After having dominated European politics since 2016, Brexit finally became a reality on January 1st, 2021. The opportunity to review a trend which is expected to continue. Indeed, over the last four years, mainly due to the Brexit, more and more UK charities and non-profit organisations (hereafter: “NPO”) are considering the possibility of having a presence in another EU Member State. In such case, Belgium is often one of the first EU Member States considered by these UK charities and NPOs.
The aims of these UK charities and NPOs for setting up a presence in Belgium are often to (i) maintain/reinforce their relationship with their members established in the European Union (hereafter: “EU”), (ii) pursue the defence of their non-profit purposes towards the EU institutions, or (iii) have access to EU grants/funding.
UK NPOs are often puzzled when facing the Belgian legal system and the various options therein foreseen to ensure a presence in Belgium. Being duly informed of these options and their respective advantages and disadvantages is nonetheless essential. Indeed, whilst deciding between the different options available under Belgian law a UK charity or NPO should take into account the specific project it wishes to carry out in Belgium and the EU. More specifically, several factors should lead the choice of a UK charity or NPO in a certain direction (e.g. property of assets, extent of the liability, need for membership, number of assets, access to grants/funding programmes, etc.).
If such a choice is not carefully made, the UK charity or NPO could end up with a presence or Belgian non-profit vehicle which is not appropriate, useless or even extremely burdensome to manage. In the end, it will be forced to change the way it ensures its presence in Belgium, which is often costly, demanding and time-consuming. Time and money the UK charity or NPO could better spend on the realisation of its non-profit purposes and activities.
In view of the above and learning from our long-standing experience in Belgian and European non-profit law, the purpose of this article is to point out what are the options for UK charities and NPOs and the main advantages and disadvantages of each option.
Main options to ensure the presence of a UK charity or NPO in Belgium
First option: representative office
A representative office is not a “recognised” or “official” entity. Indeed, there are no legal rules regulating representation offices. Consequently, it has no legal personality. Furthermore, no administrative and publication formalities must be carried out.
Usually, a UK charity or NPO uses a representative office in order to perform preparatory and/or auxiliary activities which are not activities of a permanent establishment (e.g. limited information services, limited public relations, one lobbyist, etc.).
Second option: Belgian branch office
According to the companies and associations Code of March 23, 2019 (hereafter: “Code”), each UK charity or NPO may decide to open a branch office (in French: “succursale”/in Dutch: “bijkantoor”) in Belgium.
A Belgian branch office (hereafter: “BBO”) does not have separate legal personality (next to the UK charity or NPO) and does not have own assets and liabilities. A BBO is just an expansion of the UK charity or NPO in Belgium.
The registration process of a Belgian branch office is less burdensome than the incorporation process of a new Belgian non-profit organisation (see below item C).
The BBO is represented in Belgium by one or more person(s) (natural person and/or legal entity) who is/are appointed by the UK charity or NPO as legal representative(s). This/these legal representative(s) can be entrusted with the daily management of the BBO. The appointment of (a) legal representative(s) is precisely the main advantage of a BBO as this/these legal representative(s) is/are able to sign on behalf of the UK charity or NPO and to represent it.
Third option: Belgian non-profit legal entity (subsidiary)
Under Belgian law (i.e. the Code), there are four possibilities of non-profit legal entities:
- Non-profit association (in French: “association sans but lucratif”/in Dutch “vereniging zonder winstoogmerk”) (hereafter: “ NPA”)
- International non-profit association (in French: “association internationale sans but lucratif”/in Dutch “internationale vereniging zonder winstoogmerk”) (hereafter: “ INPA”);
- Private foundation (in French: “fondation privée”/in Dutch “private stichting”) (hereafter: “PF”); and
- Foundation of public utility (in French: “fondation d’utilité publique”/in Dutch “stichting van openbare nut”).
The main advantage of the four Belgian non-profit legal entities is that they each have their own legal personality and, consequently, their own assets and liabilities. Each type has its particularities (specific incorporation process, mandatory bodies, mandatory clauses in the articles of association, possibility to carry out commercial activities, etc.) which should be duly investigated and considered whilst deciding the most appropriate option to ensure presence in Belgium.
Moreover, it should in particular be determined to which extent the Belgian non-profit legal entity shall be controlled by the UK charity or NPO. If the Belgian non-profit legal entity is controlled by the UK charity or NPO, it will be a subsidiary of the latter.
Fourth option: cross-border transformation
The Code has introduced a new immigration procedure for UK charities and NPOs (i.e. cross-border transformation). In other words, UK charities and NPOs will be allowed to choose an even more radical way to ensure their presence in Belgium by becoming a Belgian non-profit legal entity in an easy way. Indeed, this new procedure implies a transfer of the registered seat of the UK charity or NPO in Belgium and consequently a change of its nationality. The UK charity or NPO will keep all its assets, liabilities and members its legal personality will continue of the latter.
It results from the above that Belgian law offers a wide range of options to UK charities and NPOs wishing to avoid any adverse effects of the Brexit, each option having its own advantages, disadvantages and particularities. Consequently, we can only encourage and recommend any UK charity or NPO to seek the appropriate legal and tax advice when considering presence in Belgium. This should prevent a UK charity or NPO from making-up unsuitable choices and ensure a tailor-made solution fitting still needs and requirements.