Newsflash: Changes to the Belgian legal framework for specialized real estate investment funds
Newsflash: Changes to the Belgian legal framework for specialized real estate investment funds
(GVBF/FIIS) and regulated real estate companies (GVV/SIR) enter into force on 1 June 2019
Over the last few years, the Belgian legal framework for regulated real estate companies and specialized real estate investment funds has evolved quite significantly. The law of 2 May 2019 on diverse financial provisions introduces the latest set of reforms. These legislative changes enter into force as from 1 June 2019.
This news alert provides a summary of the key innovations.
1. New opportunities for joint ventures and certain partnerships
First of all, the legislative reforms identify a new type of entity that can opt for a statute as a specialized real estate investment fund. Going forward, it will be possible for investment vehicles in which investors, acting collectively, have the daily decision making power or control to opt for the statute as specialized real estate investment fund. Daily decision making power or control can be demonstrated by having the power to decide on investments and disinvestments, the appointment or dismissal of the asset manager of the determination of the maximum debt ratio of the investment vehicles. This innovation aims to make investments accessible to certain types of partnership structures
2. Reduced share capital requirements
The second amendment relates to reduced share capital requirements. Instead of EUR 1.200.000, the minimum capital for specialized real estate investment funds has been reduced to the amounts as determined in the Belgian Companies and Associations Code (i.e. EUR 61.500 for a public limited company).
The reduced minimum share capital does however not affect the obligation to hold a total real estate portfolio with a minimum value of EUR 10,000,000 at the end of the second financial year following its registration.
In addition, a few previously existing technical derogations have been abolished, bringing the new regime more in line with the Belgian Companies and Associations Code.
3. Supervisory powers of the FPS Finance
Furthermore, some clarifications have been made with regard to the competence of the supervisory authorities. Specialized real estate investment funds are registered with the Belgian Federal Public Service for Finance (FPS Finance). Once the entity is registered, the FPS Finance will supervise compliance with regulatory provisions. In this context, the FPS Finance can require entities to report on their compliance with regulatory provisions. In addition, in the event an auditor has knowledge of a breach (or facts indicating a breach), he has a duty to inform the FPS Finance without delay.
4. Modified rules for capital increase
Lastly, regulated real estate companies will be able to raise capital in cash without applying an irreducible priority allocation right for existing shareholders if the following two conditions are met cumulatively: (i) the capital increase must be executed within the limits of the authorized capital and (ii) the cumulative capital increases over the past 12 months do not exceed 10% of the capital at the moment the decision to raise (additional) capital is taken.