02/2019: NEW CORPORATE LEGISLATION PASSED!
On Thursday last week (28 February 2019), new corporate legislation was finally passed in the Chamber. The new Belgian Code of Companies and Associations entails a major reform. On the one hand, legislators intend this new legislation to modernise and simplify Belgian corporate law and to make it more flexible. On the other, they want it to make Belgium more attractive to companies as a location for their registered office. Below we summarise the most important changes for you:
- Limitation of the number of types of companies and associations
Of the existing 17 forms of incorporation, 4 will in principle continue to exist. The private company with limited liability, the public limited company, the cooperative association and the partnership. The private limited company, the public limited company and the co-operative are all three forms of joint stock companies. The partnership will be the only form of incorporation without a legal personality. Different variations of these four corporate forms are possible. For example, firms and limited partnerships have not been abolished but are treated in the Code as a partnership with legal personality.
- A private limited company without capital
Perhaps the most striking reform is the introduction of a new form of private limited company (without capital) (the SRL/ BV) to replace the previous private limited companies (SPRL/BVBA). By making a private limited company the most flexible legal form, without capital and with an open character, legislators are endeavouring to make the private limited company (SRL/BV) the most popular legal form. The notion of ‘capital’ has been completely abolished for the private limited company and replaced by ‘net assets’. The minimum capital required has therefore been replaced by a requirement to have sufficient starting capital. Those setting up a private limited company must ensure that it has sufficient net equity for the planned activities when it is incorporated. Outside (borrowed) capital also qualifies, but it will not be possible to launch a business with only outside capital. Another innovation is that in future, when incorporating a company, it will be possible to bring in not only money or assets in natura but also industry (i.e. work). This change makes it even more important to have a good, well thought out financial plan.
- Non-Profit Association (asbl/vzw)
In future both non-profits and other associations will be subject to the new Code. Profit motive has been abolished as a criterion for distinguishing between the two forms. The new criterion for this distinction is the existence or non-existence of a distribution of profit.
- One director for public limited companies
Under the new corporate legislation it is possible for a public limited company to have only one director (as opposed to three in the past). This could open up new possibilities for transfers within the family. For example, shares can be given to the children while the pater familias can be appointed as the sole director.
- Introduction of a statutory registered office
This measure brings Belgium into line with other countries, like the Netherlands and the United Kingdom. By abandoning the requirement that a registered office should also be the effective place of management, legislators aim to make Belgium more attractive for businesses that are active internationally. Opting for statutory registered offices has the advantage of legal certainty. In that context the Code also introduces a procedure for cross-border movements of registered offices.
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- In future it will be possible to issue shares with multiple voting rights.
- Legal limits will be put on directors’ liability according to the size of the company. However, this will only apply for minor accidental errors and not for repeated minor errors or serious blunders. This change, which was introduced at the last moment, largely erodes limitation of liability and leaves much room for discussion.
- In future one director will be sufficient for a Belgian foundation.
- Abolition of the distinction between professional partnerships and trading companies.
The new legislation will come into force on 1 May 2019.
For existing companies and associations, the new legislation will be applicable as of 1 January 2020. However, one can opt to apply the provisions of the Code prior to 1 January 2020.
Existing companies, associations and foundations must bring their statutes into line with the new legislation on the first occasion the statutes are changed after 1 January 2020 and by 1 January 2024 at the latest. The mandatory provisions of the Code will be immediately applicable even if there is no change to the statutes.
Now is perhaps the right time to have a good look at everything and plan any action that needs taking.
Should you have any additional questions, please do not hesitate to contact us.