The BV/SRL is intended to be the new standard company form. What are its key principles?
The new Belgian Companies and Associations Code (BCAC) has replaced the BVBA/SPRL with a 'new' form of company: the BV/SRL (besloten vennootschap / société à responsabilité limitée). The intention of the legislator is to make the BV/SRL the standard company form that can be easily customised through its articles of association. The BV/SRL allows for more flexibility than the BVBA/SPRL in terms of, inter alia, funding (with the abolishment of the minimum share capital requirement), distribution of profits and governance.
Abolishment of the minimum share capital requirement
The former Belgian Companies Code (BCC) required a minimum share capital of EUR 18,550 at the incorporation of a BVBA/SPRL. This requirement no longer exists for the incorporation of a BV/SRL as the “share capital” concept has been abolished in the BV/SRL.
The abolishment of the share capital is based on the fact that the “share capital” is not an efficient mechanism to protect third parties (creditors of the company). The legislator therefore decided to abolish the “share capital concept” while maintaining and, in some case, reinforcing other rules intended to protect third parties (e.g. restrictions on the acquisition by a BV/SRL of its own shares, confirmation of applicability of financial assistance rules on BV/SRL,…).
The abolishment of share capital should indeed not be seen as an incentive to incorporate companies without proper attention for the funding of the company’s activities. Under the BCAC, the founding shareholders will indeed still have to make sure that the company has sufficient funds at the time of incorporation. They will have to justify the funding of the company through the establishment of a financial plan (to be filed with the notary at the time of incorporating the BV/SRL). The content requirements of the financial plan have been strengthened by the BCAC in order to ensure that founders sufficiently reflect on the funding of their company. In case of bankruptcy of the BV/SRL within three years following its incorporation, the financial plan may be used to assess the liability of the founders (as it was the case under the BCC).
The legislator’s intention to provide for more flexibility while, at the same time, offering sufficient protection to third parties is also reflected in the new rules on distributions to shareholders.
In order to enhance flexibility, dividend distributions can be made at any time in the BV/SRL. A BV/SRL will therefore be able to distribute dividends based on the profits of an ongoing financial year for example (“interim-dividends”).
In order to protect third parties, all distributions made by a BV/SRL (dividends, reimbursement of contributions,…) are subject to a new “double” test: a net assets test and a liquidity test.
- the net assets test already existed under the BCC but the BCAC has replaced the reference to the share capital by the company’s net assets. It states that no distribution can be made if the company’s net assets are negative or would become negative as a result of the distribution. The company's net assets are established on the basis of the latest approved annual accounts or a more recent statement of assets and liabilities.
- the liquidity test is a new test introduced by the BCAC and requires the management body to verify that the contemplated distribution will not result in the company becoming unable to pay its debts during a period of at least 12 months following the distribution.
Since the shares issued by a BV/SRL no longer represent part of the share capital, there is more flexibility regarding the allocation of voting rights to shares. A BV/SRL can issue shares without voting rights, shares with multiple voting rights or even shares with voting rights limited to certain decisions only.
The BCAC introduces the possibility for a BV/SRL to have only one shareholder, being a legal entity or not. The sole shareholder-legal entity will no longer be jointly and severally liable for the obligations and liabilities of the BV/SRL (as it was the case under the BCC).
Types of securities
In addition to the issuance of shares and bonds already possible under the BCC, it is now possible for the BV/SRL to issue convertible bonds, subscription rights and certificates.
It is also possible of a BV/SRL to list its shares. A listed BV/SPRL will however be subject to essentially the same rules as a listed NV/SA.
Transferability of the shares
Under the BCAC the transferability of the shares of a BV/SRL can be freely determined in its articles of association. Although the default rule is still that the shares are not freely transferable, free transferability of the shares or other arrangements (such as pre-emption rights) are possible as well if included in the BV/SRL’s articles of association.
The shareholders of the BV/SRL can appoint one or more persons as directors, acting individually or as a board. If a legal entity is appointed as director, it has to designate a permanent representative who must no longer be chosen amongst its shareholders, managers, directors or employees.
The BCAC now also allows the delegation of daily management powers to one or several persons. What will be understood as daily management is broader than the definition which was upheld by the Belgian Supreme Court. It concours: (i) all day-to-day actions and decisions, or (ii) other actions or decisions of such minor importance or so urgent that they do not justify the convening of a board of directors.
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: [email protected]