Royal Decree of 30 April 1999 regulating the status and control of mutual guarantee societies

Title

1999011192

30 APRIL 1999. - Royal Decree regulating the status and control of mutual guarantee societies. (NOTE 1: the terms "Office of Insurance Control", "Control Office" and "Office" are replaced by either "CBFA" or "Banking, Financial and Insurance Commission", according to arts. 30 and 33 of the Royal Decree of 25 March 2003/34; In force: 01-01-2004) NOTE: Consultation of versions prior to 06-08-1999 and updated on 31-03-2003)(NOTE: Consultation of versions prior to 06-08-1999 and updated on 01-08-2012)

Source: Economic Affairs

Publication: 6 August 1999

Number: 1999011192

page: 29289

Case number: 1999-04-30/64

Entry into force: 16 August 1999

2 archived versions

1 implementation decree

CHAPTER I. - Definitions.
Art. 1
CHAPTER II. - Object and scope.
Art. 2-3
CHAPTER III. - Statutes and operation of the society.
Section 1. - Form and corporate object.
Art. 4-5
Section 2. - Administration and management of the society.
Art. 6-9
Section 3. - Shareholding.
Art. 10-13
Section 4. - Structure and organization.
Art. 14-16
CHAPTER IV. - Approval.
Art. 17-25
CHAPTER V. - Financial obligations and control.
Section 1. - The solvency ratio.
Art. 26-27
Section 2. - Technical provisions.
Art. 28-31
Section 3. - Representative values.
Art. 32-40
Section 4. - Annual accounts and statistics.
Art. 41-42
Section 5. - Control.
Art. 43-51
CHAPTER VI. - Specific provisions relating to the exercise of a guarantee activity abroad by a society.
Art. 52-53
CHAPTER VII. - Total or partial liquidation of societies.
Art. 54-55
CHAPTER VIII. - Transfers.
Art. 56
CHAPTER IX. - Miscellaneous provisions.
Section 1. - General provisions.
Art. 57-58
Section 2. - Relations with other funds aimed at promoting the granting of credit to small and medium-sized enterprises.
Art. 59-60
CHAPTER X. - Transitional provisions.
Art. 61-70
CHAPTER XI. - Final provisions.
Art. 71-72

Text

CHAPTER I. - Definitions.

Article 1. For the application of this decree, the following shall be understood:
1° the society: the mutual guarantee society as defined in Article 57 of the framework law of 10 February 1998 for the promotion of independent enterprise; 2° the guaranteed cooperator: the independent person or small or medium-sized enterprise referred to in Article 2 of the aforementioned framework law of 10 February 1998; 3° (the control body: the body that exercises control over the society, namely the Banking, Financial and Insurance Commission, referred to in Article 44 of the law of 2 August 2002 relating to the supervision of the financial sector and financial services.) <RD 2003-03-25/34, art. 30, 002; In force: 01-01-2004> 4° the Ministers: the ministers who respectively have insurance and small and medium-sized enterprises within their responsibilities; 5° the Member State: a State that is a member of the European Union; 6° the Guarantee Fund: one of the regional guarantee funds that succeeded the fund constituted by the law of 24 May 1959 extending access to professional and artisanal credit facilities in favor of the middle classes, replaced by the law of 4 August 1978 on economic reorientation, regionalized since 1989; 7° the Participation Fund: the participation fund constituted by the aforementioned law of 4 August 1978; 9° the European Investment Fund: the European investment fund constituted by the Council Decision of the European Union of 6 June 1994 (94/375/EC).

CHAPTER II. - Object and scope.

Art. 2. § 1. This decree aims to establish the conditions and rules to which the activity of the society is subject, to organize the control of this activity and to determine specific rules for the liquidation of the society.
§ 2. This decree does not prejudice the application of Articles 48 to 59 of the law on the organization of the public credit sector and the holding of public sector participations in certain private law financial companies, coordinated on 24 December 1996.
§ 3. This decree applies to cooperative societies that act as guarantors, in accordance with the provisions of Articles 2011 to 2039 of the Civil Code, for a cooperator, in order to facilitate the latter's access to credit.
§ 4. This decree is not applicable to companies subject to the law of another Member State of the European Union that carry out the activities referred to in the previous paragraph under the freedom to provide services, provided that they have sent to the control body a file containing at least the following information:
1° the nature of the planned activities,
2° proof that they are authorized, by the authorities of the Member State of their registered office, to carry out the activities referred to in § 2, 3° the address of the registered office, as well as the name and address of the senior management.
Companies may begin their activities as soon as they have notified this information to the control body.

Art. 3. § 1. It is prohibited for any society, whether acting on its own account or on behalf of a third party, to conclude, in the capacity of a society, or to offer guarantee contracts, if it has not previously been approved by the Ministers.
§ 2. It is prohibited for all agents or intermediaries to intervene in the subscription of guarantee contracts concluded in violation of the provisions of this decree.

CHAPTER III. - Statutes and operation of the society.

Section 1. - Form and corporate object.

Art. 4. Societies are constituted in the form of limited liability cooperative societies. Every guaranteed cooperator must hold the status of partner for the duration of their guarantee contract.

Art. 5. § 1. Societies may, in addition to guarantee operations:

carry out all movable and immovable operations for the promotion of their corporate object;
assist their guaranteed cooperators by studying their financing and credit needs as well as by studying the conditions of the credits they guarantee or may guarantee and act as intermediaries for these credits;
carry out any operation that falls within the framework of their activities;
participate, through contribution, absorption or subscription, in all Belgian enterprises or societies with an analogous, ancillary or related object.
§ 2. A society may not grant loans in any form.
§ 3. A society may, in addition to the activities referred to in § 1, exercise other activities with the agreement of the control body.

Section 2. - Administration and management of the society.

Art. 6. The composition of the Board of Directors depends on the priority orientation of the society's activity towards professional credit and small and medium-sized enterprises.
The Board of Directors shall consist of a minimum of five persons, who form a collegiate body.

Art. 7. The Board of Directors must be predominantly composed of persons other than representatives of the same credit institution.
However, if the society collaborates with several credit institutions, this rule may be derogated from provided that no single credit institution can form a majority on its own.
Representatives of a credit institution must refrain from giving any opinion or decision in files where their credit institution has an interest.

Art. 8. Effective management is exercised by the Board of Directors. The statutes of the society may provide that the Board of Directors may delegate its effective power to two or more of its members or that it may create a Management Committee and determine who will be part of it. This Management Committee constitutes a collegiate body.

Art. 9. Persons responsible for effective management and directors must possess the necessary professional integrity and adequate experience to exercise their functions.
Persons who fall into one of the cases defined in Article 90, § 2 of the law of 9 July 1975 on the control of insurance companies may not exercise or continue to exercise the functions of director, manager or managing director.
Except for persons responsible for the effective management of the society, the control body may accept derogations from the mandatory provisions referred to in this article.

Section 3. - Shareholding.

Art. 10. Societies must statutorily limit the number of shares that a partner may hold relative to the number of shares representative of the fixed share of the social capital.

Art. 11. For the purposes of applying Article 12, a qualified participation is understood as holding, directly or indirectly, at least 10% of the capital or voting rights, or any other possibility of exercising significant influence on the management of the company in which a participation is held. The voting rights to be taken into account are those referred to in the law of 2 March 1989 relating to the publicity of significant participations in listed companies and regulating public takeover bids and its implementing decrees.

Art. 12. § 1. Any natural or legal person who intends to hold, directly or indirectly, a qualified participation in a society must inform the control body in advance and communicate the percentage of this participation.
Any natural or legal person must also inform the control body if they intend to increase their qualified participation such that the proportion of voting rights or capital shares held by them reaches or exceeds the thresholds of 20%, 33% or 50% or that the society becomes their subsidiary. The control body has a maximum period of three months from the date of information provided in the preceding paragraphs to oppose the project if, given the need to ensure sound and prudent management of the society, it is not satisfied with the quality of the person referred to in the first paragraph. Any natural or legal person who intends to cease holding, directly or indirectly, a qualified participation in a society must inform the control body in advance and communicate the intended percentage of their participation. Any natural or legal person must, likewise, inform the control body of their intention to reduce their qualified participation such that the proportion of voting rights or capital shares held by them falls below the thresholds of 20%, 33% or 50% or that the society ceases to be their subsidiary. § 2. Article 23bis, § 3 of the law of 9 July 1975 relating to the control of insurance companies applies by analogy.

Art. 13. As soon as they become aware of them, societies inform the control body of acquisitions or disposals of participations in their capital that cause an increase or decrease in the thresholds referred to in Article 12, § 1.
On this occasion, they inform the control body at least once a year of the identity of partners holding qualified participations, as well as the size of these participations as they have been determined, for example, at the annual general meeting of partners or based on information received due to the obligations of listed companies.

Section 4. - Structure and organization.

Art. 14. Societies must have a management structure, administrative and accounting organization and internal control appropriate to their activities.

