CPEffective Insolvency and Creditor Rights Systems
PricewaterhouseCoopers' European Restructuring and Insolvency Guide 2005/2006 lists three procedures available to insolvent companies in Belgium: judicial composition, bankruptcy, and judicial or voluntary winding-up. The purpose of winding-up and bankruptcy is to liquidate bankrupt enterprises that have no chance for recovery, whereas a judicial composition helps recover assets of companies that still have potential and a chance to be economically viable. The country's insolvency framework is governed by two acts: the Judicial Composition Law of July 17, 1997 and the Bankruptcy Law of October 8, 1997. Belgium has no specialized bankruptcy courts, and bankruptcy and judicial composition cases are supervised by the commercial court. In 2003, the European Commission's Expert Group reported that of the 41 Principles and Guidelines for Effective Insolvency and Creditor Rights Systems set forth by the World Bank, Belgium has fully adopted 8, almost fully adopted 20, partially adopted 9, and not adopted 4.
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NCInternational Financial Reporting Standards
In line with the European Commission's (EC) Regulation No. 1606 of 2002, listed companies in Belgium are required to use International Financial Reporting Standards (IFRSs) as endorsed by the European Union for preparation of consolidated accounts. As far as the options available for member states to permit or require international standards in other types of accounts for different types of companies are concerned, the 2008 EC report on the implementation of Regulation No. 1606 of 2002 asserts that Belgium requires IFRSs in the annual accounts of listed real estate investment companies and will consider permitting IFRSs in the annual accounts for other companies (listed and unlisted), once the tax and legal aspects of this decision are evaluated. Further, the use of IFRSs is permitted in the consolidated accounts of all other companies and is required in the consolidated accounts of credit institutions and investment firms. Companies that are not required to use IFRSs or choose not to use them follow the Belgian Generally Accepted Accounting Principles, which, according to a number of publications on the subject, differ from their international equivalents. However, as noted in the 2007 European Committee of Central Balance Sheet Data Offices, in December 2003 the Accounting Standards Committee (ASC) published the "Policy plan concerning the application of the IFRS Regulation and the convergence of the Belgian accounting law towards IFRS" with the objective of "adjusting" the Belgian accounting framework to IFRSs. As of June 2008, there is insufficient information publicly available as to the progress made in eliminating differences between the Belgian and international requirements.
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IIPrinciples of Corporate Governance
According to a 2002 study prepared by the international law firm Weil, Gotshal & Manges for the European Commission, the Belgian financial market is characterized by the use of bearer shares, the dominance of small and medium-sized companies, and strong ownership concentration. The corporate governance debate in Belgium centers around the separation between ownership and control, as well as the opposition between the controlling and the minority shareholders, as stated in a 2006 report by Bogaert and Peeters. On December 9, 2004, the Corporate Governance Committee (Committee Lippens) published the Belgian Corporate Governance Code, which is based on the "comply or explain" principle, replacing the 1998 Recommendations on Corporate Governance. Bogaert and Peeters note that the Code, which entered into force on January 1, 2005, has brought significant improvements to the Belgian corporate governance regime. While the Code applies to all Belgian listed companies, it also functions as a reference framework for all other companies. According to the International Monetary Fund's 2006 Financial System Stability Assessment, the Banking, Finance and Insurance Commission intends to review the current system of corporate governance applicable to financial institutions, with the aim of developing a modern framework that will empower financial institutions to put in place their own corporate governance structure. Nevertheless, there is insufficient information publicly available addressing Belgium's compliance with the Organization for Economic Co-operation and Development (OECD) Principles of Corporate Governance.
