We are pleased to announce that the new Belgian Code on Companies and Associations (the “Code”) has been approved by Parliament on 28 February 2019. As to existing companies and associations, the new Code will enter into force on 1 January 2020. As such, these existing companies and associations will have until 1 January 2024 to update their articles of association. Nevertheless, companies and associations already have the possibility to amend their articles of association as from 1 May 2019 in accordance with the new Code and take advantage of the many new possibilities and flexibility provided by the new Code. As to companies and associations incorporated as from 1 May 2019, these will have to apply the new Code as from their incorporation.
Background of the new law
In view of modernizing and simplifying Belgian company and association law, as well as to improve its competitive nature in a European and international context, an extensive legislative reform was launched in 2014. More specifically, this is an all-encompassing reform of the old Belgian Companies’ Code, which structurally integrates the non-profit legislation as well. The new Code modernizes the old Belgian Companies’ Code based on three key objectives:
1. Introducing a large-scale simplification of the old legislation;
2. Opting for a more supplementary (‘default’) legislation and flexibility; and
3. Introducing new rules to cope with, mainly, European evolutions and new tendencies such as corporate mobility.
What are the key modifications?
The changed highlights include:
- A reduction of the different company types. More specifically, the following types will disappear: agricultural partnerships, the partnership limited by shares, the economic interest grouping, the cooperative partnership with unlimited liability and the silent and the temporary partnership.
- The introduction of new civil penalties, replacing the former ineffective criminal penalties.
- More flexibility and default rules for the BV (e.g. abolishment of ‘share capital’ concept and introduction of unrestricted transferability of shares).
- More flexibility for the organization of the management of the NV. Besides a board of directors, the appointment of a single director will become possible. Furthermore, a two-tier system (consisting of a management board and a supervisory board) will also be an option. Ad nutum dismissal (i.e. dismissal without restrictions) of a director will become supplementary law.
- A monetary cap on the liability of directors.
- The introduction of plural voting shares for both a BV and a NV.
- The introduction of a more attractive establishment regime by adhering to the “statutory seat theory” (instead of the current “real seat theory”). This will allow Belgian companies to easily move their center of economic interests to other countries without having to relocate their corporate address.
- The emigration and immigration of companies is now explicitly regulated with the introduction of a procedure on cross-border conversions.
- The integration of the non-profit legislation in the new Code.
- Associations will be allowed to perform commercial activities. The sole difference with a company will be the absolute prohibition to distribute dividends or provide advantages to its member or directors.
It is clear that the new Code will have considerable implications on the entire Belgian corporate and non-profit sector. Therefore, timely action is essential for a good understanding of all the changes, the impact on your organization and to accomplish a smooth transition to the new legislation. Our lawyers from EY Law have analyzed the new Code extensively over the past months and are fully up to speed on its content. Therefore, we are ready to assist you with any immediate or urgent request you might have.
Do not hesitate to get in touch with your regular contact at EY Law for more information or assistance.