Belgian Companies and Associations Code: what are the key changes for (international) non-profit associations?
Right to carry out profit-making activities without limitation
Under the regime provided for by the Belgian law of 27 June 1921 (the Law of 1921), INPAs are prohibited from carrying out industrial or commercial operations unless the latter remain ancillary to their non-profit activities.
Under the BCAC, INPAs are entitled to carry out any type of activities – whether profit-making or not – to achieve their disinterested purpose. Unlike companies, INPAs can however not distribute or procure any pecuniary gain to their founders, members, directors or any other person except for the disinterested purpose determined by their articles of association. INPAs must in other words fully allocate the profits generated by their industrial or commercial activities to the achievement of their disinterested purpose.
Capped liability for directors and daily managers
Under the Law of 1921, negligent directors and daily managers of (I)NPAs may have to compensate the entire damage suffered by a plaintiff.
The BCAC considerably reduces the exposure of directors, daily managers, as well as de facto directors of (I)NPAs in this regard. It sets out caps on the amount of their liability, ranging between EUR 125,000 and EUR 12,000,000 (to be indexed) depending on the size of the (I)NPA. Such caps apply as aggregates for all liable persons concerned, per fact, regardless of the number of plaintiffs and defendants. They further apply regardless of the identity of the plaintiff(s) and the ground of the liability claim (contractual or in tort). By way of exception, the caps are however not applicable in the event of repeated minor negligence (what is a minor negligence and the concept of repetition have to be defined by case law), gross negligence, fraudulent or malicious intent, or for certain specific liabilities towards tax and social security authorities.
The new regime will encourage taking out insurance coverage (so-called D&O) for directors/daily managers. (I)NPAs can however no longer exonerate or hold their directors/daily managers harmless in advance (i.e. as a precautionary measure).
Restructuring and conversion
Alongside the pre-existing regime of free contribution of universality or branch of activity by (I)NPAs to other non-profit entities, the BCAC introduces a brand new regime of merger and demerger of (I)NPAs. Pursuant to a procedure similar to the one applicable to companies, (I)NPAs have now the possibility to contribute all their assets and liabilities to one or more entities having a disinterested purpose. The contributing (I)NPA is consequently dissolved without going into liquidation and its members lose their status unless the draft terms of (de)merger expressly stipulate otherwise.
The BCAC further provides for a new national and cross-border conversion procedure. At the national level, three conversions of legal forms are allowed: (i) from NPA into INPA and vice versa, (ii) from company into (I)NPA, and (iii) from (I)NPA into cooperative company (licensed as social enterprise). The conversion from (I)NPA into other types of company remains forbidden. At the international level, (I)NPAs have moreover the possibility to transfer their seat both from and to Belgium and consequently to convert themselves into local (I)NPAs.
Complex phasing in of the new rules
The BCAC entered into force on 1 May 2019 and is applicable to (I)NPAs constituted after that date.
With respect to existing (I)NPAs, the BCAC is applicable since 1 January 2020, except for its supplementary provisions which would be overridden by the articles of association of the (I)NPAs. (I)NPAs could also have chosen to opt in and apply the BCAC prior to 1 January 2020.
When amending their articles of association for the first time following 1 January 2020 (and ultimately by 1 January 2024), (I)NPAs must at the same time restate their articles of association to fully comply with the BCAC. As long as existing (I)NPAs have not amended their purpose, they remain prohibited from carrying out (main) industrial or commercial activities until 1 January 2029.
Grégoire JakhianPartner Attorney at Law
Grégoire Jakhian, attorney at law, heads the Corporate and M&A Practice Group, the Aviation team, the French Desk and the Non-profit team in Belgium. Grégoire has extensive experience in cross-border M&A transactions, take-over bids, corporate finance dispute resolution (including arbitration) and civil law.T: +32 2 743 43 54 E: [email protected]