Why a gap costs more than the thing it hides

A buyer's adviser reads your company in two columns. On the left, everything he can verify from a document. On the right, everything he has to take your word for. What lands on the left gets a number, gets priced, and is finished. What lands on the right gets a range, and he decides where the top of that range sits.

That is the whole economics of preparation, and it is worth being blunt about it. A documented item is a fact. It is priced once, in the price, and then it is closed. An undocumented item is an open question, and an open question is sized by the person across the table. He is not being unreasonable. He is paid to assume the expensive version until a document says otherwise.

How a Belgian process actually runs, which workstreams a buyer opens, and how a single finding turns into a price cut, a warranty, an indemnity or an escrow, we covered in due diligence in Belgium: what buyers look for. This one is narrower. Four files in the Belgian corporate file decide, before anyone has asked you a question, which column your company starts in. None of them is complicated. All four are cheap to repair while there is no buyer in the room, and unpleasant to repair once there is.

The share register

Start here, because the other three point back to it. Article 5:24 of the Companies and Associations Code requires an SRL/BV to keep a register of shares showing what has been issued, who holds what, what has been paid up, and the transfer restrictions in the articles.

Being in the register is not what makes a transfer valid. A share sale is valid between buyer and seller on signature. Entry in the register is what makes it enforceable against the company and against third parties, under article 5:61 for the SRL/BV and 7:74 for the SA/NV. So a register that stopped three transfers ago does not usually create a defect in your title. It creates an inability to prove your title, which for a buyer's lawyer is the same problem with a longer invoice attached.

What we find broken, in rough order of frequency:

• A founder left, the buy-back sits in a signed agreement, and nobody ever wrote the line into the register.
• A capital increase was done by deed, and the register still shows the pre-money holdings.
• Warrants or options were exercised and only the payroll file knows about it.
• The register is a spreadsheet with no dates and no signatures, so it proves nothing about when anything happened.

Fixing it takes an afternoon, plus confirmatory signatures where the history is messy. Those people are reachable today. In two years one of them will be in a dispute with you, abroad, or unwilling to sign without a lawyer.

The UBO filing

Since 2018 Belgian entities have had to register their beneficial owners, update the register within 30 days of any change and confirm the data every year, even when nothing has changed. The supporting document the register asks you to upload is usually a copy of the share register or the minutes of a general meeting.

Which means the UBO filing and the share register are two statements of the same fact, signed by the same person. Buyers pull the UBO extract themselves in the first week. If it says something your cap table does not, you spend your credibility explaining an administrative slip at exactly the moment you need that credibility for your EBITDA.

Your last three distributions

An SRL/BV has no capital in the old sense, so a distribution has to survive two tests. The net asset test in article 5:142 is the one everybody knows. The liquidity test in article 5:143 is the one that gets skipped: the governing body has to satisfy itself that the company will still be able to pay its debts as they fall due for at least twelve months after the payment, and it has to write that assessment down in a report.

That report is not filed anywhere and never becomes public. Which is precisely why, in a great many Belgian companies, it does not exist. Article 5:144 then says what happens: directors who knew or should have known are jointly liable for the resulting damage, and the distribution can be recovered from the shareholder who received it, good faith or not.

For a seller this is not a governance footnote. You are the shareholder who received the money and, in most cases, the director who signed off on it. A buyer who finds three years of dividends with no minutes and no liquidity assessment has found something that travels with the company and points personally at you. It comes back as a specific indemnity carved out of the general warranty package, and a specific indemnity is money you do not receive. We set out that mechanism in how to limit your liability when selling a company in Belgium.

Who actually owns the code

Article XI.296 of the Code of Economic Law presumes that the employer acquires the economic rights in computer programmes written by employees in the execution of their duties or on the employer's instructions, unless something else was agreed. It is also narrower than founders think.

It does not reach the freelance developer who built the first version, the agency that did the brand and the interface, the co-founder who wrote the prototype before the company existed, or anything that is not a computer programme. For all of those, the rights move only by assignment, and article XI.167 wants that assignment in writing.

So the question a buyer asks is not whether you paid these people. You paid them. The question is what the contract said, and a Belgian invoice transfers no copyright at all. The usual holes are the two freelancers around incorporation, the design studio, an employment contract that predates the product and never mentions development, and a trademark still registered in a founder's own name.

Four weeks, starting Monday

None of this needs a mandate or a data room. It needs four short weeks of attention while nothing is at stake.

• Week one. Reconstruct the share register from incorporation forward. Every issue, every transfer, every exercise, with a date and a source document for each line. Where a line has no document, write down whose signature you need.
• Week two. Open the UBO register, compare it line by line to the register you just rebuilt, correct it, upload the register as the supporting document, and do the annual confirmation.
• Week three. Pull every distribution decision of the last three financial years. For each one, find the general meeting minutes and the governing body's liquidity assessment. Where the assessment is missing, have your accountant document the position as it stood on the payment date, and stop deciding dividends without it.
• Week four. List everyone who has ever produced code, design or written material for the company. Mark the ones covered by XI.296 and chase a written assignment from the rest. Move any trademark or domain in a personal name into the company.

At the end of the month, four open questions have become documents. They get priced once, and then nobody mentions them again. For the wider list of what a buyer opens, the M&A checklist covers the rest of the file.

At dups we do this work with owners who are not selling yet, because that is when it is cheap. When a process does start, the same four files are already closed.