine the conditions for the State to reduce its participation in the capital of the in-scope SOEs below the legal threshold of "50% plus one share". The act provides that the King's decision on this matter is to be guided by the strategic importance of the participation, the necessity to Belgian anchoring, the essential contribution of the business to sustainable economic growth, social benefit and the impact on employment. It was suggested, both in the explanatory memorandum preceding the draft act and in the competent Chamber Commission, that the State could opt to maintain a blocking minority right of 25%. No legal minimum threshold has been enacted, however.
As soon as the participation of the State is reduced to less than 50% plus one share, the company automatically ceases to be an SOE and becomes a public limited liability company under private law ("naamloze vennootschap van privaat recht"/"société anonyme de droit privé"), without interruption of its legal personality. To that end, the King has to adopt the necessary transitional measures regarding, inter alia, the public services and the management contract, individual employment relations with the statutory staff, collective labour relations, regulation regarding social security, etc.
Centralisation of State participations with the Federal Holding and Investment Company
The final article of the new act is a little peculiar, as it does not amend the Act of 21 March 1991 and its scope is not limited (at the time of its entry into force) to Proximus and bpost. It enacts the possibility to transfer all or some of the shares that the State owns in the capital of an SOE which has taken the form of a public limited liability company under administrative law ("naamloze vennootschap van publiek recht"/"société anonyme de droit public"), through a sale or through a contribution in kind, to the FHIC under conditions that are to be determined by the King in a decree determined after deliberation by the Council of Ministers.
This provision also fits within the implementation of the policy agreement, which provides for the centralisation of "the management and financial expertise of the participations in SOEs, whether listed or not" within the FHIC. The objective is to concentrate the follow-up of these aspects within one centre of decision-making and expertise. This is also in line with the OECD guidelines.
The provision is somewhat peculiar, as it is limited to the shares of autonomous SOEs which have been transformed into public limited liability companies under administrative law. Having regard to the wording "autonomous SOEs", the scope of the authorisation seems limited to SOEs that fall within the scope of the Act of 21 March 1991. Moreover, the SOEs need to have adopted the form of a public limited liability company under administrative law. Today, besides Proximus and bpost, this also applies to NMBS/SNCB and Infrabel. However, prima facie, the policy agreement provides for a much broader scope, i.e. "all SOEs, whether listed or not". The stipulation that the transfer needs to take place "through the sale or the contribution in kind in the capital" could also be considered as a restriction. It remains an open question whether this provision will prove to be useful in practice, once the centralisation of the State participations has been achieved.
Note: At the time of publication of this contribution, the act had been adopted by the plenary session of the Chamber of Representatives, but had not yet been published in the Official Gazette.