CHANGES IN SOCIAL SECURITY OBLIGATIONS FOR EU FOREIGN DIRECTORS OF BELGIAN COMPANIES
By Hubert André-Dumont and Martin Donaghy
According to article 3(1) of the Belgian Royal Decree No. 38 of 27 July 1967 on the application of the social security scheme for self-employed persons, agents of a company or association liable to pay Belgian corporation tax or Belgian tax on non-residents are irrebuttably presumed to pursue a professional activity in Belgium as self-employed persons.
As a result of this irrebuttable presumption, EU residents appointed as directors of Belgian companies have been presumed to be exercising a professional activity in Belgium as a self-employed person and have therefore had to subscribe to a social security scheme in Belgium and pay social security contributions in Belgium, without being allowed to prove that they already subscribe to another social security scheme in another EU Member State, and may therefore be paying social security contributions in two or more different Member States.
In its judgment dated 27 September 2012, the European Court of Justice, referred to by the Brussels Labour Appeals Court for a preliminary ruling under article 267 TFEU, considered that the Belgian legislation establishing this irrebuttable presumption was liable to lead to a definition of the location of an activity that does not correspond to the interpretation of the term "location" that would be made under EU case law, namely the interpretation of a word by considering its usual meaning in everyday language, and that it was therefore liable to be contrary to EU law. The European Court of Justice therefore held that EU law – in particular articles 13(2)(b) and 14c(b) of Council Regulation No. 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the EU Community, as amended by Council Regulation No. 1606/98 of 29 June 1998 and Annex VII thereto – precludes national legislation of a Member State to presume irrebuttably that management from another Member State of a company subject to tax in the first Member State has taken place in that first Member State.
Directors of Belgian companies who manage these companies from another EU Member State are therefore released from having to register with a Belgian social security scheme provided they prove that they already subscribe to a social security scheme in that other Member State and thus avoid having to pay social security contributions in both Member States.
CLOUD COMPUTING AND PERSONAL DATA
By Paul Van den Bulck
Cloud computing is often presented as an opportunity for companies to reduce their investment costs in computer infrastructure and only to pay an external service provider for consumption. Cloud computing varies from the provision of online processing and storage infrastructure (provision of remote data centers) to the supply of online software (messaging software, file management software, etc.) as well as the provision of online application development platforms. This model may be attractive, particularly for small and medium-size companies that do not wish, or do not have the means, to invest and to manage computer platforms or infrastructures. Generally speaking, this model is also interesting for file synchronisation.
Personal Data
Although the model may be attractive from a financial point of view, there are however several risks involved concerning personal data protection. This was recently highlighted in the opinion dated 1 July 2012, rendered by the European group reuniting the representatives of the different national authorities in charge of personal data protection (Group article 29). This opinion is shared by certain national authorities for personal data protection, such as the CNIL (National Commission Computer and Liberty) in France and the ICO (Information Commissioner's Office) in Great Britain. In substance, all these authorities underlined the two main risks related to cloud computing, namely:
- loss of control of personal data; and
- lack of transparency by the cloud computing service provider concerning the processing of personal data.
Personal Data Protection
Although the supplier of the cloud computing services is the best informed on the level of security of its services, on the flow of data generated between different services globally, on the identity of its subcontractors and so on, it is nevertheless its client, the person using the cloud computing services, who remains mainly liable for compliance with personal data processing regulations. In fact, it is the client who decides upon the purposes and means of personal data processing. The cloud computing service provider is in principle considered as a simple subcontractor.
The possible lack of balance of forces in negotiations between a small client and a large service provider does not exonerate the client from its liability concerning personal data protection. The client must obtain from the service provider, in a written contract, all assurances for compliance with personal data protection regulations. Particularly important among these are compliance with data integrity, confidentiality, transparency towards data subjects, data isolation, intervention on behalf of data subjects and portability. The client must also ensure that it has the means of checking, for example by means of an audit, the compliance by the service provider with all its obligations.
Subcontractors of the Cloud Computing Service Provider
The client must also ensure that the obligations which are incumbent upon the cloud computing service provider are not weakened by the fact that the latter itself uses subcontractors. The client therefore must contractually ensure, in particular, that:
- the service provider only subcontracts with its agreement;
- the subcontractors are identified; and
- the service provider obliges its subcontractors to comply with all the obligations that the service provider is subject to.
