Main principles of the reform of the Belgian company law regime
As mentioned in our introductory newsletter of last week, the Belgian federal council of ministers has, during its meeting of May 25, 2018, finally approved the preliminary draft of the law "introducing the Companies and Associations Code and containing various provisions" which is set to replace the current Belgian Companies Code. There exists a real need to thoroughly reform the Belgian company law as the current legislation is strongly outdated and companies are constantly on the lookout to establish themselves in countries where the legal framework is most flexible.
The new Belgian Code for Companies and Associations (BCCA) aims, among others, at simplifying our company law and providing more flexibility to companies so as to make Belgium more attractive for companies to establish themselves in. It is also important to note that certain federal tax provisions will also be amended in the future to make sure that the reform of the Belgian company law regime is tax neutral.
The new Belgian company law regime is based on the following three main principles:
- A far-reaching simplification
- A far-reaching flexibility but with attention to the interest of third parties, including creditors
- Compliance with European evolutions
Please find below a more detailed overview of the most important changes which will be implemented by the BCCA.
Limitation number of company forms
An important first principle of the reform of the Belgian Companies Code is the simplification of our company law by the abolition of a number of company forms, and more particularly, the limitation of the number of Belgian company forms to the following four basic forms (with variations):
- Maatschap / société simple
- Besloten vennootschap (BV) / société à responsabilité limitée (SRL)
- Naamloze vennootschap (NV) / société anonyme (SA)
- Coöperatieve vennootschap (CV) / société coopérative (SC)
Apart from these four company forms, the European company forms will also continue to exist (eg the Societas Europaea, the European Co-operative Society and the European economic interest grouping).
As a result of the above, the following company forms will be abolished by the upcoming reform: "stille en tijdelijke handelsvennootschap / société interne et société momentanée", "economisch samenwerkingsverband / groupement d’intérêt économique", "landbouwvennootschap / société agricole", "eenpersoons- en starter- bvba / société privée à responsabilité limitée unipersonnelle et société privée à responsabilité limitée starter", "vennootschap met sociaal oogmerk / société à finalité sociale", "coöperatieve vennootschap met onbeperkte aansprakelijkheid / société coopérative à responsabilité illimitée" and "commanditaire vennootschap op aandelen / société en commandite par actions". These company forms will have to be converted into one of the abovementioned remaining company forms.
Notwithstanding the fact that some of these company forms will be abolished, some of them will de facto continue to exist as the BCCA foresees that some company forms can receive a recognition such as the agricultural company or the forest grouping company.
The maatschap / société simple will have the following four variations:
- with silent partners: stille vennootschap / société interne
- temporary: tijdelijke vennootschap / momentanée
- with or without legal personality: vennootschap onder firma / société en nom collectif and gewone commanditaire vennootschap / société en commandite simple
Abolition distinction companies with a civil character and companies with a commercial character
Besides the limitation of the number of Belgian company forms, the distinction between companies with a civil character and companies with a commercial character will also be abolished. This distinction has been outdated by the implementation of the concept of "undertaking" in the Code of Economic Law and the contemplated conversion of the Commercial Court into an Undertakings Court. Consequently, the distinction between civil acts and commercial acts will disappear and the definition of merchant or trader is replaced by the concept of "undertaking".
As a result of the abolition of the distinction between companies with a civil character and companies with a commercial character, both companies and associations, subject to exercising an economic activity and pursuing profit, will be qualified as undertakings. However, associations and foundations should still use the profit they make for the realization of their altruistic purpose.
Civil companies with an economic activity, such as liberal professions, will be subject to the Belgian company law and Belgian insolvency law and, therefore, will be able to be declared bankrupt. This is also the case for associations and foundations.
Integration of the law on associations in the BCCA
The fact that the law on associations and the company law are generally similar is the reason why the law on associations will be integrated in the BCCA without losing the uniqueness of the law on associations.
As a result of the integration of the law on associations in the BCCA, there will be no more distinction between companies, associations and foundations with regard to the permitted activities which they can exercise. The only difference is that associations and foundations will still not be allowed to distribute any of their profit to their members as it should be used for their altruistic purpose, whereas this is not the case for companies.
The cooperative companies
The CV / SC will be reserved for genuine cooperatives, ie companies having as purpose the promotion of the economic and/or social activities of their shareholders, as was the original intent of the Belgian legislator. The companies which were previously incorporated under the form of a CV / SC only because of its flexibility can now opt for the BV / SRL statute.
Under the new BCCA, the private limited liability company (BV / SRL) will become, contrary to the current situation, the new 'by-default' company type for small and large businesses because of its high degree of flexibility and non-mandatory default rules.
The most eye-catching modernization in this respect is the abolishment of the concept of legal share capital in the BV / SRL. While there will no longer be a ‘minimum share capital’, more emphasis will be placed on the duty of the founding shareholders to ensure that the company has "adequate" capital upon incorporation to pursue its objectives and distribution rules, which are more adapted to reality.
Together with the abolishment of legal share capital, the rights attached to shares in a BV / SRL will no longer be required to be proportional with the paid-in equity. This means that multiple voting rights and no vote shares are possible as are preference and "no profit" shares. Furthermore, shares in the BV / SRL will be freely transferable if so provided in the articles of association. Finally, a high level of contractual modification of the governance regime in a BV /S RL will be possible, such as the establishment of a body of "daily governance".
On the level of the NV / SA, changes are less radical and the concept of legal share capital will remain in existence due to mandatory European law. However more flexibility is introduced, such as the possibility to attach multiple voting rights to shares. In respect of governance, different systems can be made use of such as a single director, a board of directors or a management board combined with a supervisory council.
"Actual seat" doctrine replaced by "statutory seat" doctrine
By replacing the "actual seat" doctrine by the “statutory seat” doctrine, companies will be subject to the law of the country where the companies were established instead of to the law of the country where the companies have their actual seat. Consequently, foreign companies can now adopt a Belgian legal form and Belgian companies will be able to keep their foreign legal entity. The main benefit of this change is that under the "statutory seat" doctrine parties will have more legal certainty than under the "actual seat" doctrine which allowed for a lot of interpretation.
However, it is important to note that the "statutory seat" doctrine will apply merely for company law issues and not for environment law, social law and insolvency law issues. As such, many aspects of economic life will still be regulated by the "actual seat" doctrine.