An important reform of our corporate law is being prepared. The reason for this is that corporate law has become extremely complicated due to numerous amendments and repairs, and then new amendments.
The purpose of this reform is to simplify and modernize our corporate law. The government hopes to make Belgium more attractive, and thus more competitive, as a country for establishing companies. Our neighbouring countries have done the same.
The reform is still under debate and the text is not yet made available, but from professional literature and seminars that we followed, we picked up the main topics.
In this first article we will limit ourselves to these main topics, as we do not yet know all the details and things can still be changed.
1. There will be one code of companies and associations (CCA)
This code will contain common provisions for companies and associations. Currently, the non-profit association, the international non-profit association, and the foundation are still regulated in a separate law. The rules for the organisation of associations are less detailed than the rules for companies. Because of this, reference is often made, especially in large associations, to the provisions applicable to companies by analogy, e.g. in respect to the regulation of conflicts of interest in the board of directors. It is therefore logic that companies and associations are regulated in one code.
Associations will be able to conduct economic activities without limitation. In such case, they will be regarded as being an enterprise, and thus will be subject to insolvency laws. The only difference will be that an association cannot distribute profit to its members.
2. The difference between civil and commercial companies will be abolished
Practitioners of liberal professions, who currently practice within a civil company in the form of a commercial company, will be regarded as an enterprise, and will also be subject to insolvency laws.
3. The contribution of labour and know-how, in exchange of shares, will be made possible
Currently, in order to become a shareholder, one must contribute cash or an asset (contribution in kind).
Under the new rules, it will be possible to contribute labour or know-how, in exchange for a part of the profit.
4. The principle that a company must have multiple shareholders will be abolished
A company can be established and directed by one single person.
5. Belgium will no longer apply the theory of the true registered office
According to this theory, the law applicable to the company is determined by the place of its true registered office. In the future, Belgium will apply the incorporation theory, meaning that the law applicable to the company will be determined by the place of its incorporation.
6. Abolition of the prohibition of the exemption to contribute in the losses
Currently, a provision that exempts a shareholder to contribute in the losses is considered null and void. This prohibition of exemption to contribute in the losses will be abolished.
7. The main simplification in the reform is that there will be much less different forms of companies
There will remain four company forms:
- the partnership (“maatschap” / “société simple”), which can acquire legal personality;
- the public limited liability company (“naamloze vennootschap” – NV / “société anonyme” – SA)
- the private limited liability company (“besloten vennootschap” – BV / “société à responsibilité” – SRL) and
- the co-operative company (“coöperatieve vennootschap” – CV / “société cooperative” – SC).
The following company forms will be abolished:
- the silent and the temporary partnerships (“stille vennootschap” / “société interne” – “tijdelijke handelsvennootschap” / “société momentanée”);
- the economic interest grouping (EIG) (“economisch samenwerkingsverband” – ESV / “groupement d’intérêt économique” – GIE);
- the co-operative company with unlimited liability;
- the agricultural company (“landbouwvennootschap” / “société agricole”), currently the only transparent company with legal personality, although this is covered by the fact that the partnership will be able to acquire legal personality;
- the private limited liability company with one shareholder (as currently organized) and the starters private limited liability company;
- the limited partnership with shares (“commanditaire vennootschap op aandelen” – Comm.VA / “société en commandite par actions” – SCA); and
- the company with a social purpose.
7.1 The BV/ SRL will be considered as the main corporate form, such as in the Netherlands
Currently, numerous small companies are organized as an NV/ SA.
Belgian entrepreneurs often do not choose for a BVBA / SPRL (the current private limited liability company) because of certain possibilities that can be interesting and existing in a NV / SA, are not possible in a BVBA / SPRL, such as a preferential dividend, authorised capital, interim dividend, the issuing of profit-sharing certificates, warrants, and convertible bonds.
These rules and possibilities will in the future also be possible in the BV/ SRL.
The NV/ SA will be reserved for the very large and for the listed companies.
7.1.1 De BV/ SRL will no longer be a company with share capital
The concepts of capital, minimum capital, and capital protection will be abolished. It is still necessary to make a contribution, but the item “capital” in the financial statements will disappear. The concept of capital will be replaced by the concept of “net assets”, enabling the company to finance its activities and to pay its creditors.
Because of the abolition of the provisions regarding capital protection, new mechanisms need to be found, or existing mechanisms need to be strengthened for the protection of creditors. For a creditor it is important that the company is solvent and disposes of sufficient liquid assets to pay its creditors. The control on contributions in kind remains unchanged. The initial net assets must be sufficient to conduct the company’s business. The rules regarding the financial plan that must be established by the incorporators at incorporation of the company will be more severe. The minimal content of such financial plan will be regulated in the CCA.
The liability of incorporators and directors remains.
Distribution of profit can only occur after a double test:
- are the net assets sufficiently high to pay a dividend; and
- does the company, after payment of the dividend conserves sufficient liquid assets to pay its debts for the following twelve months.
This increases the potential liability of the directors.
7.1.2 The BV/ SRL is no longer necessarily a “closed” company
In the current BVBA / SPRL the shares cannot be freely transferred (unlike the NV/ SA). A special procedure needs to be applied. The bylaws of the BV / Sàrl may provide that the shares are freely transferrable. Also, one can choose between the maintaining of the current rule in a BVBA/ SPRL that one share offers one vote, or to opt for multiple voting rights.
7.2 As indicated above, the NV / SA will be reserved for the very large and for the listed companies
It will be possible to have one single shareholder in a NV/ SA. Multiple voting rights will be possible in a non-listed NV / SA; double voting rights in a listed NV / SA.
Currently directors can be revoked at any time with immediate effect (at nutum). According to the upcoming legislation, one is aloud to provide a protection against dismissal. There will be an option to choose between the current corporate governance model, or the dual corporate governance system, like in the Netherlands, with a board of executives and a supervisory board, with distinct competences and composition.
7.3 Regarding the CV / SC the legislator wants to return to the original co-operative idea
In the future the corporate form of CV/ SC can only by used by co-operative companies recognised by the National Co-operation Council. The “unreal” co-operative companies (currently often used by partnerships of accountants) would be pushed towards a BV/ SRL. A minimum of three shareholders will still be required to form a CV/ SC.
We will continue monitoring this reform.