The private limited company (BV), in French "société à responsabilité limitée" or "SRL" for short) is to become the preeminent company form, and is characterised by its flexibility. Parties are free to make specific contractual arrangements, and the new CAC (Companies and Associations Code) (WVV) provides general rules to fall back on.
In this first contribution concerning the Private Limited Company (BV), we examine how this is is formed, the composition of its initial assets, all of the relevant obligations, and the resulting liability of the founder.
1. A company without capital
From now on, the limited liability company is a company without share capital, in which shareholders are only bind to their contribution.
The notion of the company’s share capital disappears, and thus with it, the minimum capital requirements as we know them today. It is replaced by the initial assets.
Pursuant to the disappearance of the concept of share capital (and therefore the minimum capital), any payments are to be subjected to a balance sheet test (net assets test) and a liquidity test. We will return to this subject in detail in a future article.
Founders must ensure that, at the time of formation, the equity of the private limited company is sufficient, in view of the other funding sources, for the intended activity.
Therefore, in principle, it is possible to form a private limited company using a very modest contribution (1 euro), on the understanding that a solid financial basis is provided. If this is not the case, the liability of the founders will be threatened.
In this regard, the financial plan gains an important function.
The founders must draw up a financial plan and send it to the Notary Public. In it, they must justify the amount of the initial assets, in the light of the intended activity of the company, and this over a minimum period of 2 years.
The financial plan must also, (as is currently the case for formation of the Starters Private Limited Liability Company (Starters-BVBA)), contain the following items:
- an accurate description of the intended activity;
- an overview of all sources of funding at formation;
- an opening balance sheet;
- a projected profit and loss account after twelve, and after twenty-four months;
- estimates of the expected income and expenditure for a minimum period of two years;
- a description of the scenarios considered when estimating the expected turnover and the expected profitability;
- where the case arises, (as this is not obligatory), the name of the external expert who assisted with the drawing up of the financial plan.
2. Contribution of industry/labour now possible
In addition to the familiar contribution in kind and contribution in species, a contribution of industry (labour) is now also possible. The contribution of industry comprises an undertaking to perform work and services.
Unless agreed otherwise, a person making a contribution of industry will be accountable to the company for all profits directly or indirectly linked to the activity contributed by him.
For the entire period of his contribution, he may not directly or indirectly compete with the company, or develop any activity which could harm the company or decrease the value of his contribution.
The procedure for quasi-contribution is not included in the new CAC. The legislator is of the opinion that the new, slightly changed rules on conflict of interest will provide the necessary guarantee in this area.
3. Liability of founders only for founders
The persons appearing at the time of the memorandum of association will be regarded as founders of the company.
However, if the memorandum indicates one or more shareholders as founders, and they together own at least one-third of the shares, the other persons appearing at the formation can be regarded as ordinary registering parties.
These ordinary registering parties must, in turn, meet the following conditions:
- limit themselves to subscribing to shares in exchange for a contribution in species,
- not enjoy any special direct or indirect benefit.
This is important, because the founders are jointly and severally liable for the undertakings of the company, if the company is declared bankrupt within three years of acquiring legal personality and, on formation, the initial assets were manifestly insufficient for normal performance of the intended activity over a minimum of two years.
Thus, the liability of the founder remains intact, however, in future it must be borne in mind that:
- under certain conditions, not all of the persons appearing at the formation of the company will be categorised as a founder, and will instead be regarded as an ordinary registering party who does not have the liability of a founder, and;
- insufficient capital is replaced by manifestly insufficient initial assets.
4. New Terminology
Whereas, previously, a distinction was made between partners in a private limited liability company (BVBA) and shareholders in a public limited company (NV), the new CAC opts for the general term of shareholder (regardless of the company form). And the term "business manager" in the private limited liability company (BVBA) is replaced by director in the private limited company (BV).
Moreover, a private limited company may issue all securities (even listed) which are not prohibited by or pursuant to the law.