Art. 15. For technical execution, the society may call upon the infrastructure and personnel of another enterprise or credit institution. The personnel may only be responsible for strictly administrative tasks.

Art. 16. Unless Article 46 applies, any modification of the financial or administrative organization, and in particular that relating to the elements referred to in Article 19, § 2, 2° and 3°, must be communicated to the control body within one month.
Any modification of the operating conditions must be communicated to the control body.

CHAPTER IV. - Approval.

Art. 17. The application for approval, accompanied by the documents and information referred to in Article 19, § 2, is addressed to the control body. The application is signed by the competent management body or by one or more persons who have received a special mandate for this purpose. The control body acknowledges receipt, within two weeks, of the application and the accompanying documents.

Art. 18. The approval of the society is granted by the Ministers after the opinion of the control body. The decision to grant or refuse approval is taken no later than six months after the receipt by the control body of all information and documents, conforming to the requirements of this decree, which must accompany the application referred to in Article 17. Approval is considered refused if no decision has been taken at the expiration of a period of six months. The decision to grant or refuse approval is notified to the society. The decision to grant is published in the Belgian Monitor by extract.

Art. 19. § 1. Any application for approval is addressed to the control body which will transmit it, together with its opinion, to the Ministers.
§ 2. The application must be accompanied by the following information and documents:
1° the statutes and the date of their publication in the annexes to the Belgian Monitor; 2° the name, first name, domicile, residence, profession and nationality of the persons responsible for effective management and directors; 3° the indication of the seat or seats of operation abroad; 4° the activity program which must contain the following indications or justifications:
a) the nature and characteristics of the risks; b) the elements necessary for the calculation of the premium; c) the modes of re-guarantee and the identity of the re-guarantors, in compliance with the rules of Article 59; d) the estimated costs for setting up administrative services and the production network and the means intended to cover them; e) for the first three financial years, the forecasts relating to:

management costs other than installation costs, namely current general expenses and commissions;
premiums and losses;
cash flow position;
5° proof that the minimum solvency referred to in Article 26 is constituted.
§ 3. The indications and documents referred to in § 2 must be formulated in at least the language imposed by law or decree.

Art. 20. Approved societies must include the following mention in all documents made available to the public:
" Mutual guarantee society approved by ministerial decree of....... ".
This mention must be followed by the date of publication in the Belgian Monitor of the decree or decrees cited.
Reference to the approval or control of societies may only be made in the aforementioned documents in the terms indicated in the first paragraph.

Art. 21. Approval may only be granted to societies:

if the partners who hold a qualified participation within the meaning of Articles 11 and 12 possess, given the need to ensure sound and prudent management, the necessary qualities;
if the close links existing between the societies and other natural or legal persons do not hinder the proper exercise of the control body's supervisory mission;
if the legislative or administrative provisions of a State that is not a member of the European Union and to which one or more natural or legal persons with whom the society has close links are subject, or the difficulties arising from the application of these provisions, do not hinder the proper exercise of the control body's supervisory mission over the society.

Art. 22. Approved societies may waive their approval.
The waiver is addressed to the control body.
Unless revoked in application of Article 23, the waiver recorded by ministerial decree will be taken on the proposal of the control body.
The waiver will only take effect upon the entry into force of the ministerial decree relating to the recording.

Art. 23. § 1.
The approval granted to a society is revoked by reasoned ministerial decree, on the proposal of the control body, when the society:
1° does not use the approval within a period of twelve months, or has ceased to exercise its activity for a period exceeding six months or if it no longer meets the access conditions; 2° seriously fails to comply with the obligations imposed on it by this decree or its implementing decrees, particularly regarding the constitution and representation of technical provisions referred to in Articles 28 to 40; 3° has failed to implement, within the time limits set, the measures provided for by the recovery plan or the financing plan referred to in Article 47. § 2. Any ministerial decree revoking approval is notified to the society and published by extract in the Belgian Monitor.

Art. 24. Approval is revoked of right in the event of bankruptcy or dissolution of a society.

Art. 25. Each year, the list of approved and provisionally approved societies in application of Chapter XI is published in the Belgian Monitor.

CHAPTER V. - Financial obligations and control.

Section 1. - The solvency ratio.

Art. 26. Societies must establish a solvency ratio relating to all their activities. This solvency ratio must amount to 4% of all own commitments with a minimum of 1,235,000 Euros. Own commitments are composed of guarantees in force, excluding re-guaranteed commitments.

Art. 27. The following elements are taken into consideration for the calculation of the solvency ratio.

Paid-up share capital, increased by share premiums;
Half of the unpaid portion of the share capital once the paid-up portion reaches 25% of this capital;
Reserves, whether legal or available, that do not correspond to commitments;
Retained earnings;
Subordinated loans. These loans are taken into consideration only:
a) up to 50% of the ratio, of which a maximum of 25% may include subordinated loans with a fixed maturity; b) if the agreement stipulates that in the event of bankruptcy or liquidation of the company, they rank below the claims of all other creditors and will only be repaid after settlement of all other debts due at that time. Furthermore, they are taken into consideration only up to the amounts actually paid up and under the following conditions:
a) regarding loans with a fixed maturity, their initial maturity is set at least five years. At the latest one year before maturity, the company submits to the supervisory authority for approval a plan indicating how the solvency ratio will be maintained or brought to the desired level at maturity, unless the amount up to which the loan can be included in the components of the solvency ratio is progressively reduced at least during the five years preceding maturity. The supervisory authority may authorize the early repayment of these loans provided that the request has been made by the issuing company and that its solvency ratio does not thereby fall below the required level; b) loans without a fixed maturity are repayable only with five years' notice as long as they constitute a component of the solvency ratio or if the prior agreement of the supervisory authority is formally required for their early repayment. In the latter case, the company informs the supervisory authority at least six months before the proposed repayment date, indicating the effective and required solvency ratio before and after this repayment. The supervisory authority only authorizes repayment if the company's solvency ratio is not thereby at risk of falling below the required level; c) the loan agreement does not contain a clause providing that, under circumstances other than the liquidation of the company, the debt must be repaid before the agreed maturity; d) the loan agreement provides that it cannot be modified after the supervisory authority has declared no objection to the modification;
Indefinite-duration securities and other financial instruments. They are taken into consideration only up to the amounts actually paid up and up to 50% of the ratio for the total of these securities and the subordinated loans mentioned in point 5, and if they meet the following conditions:
a) they are not repayable without the prior agreement of the supervisory authority; b) the issuance contract gives the company the possibility to defer the payment of interest on the loan; c) the lender's claims against the company are fully subordinated to those of all non-subordinated creditors; d) the documents governing the issuance of the securities stipulate that losses can be offset by the debt and unpaid interest, while allowing the company to continue its activities.
At the request and justification of the company, capital gains resulting from the underestimation of asset items, insofar as such capital gains do not have an exceptional character.

Section 2. - Technical provisions.

Art. 28. Companies are required to calculate and account for under the name of technical provisions, the obligations incumbent upon them both for the execution of the guarantee acts they have subscribed to and for the application of legal or regulatory provisions relating to these guarantee operations. Technical provisions concern both ongoing contracts and contracts that have matured and are not fully settled, regardless of the country where the risk is located.

Art. 29. Technical provisions must include:

A provision for unearned premiums and current risks:
a) The provision for unearned premiums corresponds to the fraction of gross premiums of guarantee contracts that must be allocated to the following year or subsequent years, in order to cover the cost of losses, administrative expenses, and management expenses of investments. b) The provision for current risks consists of an additional amount to the provision for unearned premiums. It is constituted when it appears that the estimated total cost of losses and administrative expenses concerning ongoing contracts remaining to be assumed by the company will be greater than the total of unearned premiums and premiums due relating to said contracts.
A provision for losses to be paid.
This provision corresponds to the estimated total cost that will ultimately represent for the company the settlement of all losses occurred, whether declared or not, less the amounts already paid for these losses. It includes indemnities and external and internal management expenses of losses. No deduction can be made to take into account the financial income from investments, except in the case and under the conditions admitted by the supervisory authority. Unrealized recoveries, including deductibles to be recovered, cannot be deducted from the provision for losses.
An equalization provision.
This provision must be constituted for the purpose of either compensating for non-recurring technical losses or equalizing fluctuations in the loss ratio.
Any other provision provided for by the supervisory authority.

Art. 30. If the information relating to premiums to be collected or reimbursements to be made for the subscription year is insufficient to allow a precise estimate at the time of the constitution of provisions, the supervisory authority may, for the calculation of provisions for unearned premiums and for losses to be paid, authorize or impose the application of one of the methods provided for by the valuation rules fixed for the establishment of annual accounts.

Art. 31. Technical provisions are calculated on the basis of the valuation rules fixed for the establishment of annual accounts and according to methods admitted by the supervisory authority.
The company communicates to the supervisory authority the methods it uses and warns it in advance of any change of method.

Section 3. - Representative assets.