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IDInternational Standards on Auditing
On May 17, 2006, Directive 2006/43/EC of the European Parliament and Council came into force, requiring all statutory audits to be carried out on the basis of International Standards on Auditing (ISAs) as adopted by the European Commission. EU member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member States may impose additional requirements relating to the statutory audits of annual and consolidated accounts for periods expiring on June 29, 2010. Being a member of the European Union, Belgium has to transpose the Directive into national legislation and will therefore adopt ISAs in the required timeframe. According to the self-assessment prepared by the Institute of Public Accountants and Tax Consultants in Belgium (IEC), the Company Code of 2001 requires auditors to use the Belgian Generally Accepted Auditing Standards (GAAS) for statutory audits. Listed companies can be audited either in accordance with the Belgian GAAS or following ISAs. Per the 2007 IEC self-assessment, the IEC together with the Institute of Registered Auditors established a commission with the aim to converge the national auditing standards with ISAs.
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CPAnti-Money Laundering/Combating Terrorist Financing Standard
The Financial Action Task Force (FATF) conducted a mutual evaluation of Belgium's Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime against the FATF's 40+9 recommendations and special recommendations. The FATF published its findings in a 2005 report, in which it concludes that Belgium is compliant with 21 recommendations and special recommendations; largely compliant with 20; partially compliant with 6; non-compliant with 1; and one recommendation does not apply to Belgium. The report notes that Belgium's legal and oversight framework for AML/CFT is broadly consistent with FATF standards, due partly to the implementation, in January 2004, of the Second European Union (EU) Anti-Money Laundering Directive, which broadened the scope of money laundering predicate offenses beyond drug-trafficking to include the financing of terrorist acts or organizations. Nevertheless, there are some minor areas where Belgium's AML/CFT regime could be enhanced. Most importantly, the FATF report notes that Belgium's freezing and confiscation regime is generally insufficient to meet the FATF Recommendations, since the EU regulation on freezing terrorist assets (S/RES/1373 of 2001), to which Belgium is a signatory, does not apply to European terrorists. In addition, Belgium is only "partially complaint" with the FATF's recommendations relating to Designated Non-Financial Business and Professions (DNFBPs), due partially to limited staff resources, which prevents authorities from adequately monitoring AML/CFT legislation adoption by DNFBPs. According to a 2008 report by the U.S. Department of State, Belgium was expected to implement the Third EU Money Laundering Directive in December 2007. This Directive contains the requirement that all EU member states implement the FATF's recommendations. However, a June 2008 press release by the EU, reports that the European Commission has decided to pursue infringement procedures against 15 member states, including Belgium, for failure to implement the Third Anti-Money Laundering Directive in national law.
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CPCore Principles for Systemically Important Payment Systems
The domestic inter-bank payment systems in Belgium are the Electronic Large-value Inter-bank Payment System (ELLIPS), the Centre for Exchange and Clearing, and the Clearing House of Belgium. Of the three, only the ELLIPS has been explicitly classified as a systemically important payment system (SIPS) by the National Bank of Belgium in its 2007 Financial Stability Review. In its 2004 assessment of the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) system components, the European Central Bank concluded that the ELLIPS fully observed eight of the ten Core Principles for Systemically Important Payment System (CPSIPS) as defined by the Committee on Payment and Settlement Systems. It largely observed Principle VII and VIII. TARGET was replaced by TARGET2 in November 2007. The migration of TARGET member countries has taken place in groups of four. Belgium was part of the second group of countries that joined TARGET2 on February 18, 2008. With the adoption of TARGET2 by Belgium, the ELLIPS ceased to exist. With TARGET, the large value interbank payment systems of member countries were interlinked, but TARGET2 provides harmonized payment services under a single shared platform across its member countries. However, there is little information assessing TARGET2's compliance with the CPSIPS, except for a statement in the ECB's 2002 report on TARGET2, in which it indicates that the system is expected to fully comply with the CPSIPS. Despite the lack of information on TARGET2, it is generally believed that TARGET2 is an improvement over its predecessor and its component systems. Therefore, the level of compliance assigned to Belgium by the 2004 ECB assessment is maintained until TARGET2 is fully implemented in all its member countries and assessed against the CPSIPS.
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