The main rules can be outlined as follows.

1. Annual corporate governance statement

As
from this financial year, each listed company must include in its annual
report a specific section on corporate governance, disclosing the
following information as a minimum:

• the corporate governance code applied by the company, as well as
  relevant information on any corporate governance practice applied
  beyond this code or any statutory obligation;


• the sections of
  this code from which the company departs and the reasons for doing so.
  The legislator has made the ‘comply or explain’ approach mandatory;


• a
  description of the main features of the company’s internal control and
  risk management systems in connection with the process of financial
  reporting;


• the shareholder structure on the balance sheet date
  and measures against hostile takeover bids: the holders of securities
  which grant rights of control, as well as a description of these rights;
  limitations on the exercise of voting rights under statutory law or the
  articles of association; rules governing the appointment and
  replacement of the members of the managing body and the amendment of the
  articles of association of the issuer; powers of the managing body, in
  particular as regards the ability to issue or buyback shares;


• the
  membership of the board and its committees and how they operate.

The act provides that a specific corporate governance code may be
made mandatory by Royal Decree. Discussions as to whether the Belgian
Corporate Governance Code 2009 can serve this purpose are ongoing. The
above obligations apply to companies whose shares are listed on the
public market Euronext Brussels.

Companies that do not have shares listed on the public market
Euronext Brussels, but do have other securities listed on the public
market Euronext Brussels or on the derivatives market of Euronext
Brussels NV, must only include in their annual report a description of
the most important features of the company’s internal control and risk
management systems in connection with the process of financial
reporting. Should their shares however be traded on a multilateral
trading facility (MTF), they shall also have to establish a
comprehensive corporate governance statement in their annual report,
with the exception of a description of measures against hostile takeover
bids.

2. The mandatory establishment of a remuneration committee

Companies obliged to establish an audit committee in accordance with
the act of 17 December 2008, must also establish a remuneration
committee as from the next financial year (new article 526 quater of the
Companies Code). This concerns companies with shares listed on the
public market Euronext Brussels.

The remuneration committee, of which a majority of the members must
be independent, should exclusively be composed of non-executive
directors. The board of directors must see to the fact that the
remuneration committee has the necessary expertise as regards
remuneration policy(1). The CEO participates to the meetings of the
remuneration committee in an advisory capacity each time the
remuneration of another executive is being discussed.

According to article 522 of the Companies Code, the remuneration
committee only has consultative powers and duties. The act imposes a
minimum set of tasks. The remuneration committee should at least take
charge of:

• proposing the remuneration policy for directors, members of the
  management committee, other executives of the company and persons in
  charge of the daily management of the company;


• proposing the
  individual remuneration of directors, members of the management
  committee, other executives of the company and persons in charge of the
  daily management of the company;


• preparing the annual
  remuneration report;


• explaining the remuneration report during
  the statutory shareholders’ meeting.

“Small” listed companies(2) are not required to establish a separate
remuneration committee. Their board of directors takes charge of the
tasks of the remuneration committee on the condition that at least one
of the directors qualifies as independent and that when the chairman is
an executive director, the role of chairman shall be taken over by a
non-executive director each time the board of directors exercises the
statutory duties of the remuneration committee.

3. The annual remuneration report

As of the next financial year, companies which have their shares
listed on the public market Euronext Brussels will have to include a
separate remuneration report on the remuneration of directors and
executives in the annual report. As of now, the following persons are
considered to be executives: the members of the management committee as
referred to in article 524bis of the Companies Code, the members of the
body of daily management and other executives of the company as
determined by law (notably the members of each committee involved in the
general management of the company and not organized as a statutory
management committee).

This report must at least include the information as listed in the schedule
to this Newsflash. For instance, the remuneration of the CEO(3) should
be disclosed individually and in a detailed manner. The same applies to
the individual shares and share options of the executive directors and
other executives.

The work’s council or other bodies of employee representation must be
informed of the remuneration report.

The statutory shareholders meeting approves the remuneration report
by way of separate voting.

These requirements also apply to a number of autonomous public
undertakings: NMBS, NMBS Holding, Infrabel, De Post, Belgacom and
Belgocontrol.

