It was all hanging in the balance until the very end, but on 28 February 2019 the new Code on Companies and Associations (abbreviated in Dutch as “WVV”) was finally approved by the Belgian Chamber of Representatives. The new code means a thorough reform, simplification and modernisation of the existing company law.
Reduction of the number of company forms
The wide range of company forms is reduced drastically. Besides the European legal forms, four basic forms remain: the partnership (“société simple” / “maatschap”), the cooperative company (“société coopérative” / “coöperatieve vennootschap”), the private limited liability company (“société à responsabilité limitée” / “besloten vennootschap”) and the public limited liability company (“société anonyme” / “naamloze vennootschap”).
Cooperative companies that do not comply with the new rules are required to take on a new form over time.
Risk-free shareholdership becomes possible
The ban against a “societas leonina” clause has been abolished: it is now possible to entirely exempt a shareholder from any contribution to the loss. However, it remains prohibited to fully exclude a shareholder from participation in the profits.
The plurality requirement at incorporation and during the existence of the private limited liability company (BVBA) and the public limited liability company (NV) has been dropped. Under the new rules, one person will be able to incorporate a company, without any repercussion on the liability of its shareholders.
Abolition of the minimum capital requirement and free transfer within the private limited liability company and the cooperative company
Even more far-reaching is the complete disappearance of the term “capital” within the private limited liability company and the cooperative company. There is no longer a minimum capital requirement, but you must (depending on the needs for the coming two years) provide your company with sufficient equity and other funds at incorporation.
In addition, the transfer restrictions within the private limited liability company are no longer mandatory. You can provide for the free transfer (or stricter transfer restrictions) of shares in your articles of association.
Unequal distribution of profits and multiple voting rights
The allocation of profit and voting rights in proportion to your contribution becomes a rule of non-mandatory law. You can deviate from this rule and create various types of shares that grant a disproportionate voting right and/or profit entitlement. This offers, for example, the opportunity to attract investors without losing control of your company and opportunities in the context of succession planning.
All possible distributions to shareholders and directors of a private limited liability company or a cooperative company are subject to a balance sheet test and a liquidity test. If such a distribution might jeopardise the repayment of debts by your company for the coming twelve months, a distribution is not allowed. Interim and intermediary dividends can also be paid out at all times by the private limited liability company and the cooperative company.
New management models for the public limited liability company
In addition to the existing (one-tier) collegial management by at least 3 directors, the public limited liability company can now also be managed by either one director (who -if certain conditions are met- can become undismissable and can acquire veto rights) or two bodies, i.e., a supervisory board (that takes strategic decisions) and a management board (that functions at an operational level). From now on it will also be possible to include a notice period or compensation in lieu of notice for your directors in the articles of association.
Also new: a permanent representative of a director/company must always be a natural person.
Entry into force
While the WVV enters into force on 1 May 2019, the legislator allows existing companies a sufficient transition period in order to comply with the new law, by opting for a phased implementation and a number of transitional provisions.
Companies incorporated on or after 1 May 2019 must immediately adhere to the new rules. Existing companies may voluntarily comply with the new law from that date (the so called “opt-in”). A number of rules (such as the dispute settlement procedure) will also enter into force on 1 May 2019.
From 1 January 2020, all companies are subject to the mandatory legal rules of the WVV. Conflicting provisions in the articles of association are not taken into consideration. If you amend your articles of association after 1 January 2020, you must also immediately align them with the new rules. However, you will have until 1 January 2024 to update your articles of association. Afterwards, all abolished company forms will be converted by operation of law.
Sara Burm and Nathan Declerck
De Langhe Attorneys