Transfers Abroad
Cloud computing infrastructures are generally spread out geographically and therefore personal data is transferred. This does not cause any problem within the European economic area (European Union, Norway, Iceland and Liechtenstein) or when the transfers take place to other countries which are presumed to offer adequate data protection. Things are different beyond the European economic area and these countries. The client should therefore be sure to check that its cloud computing service provider is also bound by contractual clauses or by binding company rules ensuring an adequate protection in case of the transfer of personal data outside the European economic area or to a country not offering an adequate level of protection.
CONVERSION OF BELGIAN BEARER SECURITIES TO BE TAXED AT AN INCREASED RATE OF 2%
By Timothy Speelman and Michiel Gevers
The Act of 15 December 2005 on the abolishment of bearer securities prescribes that they must be converted into registered or dematerialised securities before 31 December 2013.
In order to encourage investors to convert bearer securities before the 2013 deadline and inspired by the Belgian Federal Government's attempt to meet budgetary objectives, a conversion tax was introduced by the Act of 28 December 2011 on the conversion of bearer securities in accordance with the Act of 15 December 2005.
Conversion Taxes
Since 1 January 2012, conversion of bearer securities is taxed at a rate of 1%, to be increased to 2% for conversions taking place in 2013. Securities expiring before 1 January 2014 (i.e. mainly corporate bonds) are exempt from these conversion taxes.
The conversion tax is calculated on the date on which the securities are deposited by the entitled party on the following basis:
- for listed securities: on the last price preceding the deposit date;
- for nonlisted securities representing receivables: on the principal amount of the receivable;
- for participations in open-end investment funds: on the last inventory preceding the deposit date; and
- for other securities: on the estimated book value of these securities (interests excluded).
These taxes must be paid (i) by the professional intermediary for securities to be dematerialised and (ii) by the issuing company for securities to be converted into registered form.
Conversion Formalities
Conversion into registered securities is the simplest option. The entitled party requests the issuer to convert its bearer securities into registered form and delivers these securities to the issuer. Conversion is effective as from the date it is recorded in the relevant register (e.g. share register, bond register), which must be done by the issuer within five working days following a valid request. The articles of association do not necessarily need to be changed, but it is advisable if they do not foresee that the securities are in registered form.
Conversion into dematerialised securities requires the articles of association of the issuer to explicitly mention its securities can be in dematerialised form, including the date from which the bearer securities registered on a securities account are considered to be dematerialised. In addition, the issuer must make arrangements with a depository participant (i.e. a certified account holder [e.g. a bank] or a clearing institution). The conversion date and identity of the depository participant must be published in the Belgian Official Gazette, in two national newspapers and on the issuer's website. Once these formalities have been complied with, bearer securities will automatically be dematerialised as of the conversion date or the registration on a securities account (if this is after the conversion date).
Noncompliance by Year-end 2013
Bearer securities that have not been converted by 31 December 2013 will be converted by law into dematerialised securities and must be registered by the issuer on a securities account in its own name. In the case that the issuer's articles of association do not provide the required wording for issuing dematerialised securities and/or if the issuer did not make arrangements with a depository participant, these securities will be converted by law into registered form and are to be recorded by the issuer in the relevant register in its own name.
Such registration in the issuer's name does not grant the issuer the capacity as owner. The rights attached to those securities are suspended until registration in the securities account or in the register in the name of the entitled party.
As from 2015, securities of which the entitled party remains unknown must be sold by the issuer. The consideration for these securities or the securities itself (if these have not been sold by 30 November 2015) will be deposited with the Official Receiver (Deposito- en Consignatiekas / Caisse des Dépôts et Consignations) and can be claimed back by the entitled party providing evidence of ownership. A fine of 10% of the consideration of these securities or their counter value per year (as from 31 December 2015) applies. In addition, the Official Receiver must communicate the identity of the entitled party to other government institutions.
BELGIUM INTRODUCES COVERED BONDS
By Hubert André-Dumont and Martin Donaghy
On 3 August 2012 Belgium enacted a law creating a legal framework for Belgian covered bonds (the Law), thus joining the numerous European States that have already legislated on the matter. On 17 October 2012, two royal Decrees were issued to implement the new law.
Covered bonds are bonds issued by a credit institution covered by security consisting of a pool of collateral, granting investors a claim against (i) the issuing institution in the first instance and (ii), in the event of failure of the latter, a priority claim on the cover pool.