Art. 32. The technical provisions referred to in Article 29 relating to guarantee contracts and obligations deriving from legislative or regulatory provisions concerning guarantee operations must be represented at all times by equivalent assets belonging in full ownership to the company and specifically allocated to the guarantee of the obligations mentioned above. These assets are designated hereinafter under the name of "representative assets". Companies must keep a permanent inventory of representative assets and communicate to the supervisory authority the situation on December 31 of each year. The form and content of these various documents and, if applicable, the deadlines within which they must be communicated are fixed by the supervisory authority.

Art. 33. The representative assets of technical provisions and debts must take into account the type of operations carried out by the company in order to guarantee the security, yield, and liquidity of the company's investments; the company must ensure adequate diversification and dispersion of its investments. Furthermore, representative assets must be located within the European Union. Representative securities located outside the European Union are also admitted provided that the National Bank or a credit institution, a stock exchange company, or a foreign investment enterprise approved by the Banking and Financial Commission or by the competent authority of a member country of the European Union attests that it holds on behalf of the company, through an establishment in the European Union, these representative assets with a credit institution or an investment enterprise, established outside the European Union, approved by a public law body whose role is analogous to that of the Banking and Financial Commission. By localization of assets is meant the presence of movable or immovable assets within the borders. Assets in the form of claims that are not represented by securities are considered to be located in the country where they are realizable.

Art. 34. Representative assets must further belong to the following categories of investments:

Bonds;
Shares and other participations with variable income;
Shares in collective investment undertakings that invest in securities, cash, and real estate;
Other money and capital market instruments;
Call options (also called calls) or put options (also called puts) on securities, forward contracts (hereinafter called futures) as well as other derivative instruments such as forward exchange contracts, which are traded on a regulated, liquid, recognized, open to the public, and regularly functioning market. Both call options, put options, futures, and other derivative instruments must contribute to limiting investment risk or allow for effective portfolio management. For futures, the underlying commitment must be maintained in the form of liquid and safe short-term investments;
Real estate and real estate rights and real estate certificates;
Claims on co-guarantors in technical provisions, under conditions accepted by the supervisory authority;
Share of co-guarantors in technical provisions, under conditions accepted by the supervisory authority;
Uncontested tax claims;
Demand accounts or time deposits with the National Bank or a credit institution approved by the Banking and Financial Commission or by the competent authority of a member country of the European Union in which this credit institution has its registered office;
Accrued and unpaid interest and rents on allocated assets. Furthermore, only accrued and unpaid interest that is not already included in the value of an asset of another category can be included in this category;
The supervisory authority may, in exceptional circumstances and for the duration thereof, accept other categories of investment that respect the principles of security, yield, liquidity, diversification, and dispersion referred to in Article 33, as well as grant derogations from the localization rules.

Art. 35. § 1. Representative assets cannot exceed the proportions hereinafter expressed as a percentage of the total of technical provisions and debts concerning the total assets of a heading:

10% for bonds and other money and capital market instruments, issued by States, their local or regional authorities, and by companies, which do not belong to Zone A referred to in Council Directive (89/647/EEC) of 18 December 1989 on a solvency ratio for credit institutions, as well as by international organizations of which no member State of the European Union is part;
10% for investments in shares or share-equivalent securities and in bonds, which are not traded on a regulated market. This limitation is increased to 20% if the company also makes investments in such values emanating from Community companies, which are subject to the supervision of the supervisory authority or a public law body whose role is analogous to that of the supervisory authority.
10% for shares in collective investment undertakings that are not subject to the legislation of a member State of the European Union in accordance with Council Directive (85/611/EEC) of 20 December 1985 on the coordination of laws, regulations, and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS);
5% for real estate certificates of the same issue;
5% for derivatives that are not allocated as hedging within the meaning of Articles 27ter and 36sexies of the Royal Decree of 17 November 1994 relating to the annual accounts of insurance companies;
5% for loans that are not secured by a real security, by a credit institution, or by an insurance company, and no more than 1% for such loans granted to the same borrower. This limitation does not apply to such loans granted to credit institutions, insurance companies, or investment enterprises established in the European Union, nor to such loans granted to States, their local and regional authorities that belong to Zone A referred to in Council Directive (89/647/EEC) of 18 December 1989 on a solvency ratio for credit institutions, as well as to international organizations of which one or more member States of the European Union are part;
10% for investments in a building or in several buildings sufficiently close to each other to be effectively considered as a single investment.
§ 2. Furthermore, the company cannot invest in representative assets of its technical provisions and debts more than 5% in shares and share-equivalent securities, in bonds and other money and capital market instruments, of the same issuer or in loans granted to the same borrower, considered together. However, loans granted to a state, regional, or local authority or to an international organization of which one or more member States of the European Union are part are not covered. Nor are covered bonds and other money and capital market instruments issued by these same authorities or organizations, nor shares in collective investment undertakings. This limitation is increased to 10% for the aforementioned values of Community companies that are subject to the supervision of the supervisory authority or a public law body whose role is analogous to that of the supervisory authority, provided that the company's total investment in the aforementioned values in which it invests more than 5% of its technical provisions and debts does not exceed 20% of its technical provisions and debts. § 3. For the application of the previous paragraph, the position in each option, future, and other derivative instrument is converted into a position of the underlying asset, taking into account its probability of effective exercise. § 4. The supervisory authority may, by a duly reasoned decision, for exceptional circumstances and for the duration thereof, at the request of companies, derogate from the rules set out in the previous paragraphs provided that the principles of security, yield, liquidity, diversification, and dispersion mentioned in Article 33 are respected.

Art. 36. For the application of the provisions of this section, a regulated market is understood as: any market referred to in Article 1, § 3, paragraphs 1 and 2 of the Law of 6 April 1995 relating to secondary markets, the status of investment enterprises and their control, intermediaries, and investment advisors, as well as any other organized, recognized, and regularly functioning market, provided that this market satisfies comparable requirements and that the financial instruments traded thereon have comparable quality.

Art. 37. For participations in subsidiary companies that, on behalf of the company, manage all or part of the investments of the latter, the application of the rules and principles set out in Articles 34 and 35 takes into account the underlying assets held by the subsidiary company. The supervisory authority may apply the same treatment to the assets of other subsidiaries.

Art. 38. Securities that are not traded on a regulated market are admitted as representative assets only to the extent that they are realizable in the short term. This condition does not apply to participations in credit institutions, insurance companies, and investment enterprises whose registered office is located in the European Union.

Art. 39. § 1. The allocation value of the representative assets of technical provisions and debts is determined taking into account the following provisions:

Representative assets are evaluated, less debts contracted for their acquisition;
Representative assets must be evaluated with the necessary prudence taking into account the risk of non-realization;
Claims on a third party, taken as representative assets, are evaluated, less debts owed to this third party.
§ 2. Furthermore, representative assets are retained for an allocation value which is fixed as follows:
For real estate: the market value of the allocated real estate. By market value is meant the price that, on the date of evaluation, could be obtained if the real estate concerned were sold assuming that:
- it is a voluntary sale;
- the buyer can act totally independently of the seller;
- normal publicity has been organized;
- market conditions allow for a regular sale;
- the time available for the negotiation of the property is normal given the nature of the property.
  The market value is determined by a separate evaluation of each plot of land and each construction according to a method accepted by the supervisory authority.
  When, since the last evaluation carried out in accordance with the previous paragraph, the market value of a plot of land or a construction has decreased, the corresponding adjustment of the allocation value lower is only increased if a new market value is determined in accordance with the previous paragraph. When, on the date of evaluation, the intention exists to sell the real estate in the short term, the market value is reduced by estimated realization costs. When it is not possible to determine the market value of real estate, the value determined on the basis of the acquisition price principle or cost price is deemed to be the market value;
For securities issued or guaranteed by a state, regional, or local authority and equivalent securities: the value calculated in accordance with the provisions of Article 27bis, § 3 of the Royal Decree of 17 November 1994 relating to the annual accounts of insurance companies;
For securities listed on an official stock exchange, except those referred to in § 2, 2° of this article: the market value. By market value is meant the stock value determined, either at the official prices on the date of evaluation or, when the evaluation date is not a stock exchange trading day, the last trading day preceding this date, either at indicative prices published at least monthly by an official stock exchange. The aforementioned indicative or official prices of these securities are those published by the stock exchanges where these securities are the subject of numerous transactions.
When, on the date of evaluation, the intention exists to sell these securities in the short term, the market value is reduced by estimated realization costs;
For unlisted securities, except those referred to in § 2, 2° of this article: the market value. When a market exists for these securities, by market value is meant the average price at which these securities were the subject of a transaction on the date of evaluation or, when the evaluation date is not a trading day, the last trading day preceding this date, on the concerned market.
When no market exists for these securities, by market value is meant the value obtained on the basis of a prudent evaluation of the presumed direct value of income.
When, on the date of evaluation, the intention exists to sell these securities in the short term, the market value is reduced by estimated realization costs;
For mortgage loans: the sum of the remaining balances due. Each mortgage claim is taken into consideration only for a maximum of 100% of the value of the real estate, less, if applicable, prior privileges and mortgages;
For other assets: the value indicated for these assets, on the asset side of the balance sheet.
§ 3. Furthermore, the allocation value of representative assets is determined taking into account derivatives relating to these representative assets insofar as these derivatives are not themselves used as representative assets. Furthermore, these derivatives must be used to limit investment risk or make possible effective portfolio management and traded on a liquid market. For there to be a liquid market within the meaning of this paragraph, it is necessary:

that there is either an organized over-the-counter market functioning regularly with the intervention of third-party financial institutions acting as market makers ensuring permanent quotations of buyer and seller prices whose ranges correspond to market practices;
that by volume, the securities or financial instruments concerned can, given the volumes regularly traded on their market, be considered realizable at any time without significant impact on prices.
§ 4. On the basis of the evaluation rules defined above, the supervisory authority may reject the proposed value for a representative asset.

