The second edition of the Belgian Code on Corporate Governance (formerly also known as the Lippens Code) was published on 12 March 2009. The changes made to the Code purport to align the Code with the evolutions in Belgian law, European recommendations and international practices, while reflecting the outcome of consultations carried out by the Corporate Governance Committee. Like its predecessor, the new Code highlights the importance of self-regulation (on the basis of the ‘comply or explain’ principle) and the central role of transparency.
The new Code will apply to reporting years beginning on or after 1 January 2009. Belgian listed companies are expected to comply with these new provisions for the preparation of their annual report to be published in 2010.
The key recommendations brought by the new Code reflect the most recent debates on the financial crisis.
Efficiency of the board / internal control and risk management
The Code stresses the responsibility of the board of directors in the monitoring of its committees and in the setting up of a framework of internal control and risk management.
The Code continues to recommend at least three independent directors, but the criteria of independence are now the same as under the Companies Code
The role of the company secretary, who essentially advises the board on all governance matters, is clarified.
While recommending that the board chooses a chairman with knowledge and experience, the Code adds that the board should be careful in appointing a former CEO as chairman, and should explain why such appointment is in the interest of the company.
Fair and responsible remuneration
Most provisions and disclosure requirements of the Code regarding remuneration have been aligned to the European Recommendation (2004/913/EC).
It is the board’s responsibility to approve the contracts for the appointment of the CEO and other executive managers (including provisions on early termination) further to the advice of the remuneration committee.
The severance payment of the CEO and other executive managers should not exceed 12 months’ basic and variable remuneration (a higher payment would be possible – with a maximum of 18 months – if recommended by the remuneration committee).
Dialogue between the board and the shareholders
The Code encourages the board to foster an effective dialogue with the shareholders.
For further information, please contact:
Arnaud Coibion on (32) 2 501 9018 or arnaud.coibion@linklaters.com
Nico Goossens on (32) 3 203 6305 or nico.goossens@linklaters.com
Thierry L’Homme on (32) 2 501 9186 or thierry.lhomme@linklaters.com
