Friends’ Share

Published: 12 Apr 2021

Authors: Joost Peeters, Ruben Brosens en Simon Geens at STUDIO | LEGALE Advocaten in Belgium

After the easing of the win-win loan, the Flemish Parliament decided to approve the draft decree on the "Friends' share". This is a variant of the win-win loan.

Private individuals will be able to invest in the future of a befriended SME and at the same time benefit from a tax advantage. After all, to recover from the damage caused by the coronavirus, the Flemish government wants to activate the savings of private individuals and enable companies to acquire additional capital.

The decree amending the win-win loan was adopted by the Flemish Parliament on 25 November 2020. This measure entered into force on 11 February by means of the implementing decree of 22 January 2021.

Who can invest?

The shareholder and the issuing company must meet certain conditions.

According to the approved draft decree, the shareholder must meet the following conditions:

- he is a natural person who subscribes to a Friends' share outside the framework of his commercial or professional activities;

- he is not an employee of the issuer;

- neither he nor the spouse or legal cohabitant of the Friends' shareholder has been appointed or acts as a director, manager or in a similar capacity within the issuer;

- Neither he himself, nor the spouse or legal cohabitant of the Friends shareholder holds, directly or indirectly

• more than 10% of the shares or the voting rights of the issuer;

• rights or securities of which the exercise, conversion or exchange results in

• the threshold, mentioned in point a), being exceeded.

The company that is eligible to sell shares must meet the following conditions:

- the issuer has an operating office in the Flemish Region;

- the issuer is an SME;

- the issuer has legal personality;

- the issuer is not an investment, treasury or finance company;

- the issuer is not one of the following companies:

• a company whose statutory principal object or main activity is the creation, acquisition, management, conversion, sale or rental of real estate for its own account or the holding of participations in companies with a similar object;

• a company in which immovable property or other rights in rem in respect of such property are vested, of which natural persons who are appointed in the company or act as directors, managers or in a similar capacity, their spouses or their children, if such persons or their spouses have the legal enjoyment of the income of such children, have the use;

- the issuer is not a company formed for the purpose of concluding a management or directorship agreement or that derives its principal source of income from management or directorship agreements;

- the issuer is an unlisted company;

- the issuer has not carried out a capital reduction, repurchase of own shares or any other reduction or distribution of equity 24 months prior to the payment of the Friends' share;

- the issuer does not hold a direct participation in a company that is established in a state that is included in one of the lists mentioned in article 307, §1/2 of the Income Tax Code 1992, or a state that is included in the list mentioned in article 179 of the Royal Decree of 27 August 1993 in execution of the Income Tax Code 1992;

- the issuer does not make payments to companies established in one of the States referred to in point 9°, which cannot be demonstrated to have been made as part of genuine and sincere transactions resulting from legitimate financial or economic needs and which in total exceed EUR 100,000 per taxable period.

The company must comply with the conditions for 60 months after the Friends' shares have been paid up. In addition, the company may not reduce capital, buy back its own shares or make any other reduction or distribution of equity during this period.

Terms and conditions:

The Friends' shareholder receives newly issued shares in his own name in exchange for a cash contribution. He may not use the amounts borrowed or made available in the context of the win-win loan for the full payment of these shares.

The issuer may not use the amounts received from the friends’ share for paying dividends (including the distribution of cash reserves or the purchase of shares) or for making loans.

As with the win-win loan, the shareholder can invest up to 75,000 euros in a Flemish company and each company can raise up to 300,000 euros in capital. This limit applies to both the friends’ share and the win-win loan together.

The tax benefit is a tax credit of 2.5% during the period that the shares are held, with a maximum of five years. The credit is neither refundable nor transferable.

In order to protect the potential private shareholder in case of a capital increase or contribution, a report on the issue price of the shares will be prepared in accordance with company law. This report must have received a positive opinion from the auditor, a company auditor or an external accountant.

The application for the friends' share will, just like the win-win loan, have to go through PMV/z.

If you have doubts whether it is worthwhile to take a "friends' share" in your specific case, or if you have further questions on this subject, please do not hesitate to contact us for further questions and/or assistance. You can always reach us at telephone number: 03/216.70.70 or by e-mail at mail address:

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