Art. 40. The supervisory authority may oppose investments or the maintenance thereof if it has reasons to believe that these investments do not offer sufficient guarantees.

Section 4. - Annual and statistical accounts.

Art. 41. The societies are required to communicate their annual accounts to the control body on the medium and within the time limits set by it.

Art. 42. The societies are required to draw up statistics in the form and content prescribed by the control body and to transmit them to it on the medium and within the time limits set by it.

Section 5. - Control.

Art. 43. The control body ensures the application of this decree and its implementing measures and exercises control over the guarantee activities. Any other potential activities are not subject to the control of the control body, which, however, monitors the overall financial health of the society.

Art. 44. § 1. In all societies, at least one of the auditors must be designated by the statutory general meeting of partners from among the members of the Institute of Business Auditors created by the law of 22 July 1953, or from among the members of the Institute of Chartered Accountants created by the law of 21 February 1985 relating to the reform of business auditing. § 2. Article 40 of the law of 9 July 1975 relating to the control of insurance companies is applicable by analogy.

Art. 45. Articles 21bis to 21septies of the aforementioned law of 9 July 1975 are applicable by analogy.

Art. 46. § 1. The societies communicate to the control body at least three weeks before the meeting of the general meeting of the society, the draft annual accounts and draft modifications to the statutes, as well as the decisions they propose to take during this meeting which are likely to have an impact on guarantee acts in general. The control body may require that the observations it formulates concerning these drafts be brought to the knowledge of the general meeting of the society. These observations and the responses made to them must appear in the minutes. § 2. The society communicates to the control body within one month following their approval by the general meeting, the modifications to the statutes, as well as the decisions which may have an impact on the guarantee acts. The control body opposes, within a maximum period of one month from the date on which it became aware of them, the execution in Belgium of all decisions or modifications referred to in the previous paragraph, which would violate the provisions of this decree or its implementing measures.

Art. 47. In order to restore the financial situation of a society whose solvency ratio no longer reaches the level referred to in Article 26, the control body requires that a recovery plan be submitted to it for approval within the time limit it indicates. In the exceptional circumstance where the control body is of the opinion that the financial situation of the society will deteriorate further, it may restrict or prohibit the free disposal of assets. If the solvency ratio no longer reaches the minimum level fixed in Article 26, the control body requires the society to submit a short-term financing plan which must be submitted for its approval. It may restrict or prohibit the free disposal of the society's assets. The control body may, in addition, take any measures suitable to safeguard the interests of the guaranteed cooperators.

Art. 48. When the control body finds that a society is not operating in conformity with the provisions of this decree, that its management or financial situation does not offer sufficient guarantees for the proper fulfillment of its commitments, or that its administrative or accounting organization or internal control presents serious shortcomings, it sets the time limit within which the situation found must be remedied. If at the end of this time limit, the situation has not been remedied, the control body may:
1° appoint a special commissioner;
In this case, the written, general or special authorization of the latter is required for all acts and decisions of all bodies of the society and for those of the persons in charge of management; the control body may however limit the scope of operations subject to authorization. The special commissioner may submit to the deliberation of all bodies of the society any proposals he deems appropriate; the remuneration of the special commissioner is fixed by the control body and borne by the society concerned; 2° prohibit certain operations or limit activity; 3° impose the replacement of the persons in charge of effective management and directors of a society, within a time limit it sets and, in the event of non-execution within this time limit, substitute for all the management bodies of the society an interim manager who has the widest powers to manage and administer the society. The remuneration of the interim manager is fixed by the control body and borne by the society concerned. The control body may at any time revoke and replace the interim manager, either ex officio or at the request of the society, when the management of the interested party no longer offers sufficient guarantees.

Art. 49. § 1. In the event of prohibition of the free disposal of assets located in Belgium under Article 47, the control body may apply the following provisions to the society:
1° The allocation of securities and real estate is the subject of a written declaration by the society to the control body; withdrawals or reductions are subject to the prior authorization of the control body; 2° For securities deposited in Belgium in an overdraft deposit account, the control body orders the depositary body to block the deposit account. For other securities capable of being deposited, the control body orders the society to immediately deposit them in a special and blocked account (.) at the National Bank of Belgium or with a credit institution, a brokerage company, or a foreign investment company, approved by the Banking and Finance Commission. § 2. Depositary bodies may not return deposited securities without producing the authorization of the control body; Deposit receipts must mention the allocation of the deposited securities, as well as the prohibition to dispose of them without authorization from the control body; Depositary companies and societies are jointly liable for any damage resulting from non-observance of the obligations referred to in the two preceding paragraphs; The control body informs the depositary bodies of the obligations incumbent upon them under this article.

Art. 50. When the results of a society are such as to compromise the interests of the guaranteed cooperators, the control body may recommend to this society all useful measures with a view to its merger with or absorption by an approved society.
Any project for merger or absorption must be submitted for approval by the control body by the society concerned.
When, despite the recommendations of the control body, a society abstains from seeking or taking useful measures, and when this abstention is likely to seriously harm the interests of the society's creditors, the control body may appoint an interim manager, in accordance with the provisions of Article 48, 3°.

Art. 51. Articles 19bis, 21 § 1, § 1bis and § 2, 26 § 4, 3°, 29 paragraphs 4, 5 and 6, 30, 37 and 44 paragraphs 1 and 4 of the law of 9 July 1975 relating to the control of insurance companies are applicable to the control of the society by the control body.

CHAPTER VI. - Special provisions relating to the exercise of a guarantee activity abroad by a society.

Art. 52. The society which, on the territory of another state, plans to exercise a guarantee activity for which it is approved, notifies its intention to the control body, indicating the country on the territory of which it wishes to exercise this activity. The control body verifies that the solvency of the society is not compromised.

Art. 53. The control body may oppose the realization of the guarantee operation in another state if it considers that this operation would have adverse consequences for the organization, financial situation or supervision of this society.
This opposition must be notified to the society by registered letter at the latest one month after receipt of the complete file.

CHAPTER VII. - Total or partial liquidation of societies.

Art. 54. In the event of dissolution of the society, the liquidator, in accordance with statutory or legal rules, may only be appointed with the approval of the control body.
This provision is not applicable to a society declared bankrupt at the time of the revocation of the approval.

Art. 55. Any admission of cessation of payments by a society, as well as any petition by creditors seeking bankruptcy, must be notified to the control body by the registry of the concerned tribunal.

CHAPTER VIII. - Transfers.

Art. 56. Societies may not transfer all or part of the rights and obligations resulting from their guarantee acts to another society except with the prior authorization of the control body.

CHAPTER IX. - Miscellaneous provisions.

Section 1. - General provisions.

Art. 57. Articles 81 to 89 and Article 91 of the law of 9 July 1975 on the control of insurance companies are applicable to societies.

Art. 58.
<Abrogé par AR 2012-07-17/06, art. 19, 003; En vigueur : 01-01-2012>

Section 2. - Relations with other funds aiming to promote the granting of credits to small and medium-sized enterprises.

Art. 59. Societies are authorized to re-guarantee their risks with the guarantee fund and with supranational funds of the same type, according to the rules applicable to them. The guarantee fund is not subject to the supervision of the control body.

Art. 60. Societies may benefit from the support programs for small and medium-sized enterprises of the Participation Fund established by the law of 4 August 1978 or of the European Investment Fund. The Participation Fund is not subject to the supervision of the control body.

CHAPTER X. - Transitional provisions.

Art. 61. Societies that are active before the entry into force of this Royal Decree may continue their activities. From the entry into force of this decree, these societies are provisionally approved. For the exercise of their activities, they are subject to the obligations and control provided for in this decree.

Art. 62. Societies benefiting from provisional approval transmit to the control body within nine months of the entry into force of this decree the following documents:
a) the annual accounts of the financial years closed during the last five years. b) a statement of losses not yet settled declared before the beginning of the civil year during which the request is introduced.

Art. 63. Societies benefiting from provisional approval must, within two years of the entry into force of this decree, constitute the securities defined in Articles 34 and 35.

