Related Party Transaction Disputes in Belgium

Related party transaction disputes in Belgium arise when transactions between a company and its directors, shareholders, or affiliated entities are challenged as unfair, undisclosed, or harmful to minority interests. Belgian corporate law imposes strict procedural and substantive requirements on such transactions, and failure to comply can expose directors to personal liability and render transactions voidable. This guide covers the legal framework, conflict-of-interest procedures, grounds for dispute, enforcement mechanisms, and strategic considerations for international businesses operating in Belgium.

A related party transaction is any transaction between a company and a person or entity that has a significant influence over, or a close connection to, that company. In Belgium, the primary legislative framework is the Companies and Associations Code, known in Dutch as the Wetboek van Vennootschappen en Verenigingen and in French as the Code des sociétés et des associations, which entered into force in recent years following a comprehensive reform of Belgian company law. This code replaced the earlier Companies Code and introduced modernised conflict-of-interest rules aligned with European standards.

Under the current framework, related parties include directors, members of the supervisory board, shareholders holding a controlling or significant stake, and entities affiliated with any of these persons. The definition broadly mirrors the accounting standard IAS 24, which Belgian listed companies must apply when preparing consolidated financial statements. For unlisted private companies, the code sets out its own definitions, which are somewhat narrower but still capture the most commercially significant relationships.

The practical scope is wider than many foreign founders expect. A common mistake is assuming that only direct transactions with a director trigger the rules. In practice, transactions with a company controlled by a director';s spouse, a trust in which a director is a beneficiary, or a sister company within the same group can all fall within the related party perimeter. Identifying the full universe of related parties before structuring any intra-group transaction is therefore an essential first step.

Belgian law distinguishes between two main procedural tracks depending on the type of company and the nature of the transaction. For public limited companies, the NV or SA, the conflict-of-interest procedure under the Companies and Associations Code requires a director with a conflicting financial interest to declare that interest before the board deliberates, to withdraw from the deliberation and the vote, and to ensure that the declaration and the board';s reasoning are recorded in the minutes. The statutory auditor must also be informed and must include a description of the transaction in the annual report.

For listed companies, the rules are more demanding. The Belgian Corporate Governance Code, which applies on a comply-or-explain basis, and the mandatory provisions of the Companies and Associations Code together require that material related party transactions be approved by an independent committee before board approval. The committee must assess whether the transaction is in the company';s interest and whether the terms are consistent with normal market conditions. This assessment must be made available to shareholders.

Disputes most commonly arise when one or more of these procedural steps are skipped or inadequately performed. A director may declare a conflict but fail to withdraw from the vote. The board minutes may record the transaction without adequate reasoning. The independent committee may be constituted from directors who are not genuinely independent. In each case, the procedural defect creates grounds for challenge.

A non-obvious requirement is that the mere existence of a conflict of interest does not automatically invalidate the transaction. Belgian courts assess whether the procedural breach caused actual harm to the company. If the transaction was objectively fair and the company suffered no loss, courts have sometimes declined to annul it. However, the director responsible for the breach remains exposed to a damages claim regardless of whether the transaction itself is set aside.

The grounds on which a related party transaction can be challenged in Belgium fall into three broad categories: procedural non-compliance, substantive unfairness, and breach of fiduciary duty.

Procedural non-compliance is the most straightforward ground. If the mandatory declaration, withdrawal, and reporting requirements were not followed, any interested party - including a minority shareholder or the company itself - can seek annulment of the transaction before the competent commercial court. The action must generally be brought within a reasonable period after the claimant became aware of the defect, and Belgian courts apply general civil law limitation rules, which set a standard period of ten years for contractual claims and five years for tort claims, subject to shorter specific periods in certain contexts.

Substantive unfairness is harder to establish but potentially more powerful. A claimant must show that the transaction was not concluded at arm';s length and that the terms were materially disadvantageous to the company. Evidence typically includes independent valuations, comparable market transactions, and expert testimony. Belgian courts have shown willingness to scrutinise intra-group pricing, loan terms, and asset transfers where the economic substance suggests value was extracted from the company to the benefit of a controlling shareholder.