4. Deferral in time of bonuses

The Companies Code will also regulate the variable remuneration of
the executive directors, members of the management committee as referred
to in article 524 bis of the Companies Code, the members of the body of
daily management and the “other executives” of the company.

Criteria set for variable remuneration must not be arbitrary and must
be determined in advance, as well as being explicitly included in an
agreement or another document binding the company and the person
concerned.

Moreover, the paying out of the variable remuneration may only occur
if the criteria are effectively met.

The performance criteria need further to establish a deferral of
bonuses in time: at least one quarter of the variable remuneration must
be based on performance criteria measured over at least two years, while
at least another quarter must be based on performance criteria measured
over at least three years. Consequently, only half of the variable
remuneration for one performance year may be awarded on the basis of
criteria which are measured over the performance year itself.

The legal minimum deferral of bonuses in time does not apply if the
variable remuneration merely accounts for one fourth or less of the
annual remuneration of the person involved.

Companies may depart from these rules, subject to the prior approval
by the shareholders’ meeting.

These rules regarding the variable remuneration do not only concern
companies which have their shares listed on the public market ‘Euronext
Brussels’, but also apply to several autonomous public undertakings:
NMBS, NMBS Holding, Infrabel, De Post and Belgocontrol. Belgacom is
subject to the provisions applicable to listed companies.

The new regime applies as from the financial year which starts after
31 December 2010. As regards autonomous public undertakings, this regime
applies from the first financial year following the publication of the
act in the Belgian Official Journal.

5. Share-based remuneration

Furthermore, the act imposes a mandatory minimum ‘vesting period’ for
shares and share-based remuneration. Shares must not be vested earlier
than three years after they are granted and share options or other
share-based benefits must not be exercisable earlier than three years
after they are granted.

Companies may also depart from this rule provided that the prior
approval of the shareholders’ meeting has been obtained.

This rule applies to the same companies as the rule on variable
remuneration (see 4).

6. Limiting severance payments (golden parachutes)

As from the tenth day after the publication of the act in the Belgian
Official Journal, contractual arrangements executed or renewed with the
executive directors, members of the management committee, members of
the body of daily management or other executives of the company may no
longer freely determine the severance payment awarded to these persons
in the event of early termination of these contracts by the company. In
other words, the so-called ‘golden parachutes’ are being limited.

Severance pay should not exceed twelve months’ remuneration. If
however the severance pay exceeds twelve months’ remuneration or if it
is higher than eighteen months’ remuneration further to a recommendation
by the remuneration committee, this departure should be approved by the
very next ordinary shareholders’ meeting.

The proposal to depart from the aforesaid rule must be reported to
the work’s council or the employee representation thirty days before the
publication of the convening notice for the shareholders’ meeting.
These bodies may then issue an advice to the shareholders’ meeting.

This rule applies to the same companies as the rule on variable
remuneration (see 4), except that any departure from the rule by the
autonomous public undertakings may be authorized by the competent
minister.

7. Principle that bonuses are excluded for independent
directors

Independent directors may only receive variable remuneration if
approved in advance by the shareholders’ meeting. In the same way as for
severance payments, the work’s council or employee representation is
also involved.

This rule is applicable to contractual agreements with independent
directors executed or renewed as from the tenth day after the act has
been published in the Belgian Official Journal.

This rule has not been extended to autonomous public undertakings
which are not listed.

Emmanuel
Leroux, Advocaat/Avocat, Tel.: + 32 56 59 43 32, E-mail: emleroux@laga.be

(1)According to the Explanatory Memorandum, this
condition is fulfilled as soon as at least one member has a degree of
higher education and has at least three years experience regarding the
management of personnel or regarding the remuneration of directors and
executives of companies.

(2)Companies which, on a consolidated basis, meet
the following three criteria: (a) average number of employees not
exceeding 250 persons during the financial reported year; (b) balance
sheet total of less than or equivalent to 43.000.000 EUR; (c) annual net
turnover of less than or equivalent to 50.000.000 EUR.

(3)i.e. the chief representative of the executive
directors, the chairman of the management committee, the chief
representative of the “other executives” of the company or the chief
representative of the persons in charge of the daily management of the
company.