Art. 64. The provisional approval is revoked by the Ministers when, after a period of two years, the request referred to in Article 17 has not been filed or the securities have not been constituted.
The provisional approval does not end until a decision is made on the filed request.

Art. 65. Approval may be granted to societies that are active before the entry into force of this Royal Decree, for the activities they were exercising at that date, notwithstanding the fact that they do not meet the obligations referred to in Article 26. In order to comply with them, these societies benefit from their provisional approval for a period of two years to reach a solvency ratio of 740,000 Euros and a period of five years to reach a solvency ratio of 4% of their own commitments with a minimum of 1,235,000 Euros as provided for in Article 26.

Art. 66. In the event of cessation of provisional approval, the provisions of Article 54 are applicable.

Art. 67. The list of societies benefiting from the provisional approval referred to in this decree will be published annually in the Belgian Monitor as long as it is applicable.

Art. 68. Societies have a period of four years from the entry into force of this decree to comply with the provisions of Articles 6 to 9.

Art. 69. Within ten years of the entry into force of this decree, the application of Articles 35 to 40 is limited to the part of the portfolio of societies that is not composed of bonds from the National Credit Fund for Professional Credit.

Art. 70. Societies benefiting from provisional approval and wishing to obtain the final approval referred to in Article 18 must, within two years of the entry into force of this decree, submit the request referred to in Article 17. The decree granting final approval is published by extract in the Belgian Monitor.

CHAPTER XI. - Final provisions.

Art. 71. The following enter into force on the day of publication of this decree in the Belgian Monitor:
1° Article 57 of the program law of 10 February 1998 for the promotion of independent enterprise; 2° this decree.

Art. 72. The Ministers having insurance and small and medium-sized enterprises within their attributions are charged with the execution of this decree.
Given in Brussels, on 30 April 1999.
ALBERT
By the King:
The Minister of the Economy,
E. DI RUPO
The Minister of Small and Medium-sized Enterprises, K. PINXTEN

Aanhef

ALBERT II, King of the Belgians,
To all, present and future, Greetings.
Having regard to the program law of 10 February 1998 for the promotion of independent enterprise, in particular Article 57; Having regard to the urgency motivated by the circumstance:

that mutual guarantee societies have had a sui generis status in Belgian legislation, notably in that their activities take the form of guarantees in accordance with the provisions of Articles 2011 to 2039 of the Civil Code; that these societies were until now approved by the National Credit Fund for Professional Credit pursuant to Article 91 of the law of 17 June 1991 organizing the public credit sector and harmonizing the control and conditions of operation of credit institutions, coordinated by the Royal Decree of 23 December 1996; that, due to its privatization, the National Credit Fund for Professional Credit no longer exercises this control, thus depriving mutual guarantee societies of a legal status; that in the absence of such a status, the activities of mutual guarantee societies could be considered, pursuant to the law of 25 June 1992 on the terrestrial insurance contract, as insurance activities; that, therefore, mutual guarantee societies would be in violation of the law of 9 July 1975 relating to the control of insurance companies, and in particular its Article 3; that the implementing measures of Article 57 of the program law of 10 February 1998 for the promotion of independent enterprise, providing for the establishment of a special status for mutual guarantee societies, must therefore be taken urgently; Having regard to the opinion of the Council of State, given on 21 January 1999, in application of Article 84, paragraph 1, 2°, of the coordinated laws on the Council of State; On the proposal of Our Vice-Prime Minister and Minister of the Economy, and of Our Minister of Small and Medium-sized Enterprises, and with the advice of Our Ministers who have deliberated in Council, We have decreed and decree:

Wijziging(en)

Royal Decree of 17-07-2012 published on 01-08-2012

Article modified: 58

Royal Decree of 25-03-2003 published on 31-03-2003

Verslag aan de Koning

REPORT TO THE KING,

Sire,

The project we have the honor to present to Your Majesty implements Article 57 of the framework law of 10 February 1998 for the promotion of independent enterprise. More precisely, this project organizes the status and control of mutual guarantee societies.

A. Current Situation

Until the entry into force of Articles 90 and 91 of the law of 17 June 1991 (9 September 1992), mutual guarantee societies were approved by the National Credit for Professional Credit Fund (CNCP) in the same manner as the credit unions it approved.

The CNCP approved mutual guarantee societies. It also defined the rules of operation: conditions for granting guarantees, remuneration, prudential coefficients, guarantee limits per credit, and procedures in case of loss.

Article 91 mentioned above provided for the approval of mutual guarantee societies by the CNCP, the modalities of which were to be regulated by a Royal Decree. In the absence of such a decree, the CNCP continued the previous regime.

The Royal Decree of 23 December 1996, privatizing the CNCP, replaced the approval procedures with an affiliation regime. This implies that S.A. Crédit Professionnel no longer has any prudential control power over mutual guarantee societies. Only the power to verify the legal conditions for maintaining membership in the Crédit Professionnel network remains.

Among these conditions is the respect of a code of ethics, adopted on 30 June 1997. Only point 10 of said code deals very generally with financial requirements: "In order not to harm the common brand image of network members, they will respect the principles of sound and prudent management regarding the stability of their organization. They will ensure the liquidity and solvency of their financial structure."

It can be concluded that there is currently no well-defined status nor any prudential control over mutual guarantee societies.

The control exercised by the CNCP was no longer desirable. Indeed, mutual guarantee societies are no longer obliged to join the professional credit network and can guarantee credits granted by other institutions. Existing societies had to decide on their affiliation with the Crédit Professionnel network by 30 September 1997. Societies that joined can, however, resign from the network by simple notification addressed to the board of directors of Crédit Professionnel S.A. with a notice period of one year (cf. art. 57 of the law of 17 June 1991). In this context, it is no longer conceivable to grant a private company a mission of public interest which, moreover, concerns operations carried out by its competitors.

B. Sui Generis Status and Control

The activity of mutual guarantee societies can be likened to credit insurance. The terminology used is very similar (risk, premium, loss...). However, there are important differences.

The guarantee granted conforms to civil law. In particular, it is not necessarily joint and several (which is always the case for insurance), and the mutual guarantee society will recourse against the defaulting debtor, which the insurer will not do.

Mutual guarantee societies limit their operations to credits granted to small and medium-sized enterprises (SMEs). The members of mutual guarantee societies are themselves merchants or holders of SMEs.

The guarantee contract is accessory to a single credit contract. Credit insurance is a principal contract (the link with credit is the insured's insurance interest), most often relating to a set of credits (to diversify risk).

The guarantee guarantees in principle only the non-payment at maturity of the claim to which it relates. Insurance also covers the risk of non-payment after a waiting period or even the general insolvency of the insured.

Insurance operates a transfer of risk from the insured to the insurer. The guarantor guarantees the client in order to facilitate their access to credit.

It is also noted that in most countries of the European Union, mutual guarantee societies are not considered as insurers. In France and Germany, they fall under the banking sector. In Italy, Spain, and Portugal, they benefit from a sui generis status that is not that of insurance.

The intention is therefore to provide mutual guarantee societies with a sui generis status. However, since technically, guarantee operations are more akin to insurance operations than to bank credits (signature credits), the choice was made to draw as much inspiration as possible from the law of 9 July 1975 on the control of insurance companies and its implementing decrees.

C. Examination of the Main Provisions

Chapters I and II

Chapter I (Article 1) provides some definitions, while Chapter II (Articles 2 and 3) defines the object and scope of the decree. The principle of prior registration before any activity prevails (art. 3, § 1).

Following a remark from the Council of State, Article 62 of the project was deleted. The authorization conferred by Article 57 of the framework law of 10 February 1998 mentioned above does not indeed allow imposing a rule of asset allocation in the event of liquidation. However, such a rule is imposed on societies currently members of the Crédit Professionnel network due to Article 54, f) of the coordinated law of 24 December 1996 on the organization of the public credit sector and the holding of participations of the public sector in certain private law financial companies. It was deemed appropriate to recall this principle. Moreover, to avoid any discussion regarding a potential conflict between Articles 48 to 59 of the aforementioned coordinated law and any provision of the project, this principle was recalled in the article of the project dedicated to its scope of application.

The decree is not applicable to enterprises of the European Union wishing to work in Belgium under the free provision of services and which are themselves controlled by the authorities of the member state of their registered office. These enterprises must only make themselves known to the control body.

CHAPTER III

Chapter III (Articles 4 to 16) regulates the statutes and operation of the mutual guarantee society. The rules are largely inspired by the law of 9 July 1975 on the control of insurance companies, notably its Articles 9, 9bis, 14bis, 23bis, and 90.

CHAPTER IV

Chapter IV (Articles 17 to 25) relates to the approval of the society. This approval is granted by the Ministers having insurance and small and medium-sized enterprises within their responsibilities. Administratively, the request is processed by the Office of Insurance Control.

The procedure follows, in its main lines, that in force for insurance companies.

It should be noted, however, that, in accordance with the opinion of the Council of State, the particular appeal procedure of the aforementioned law of 9 July 1975 is not applicable to mutual guarantee societies (see Chapter IX).