Breach of fiduciary duty arises under the general duty of care and loyalty that Belgian law imposes on directors. Directors must act in the company';s corporate interest, a concept that Belgian courts interpret as the long-term interest of the company as an autonomous entity, not simply the interest of the majority shareholder. A transaction that benefits the group at the expense of the subsidiary can therefore constitute a breach of duty even if it was procedurally compliant.

In practice, claimants often combine all three grounds in a single action to maximise their chances of success and to preserve flexibility as evidence emerges during proceedings.

Several categories of claimant can initiate proceedings in Belgium relating to related party transaction disputes. The company itself, acting through its board or through a special representative appointed by the general meeting, can bring a direct action against a director for damages. Shareholders can bring a derivative action on behalf of the company if the board fails to act, subject to the procedural requirements set out in the Companies and Associations Code. Individual shareholders can also bring a direct action for harm suffered in their personal capacity, distinct from harm suffered by the company.

The competent forum for most corporate disputes in Belgium is the commercial division of the court of first instance, known as the ondernemingsrechtbank or tribunal de l';entreprise. Belgium has specialised enterprise courts in each judicial district, and these courts have developed significant expertise in corporate law matters. For listed companies, the Financial Services and Markets Authority, the FSMA, also has supervisory powers and can investigate failures to comply with transparency and disclosure obligations relating to related party transactions.

Arbitration is available if the parties have agreed to it in the company';s articles of association or in a shareholders'; agreement. Belgian arbitration law, codified in the Judicial Code, is modern and arbitration-friendly. International arbitration under ICC or CEPANI rules is common in disputes involving foreign shareholders or cross-border groups. However, certain corporate law remedies - such as the annulment of a shareholders'; resolution - are considered non-arbitrable under Belgian law and must be pursued before the state courts.

For international businesses, a practical scenario worth considering is the following. A foreign parent company causes its Belgian subsidiary to enter into a service agreement on terms that are commercially favourable to the parent. A minority shareholder in the Belgian subsidiary challenges the agreement. The minority shareholder can bring a derivative action before the enterprise court, seek an expert valuation of the services, and claim damages equal to the difference between the contract price and the arm';s length price. If the parent is domiciled outside Belgium, Belgian courts can assert jurisdiction under EU Regulation 1215/2012 on jurisdiction and the recognition of judgments, provided the Belgian subsidiary is the defendant or the harmful event occurred in Belgium.

If you are navigating a related party dispute or seeking to structure a transaction to minimise litigation risk, contact info@vlolawfirm.com. We can help structure the setup correctly the first time.

Belgian courts have a range of remedies available in related party transaction disputes. Annulment of the transaction is the most drastic remedy and requires the claimant to demonstrate both a procedural or substantive defect and a causal link to harm. Courts may decline to annul a transaction if third parties have acquired rights in good faith or if annulment would cause disproportionate disruption. In such cases, damages are the primary remedy.

Damages claims against directors are assessed on the basis of the loss actually suffered by the company or the shareholder. Belgian law does not generally permit punitive damages, so the award is compensatory. However, where multiple directors are jointly responsible for a breach, they can be held jointly and severally liable, which significantly increases the practical exposure of each individual director.

The statutory auditor plays a distinctive role in the Belgian enforcement ecosystem. Under the Companies and Associations Code, the auditor must report on related party transactions in the annual report and must flag any transactions that were not conducted at arm';s length or that were not properly disclosed. An auditor who fails to report a material related party transaction can face professional sanctions from the Institute of Registered Auditors, the Instituut van de Bedrijfsrevisoren or Institut des Réviseurs d';Entreprises. In practice, the auditor';s report is often the first document that minority shareholders or creditors examine when investigating potential misconduct.

A second practical scenario illustrates the enforcement dynamic. A Belgian family-owned NV has three shareholders: two family members holding a combined majority and a private equity fund holding a minority stake. The majority causes the company to acquire real estate from a family trust at an above-market price. The statutory auditor flags the transaction in the annual report. The private equity fund commissions an independent valuation, which confirms the overvaluation. The fund brings a derivative action before the enterprise court, seeking damages equal to the excess purchase price. The court appoints a judicial expert to assess the market value. The directors who approved the transaction without following the conflict-of-interest procedure are held jointly and severally liable for the damages.

International businesses operating in Belgium through subsidiaries or joint ventures should treat related party transaction compliance as an ongoing operational matter rather than a one-time legal exercise. The most effective risk management approach combines clear internal policies, robust documentation, and proactive engagement with the statutory auditor.

