On 11 September 2024, the Moniteur Belge (Belgian Official Gazette) published a Royal Decree introducing yet another amendment to the pre-contractual information requirements for commercial cooperation agreements[1] under Belgium’s Disclosure Act, which is incorporated in the Belgian Code of Economic Law (“BCEL”). The Royal Decree, adopted on 19 August 2024, adds four new elements of information that must be provided to a prospective franchisee. This is the second modification to the pre-contractual disclosure requirements in Belgium this year.
The Pre-Contractual Disclosure Document under Belgian law
Belgian law requires grantors of commercial rights, such as franchisors, to provide grantees with a pre-contractual disclosure document (“DD”) at least one month before signing the agreement (Article X.27 BCEL). Earlier this year, the Belgian legislator revised the content of the DD to address concerns that the DD had become a too voluminous and complex document that failed to meet its purpose of informing the prospective franchisee of only the key contractual provisions and key business information. This reform formally entered into force on 1 September 2024.
Just ten days after the reform came into effect, another amendment was published in the Moniteur Belge. Article X.28, §2 BCEL allows the format and content of the DD to be determined by Royal Decree. Accordingly, the new Royal Decree introduces four additional mandatory disclosures that will be applicable to all agreements entered into after 1 March 2025.
Additional Disclosure Requirements
Under the new amendments, the DD must now include the following additional elements:
- Expansion plans: information on the expansion plans that the franchisor currently has in the commercial area that is relevant to the franchisee ;
- Licenses for competing points of sale: any applications for licenses to operate or establish wholly or partially competing points of sale in the commercial area that is relevant to the franchisee, provided that such information is available;
- Investment details: if it is customary in the network covered by the agreement to make regular investments, the information on these investments, including an estimate of the amounts to be invested;
- Forecast operating account: a forecast operating account covering a minimum period of three years so that the franchisee can draw up his own operating account.
The franchisor must also inform the franchisee of any existing exceptions relating to its exclusive rights. This mainly concerns the possibility (or lack of possibility) of identical or similar products or services being sold under the same brand name in points of sale located in the franchisee’s territory.
Legal Consequences of Non-Compliance
If the franchisor fails to provide any of the required information in the DD, the franchisee may challenge the validity of the agreement due to a “defect in consent” (“vice du consentement” or “wilsgebrek”) up to ten years after it was signed. A finding of such a “defect in consent,” will result in the agreement being declared null and void.
Franchisees are tempted to resort to litigation when their business performance falters, seeking to invalidate the agreement on the grounds of incomplete or incorrect pre-contractual disclosure. Compliance with the disclosure obligations is therefore particularly important. Grantors of commercial rights should thus ensure that their DD are updated in a timely manner.
Disclosure of a Forecast Operating Account
As seen above, a notable addition is the requirement for the franchisor to include a forecast operating account covering at least three years. Although this information is only an estimate and is not binding in nature, it must be presented with care to avoid challenges to the validity of the agreement.
Effective Date and Important Considerations
The new requirements will apply to all commercial cooperation agreements (including franchise agreements) signed after 1 March 2025. However, it should be noted that the DD must be provided at least one month before signing the agreement. Franchisors should therefore be mindful of the timeframe for presenting the DD to their prospective franchisee. For example, if a DD is provided on 5 February 2025, i.e., before 1 March 2025, for an agreement to be signed on 5 March 2025, the DD must already comply with the new disclosure requirements. Indeed, the relevant benchmark is the date of execution of the agreement, and not the delivery date of the DD. Franchisors should thus timely adapt their DD to the new disclosure requirements to avoid inadvertently running afoul of the new disclosure requirements.
Conclusion
These recent amendments to the BCEL reflect the importance that the Belgian legislator attaches to transparency in commercial cooperation agreements. With the new pre-contractual disclosure requirements, franchisors and other grantors of commercial rights must take timely action to review and update their DD to ensure compliance with the pre-contractual disclosure requirements.
[1] While the material scope of the Disclosure Law is larger than franchise agreements, we’ll refer hereafter for the sake of brevity to the relevant parties as the franchisor and the franchisee.
Pascal Hollander, IDI Country Expert for franchising in Belgium
Pierre Vermeire, IDI member
