Does the new Belgian Companies and Associations Code bring opportunities for private equity and venture capital investors?
The BV / SRL as main investment vehicle
This Belgian legislator’s objective is most clearly reflected in the new-look private limited liability company (BV / SRL). Indeed, the BV / SRL is specifically structured to become the ‘default’ company for most investors and corporations, and offers a substantial amount of flexibility in terms of funding, governance and the distribution of profits.
New features of the BV / SRL that could be of interest to private equity and venture capital investors include:
- the possibility to issue various types of securities, including e.g. subscription rights (formerly known as warrants) and convertible bonds, following the abolishment of the numerus clausus principle. This offers investors additional options to spread their investment risk;
- the freedom to contribute labour and know-how to the BV / SRL. This could be of particular interest to founders or in the context of management incentive schemes (assuming a favorable tax treatment can be assured);
- the dismantlement of the “one share, one vote” rule, effectively enabling the issue of shares with multiple voting rights or without voting rights. It will also be possible to issue categories of shares with unequal profit rights/liquidation proceeds;
- the freedom to distribute profits at any given time, subject to a (i) net asset test, and (ii) liquidity test;
- the introduction of a specific share capital redemption mechanism (similar to the voluntary withdrawal system under the old CVBA / SCRL legal form), that could improve the liquidity of private equity/venture capital investments;
- the possibility to list the shares of a BV / SRL, e.g. as part of an exit strategy; and
- the freedom to determine the transferability of shares of a BV / SRL through the articles of association. A tailor-made or even free or non-transferability of shares in a BV / SRL will be possible.
The NV / SA as go-to company form for large corporations
The NV / SA company form, originally designed to serve as company form for large corporations and listed companies, will not benefit from the same level of flexibility as the BV / SRL.
Nevertheless, the BCAC introduces substantial flexibility with respect to the governance of the NV / SA. A NV / SA can henceforth be governed by (i) a sole director, (ii) a monistic governance system whereby the NV / SA is managed by a board of directors, or (iii) a (Dutch/German-inspired) dualistic governance system whereby the NV / SA is managed by a management board (responsible for the general operations of the company) and a supervisory board (responsible for the overall strategy and supervision of the management board). The latter governance structure in particular could offer interesting opportunities for private equity and venture capital investors.
Additionally, as is the case for the BV / SRL, the NV / SA will also be able to issue shares with multiple voting rights. This is arguably the main new feature for the NV / SA, taking into account that the BCAC did not provide for any limitations in this respect. Parties will thus be free to determine how they want to allocate voting rights. For listed companies, however, this will be limited to a double voting right for loyal shareholders who have owned their shares for at least two years.
The rewording of the societas leonina
Finally, and common to all company forms, the BCAC provides for a flexibilisation of the societas leonina by allowing a specific shareholder to be exempted from any losses. Going forward, it will be possible for investors to negotiate a put option that allows them to recover their entire contribution regardless of any losses incurred by the company. This new feature is likely to attract venture capital investors and to facilitate the financing of Belgian growth companies.