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10 January 2020 / article

What is the impact of the new Belgian Companies and Associations Code on family owned businesses and succession planning?

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Firmly entrenched as a director of an NV/SA

Under the former Belgian Companies Code (BCC), a director of an NV/SA could be dismissed at any time by the shareholders, with immediate effect and without any notice period or severance pay (‘ad nutum’ revocability). Under the BCAC, the ‘ad-nutum’ dismissal of directors in the NV/SA remains the default rule but shareholders may agree otherwise in the articles of association. In such case, directors of an NV/SA may be granted notice periods and severance payments in case of dismissal, except in the event of dismissal for cause.

The new BCAC now (among other models) allows for the appointment of a sole director instead of a board of directors, which was the mandatory governance model under the BCC. In the new sole director model of the NV/SA, protection against dismissal can be strengthened even further as the BCAC allows for the appointment of a statutory director and/or the granting of veto rights to the sole director against his/her own dismissal. In such case, the statutory director can only be dismissed for cause, decided with the quorum and majority required for an amendment of the articles of association.

Thanks to these changes, the old governance model of the partnership limited by shares (Comm.VA/CSA) – which was often used in the context of succession planning – can be copied in the NV/SA, but without the disadvantage of the unlimited liability of the managing partner. Consequently, the Comm.VA/CSA has become obsolete and has been abolished as a separate corporate form. For more details on the steps to be taken to convert a Comm.VA/CSA to another legal form, click here.

In the BV/SRL it remains possible to strengthen protection against dismissal of directors through the appointment of one or more statutory directors. Contrary to the NV/SA this possibility is not restricted to a management body consisting of a single director.

Tailoring of voting rights and dividend rights

The BCAC moves away from the mandatory ‘one share, one vote’ rule. Under the BCAC, the default continues to be the ‘one share, one vote’ rule, but both non-listed companies of the type BV/SRL and NV/SA will be free to deviate from this rule in the articles of association. As a result, there is a substantively increased freedom to issue shares with unlimited multiple voting rights, shares without voting rights or shares with voting rights only in particular situations (e.g. only in the event of (de)mergers, cross-border transfer of registered seat, conversion, liquidation or other fundamental restructurings).

Additionally, under the BCC arrangements that shielded the contribution of one or more particular shareholders against all losses (or that allocated all profits to one or more shareholders) where considered null and void (this was known as the prohibition of the ‘leonine pact’). Although the prohibition of the 'leonine pact’ has been tempered in recent case law on the use of put-options, it is good to see that the BCAC further restricts the scope of the prohibition. It will now be possible to make arrangements resulting in one or more shareholders being entirely shielded from the losses of the company. However, excluding one or more shareholders from sharing in any of the profits of the company remains prohibited.

The increase in flexibility as regards voting rights and dividend rights offers new opportunities to craft tailor-made arrangements separating legal and economic ownership of shares. Succession arrangements at company level could hence become suitable alternatives for the traditional succession vehicles such as simple partnerships (maatschap/société simple) and Dutch STAKs (stichting administratiekantoor), or for the succession planning technique of the gift of the bare ownership of shares, with the reservation of usufruct.

Simplification of shareholding structures

The BCAC removes the need to have more than one shareholder in the NV/SA and the BV/SRL. Both the NV/SA and the BV/SRL can now be incorporated and owned by a sole shareholder, without risking any penalties for a sole shareholder. Under the old BCC, an NV/SA needed to be incorporated by two shareholders, and, as a general rule, both in the NV/SA and in certain circumstances the BV/SPRL, a sole shareholder risked joint and several liability for the obligations and liabilities of the company if no second shareholder was found within a period of one year.

This change is expected to bring an end to the practice of placing one or several nominee shares with family members or other group companies (in order to avoid joint and several liability of a sole shareholder) and offers an opportunity for simplification of existing group structures by regrouping all shares in subsidiaries with a single parent company.

BV/SRL as either an open or a closed company

By way of default, the shares in a BV/SRL are not freely transferable. The company’s articles of association may, however, deviate from this default rule and introduce a more flexible or stricter regime. As a result, the BV can be a very closed or a very open type of company, as desired. For instance, in the BV/SRL it is possible to only allow a free transfer of shares between family members.

Legal clarity regarding usufruct on shares

A common succession planning technique consists of a gift of the bare ownership of shares by a parent to the children, whereby the parent keeps the usufruct on the shares and correspondingly the dividend rights relating to the shares. However, under the BCC there was a long-lasting controversy in legal doctrine and jurisprudence whether voting rights on shares had to be exercised by the bare owner or the usufructuary in the absence of any explicit arrangements in the company’s articles of association.

The BCAC now settles this discussion by granting all voting rights on shares to the usufructuary, regardless of the subject of the vote. Note however that this is only a default rule, from which may be deviated in the articles of association or an agreement.

Sole director in a foundation

The BCAC now allows that a foundation (stichting/fondation) is governed by a single director, whereas under the BCC a foundation required a board consisting of at least 3 directors. This increases the attractiveness of the Belgian foundation as a special purpose vehicle (SPV) for certification of shares, but it remains doubtful whether this development will cause a switch from the Dutch STAK (stichting administratiekantoor) to the Belgian foundation as the preferred SPV for certification of shares.

New administrative obligations for the simple partnership

The simple partnership (maatschap/société simple) is often used in the context of succession planning as it is easy to setup, flexible and tax-transparent. This has generally remained unamended under the BCAC as the legislator has restricted itself to making a number of minor technical clarifications with respect to the legal framework of the simple partnership.

However, it is worth reminding that more prominent changes concerning the administrative obligations of the simple partnership have been introduced in the context of the Act of 15 April 2018 on the reform of the enterprise law and the anti-money laundering Act of 18 September 2017:

  • Joint and several liability of the partners: The partners of a simple partnership are now always jointly and severally liable towards third parties for the debts and obligations of the partnership, regardless of the size of their participation in the partnership.
  • Registration with the CBE: Both new and existing simple partnerships must be registered with the Crossroads Bank for Enterprises (the Belgian commercial register).
  • Accounting: Simple partnerships must keep accounts. If the turnover of the last financial year does not exceed EUR 500,000 (excl. VAT), single-entry bookkeeping is sufficient. If the turnover exceeds the threshold of EUR 500,000, the usual double-entry bookkeeping rules apply. Important to note is that simple partnerships are not legally required to publish their annual accounts, not even when their annual turnover exceeds the threshold of EUR 500,000.
  • Ultimate Beneficial Owner: Simple partnerships must – just as any other company – collect and keep adequate, accurate and up-to-date information on their ultimate beneficial owners (UBO’s), including detailed information on the economic interests held by the UBO’s. Furthermore, they are required to register the relevant information on their UBO’s in the Belgian UBO register. The formal deadline for a first registration in the UBO register was 30 September 2019, but the administration applied a ‘grace period’ until 31 December 2019, during which no sanctions were imposed. This grace period has now also come to an end.


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