Member Article

The Act of 21 December 2013 concerning the financing of small and medium-sized undertakings (the “Act”) was published in the Belgian State Gazette on 31 December 2013. The Act entered into force in 2014 and applies to all Credit Agreements that have been concluded since that date. The Act applies to all Credit Agreements entered into between an Undertaking and an EEA Provider of Credit. Such a Provider of Credit: (i) either has its commercial activities in Belgium or by any means, directs such activities toBelgium or several countries including Belgium; and (ii) offers credit agreements in the course of its Belgian activities.

Under the Act, a Credit Agreement is any agreement whereby a Provider of Credit grants or promises to grant to an Undertaking credit in the form of a loan. The Act excludes credit agreements subject to the Consumer Credit Act of 12 June 1991 or the Mortgage Credit Act of 4 August 1992.

A Provider of Credit under the Act is a natural or legal person or a group of suchpersons who grants credit in the course of their trade, business or profession,except a person or group of persons that offers or concludes credit agreements that are subject to an immediate transfer or assignment to a licensed creditor (as indicated in the credit agreement).

An Undertaking under the Act is: (1) any association and natural person or legal entity that permanently pursues an economic purpose or a profession and (2) that does not exceed more than one condition mentioned in Article 15 of the Belgian Companies Code. These conditions are that the Undertaking must not exceed:

• an annual average number of 50 employees;
• an annual turnover, excluding VAT, of €7,300,000; and
• a Balance Sheet total of €3,650,000.

If, during a financial year, an Undertaking has an average number of employees higher than 100, then it is always excluded from the Act’s scope.

Under the Act, a Credit Intermediary is defined as a natural or legalperson who is not acting as a creditor and who, in the course of their trade,business or profession, for remuneration:

1. presents or offers Credit Agreements to Undertakings; or
2. assists Undertakings concerning obtaining Credit Agreements; or
3. concludes Credit Agreements with an Undertaking on behalf ofa Provider of Credit.

The Act’s key provisions are:

1. Standard of behaviour

The Act requires that Providers of Credit andCredit Intermediaries act reasonably and in good faith in their dealingswith an Undertaking. All provided information must be correct, clear and unambiguous.

2. Background information

Providers of Credit and/or CreditIntermediaries must, before entering into a Credit Agreement, obtaininformation from the Undertaking (and, if applicable, the persons who are providingpersonal security) with regard to their (i) financial situation and (ii)ability to repay the credit.

3. Specific obligations owed to the Undertaking

In particular, the Provider of Credit is underthe following obligations:

3.1 The obligation to provide pre-contractualinformation

Before the conclusion of a Credit Agreement, theProvider of Credit and/or Credit Intermediary must provide an Undertaking witha pre-contractual information document.

3.2 The obligation to provide an explanation

Providers of Credit and/or CreditIntermediaries must provide an Undertaking, when they apply for credit, with a written explanation. This explanation must enable an Undertaking to assess which types of credit are suitable for its situation. The explanation must include theessential characteristics of the relevant Credit Agreements and the specificeffects they may have on the Undertaking.

3.3 The obligation to provide a copy of the draftCredit Agreement

Unless the Provider of Credit, at the time ofthe request, is unwilling to conclude the Credit Agreement with theUndertaking, the Undertaking must also be provided - for free – with a copy ofthe draft Credit Agreement.

3.4 Obligation of an information requirementupon a credit refusal

If a credit application is refused, then theProvider of Credit and/or the Credit Intermediary must inform the Undertaking whatare the main reasons for the refusal. AnUndertaking can also request a written document that outlines why the creditapplication was refused.

The Act states that a Provider of Credit orCredit Intermediary’s positive creditworthiness assessment does not imply a rightfor the Undertaking to obtain credit.

4. Providing advice

Providers of Credit and/or Credit Intermediariesare required to choose, the type of Credit Agreement that is most suitable forthe Undertaking, taking into account the Undertaking’s financial situation andthe purpose of the Credit Agreement. Incase a Provider of Credit infringes this obligation to provide advice concerningsuitability, the courts could order the Provider of Credit to change theexisting credit to a type of credit that is more suitable for the Undertaking.

5. Early repayment

Undertakings have the right at any time torepay the outstanding principal amount under a Credit Agreement. The Act restricts the early repaymentpenalties concerning credit that does not qualify as a “loan” (in which case Article1907bis of the Civil Code applies). As is the case under Article 1907bis of theCivil Code, early repayment and related fees may not exceed six months of interestover the repaid amount.

Under the Act, Providers of Credit andUndertakings remain free, however, to determine contractually the early repaymentpenalty in the event that the original credit exceeds € 1,000,000.

 

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