Revolution in Belgian corporate law

Following several years of preparation, the new Belgian Code of Companies and Associations (the BCCA) was finally adopted by the Belgian Parliament on 28 February 2019.

The BCCA substantially reforms Belgian company and associations law currently in force and aims to simplify the regime making it more flexible and coherent. The BCCA will gradually enter into force on 1 May 2019 for companies and associations incorporated as of that date and on 1 January 2020 for currently existing companies and associations.

In view of the substantial changes introduced by the new BCCA, currently existing Belgian companies and associations will need to review their structures and key corporate documents to see whether they still align with the BCCA.

Key changes introduced by the BCCA

The BCCA introduces the following key changes: 

1.  Reduction in the available company forms

Under the BCCA, the number of company forms is drastically reduced. In future, all companies will need to take the form of a partnership (maatschap/société simple), general partnership (VOF/SNC), private company (besloten vennootschap/société à responsabilité limitée), limited liability company (naamloze vennootschap/société anonyme), cooperative company (cooperatieve vennootschap/société cooperative), European Company or a European cooperative company.

In practice, a number of older company forms (such as the agricultural company) will continue to exist, but only as a modality of one of the above company forms.

2.  BV/SRL becomes the go-to company form for most privately held companies

The current BVBA/SPRL is restyled into a new company form, i.e. the BV/SRL. The BV/SRL excels in flexibility and provides maximum contractual freedom for shareholders. Some key takeaways of this flexibility: 

• the concept of share capital is abolished making it possible to incorporate a BV/SRL with only EUR 1; 
• the BV/SRL's articles of association can freely determine the transfer of shares and provide for flexible mechanisms in relation to shareholder withdrawal and exclusion;

• the BV/SRL is able to issue all securities that are not prohibited by law, including convertible bonds and warrants; and 
• it is even possible to get the BV/SRL listed on the stock exchange.

3.  The regime for the NV/SA has been simplified

The regime for the NV/SA has been simplified where possible in the light of European regulations. As such, an NV/SA can now be incorporated by only one shareholder. Also the procedure to acquire own shares has been made less complex.

The BCCA also introduces new governance models for the NV/SA. In future, the following governance options will be available, depending on the company's needs: 

• "one-tier" board, i.e. the traditional board of directors;
• the so-called "two-tier" structure, consisting of a management board (responsible for the operational policy) and a supervisory board (responsible for strategy and supervision of the management board); and
• one sole director. 

Moreover, the principle of ad nutum termination of a director's mandate is no longer mandatory and the articles of association can now provide for various provisions protecting directors against their potential removal.

The intention of the Belgian legislator is to keep the NV/SA as the standard for listed and (very) large companies; however other companies will be better off in most cases with taking the company form of a BV/SRL.

4.  Multiple voting rights

In both the BV/SP and the non-listed NV/SA, it will be possible to truly tailor the voting rights to the company's needs and issue shares granting one vote, multiple voting rights, or even no voting rights at all. 

For the listed NV/SA, the current restrictions remain -  it being understood that it becomes possible to grant double voting rights to "loyal" shareholders holding their fully paid - up shares for at least two years.

5.  Financial cap on directors' liability

The BCCA introduces a financial cap on the liability of directors and daily managers of EUR 12,000,000 (aggregate cap that applies to all directors together), depending on the size, turnover and balance sheet total of the company. 

The cap will not apply in cases of fraud, repeated minor faults, gross negligence, wilful intent, and in a number of exceptions set out in the BCCA (e.g. liability in relation to unpaid VAT, corporate income taxes or social security contributions).

6.  Nationality of companies

The nationality of a company (and thus the application of the BCCA) will be determined by the registered office mentioned in the company's articles of association, and no longer by reference to the "real" seat, i.e. the place where the company's business is conducted. 
As a result, a foreign company will be able to choose a Belgian legal form by establishing its registered office in Belgium, without the need to conduct business within the Belgian territory. However, in order for a company to qualify as  resident for Belgian corporate income tax purposes, the head office (i.e. the place of effective management) should still be located in Belgium.

7.  Timeline

The BCCA will gradually enter into force from 1 May 2019. Key aspects of the transition at regime are: 

• The new BCCA will enter into force on 1 May 2019 and shall automatically apply in its entirety to all currently existing companies incorporated as of that date. As a result, the only corporate forms that can be incorporated as of 1 May 2019 are the corporate forms mentioned above. 
• Existing companies and associations will be subject to the mandatory provisions of the BCCA from 1 January 2020. However, they have until 1 January 2024 to voluntarily fully align their articles of association with the BCCA, it being understood that they are obliged to fully align their articles of association with the entire BCCA (including non-mandatory provisions) upon the next amendment of their articles of association. 
• On 1 January 2024, companies in a form that no longer exists under the BCCA will automatically be converted into the closest surviving company form under the BCCA.

If you would like to have more information on the impact of the new BCCA or other legislative changes on your company, feel free to contact us.