Internal policies should define the company';s related party perimeter, set thresholds for transactions requiring board approval or independent committee review, and establish a process for annual disclosure. These policies should be aligned with the group';s global transfer pricing framework, since Belgian tax authorities and corporate law courts can both scrutinise intra-group pricing, and inconsistency between the two creates additional risk.

Documentation is critical. Belgian courts place significant weight on contemporaneous records showing that the board considered the transaction independently, obtained relevant information, and reached a reasoned conclusion. Board minutes that simply record approval without reasoning are a red flag. Independent valuations, fairness opinions, and comparable transaction analyses should be obtained and retained for any material related party transaction.

Many foreign founders underestimate the importance of the independent committee requirement for listed companies and for companies with a supervisory board structure. Constituting a committee from directors who have indirect connections to the counterparty - through shared investments, professional relationships, or family ties - is a common mistake that can invalidate the committee';s assessment and expose the entire approval process to challenge.

Transfer pricing documentation deserves particular attention. Belgium has adopted the OECD Transfer Pricing Guidelines and requires companies to maintain a master file, a local file, and, for large multinationals, a country-by-country report. While transfer pricing is primarily a tax matter, the same documentation can be used in corporate law proceedings to establish whether intra-group transactions were conducted at arm';s length. A well-maintained transfer pricing file therefore serves a dual protective function.

Finally, dispute resolution clauses in shareholders'; agreements and joint venture agreements should be carefully drafted. Specifying the forum, the governing law, and the language of proceedings in advance reduces uncertainty and can significantly affect the outcome of a dispute. Belgian law generally respects party autonomy in commercial matters, but certain mandatory corporate law provisions cannot be contracted out of, and any dispute resolution clause must be tested against these limits before it is relied upon.

What happens if a related party transaction in Belgium was not disclosed to the board?

Non-disclosure of a conflict of interest is a serious breach under the Companies and Associations Code. The transaction can be challenged before the enterprise court on grounds of procedural non-compliance, and the director who failed to disclose can be held personally liable for any resulting loss. Belgian courts do not require the claimant to prove that the transaction was substantively unfair - the procedural breach alone is sufficient to establish liability, though the quantum of damages depends on the actual harm suffered. In practice, non-disclosure also triggers scrutiny from the statutory auditor, who is required to report the matter. The reputational and regulatory consequences can be as significant as the legal ones.

How long does a related party transaction dispute typically take in Belgium, and what does it cost?

Proceedings before the Belgian enterprise courts typically take between one and three years from filing to a first-instance judgment, depending on the complexity of the case and whether a judicial expert is appointed. Appeals before the court of appeal add further time. Professional fees vary considerably depending on the size of the transaction, the number of parties, and the volume of evidence. For disputes involving material transactions, total legal costs on each side commonly run into the mid to high tens of thousands of euros, and expert fees add further expense. Arbitration can sometimes be faster and more cost-predictable, particularly if the parties have agreed to expedited procedures, but it requires a pre-existing arbitration clause.

Can a minority shareholder in a Belgian company block or reverse a related party transaction?

A minority shareholder cannot unilaterally block a related party transaction before it is concluded, unless the articles of association or a shareholders'; agreement give specific veto rights. After the fact, a minority shareholder can bring a derivative action on behalf of the company to seek annulment or damages, provided the procedural requirements for such an action are met. Belgian law also gives minority shareholders the right to request a special audit of specific transactions if they hold a sufficient percentage of the share capital, which can be a useful investigative tool before deciding whether to litigate. In addition, a minority shareholder who suffers harm distinct from the harm suffered by the company can bring a direct personal action.

Related party transaction disputes in Belgium involve a well-developed legal framework, specialist courts, and meaningful enforcement mechanisms. Compliance requires attention to procedure, documentation, and the independence of decision-makers - not just the economic terms of the transaction. International businesses that invest in robust internal governance reduce both their litigation exposure and the cost of resolving disputes when they arise.

VLO Law Firms advises international clients on corporate matters in Belgium. We can assist with conflict-of-interest procedures, transaction structuring, dispute assessment, and representation before Belgian enterprise courts. To request a consultation, contact: info@vlolawfirm.com