In our newsletter dated April 9, 2019 we discussed some key changes to public limited liability companies (NV/SA) under Belgian law following the reform of Belgian Company Law to come into force on May 1, 2019. The NV/SA is anticipated to become, over time, the reference for large and/or listed corporations.
This newsletter will address the changes to the governance of the NV/SA with the two following key aspects: (i) the multiple/double voting right of shares that is made possible in, respectively, the non-listed NV/SA and the listed NV/SA and (ii) the possibility to install a two-tier governance structure with a board of directors and supervisory board. In the last chapter, a number of other changes to the governance of the NV/SA are detailed.
Multiple/double voting right of shares
The principle of “one share, one vote” becomes optional in the NV/SA (as well as in the BV/SRL and the CV/SC).
Consequently, founders/shareholders of a non-listed NV/SA can freely choose to sever the link between the shares of their NV/SA and the voting rights attached thereto. Indeed, multiple voting rights can be attached to certain shares, while other shares can have no voting rights at all. In this respect, it is no longer mandatory to accord a preferential dividend to shares without voting rights. Even more, the maximum number of shares without voting rights (one-third of the share capital) no longer applies: it suffices that one single share with voting rights is issued, meaning that all the others shares can be issued without voting rights.
The above possibility of issuing shares with multiple voting rights has not (completely) been extrapolated to listed companies. In these companies, a so-called loyalty vote has been introduced: if shareholders hold their registered, paid-up shares for an uninterrupted period of at least two years, the articles of association can grant those shareholders a double voting right. In order to include such a provision in the articles of association, a two-thirds majority (instead of the normal three-fourths majority) of cast votes is required.
Two-tier governance structure
Under the current Belgian Companies Code, the board of directors of an NV/SA needs to comprise at least three directors (except when the company has only two shareholders, in which case the board of directors can comprise only two directors).
The BCCA now allows the structuring of the governance within an NV/SA in three different ways:
1. Monistic governance with a collegiate board
The first option is the regime as we currently know it under the Belgian Companies Code: monistic governance with a collegiate board. The board needs to comprise at least three (or two, see above) directors and forms a collegiate body.
A novelty that is introduced by the BCCA concerns the so-called ad nutum revocation of the mandate of a director in an NV/SA. Whereas the mandate of such a director can – under the Belgian Companies Code – be revoked at any time without motivation, notice or indemnity, the BCCA expressly stipulates that a revocation of the mandate with a notice or indemnity is possible, provided that a provision in that sense is included in the articles of association.
2. Monistic governance with a sole director
An NV/SA can also be governed by a sole director (natural person or legal entity), who can be appointed in a shareholder(s) resolution or in the articles of association.
The articles of association can grant a veto right to the sole director with respect to every modification of the articles of association, every distribution to the shareholders or even the director’s own dismissal. However, even if such veto rights have been granted, the shareholders can terminate the mandate of the sole director when they have a legitimate reason and with the majorities required for a modification of the articles of association.
The articles of association can also stipulate that the sole director is severally liable for the obligations of the public limited liability company. Finally, in listed companies and companies for which the law imposes a collegiate board, a sole director can also be appointed, but this sole director needs to be an NV/SA that has a collegiate board.
3. Dual governance with a board of directors and supervisory board
Lastly, the articles of association can determine that the governance within an NV/SA is vested with a supervisory board (charged with the general policy, the company’s strategy and all powers expressly reserved to it in the BCCA) on the one hand and an executive board (charged with all managerial powers) on the other hand, each acting within the boundaries of the powers allocated to them:
- both the supervisory board and the executive board are collegiate bodies comprising a minimum of three members (legal entities or natural persons);
- members of the supervisory board cannot at the same time be members of the executive board;
- the members of the supervisory board are appointed and dismissed by the shareholders (in accordance with the rules applicable to the board of directors under the monistic system, including the possibility to grant a notice period or indemnification in case of dismissal); and
- members of the executive board on the other hand are appointed and dismissed by the supervisory board.The latter is also charged with supervision of the executive board.
Other changes to governance
Besides the above two key changes to governance within the NV/SA, the BCCA introduces some other interesting novelties in this regard.
1. Daily management
The term “daily management” is enshrined in the BCCA. This definition of daily management (which is inspired on (but not identical to) the one adopted by Belgian jurisprudence) includes both the acts and decisions which do not reach further than the needs of the daily life of the company, as well as decisions which, either due to their lesser importance or due to their urgent nature, do not justify the intervention of the management body. In a system of dual governance, the decision to delegate the daily management is made by the executive board.
2. Conflicts of interest
Directors who have a conflict of interest with respect to a decision need to respect the same procedure as under the old regime. However, under the BCCA, they will need to abstain from deliberating and voting on the decision in question.
In instances when all directors (in case of dual governance: the members of the supervisory board) have a conflict of interest, the decision is brought before the shareholders’ meeting.
If all members of the executive board have a conflict of interest, the decision is brought before the supervisory board.
3. Written resolutions
Finally, the procedure for written resolutions by the management board has been eased. The Belgian Company Code only authorizes the application of written resolutions if (i) the articles of association authorize so and (ii) in exceptional cases when the urgent necessity and the interests of the company require it.
Under the BCCA, written resolutions are possible in all collegiate bodies, on the (sole) condition that the members unanimously agree to follow this procedure, on a case-by-case basis.
The articles of association no longer need to provide express authorization in this respect but can, conversely, exclude the application of the written resolution for certain decisions.