The CAC Explained for You - Part 2.2 - The Private Limited Company (BV-SRL) – Securities

Securities of the Private Limited Company (BV-SRL)

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In this second contribution we will discuss the classes of securities that may be issued by a private limited company, the voting rights involved and the transfer of shares, showing that at that level a private limited company may compete with a public limited company, making it the company form par excellence.

1. Classes of Securities 

The Companies and Associations Code gives the private limited company a large margin (in addition to the traditional ordinary shares) to also issue other classes of securities (such as warrants and (convertible) bonds). Voting rights may, however, only be attached to shares.

However, the company must, at all times, issue at least one share, and at least one share must be a voting share.

Furthermore, the shareholders of a private limited company have extensive freedom and flexibility to organise their voting rights.

Unless the articles of association provide otherwise, each share entitles to an equal share in the profits and the settlement balance. It thus becomes perfectly possible to stipulate in the articles of association that certain classes of shares are entitled to a larger share of the profits.

The private limited company may also enter into an agreement by issuing registered bonds, which may be converted into shares. The conversion right itself may, under the conditions of issue - automatically or under certain conditions - belong to the bondholder or to the company. The private limited company may issue bonds for a specific term or perpetually.

2. (Multiple) Voting Right

The Companies and Associations Code also provides for the possibility of introducing multiple-vote shares and/or nonvoting shares. However, if nothing is provided for in the articles of association, the general rule remains that one vote is attached to each share.

If nonvoting shares are issued, these shares, however, entitle to at least one vote per share (notwithstanding any provisions to the contrary) if:

  • the rights attached to classes of shares are changed;
  • the company is converted;
  • the company is dissolved within the framework of a cross-border merger;
  • the registered office is transferred cross border.

In the event of non-voting shares being issued to which a preference dividend has been granted, these shares will, however, have voting rights if the preference dividends were not made fully payable during two consecutive financial years. The voting right expires again if a dividend is paid that, in addition to the dividend for the financial year in question, is equal to the amount of the unpaid preference dividends.

Shares with the same voting rights form a class of shares. Shares with different voting rights, as well as nonvoting shares always form separate classes. This means that if the same company attaches other rights to one or a series of shares than to other shares, each of such series will then be of a class different from  the other series of shares.

3. Transfer of Shares

Whereas a private limited liability company (BVBA - SPRL) was previously known for its private character, the shares issued by a private limited company are now, in principle, freely transferable. The Companies and Associations Code provides for 'default rules', which we already know from the private limited liability company, if the founders / shareholders have not provided for a different provision.

If the articles of association do not contain a special arrangement for the transfer of shares, any transfer or transmission is subject to the consent of at least half of the shareholders who hold at least three quarters of the shares, after deduction of the shares whose transfer has been proposed.

However, their consent is not required if the shares are transferred or transmitted to:

  1. another shareholder;
  2. the transferor’s spouse;
  3. the transferor’s blood relatives in the direct ascending line or in the direct descending line.

Just as with a public limited company (NV - SA), any natural person or legal entity that - acting alone or in joint consultation - holds 95% of the voting shares of a private limited company may make a squeeze-out bid to acquire all of the voting shares or securities giving access to a voting right from this company.

4.  Conclusion

With the introduction of the option to issue classes of securities and the free transferability of shares in principle, the limited advantages of a public limited company have disappeared, and the private limited company has become the standard company par excellence.

It goes without saying that we are happy to be at your disposal for any additional information or to assist you, info@seeds.law or +32 (0) 2 747 40 07. 

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Leo Peeters

Leo Peeters

Partner
Koen De Puydt

Koen De Puydt

Partner
Alain De Jonge

Alain De Jonge

Partner
Toon Rummens

Toon Rummens

Partner
Leila Mstoian

Leila Mstoian

Partner
Maxiem Devos

Maxiem Devos

Senior Counsel