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06 July 2018 / article

Grand finale in replacing the merchant with the enterprise

Antonio, the merchant of Venice in Shakespeare’s famous play, describes the world as a stage where every man must play a part, and his “is a sad one”. It is a fate shared with the entire merchant notion in Belgian business law. The Act of 15 April 2018 on the reform of Belgian business law, set to enter into force on 1 November 2018, removes what was left of the concept of the merchant, further reinforcing the position of an enterprise concept. It also deals a final blow to the waning reign of the (Belgian) Code of Commerce.

Grand finale in replacing the merchant with the enterprise

In force since 1807, the Napoleonic Code of Commerce once compiled the entire body of rules applicable to merchants and their activities, and thereby effectively governed economic life. The qualification of a merchant pursuant to the Code of Commerce is done on the basis of an exhaustive list of activities, deemed objectively commercial. A significant number of economic activities are not included in that list, and performing them does not make one a merchant. This is how the liberal professions, agriculture, mining and other sectors were excluded from the application of commercial law.

Soon after its conception, the dismantling of the Code of Commerce began. In the beginning of this process, the position of the merchant concept as cornerstone of commercial law remained largely unscathed. It came under increasing pressure, however, in the second part of the twentieth century. Business law today is no longer centred around the merchant, but around ‘enterprises’. The specific definition of enterprise can vary, but it is broader than the notion of merchant and does generally not a priori exclude any sectors of the economy. It is therefore considered a more apt reference point for regulating contemporary economic activity and business.

In 2013, in an effort of re-codification, dispersed pieces of business law-related legislation were brought together, not in the Code of Commerce, but in a newly created ‘Code of Economic Law’. This Code starts from the concept of enterprise, instead of that of a merchant. If there was any hope left for a fresh start for the Code of Commerce, it vanished there and then.

From the outset, the Code of Economic Law made use of a general enterprise definition which applied to most enterprise references in its different books and in other legislation. This general definition used a functional criterion relating to the ‘durable pursuit of an economic purpose’, and left room for discussion.

When the Code of Economic Law saw the light of day in 2013, the concept of the merchant was still relevant in only a few areas: the competence of the Commercial Court, the applicability of bankruptcy legislation, the rules of evidence against and between merchants, and the presumption of joint and several liability for merchants bound by the same contractual obligation. A number of legislative reforms has eliminated, or is about to eliminate, each of these last remaining strongholds. The latest one puts the Code of Commerce out of its misery altogether.

Recent legislative reforms

First, by Act of 26 March 2014, the legislator has modified the Belgian Judicial Code, making the Commercial Court competent for adjudicating on disputes between and against ‘enterprises’. References to ‘merchants’, ‘commercial activities’ and ‘commercial companies’ were removed and/or replaced.

Secondly, with the Act of 11 August 2017, entered into force on 1 May 2018, the separate acts on bankruptcy and judicial reorganisation were abrogated. Their restated versions were inserted in a new ‘Book XX’ to the Code of Economic Law, titled ‘Insolvency of enterprises’. Before, the quality of merchant was a prerequisite for bankruptcy and a relevant criterion for application of the judicial reorganisation procedure. With the entry into force of Book XX, the debtor must no longer be a merchant, but an enterprise, to fall under the scope of these insolvency procedures.

When introducing Book XX to the Code of Economic Law, a new definition of enterprise was used, but solely for the purposes of this new Book. The new definition starts from the way an enterprise is organised, rather than from its activities. This provided more objective criteria. Under this new definition, self-employed persons, all(!) legal persons (except those of public law) and any other organisation having a purpose (or practice) of profit distribution, are enterprises. This includes non-profit associations (vzw/asbl), liberal professionals such as lawyers, auditors or architects as well as the companies through which they may be organised, and partnerships. They can henceforth all be declared bankrupt.

Act of 15 April 2018 on the reform of Belgian business law

The Act of 15 April 2018 on the reform of Belgian business law wipes out the last remaining traces of the merchant. It foresees a catch-all replacement of merchant references throughout Belgian law by references to the enterprise. It abolishes the difference between a ‘civil’ and a ‘commercial’ company. It transforms the Code of Commerce’s rules on evidence between merchants into evidence between and against enterprises, and inserts these rules in the Civil Code. It changes the name of the Commercial Court to the Business Court (Ondernermingsrechtbank/Tribunal de l’entreprise). This and a number of other changes are implemented through amendments to the Judicial Code, Civil Code, Code of Economic Law, Criminal Code and Companies’ Code.

Importantly, with the Act of 15 April 2018, the legislator has promoted the new and more objective enterprise definition first laid down in Book XX of the Code of Economic law as the new general definition. It applies to most (but not all) enterprise references in the Code as well as in other legislation. The old definition is reserved for specific books of the Code in view of compliance with EU directives on market practices and competition. The change in definitions has already taken effect on 1 May 2018, whereas most other provisions of the Act enter into force on 1 November 2018.

As referred to above, the new general enterprise definition includes partnerships (maatschap/société de droit commun). Among other consequences, partnerships will therefore be subject to registration with the Crossroads Bank for Enterprises, and will need to keep accounts in accordance with the Code of Economic Law.

Finally, the Act repeals almost all provisions of the Code of Commerce and changes its title to reflect its remaining contents: “Code on certain rights with regard to seagoing vessels and various provisions”. The Code of Commerce will thereby be no more as from 1 November 2018.

The Act of 15 April 2018 is no bolt from the blue. It fits within and forms the concluding piece of the process of dismantling the Code of Commerce and transferring the focus of business law from the merchant to a more modern enterprise concept. The Act also fits in the recent years’ modernisation effort of the legislator in all fields of Belgian law. Still within the realm of business law, big changes are on their way in company law, now that the draft new Companies’ and Associations’ Code was submitted to parliament last month.

Whatever the reason for the Act, we cannot but acknowledge the prophetic character of Antonio’s words. Perhaps his fate had been brighter were he known as the enterprise of Venice.

Man in suit holding a white pen

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