What are the key changes introduced by the new Belgian Companies and Associations Code?
Flexibility & competitiveness. Those two words summarize perfectly the motive for a new, better framework for companies & associations in Belgium.
The BCAC introduces major changes to the existing legal landscape, envisioning a more efficient, more attractive framework for businesses and their investors.
Limitation of company types in BCAC...
In the BCAC, 7 main types of companies with legal personality will remain: the NV / SA, the BV / SRL (replacing the BVBA / SPRL), the cooperative company (CV / SC), the partnership (VOF / SNC), the limited partnership (CommV / SComm), the European Company (SE) and the European Cooperative Company (SCE) (although the latter two are mainly governed by European law). The BV / SRL is intended to become the ‘default company’ in Belgian corporate law.
With respect to the cooperative company (CV / SC), it should be noted that many existing cooperative companies will have to be converted (into a BV / SRL), as the intention of the legislator is to limit the cooperative company to organisations with a truly cooperative spirit and functioning (click here for more information).
Other company types currently used will be abolished, including the partnership limited by shares (Comm.VA / SCA) and the temporary partnership (tijdelijke handelsvennootschap / société momentanée). The flexibility offered in the remaining corporate types should however allow to incorporate the key features of these abolished company types in one or more of the remaining ones.
...But also applicable to non-profit organisations
The BCAC will not only apply to Belgian companies, but also to non-profit organisations and foundations. Consequently, the current Act of 27 June 1921 on Associations & Foundations will be repealed.
The distinguishing feature between companies and non-profit organisations will no longer be the type of activities they can carry out, but whether or not they distribute the profits resulting from these activities. Whereas companies may of course distribute their profits, non-profit organisations are not authorised to distribute their profits directly or indirectly (e.g. through disproportionate remuneration paid to their directors).
In the future, non-profit organisations can therefore carry out all types of ‘commercial activities’, but will not be allowed to distribute the profits resulting from these activities (except for distributions to the non-profit cause for which they have been founded). To learn more about the changes for non-profit organisations, click here.
The BV/SRL as cornerstone of the new BCAC
The modernisation of the BVBA/SPRL into the BV/SRL (based on the Dutch ‘Besloten Vennootschap’) is perceived as one of the cornerstones of the BCAC. The intention of the legislator is indeed to turn the BV/SRL into the ‘default’ company type for most investors and corporations. To this effect, the BV/SRL is structured as a company type offering a large amount of flexibility in terms of governance, funding and distribution of profits. Some examples of this modernisation and flexibility include:
- The possibility for a BV/SRL to have only one shareholder (whether or not a legal entity). The sole shareholder-legal entity will not be jointly and severally liable for obligations and liabilities of the BV/SRL.
- The abolishment of the (minimum) corporate capital requirements in the BV/SRL.
- The corporate law implications hereof are vast and include, amongst others, entirely new rules on (a) dividend distributions (which will become possible at any time but will always be subject to a net asset test as well as a liquidity test) and (b) flexibility in the allocation of voting rights to shares (shares without voting rights, shares with multiple voting rights, …).
- The possibility to list the shares of a BV/SRL.
The transferability of the shares of a BV/SRL can be freely determined in the articles of association. A free transfer of shares will be possible. To learn more about the changes on the BV/SRL, click here.
The NV/SA: flexibility in terms of management structure
Since the importance of the BV/SRL has been increased significantly, the legislator envisioned that the use of the NV/SA should be limited to large corporations and listed companies. The NV/SA will therefore not have the same level of flexibility as the BV/SRL.
Compared to the current NV/SA, some important changes are to be noted, including:
- The possibility for an NV/SA to have only one shareholder without such shareholder becoming jointly and severally liable for the obligations and liabilities of the NV/SA.
- The introduction of a large degree of flexibility with respect to the governance of an NV/SA: an NV/SA will have the choice to opt for (i) a sole director governing the NV/SA, (ii) a monistic governance system whereby the NV is governed by a board of directors consisting of several directors or (iii) a dualistic system whereby the NV/SA is managed by a management board(directieraad/conseil de direction) and a supervisory board (raad van toezicht/conseil de surveillance).
- It will be possible to provide for notice periods and/or notice payments in case of termination of a director’s mandate. The ‘ad nutum’ rule will no longer be of public order.
It will be possible to issue shares with multiple voting rights. For listed companies, this flexibility will be limited to a double voting right for loyal shareholders who have owned their shares for at least two years.
A capped liability for directors of all companies
One of the most eye-catching novelties introduced by the BCAC relates to the introduction of a financial liability cap on the liabilities which directors (as well as de facto directors) may incur in the exercise of their mandate. The BCAC provides for capped amounts, varying between EUR 125,000 and EUR 12 million, depending on the size and activities of the company. These caps will apply on an aggregate basis for all directors of the company.
They will not apply (i) in case of recurring simple negligence (lichte fout die eerder gewoonlijk dan toevallig voorkomt / faute légère présentant dans leur chef un caractère habituel plutôt qu’accidentel), (ii) in case of gross negligence (zware fout / faute grave), (iii) in case of fraud or intent to cause damage (bedrieglijk opzet of oogmerk om te schaden/ d’intention frauduleuse ou à dessein de nuire dans le chef de la personne responsable), nor (iv) in case of a limited number of exceptions set out in the BCAC (including the liability of directors in case of unpaid corporate income tax, social security contributions or VAT).
With respect to director’s liability, the BCAC furthermore expressly rules out any hold harmless or exoneration undertakings by the company (or any of its subsidiaries) in favour of its directors. For more information on the changes for directors in the BCAC, click here.
Registered office as benchmark for determining applicability of Belgian company law
The BCAC introduces the “registered office” or statutory seat doctrine into Belgian law. Belgian company law will apply to any company whose registered office is located in Belgium. This should enable Belgium to export its own company law abroad and foreign companies to choose for a Belgian legal form by establishing their registered offices in Belgium, without the need to conduct business within the Belgian territory.
For the avoidance of doubt, the scope of the statutory seat doctrine is limited to corporate law. It does not apply to other fields of the law, such as insolvency law and tax. For a company to qualify as a resident for Belgian corporate income tax purposes for example, the head office (i.e. the place of effective management) must still be located in Belgium.
The BCAC entered into effect as of 1 May 2019. Companies incorporated as of that date are subject to the BCAC.
Existing companies are subject to the BCAC as of 1 January 2020. They have to amend their articles of association to the new BCAC at the occasion of the first (other) amendment of their articles of association after 1 January 2020 (subject to a limited number of exceptions) and, ultimately, by 1 January 2024.
The abolished company types (such as the partnership limited by shares (Comm.VA/SCA)) will have to be converted by 1 January 2024 at the latest. If not, they will be converted by law in a company type set out in the BCAC. For example:
- a partnership limited by shares (Comm.VA/SCA) will be converted into a NV/SA with one director; and
- a cooperative company with limited liability (CVBA/SCRL) will be converted into a BV/SR (unless it meets the requirements of a cooperative company in the new BCAC).
Click here for more information about the key dates for companies in the transition period.
Wim Vande VeldePartner Attorney at Law
Wim Vande Velde is a local partner in the Corporate and M&A Practice Group in Belgium. He has extensive experience in national and international M&A transactions for both listed and non-listed companies, as well as in corporate restructuring.T: +32 2 743 43 96 E: firstname.lastname@example.org