CHAPTER V

Chapter V (Articles 26 to 51) deals with financial obligations and control.

Article 26 sets the solvency ratio for mutual guarantee societies. This ratio is equivalent to 4% of the total commitments of the society, minus guarantees ceded to a regional guarantee fund or a similar supranational fund.

In any case, a society cannot have net worth less than 1,235,000 Euros.

Article 27 lists the elements that can be taken into consideration for the constitution of the solvency ratio. A parallel was drawn with Article 15bis of the aforementioned law of 9 July 1975.

Articles 28 to 31 oblige mutual guarantee societies to set up technical provisions like insurance companies (see Article 16 of the aforementioned law of 9 July 1975 and its implementing measures).

The representative values provided for in Articles 32 to 40 constitute the counterpart to the asset side of the balance sheet of the technical provisions accounted for on the liability side. These representative values must cover the technical provisions and guarantee the security, yield, and liquidity of investments. They must be diversified and dispersed.

Articles 41 and 42 impose on societies the obligation to communicate their annual accounts to the Office of Insurance Control and to transmit statistics allowing the exercise of control.

The control of mutual guarantee societies is specified in Articles 43 to 51. This control is carried out by the Office of Insurance Control.

It is also provided that mutual guarantee societies must engage an accountant or a corporate auditor. In addition to his mission as a statutory auditor as determined by the coordinated laws on commercial companies, he performs the tasks provided for in Article 40 of the aforementioned law of 9 July 1975.

The small size and relative simplicity of mutual guarantee societies do not justify, in this regard, complete parallelism with the provisions applicable to insurance companies.

The measures that the Office of Insurance Control can take against a society that does not respect the regulations or whose financial situation is compromised are listed in Articles 46 to 51. These measures are also modeled on those provided by the aforementioned law of 9 July 1975, among others its Articles 17, 22, 26, and 27.

CHAPTER VI

Articles 52 and 53 oblige societies to notify their intention to exercise their activities abroad. The control body may oppose this if it could compromise the financial situation of the society.

CHAPTER VII

Articles 54 and 55 concern the liquidation of societies. It should be noted that, contrary to insurance, there is no privilege on the assets of mutual guarantee societies in favor of guaranteed cooperators.

CHAPTER VIII

The transfer of a guarantee portfolio is subject to prior authorization from the control body, in application of Article 56. The task of the control body is, among other things, to verify that the acquiring society has the solvency ratio, technical provisions, and structure necessary to continue the activity of the transferring society.

CHAPTER IX

Articles 57 to 60 contain some provisions relating to sanctions, control costs, and "re-guarantees."

CHAPTER X

Transitional provisions have been provided for in Articles 61 to 70.

Societies active at the time of the entry into force of the decree may continue their activities and are provisionally registered.

They must satisfy the obligations of the draft decree within the following deadlines:

a) nine months to transmit annual accounts and a statement of losses not yet settled, b) two years to constitute representative values, c) two years to introduce the request for definitive approval, d) two years to reach a solvency ratio of 740,000 Euros, e) five years to reach a solvency ratio of 1,235,000 Euros, f) ten years to be subject to the rules on representative values for all of these values.

This last provision (Article 69) is motivated by the fact that the portfolio of existing mutual guarantee societies is currently constituted by securities of Crédit Professionnel S.A. These are fixed-income securities with a relatively high yield. This is why a fairly long period has been provided to replace them with other values respecting the prescription of Articles 35 to 40.

CHAPTER XI

Articles 71 and 72 do not call for any particular remark.

We have the honor to be,

Sire,

Your Majesty's

very respectful

and very faithful servants,

The Minister of the Economy
E. DI RUPO

The Minister of Small and Medium Enterprises
K. PINXTEN

OPINION OF THE COUNCIL OF STATE.

The Council of State, legislative section, first chamber, seized by the Minister of the Economy, on 15 January 1999, of a request for an opinion, within a period not exceeding three days, on a draft royal decree "regulating the status and control of mutual guarantee societies", gave on 21 January 1999 the following opinion:

In accordance with Article 84, paragraph 1, 2., of the coordinated laws on the Council of State, the request for an opinion must indicate the reasons justifying its urgent character.

In this case, the request for urgency is motivated as follows (1):

(NOTE 1: This is the reasoning advanced in the ministerial letter of 21 January 1999. The letter of 15 January 1999, containing the request for an opinion, contained no reasoning.)

"Mutual guarantee societies have had a sui generis status in Belgian legislation, notably because their activities take the form of guarantees in accordance with the provisions of Articles 2011 to 2039 of the Civil Code.

Until now, these societies were approved by the National Credit Fund pursuant to Article 91 of the Law of 17 June 1991 on the organization of the public credit sector and the harmonization of the control and operating conditions of credit institutions, coordinated by the Royal Decree of 23 December 1996.

Due to its privatization, the National Credit Fund no longer exercises this control, thereby depriving mutual guarantee societies of a legal status, and they could be considered, pursuant to the Law of 25 June 1992 on the land insurance contract, as insurance activities. Consequently, mutual guarantee societies would be in violation of the Law of 9 July 1975 on the control of insurance companies, and more particularly its Article 3.

The implementing measures of Article 57 of the Law Programme of 10 February 1998 for the promotion of independent enterprise, providing for the establishment of a special status for mutual guarantee societies, must therefore be taken urgently."

In application of Article 84, paragraph 2, of the coordinated laws on the Council of State, the Legislation Section has essentially limited itself to "the examination of the legal basis, the competence of the author of the act as well as the accomplishment of the prescribed formalities."

This examination requires the following observations.

Scope and Legal Basis of the Project

The draft decree submitted for opinion intends to implement Article 57 of the Law Programme of 10 February 1998 for the promotion of independent enterprise.

Under this provision, the King may, by decree deliberated in the Council of Ministers, organize the control of companies constituted in the form of limited liability cooperative societies, referred to in Article 59, paragraph 1, 2, of the coordinated Law of 24 December 1996 on the organization of the public credit sector and the holding of participations of the public sector in certain private law financial companies (2), which act as guarantors for a member in accordance with Articles 2011 to 2039 of the Civil Code, with a view to facilitating the latter's access to credit.

(NOTE 2: This Article 59, paragraph 1, 2, refers to financial enterprises "that guarantee the credit of reputation granted by them or by credit associations that have joined the professional credit network").

According to the explanatory statement, the companies referred to in Article 57 of the Law Programme of 10 February 1998 are mutual guarantee societies whose mission consists essentially "in ensuring the proper completion of credit operations granted to their members by a credit institution or a financial institution" (3).

(NOTE 3: Parl. Doc., Chamber, 1996-1997, No. 1206/1 and 1207/1, p. 36).

It must be noted that, strictly speaking, the draft contains provisions exceeding "the organization of control" of the companies concerned, as indicated by Article 57 cited of the Law Programme of 10 February 1998.

This finding results first of all from the definition of the objective of the regulation given in Article 2, § 1, of the draft, where reference is made, not only to the control of the activity of the companies concerned, but also to the establishment of the "rules to which the activity of the company is subject" and to the "special rules for the liquidation of the company".

The draft indeed includes rules relating to the operation, administration, organization, and structure of the companies concerned (Chapter III) and provides for an approval procedure for these companies (Chapter IV). In addition to the prescriptions concerning financial obligations and control (Chapter V), the draft also contains provisions relating, inter alia, to the liquidation of the companies (Chapter VIII) and to transfers (Chapter IX).

It may be admitted that, even if Article 57 of the Law Programme of 10 February 1998 refers exclusively to the "control" of the companies concerned (4), the intention of the legislator was to ensure the most effective possible conduct of this control, which implies that the King must be deemed competent to also specify, in execution of the aforementioned Article 57 and for the purposes of control operations, the activities of the companies concerned and their statutory regime (5).

(NOTE 4: Indeed, the text of the draft law programme, as submitted for opinion to the Council of State, charged the King, not only with organizing the control of the companies concerned, but also with fixing the status of said companies (Parl. Doc., Chamber, 1996-1997, Nos 1206/1 and 1207/1, p. 67).

(NOTE 5: This consideration finds confirmation notably in the circumstance that various provisions of the draft concerning the statutory regime and the operation of mutual guarantee societies provide for an obligation to notify the control body, namely the Insurance Control Office.

Approached from this angle, the regime in draft finds in principle and without prejudice to the observations formulated below, a sufficient legal basis in Article 57 of the Law Programme of 10 February 1998.

General Observations

Pursuant to Article 2, § 2, of the draft, the regulation in draft applies to cooperative societies that act as guarantors, in accordance with the provisions of Articles 2011 to 2039 of the Civil Code, for a member, in order to facilitate the latter's access to credit.

To this end, the authors of the draft equip the companies concerned with a sui generis status which, regarding its technical aspect, draws inspiration from the Law of 9 July 1975 on the control of insurance companies, the provisions of which are moreover reproduced in the draft in an adapted or unadapted form.

