On 15 July 2013, the Belgian government adopted a package of emergency measures combating fraud that partly amended the law of 16 January 2003 creating the Belgian Crossroads Bank for Enterprises (CBE). As part of a broader attempt to improve the national budget for 2013, including measures to combat corporate fraud, the Belgian government is also tackling the issue of so-called dormant companies, as they are sometimes used in criminal schemes for financial purposes, including VAT “carousel frauds”.
According to the Belgian Companies Code, a company is considered as inactive or “dormant” when it is legally required to deposit its annual accounts at the Belgian National Bank and fails to do so. Now, as outlined in the Belgian government’s explanations for adopting the new law and to give you some idea of the figures: in 2011, 46,614 Belgian companies did not deposit their annual accounts although required to do so. More than half of these companies were in violation of their obligations for the third year in a row and, thus, could be considered as “dormant”.
Before the adoption of the new law, the main remedy against dormant companies was the judiciary. Indeed, the Belgian Companies Code provides that any interested party or the public prosecutor may request a court to wind up a company that has not complied during three consecutive accounting years with its obligation, if applicable, to deposit the annual accounts at the Belgian National Bank. However, as pointed out by the Belgian government, this procedure is rarely used because it typically takes too much time and effort. Moreover, even when the procedure is used, the courts usually grant extra time to the company so that it can remedy its failure to file annual accounts.
Hence, as part of general attempts in the fight against dormant companies and fraudulent activities that may be related thereto, the new law of 15 July 2013 adopts an additional, mainly administrative, sanction against inactive companies, which is the removal of the company from the CBE. The law establishes two procedures by which a company may be removed from the CBE at the initiative of the CBE itself. Since the judicial procedure examined above remains applicable, it is clear that the removal of a dormant company from the CBE is a purely administrative decision and has no effect whatsoever on the legal existence as such of the removed company.
The first procedure applies to companies that are under legal obligation to file annual accounts. It provides that companies under such legal constraint that fail to do so for three consecutive years may be removed from the CBE. Here, the CBE acts on its own volition, as opposed to the judicial procedure examined above, where the court acts at the request of any interested party or the public prosecutor.
The second procedure goes beyond the identification of dormant companies through their mere failure to file annual accounts and tackles any potential dormant company according to five cumulative, and broader, criteria. Hence, the second procedure arguably applies to all companies, even those that are not required to deposit annual accounts, and impose on those companies the same sanction of removal from the CBE. The criteria, as explained below, are all shaped around the central idea that a company whose data remains incomplete and unmodified on the CBE’s website for a certain period of time may also be considered as dormant, and, consequently, removed.
The first criterion is the lack of information about qualities (e.g. employer, company subject to VAT, etc.), activities (e.g. description of sector/business in which the company is involved) or active units (i.e. place(s) of business) of a company for a period of at least three years. This criterion refers to specific information sections on the CBE’s website which are to be provided by each company with a CBE number and are made available to the public via the public search link. Secondly, that company must be registered as having an “active” status on the CBE’s website, which means that it still has a legal existence. Thirdly, the company may not have any pending requests for authorization(s) or qualities that are recorded as such on CBE’s website. The fourth criterion is the lack of modification for at least seven consecutive years of any of the company’s data that is registered with the CBE. Finally, the fifth criterion is the fact that the company has not published any corporate decision/acts, other than the annual accounts, in the Belgian Official Journal for at least seven consecutive years. As far as this last piece of information is concerned, it is implied that the CBE will have to work hand in hand with the Belgian Official Journal to obtain such data.
Now, what are the consequences of the removal of a company from the CBE? In fact, they are intended to be merely practical, as a removal makes it potentially difficult for the removed company to enter into transactions and to interact with public authorities. With respect to data available on a removed company, the measure has little impact. Indeed, as explained by the Belgian government in the draft law, such information should remain available via the public search engine on the CBE’s website, even though the company has been removed. However, the removal will also be specifically mentioned on the website for everyone to see and will be published in the Belgian Official Journal. Such publicity is expected to have an encouraging/shaming effect on the removed company, which will then strive to comply with its obligation, if any, to deposit the annual accounts or, simply, to be more active on the CBE’s website.
That being said, the main incentive to comply might instead relate to criminal law. Indeed, the law of 16 January 2003 creating the CBE, which remains applicable, provides that a company that is still active economically (i.e. conducting business) after having been removed from the CBE may be punished by one to six months’ imprisonment and/or a fine of between EUR 100 and EUR 10,000. Hence, since the new procedures examined above are initiated by the CBE, on its own volition, it is certainly hoped that some sort of notification to the company of the CBE’s decision to remove it has been considered. Indeed, if such notification is missing, a company may have to regularly check the CBE’s website to make sure that it does not conduct business while having been removed. Such continual vigilance, if needed, by the company may be a curiously appropriate side effect of the new procedures aimed at dormant companies, for one can hardly sleep with a Damocles sword hanging over his head.
However, it is clear from the government’s observations that the new measures have been designed as a temporary sanction, with the intention to serve as a mere incentive for compliance rather than as a permanent sanction for non-compliance. As a matter of fact, it is fairly easy under the new law for a company to cancel the removal. Indeed, in the event that a company is subject to the first procedure, it only needs to deposit its annual accounts for the removal to be cancelled. If the company was removed in application of the second procedure, it should be “un-removed” simply by not meeting one of the five criteria above, for instance by publishing a corporate act or providing the missing information to the CBE.