Major reforms in Belgian company law underway: what is changing for your business?
On 20 July 2017, the Belgian government approved the draft bill for a new Company Code. The Council of State examined the draft bill and delivered its advice on the 11th of October, effectively clearing the path to introduce the draft to Parliament in the next few weeks.
The new Belgian Company Code: (R)evolution in the Belgian corporate landscape requiring changes to the tax and accounting framework
The highly anticipated new Belgian Company Code (in short: BCC) will introduce major changes to the existing corporate landscape. The aim of these reforms is to align the Code with the needs of a fast-paced, ever-changing, digitalized society, effectively making Belgian corporate law and Belgian companies more attractive to (foreign) investors.
Although many of the proposed reforms have been greeted with optimism as they increase the flexibility of Belgian corporate law, it should be noted that the envisaged increased attractiveness of Belgian companies for (foreign) investors requires significant amendments to Belgian accounting and tax law provisions as well. In absence thereof, the new BCC may create legal and tax uncertainty, undermining the attractiveness of the new opportunities offered by Belgian corporate law.
It should furthermore be noted that the new BCC will not only apply to Belgian companies, but also to non-profit organisations and foundations. Consequently, the current Act on Associations & Foundations will be repealed.
Below you can find some key takeaways on the draft new BCC:
Limitation of company types
The new BCC will introduce 7 types of companies with legal personality: the NV/SA, the BV/SRL (replacing the BVBA/SPRL), the cooperative company (CV/SC), the partnership (VOF/SNC), the limited partnership (CommV/SComm), the European Company (SE) and the European Cooperative Company (SCE) (although the latter two are mainly governed by European law). The BV/SRL is intended to become the “default company” in Belgian corporate law (see further).
Other company types currently used will be abolished, including the partnership limited by shares (Comm.VA/SCA) and the temporary partnership (tijdelijke handelsvennootschap/société momentanée). The flexibility offered in the remaining corporate types should however allow to incorporate the key-features of these abolished company types in one or more of the surviving company types.
Existing companies using one of the abolished company types will have 10 years to transform their company into a “surviving” company type.
The BV/SRL as cornerstone of the new BCC
The modernisation of the BVBA/SPRL into the BV/SRL (based on the Dutch Besloten Vennootschap) is perceived as one of the cornerstones of the new BCC: the intention of the legislator is indeed to turn the BV/SRL into the “default” company type for most investors and corporations. To this effect, the BV/SRL is structured as a company type offering a large amount of flexibility in terms of governance, funding and distribution of proceeds. Some examples of this modernisation and flexibility include:
- It will be possible for a BV/SRL to have only one shareholder (whether or not a legal entity). The sole shareholder-legal entity will not be jointly and severally liable for obligations and liabilities of the BV/SRL.
- The BV/SRL will not be required to have a (minimum) corporate capital.
The corporate law implications hereof are vast and include, amongst others, entirely new rules on (a) dividend distributions (which will become possible at any time but will always be subject to a net-asset test as well as a liquidity test) and (b) allocation of voting rights to shares (shares without voting rights, shares with multiple voting rights,…).
As mentioned, the tax and accounting consequences hereof are vast as well and should be addressed in new legislation prior to the entry into force of the new BCC in order to avoid legal uncertainty undermining the attractiveness of the new BV/SRL.
- It will be possible to list the shares of a BV/SRL
- The transferability of the shares of a BV/SRL can be freely determined in the articles of association. A free transfer of shares will be possible.
The NV/SA: flexibility in terms of management structure
The rationale behind the new BCC is to turn the BV/SRL into the default company type and limit the NV/SA to large corporations & listed companies. The NV/SA will therefore not have the same level of flexibility as the BV/SRL.
However, compared to the current NV/SA, some important changes are to be noted, including:
- The possibility for a NV/SA to have only one shareholder without such shareholder becoming jointly and severally liable for the obligations and liabilities of the NV/SA.
- The introduction of a large degree of flexibility with respect to the governance of a NV/SA: a NV/SA will have the choice to opt for (i) a sole director governing the NV/SA, (ii) a “monist” governance system whereby the NV is governed by a board of directors consisting of several directors or (iii) a dual system whereby a NV/SA is managed by a management committee (directieraad/conseil de direction) and a supervisory board (raad van toezicht/conseil de surveillance).
- It will be possible to provide for notice periods and/or notice payments in case of termination of a director’s mandate. The “ad nutum” rule will no longer be of public order.
- It will be possible to issue shares with multiple voting rights. For listed companies, this flexibility will be limited to a “double voting right” for “loyal shareholders”.
A capped liability for directors of all companies?
One of the most remarkable amendments in the new BCC relates to the introduction of a liability cap on the liabilities which directors (as well as de facto directors) may incur in the exercise of their mandate. The new BCC provides for capped amounts (varying between EUR 250,000 and EUR 12M), depending on the size and activities of the company. These caps will apply on an aggregate basis for all directors of the company. They will not apply (i) in case of fraud nor (ii) in case of breach of statutory guarantee obligations set out in the BCC.
With respect to director’s liability, the new BCC furthermore expressly rules out any hold harmless or exoneration undertakings by the company (or any of its subsidiaries) in favour of its directors.
Registered office as benchmark for determining applicability of Belgian company law
Under current Belgian conflict-of- law rules, the nationality of a company is determined on the basis of the place of its real head office. The new Company Code will abandon this principle: Belgian company law will apply to any company whose registered office is located in Belgium. This should enable Belgium to export its own company law abroad and foreign companies to choose for a Belgian legal form by establishing their registered offices in Belgium, without the need to conduct business within the Belgian territory.
LindaBrosensProfessional support lawyer
Linda Brosens is a member of the International Tax Services Practice Group and a professional support lawyer in our Brussels office.T: + 32 2 700 10 20 E: firstname.lastname@example.org
KennethVansteenkisteProfessional Support Lawyer
Kenneth Vansteenkiste is a professional support lawyer in the Corporate and M&A Practice Group in Belgium.T: +32 2 700 10 58 E: email@example.com
WimVande VeldeAttorney at law Local partner
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: firstname.lastname@example.org