The Council of State, Legislation Section, notes that the activities of mutual guarantee societies present at least points in common with traditional insurance activities (6).

(NOTE 6: The explanatory statement of the draft which became the Law Programme of 10 February 1998, highlights, regarding the provisions of the future Article 57, that ".. (these societies) provide both guarantee insurance and guarantees as provided for in the Civil Code" (Parl. Doc., Chamber, 1996-1997, Nos 1206/1 and 1207/1, p. 36). Neither the text of Article 57 of the law nor the regulation in draft explicitly refer to this distinction.)

This finding is based notably on the fact that, regarding the technical aspects of the regulation, these are largely parallel to those of the aforementioned Law of 9 July 1975. Note in particular the provisions of the draft relating to the solvency ratio, technical provisions, and representative values (Articles 26 to 42). The provisions relating to control also clearly draw inspiration from the Law of 9 July 1975 (see for example Article 44 of the draft regarding the consultation of an approved actuary).

Given the short deadline imposed on the Council of State, Legislation Section, to render its opinion, it was not possible to precisely situate the activities covered by the draft in relation to traditional insurance activities. It does not seem, however, that it can affirm, obviously, that there is an intrinsic difference between certain activities of mutual guarantee societies and the insurance activities regulated by the Law of 9 July 1975.

The authors of the draft would therefore do well to precede the regulation in draft with a report to the King indicating, inter alia, precisely what the difference consists of between these activities of the aforementioned societies and those of an insurance company within the meaning of the Law of 9 July 1975.

It must not be forgotten, in fact, that if the draft itself were to regulate insurance activities, it would be necessary to comply with European directives on insurance. Furthermore, the question would arise as to how the draft, which intends to establish specific regulation regarding the companies covered by it, reconciles with the principle of equality enshrined in the Constitution, insofar as this regulation differs from that applicable to other insurance companies.

The above observations are all the more pertinent if one takes into account that the draft apparently does not limit itself to the guarantees that the companies concerned can perform under Articles 2011 to 2039 of the Civil Code, but on the contrary, reference is also made to the "other activities" of these companies (see Articles 5, 43, and 63 of the draft).

2.1. Certain provisions of the draft delegate regulatory power to a Minister. Such delegations can in principle only be deemed admissible if they concern accessory or complementary measures necessary for the execution or application of a regulation that the King has himself enacted.

Certain delegations of competence made to the Minister in the draft can hardly be deemed to concern an accessory or complementary measure (cf. Article 41 concerning annual accounts and bookkeeping, and Article 66, § 8, concerning the simplification of the procedure before the Council of State).

2.2. Various provisions of the draft delegate competences to the Insurance Control Office. Some of these competences seem to be of a regulatory nature. Such competences can in principle not be delegated to public establishments. However, given the high technicality of the subject matter concerned and the circumstance that the draft precisely aims to implement a control regime regarding mutual guarantee societies, the delegation of regulatory competence to the Control Office can be admitted on an exceptional basis.

To ensure a good understanding of the regulation and to facilitate its accessibility, it is important, on the one hand, to ensure the readability of the provisions, and on the other hand, to ensure that internal references are made with the necessary precision. This recommendation is all the more imperative if the regulation presents a high level of technicality, as in the present draft. It must however be noted that the latter is susceptible to improvement regarding the aforementioned points. Without wishing to be exhaustive in this regard - which would be impossible for it, given the deadline imposed to render the opinion - the Council of State, Legislation Section, will indicate some shortcomings that the draft contains on this subject.

3.1. It is preferable to split into autonomous sentences sentences such as those appearing, inter alia, in Articles 22, third dash, 33, paragraph 2, and 39, § 2, 3°, paragraph 1, of the draft, and this for better understanding. On this occasion, it will also be necessary to verify whether there is not a need to insert certain words, which have disappeared in the text of the draft as submitted for opinion (see for example the Dutch text of Article 33, paragraph 2).

3.2. Erroneous internal references harm the readability of the draft and consequently legal certainty. Many internal references are however incorrect in the text submitted for opinion.

Thus, for example, Article 35, § 3, erroneously refers to "the preceding paragraph", it is unclear what exactly the reference to "paragraph 2, point 2 of this section" appearing in Article 39, § 2, 3° and 4°, refers to, the terms "to the two preceding paragraphs" in Article 53, 2., third dash, are obscure and it is necessary to refer in Article 77, at least regarding the Dutch text, to "de in dit besluit bedoelde voorlopige toelating" instead of "de in dit artikel bedoelde voorlopige toelating".

Examination of the Text

Preamble

After the first paragraph of the preamble, it is appropriate to reorganize the subsequent paragraphs as follows:

"Given the urgency, motivated by the circumstance that.. (textual reproduction of the special reasoning as it appears in the letter of 21 January 1999); Given the opinion of the Council of State, given on 21 January 1999, in application of Article 84, paragraph 1, 2°, of the coordinated laws on the Council of State;".

In the Dutch text, it is appropriate to begin the proposal formula with the words "Op de voordracht van..". It is also necessary to write ".. van de Kleine en Middelgrote Ondernemingen,..", instead of "van de Middelgrote Klassen".

Article 1. 1. It is appropriate to begin Article 1 as follows: "Article 1. For the application of this decree..". One will then write in the following articles: "Art. 2", "Art. 3"., "Art. 4"., each time omitting the colons.

From a legislative perspective, it is recommended to number the different definitions in Article 1 "1°", "2°", "3°", ...).
It is appropriate to define the notion of "guaranteed member" as follows:

"The independent person or the small and medium-sized enterprise, referred to in Article 2 of the Law Programme of 10 February 1998 for the promotion of independent enterprise, for whom the society acts as guarantor".

In the definition of the "Guarantee Fund", the laws concerned must be cited with their full title. In the definition of the "Participation Fund", it will suffice to write ".. constituted by the aforementioned Law of 4 August 1978";
The definition of the "European Investment Fund" must be reviewed: instead of defining the activities of the fund concerned, it is necessary to refer to the normative text that established the fund.

Art. 3. 1. For the sake of terminological uniformity (see Articles 17 et seq. of the draft), it is appropriate to write at the end of Article 3, § 1, of the Dutch text: ".. vooraf door de Ministers te zijn toegelaten".

Regarding the nullity referred to in Article 3, § 3, it is appropriate to note that if the nullity of an act can only be prescribed by law or under its authority, Article 57 of the Law Programme of 10 February 1998 - in its generality - cannot however be deemed sufficient to establish such a sanction.

Art. 5. 1. In Article 5, § 1, it is preferable to replace the word "s'intéresser" appearing after the fourth dash with "participer".

To the extent that Article 5, § 3, refers by "these activities" to all activities other than those enumerated in Article 5, § 1, it is preferable, for the sake of clarity, to mention this expressly in the first provision invoked.

Art. 7. It is necessary to write in the Dutch text: ".. voor zover geen enkele kredietinstelling afzonderlijk een meerderheid kan vormen".

Art. 9. 1. For the sake of clarity, it is appropriate to write in Article 9, paragraph 2, ".. qui se trouvent dans l'un des cas définis à l'article 90, § 2, de la loi du 9 juillet 1975..".

Article 9, paragraph 4, provides that Article 9 is applicable "from the entry into force of this Royal Decree". The Council of State, Legislation Section, does not perceive the necessity of maintaining the concerned paragraph, which does not seem to add anything per se to the regulation in draft.

Art. 11. For the sake of clarity, it is appropriate to complete Article 11 with the words "and its implementing decrees".

Art. 12. 1. In Article 12, § 1, paragraph 1, reference is made to the project of "holding directly or indirectly, a qualified participation in a company". A similar formula also appears in paragraph 4 of Article 12, § 1. The Council of State, Legislation Section, questions the necessity of mentioning the "direct" or "indirect" nature of the participation, this being inherent in the notion of qualified participation as defined in Article 11 of the draft.

Article 11 of the draft also specifies that the qualified participation may consist in being able to "exercise significant influence on the management of the company in which a participation is held". The question arises as to whether this has been taken into account sufficiently during the drafting of Article 12, § 1, paragraph 1, where only the "percentage of this participation" is mentioned.
In the Dutch text of Article 12, § 1, paragraph 4, it is appropriate to write: "Iedere natuurlijke persoon of rechtspersoon die het voornemen heeft..". Moreover, it is preferable to replace, in the same paragraph, the words "af te stoten" with the words "te vervreemden".
In Article 12, § 2, paragraphs 1 and 2, reference is made to the "competent court, sitting in summary proceedings".

If the intention of the authors is to set up a particular judicial procedure, this cannot fall within the competence of the King as defined in Article 57 of the Law Programme of 10 February 1998. At most, the King can be deemed to refer to measures that can already be required by the control body within the framework of common law summary proceedings.

Art. 13. In the Dutch text of paragraph 1, it is necessary to write: ".. van de verwervingen of vervreemdingen van deelnemingen..".

