Reform Belgian Company Law

The final stage in the reform of the Belgian company law is initiated after submission of the preliminary draft of the new Belgian Code of Companies and Associations on June 4th 2018 with the House of Representatives.

With the new Belgian Code on Companies and Associations in sight, we hereby summarize the primary changes.

1.      Code on Companies AND Associations

The new Code on Companies and Associations includes, as the name itself suggests, both companies and associations. The term company will be defined differently. The main criterion of distinction between a company and an association will be the intention to distribute profits. Pursuing profitable activities or not becomes irrelevant under the new law.

By extension, the distinction between ‘civil’ and ‘commercial’ companies will disappear and all companies will be regarded as enterprises (“onderneming”). This change is part of the broader reform of corporate law in which the term merchant (“handelaar”) is abandoned and a more inclusive formal concept of enterprise is adopted.

2.      From 17 company forms to 8

The number of company forms will be drastically reduced from 17 forms to 8. Henceforth all companies will take the form of an ordinary partnership without legal personality (“maatschap”), a general partnership (“VOF”), a limited partnership (“CommV”), a private company (“BV”), a cooperative company (“CV”), a public company (“NV”), a European company (“SE”) and the European cooperative company (“SCE”). In practice a number of older company forms will continue to exist as a modality of one of the eight main forms.

3.      Notable simplification and flexibilization in the private company

The new private company is the Belgian response to the European light vehicle competition. The most striking change is undoubtedly the abolishing of capital requirements for private companies. Instead, the private company will need to have “sufficient” capital upon incorporation. In order to verify if a company has sufficient capital, the financial plan will be taken into account. The new code will provide for a minimum content of a financial plan, making it possible to concretize the sufficiency of the required starting capital. In addition, distributions of profits can only take place after a double test is met, a net assets test and a liquidity test.

The new company law will make it possible to have a private company or a public company incorporated by one person only.

4.      Cap on director’s liability

In order to make Belgian company law more attractive to foreign investors, director’s liability will be capped at a fixed amount. This amount will depend on the scope and size of the company. A cap on director’s liability will make it easier to insure the directors’ risk which will then of course benefit creditors. This in turn may also benefit entrepreneurship.

5.      Corporate mobility

A final remarkable change is the introduction of the registered office. Belgium now follows in the footsteps of other countries such as the Netherlands and the United Kingdom, as well as the jurisprudence of the European Court of Justice. This change definitely facilitates the mobility of companies and will increase the possibilities to go forum shopping. In line with the increased mobility, a procedure for the international transfer of registered seats is put into place to make it easier for foreign companies to relocate their registered seat to Belgium.

6.      Rules of transition

The draft law provides for rules of transition which are connected to a company’s financial year and are therefore different for each company.

The code applies to a company as from the first day of the first financial year starting after the expiry of a period of one year after the publication of the new code in the Belgian Official Gazette.

At that time, the mandatory provisions of the law will apply to a company with immediate effect. For example, the capital in the private company (BV) will automatically be converted into an unavailable equity account that cannot be disbursed.

Each company must bring its articles of association in accordance with the code when an amendment of its articles of association occurs, and at the latest 10 years after the date of applicability on the company.

The complete draft can be consulted here:

http://www.dekamer.be/FLWB/PDF/54/3119/54K3119001.pdf

Junes El-Sayyid & Jessie Vanoppen