The Law introduces a complete "on balance sheet" system without the need for a special purpose issuing vehicle: the assets covering the bonds are ringfenced on the issuer's balance sheet into a special estate and dedicated by law to secure the related bonds. The issuer's general estate includes all assets not allocated to a special estate. Belgian covered bonds may only be issued by a credit institution that is established in Belgium and that has been authorised in advance by the National Bank of Belgium to issue Belgian covered bonds and for each issuance of such bonds, which are officially called "Belgische covered bonds" or "covered bonds belges".
The assets that can be used as collateral for covered bonds include (a) residential and commercial mortgage loans on properties situated in a Member State of the European Economic Area; (b) loans to — or secured by — public authorities or public entities in OECD countries and international organisations; (c) shares in securitisation vehicles investing mainly in mortgages or public sector loans in the same categories as (a) and (b) above; (d) loans to credit institutions in OECD countries; and (e) derivatives relating to Belgian covered bonds or eligible assets. The cover pool can include assets in each of these categories, but at least 85 per cent of the nominal amount of the covered bonds must be covered by assets of categories (a) and (b) above. The value of the asset pool must always cover at least 105 per cent of the nominal value of the covered bonds.
Belgian covered bonds entitle holders (and other creditors linked to an issuance of Belgian covered bonds, e.g. a swap counterparty) to claim against the assets in the relevant special estate. They are also entitled to claim against the general estate. The issuer's other creditors, however, only have a claim against the general estate, as long as the Belgian covered bonds holders have not been fully reimbursed.
The new Law will allow Belgian credit institutions to use the loans on their books to obtain financing at reasonable conditions and will enable Belgium to catch up with other EU states, such as its neighbours France, the Netherlands, Germany, Luxembourg and the United Kingdom, in the area of covered bonds.
SOCIAL MEDIA – TIME TO TAKE CONTROL?
By Andrea Ward
The time to ignore social media has long since passed. With new technology and social media developing all the time (Myspace is due a relaunch), employers need to keep up and keep control of their employees' online habits at work and in some cases at home, if they are to limit potential claims for discrimination or harassment and damage to reputation.
The development of bring your own device (BYOD), which enables employees to use their own smartphones, tablets and laptops for work, is another potential cause for concern, and raises the obvious question: how do employers control the use of social media, personal emails or text messages, when employees are using their own equipment for work and personal use?
Employers need to set the tone and standards of behaviour for the use of social media and reserve the right to take action as necessary to deal with any incidents.
A good social media policy is linked to other company policies (on discipline, equal opportunities, IT security and acceptable use of company equipment), is essential. The policy should guide employees on what they can and cannot do online and inform them of the risks of non-compliance. Online bullying and harassment of other employees through the use of social media is an area of increasing concern for employers, as they may be vicariously liable under the Equality Act 2010 (the Act) if employees' behaviour constitutes discrimination, harassment or victimisation, on protected grounds, such as sex, race or age.
To be liable, the act must be done 'in the course of employment.' In this context, it could easily encompass the use of smartphones to access Facebook at work, sending colleagues lewd or abusive messages on BlackBerry Messenger or adding to a Twitter feed during a breakout session at an industry conference.
There is a potential defence to claims under the Act, if the employer can establish that reasonable steps were taken to prevent this type of behaviour. Having a social media policy, conducting regular training of staff and reviewing policies to keep up with developments in technology and new online trends are ways in which employers can establish this defence, but they also need to address the behaviour and react appropriately when it occurs.
Employers should remind employees that their online activities may not be private, especially if they infringe the rights of others. In particular, employers investigating bullying and harassment online may obtain and use evidence of abusive comments, as part of a disciplinary investigation, as they are often publicly available, or brought to their attention by other employees or third parties. Facebook has led to several high-profile cases involving employees who breached company codes of conduct and policies on social media, equal opportunities and harassment. Twitter, as a forum for instant publication of comments and live streaming of retorts, has the capacity to cause real damage, if it is not carefully controlled.
Employees should also be aware that they themselves may be sued (with their employer) as an individual respondent in an employment tribunal claim, brought by their victim. In extreme cases, they may also face civil proceedings for harassment or even criminal proceedings for malicious communications.
Above all, employees should be warned that they may face disciplinary sanctions for misuse of social media, whether they are at work, or not, if their actions breach company policies, bring the company into disrepute or cause harm to others.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