Art. 17. For the sake of clarity, it is appropriate to draft the beginning of Article 17 as follows: "The request for approval accompanied by the documents and information referred to in Article 19, § 1, Is addressed to the control body. The request is signed by the competent management body..".

In the last sentence of the Dutch text, it is appropriate to omit the word "vergezellende".

Art. 19. 1. The beginning of Article 19 should be stated as follows:

"Art. 19 § 1. Any request for approval..".

Pursuant to Article 19, § 1, 4°, c), of the draft, the activity program must indicate "the modes of reinsurance and the identity of the reinsurers".

Since it can be deduced solely from Article 69 of the draft with which institutions the societies are authorized to reinsure their risks, it can be envisaged, for the sake of precision, to insert in Article 19, § 1, 4°, c), a reference to the aforementioned Article 69. It is also appropriate to note that if they refer to Articles 2011 to 2039 of the Civil Code regarding the guarantees concerned, Article 57 of the Law Programme of 10 February 1998 and Article 2, § 2, of the draft do not allow determining the rules of private law according to which reinsurance "must operate".

Art. 20. In paragraph 3, it is appropriate to write: "No reference may be made, in the aforementioned documents, to the approval or control of the societies than.. to paragraph 1".

Art. 21. Regarding this provision, it is appropriate to refer to the observation made in this opinion regarding Article 66 of the draft.

Art. 22. The introductory phrase of Article 22 specifies that approval can only be granted to "companies of Belgian law". This limitation is in contradiction with European regulation concerning freedom of establishment and free movement of services.

Art. 24. 1. It is permissible to doubt that the "ex officio revocation" referred to in Article 24, § 1, 2°, of the draft also implies a motivated ministerial decree within the meaning of Article 24, § 1, 1°. If this is the case, it would be preferable to indicate this explicitly in 2.

Regarding Article 24, § 3°, it is appropriate to refer to the observation that this opinion formulates under Article 66 of the draft.

Art. 25. The "provisional approval" referred to in Article 25 is regulated in Chapter XI of the draft. For the accessibility of the regulation in draft, it would be preferable to indicate in Article 25: ".. indicating the companies approved and provisionally approved in application of Chapter XI".

Art. 26. Article 26 provides that the "transitional provision of Article 75 is applicable" to the case regulated in Article 26. Article 75 referring to Article 26, it seems superfluous to confirm in Article 26 that the transitional provision of Article 75 is applicable.

Art. 27. It is appropriate to draft the beginning of the introductory phrase of Article 27, 6° as follows:

6° indefinite-term securities and other financial instruments. They are not taken into account...

Art. 34. In the Dutch text of Article 34, 13°, it is necessary to write "..., in exceptional circumstances and for the duration thereof,..".

Art. 36. By analogy with the French text, it is necessary to indicate in the Dutch text: "For the application of the provisions of this section, it is...".

Art. 44. If, on this point, the intention is to draw inspiration from the Law of 9 July 1975, the Council of State, Section for Legislation, does not perceive why there is a derogation from Article 38 of that law insofar as it not only calls upon the company auditors referred to in the aforementioned Article 38, but also on "chartered accountants" for the purpose of external control. This observation also applies to Article 48, where accountants are also mentioned.

Art. 49. Article 49 governs the penalties applicable to infringements of Article 47 of the draft.

It results from Article 14 of the Constitution that the establishment of penalties is a matter reserved for the legislator. If the legislator wishes to delegate to the King his power of criminalization regarding the injunctive and prohibitive provisions that he designates, a law must expressly provide for this, and the legislator must furthermore fix the minimum and maximum rates of the penalty.

Article 57 of the Programme Law of 10 February 1998, from which the present draft draws its legal basis, does not fulfill - in its generality - the conditions enumerated, so that in accordance with the aforementioned principle of the legality of penalties, one cannot consider that it is within the competence of the King to regulate the penalties referred to in Article 49 of the draft.

Art. 52. Apart from the observation that Article 52, 3°, paragraph 4, has a general scope in that it undoubtedly aims at all decisions taken in application of Article 52 (7), it is necessary - regarding the possibility of recourse in question - to refer to the observation relative to Article 66 of the draft made in this opinion.

(NOTE 7: Consequently, the provision concerned should be removed from Article 52, 3°, and become a distinct paragraph 2 of Article 52.
Regarding Article 57, paragraph 2, of the draft, it is also sufficient to refer to the observation under Article 66 of the draft.

Articles 58 and 59. Article 57 of the Programme Law of 10 February 1998 does not provide the King with the required competence to introduce a particular rule of private international law or to decree the nullity of clauses relating to judicial competence.

Art. 62. Article 57 of the Programme Law of 10 February 1998 does not also provide the King with the competence to introduce a particular rule of asset allocation in the event of liquidation.

Art. 63. According to Article 63, the transfers in question can only take place for the benefit of "another company approved in Belgium". As in the case referred to in the observation relative to Article 23 of the draft, it seems that Article 63 can hardly be reconciled with EC law.

Art. 64. Article 57 of the Programme Law of 10 February 1998 does not confer on the King the competence to regulate the opposability of transfers by derogating from the Civil Code.

Art. 66. Article 66 of the draft governs a particular abbreviated procedure before the Council of State, Administrative Section, applicable when it is seized of a recourse provided for in Articles 21, 24, 52, 57 or 74 of the draft. However, this article raises various objections.

Thus, one cannot consider that the King is authorized by Article 57 of the Programme Law of 10 February 1998, and therefore without express legal authorization, to establish a procedural regulation derogating before the Administrative Section of the Council of State, thus derogating from the prescriptions established by or pursuant to the coordinated laws on the Council of State.

Furthermore, it is not easy to perceive the objective and reasonable grounds for granting the benefit of a shortened procedure to applicants introducing before the Council of State a recourse based on the regulation in draft before the Council of State to the prejudice of all other applicants who address themselves to it, whose recourses must be examined by the Council according to usual procedural rules and who, because of the shortened procedure regulated by the draft, would have to wait even longer for the ruling concerning them since the Council should examine in priority the recourses referred to by the draft.

The question of the existence of the aforementioned grounds arises all the more since the introduction of administrative summary proceedings before the Council of State by the Law of 19 July 1991, in the sense that since then, applicants have the possibility of obtaining a decision - even if only provisional - from the Council of State quite quickly within the framework of a suspension procedure or a request for provisional measures, such that the existence of the "simplified procedure" referred to in Article 66 of the draft is even less justified.

In any case, it results from the previous considerations that the question of the compatibility of the introduction of a particular procedure before the Council of State, Administrative Section, and the constitutional rules of equality and non-discrimination is not clarified in any way.

Finally, it is necessary that the authors of the draft become aware that the introduction, before the Council of State, Administrative Section, of a particular procedure derogating from the usual procedure for a specific matter would take place at the expense of the uniformity of the procedural regulation before this section of the Council of State and that the organization of the latter would be strongly affected.

Art. 70. The notion of the possibility of "collaborating in the broadest manner" mentioned in Article 70 is delimited insufficiently to be clear.

Art. 74. 1.1. In the Dutch text of Article 74, paragraph 1, of the draft, the term "ingetrokken" used in Article 24, paragraph 1, of the draft does not appear, but the term "herroepen" does. In the interest of terminological uniformity, it is recommended to always use the same term, as in the French text. Consequently, it is necessary to replace the term "herroepen" with the term "ingetrokken" in the Dutch text of Article 74, paragraph 1.

1.2. Also in paragraph 1 of Article 74, it will be necessary to specify exactly which "request" is involved.

Regarding paragraph 3 of Article 74, it will be sufficient to refer to the observation relative to Article 66 of the draft.

Articles 81 and 82. 1. From a legislative point of view, it is customary for the entry into force provision to precede the executory provision. It is therefore necessary to interchange Articles 81 and 82.

Regarding the entry into force provision, it must be noted that it confers on the regulation in draft a retroactive effect as of 1 January 1999.

The authors of the draft should ensure that such retroactivity can be maintained, it being understood that this is only admissible when there is a legal basis for this effect, that the retroactivity concerns a rule granting advantages - taking into account the principle of equality - or to the extent that this retroactivity is imposed to ensure the proper functioning of services, and that acquired situations are not, in principle, affected.

Final Observation

It is necessary that the draft be accompanied by a provision which, in application of Article 58, paragraph 1, of the Programme Law of 10 February 1998, will bring into force Article 57 of that law.

The chamber was composed of:

Messrs:

D. Verbiest, Chamber President;
M. Van Damme, J. Smets, Councillors of State;
G. Schrans, E. Wymeersch, Assessors of the Legislation Section; G. De Munter, Clerk.

The concordance between the Dutch version and the French version was verified under the control of M. M. Van Damme.

The report was presented by M. P. Depuydt, First Auditor. The note of the Coordination Bureau was drafted and explained by M. E. Vanherck, Registrar.

The President,
D. Verbiest.

The Clerk,
G. De Munter.

Links

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