The Belgian Parliament finally approved the new Belgian Code of Companies and Associations (BCAC) on February 28, 2019. With the BCAC, an important step has been taken towards a more flexible and competitive legal framework for businesses and entrepreneurs in Belgium.
The BCAC will enter into effect as of May 1, 2019. Companies incorporated as of that date will be subject to the BCAC. Existing companies will be subject to the BCAC as of January 1, 2020. They will have to amend their articles of association to the BCAC at the occasion of the first (other) amendment of their articles of association after January 1, 2020 and, ultimately, by January 1, 2024. Existing companies may, however, also opt-in and choose to apply the BCAC prior to January 1, 2020. The abolished company types will have to be converted by January 1, 2024, at the latest. If not, they will be converted by law into a company type set out in the BCAC.
LIMITATION OF COMPANY TYPES
Several company types disappear, only to resurface again by having some of their key features integrated into one of the seven main company types that remain. The BV/SRL is intended to become the ‘default company’ in Belgian corporate law. It is expected that the BV/SRL and the NV/SA (for larger and listed companies) will represent the bulk of the companies in Belgium. The cooperative company (CV/SC), the partnership (VOF/SNC), the limited partnership (CommV/SComm), the European Company (SE) and the European Cooperative Company (SCE) are the other company types. Additionally, the new Code will also apply to non-profit organizations and foundations.
The modernization of the BVBA/SPRL into the BV/SRL is perceived as one of the cornerstones of the new BCAC. The BV/SRL is structured as a company type without share capital, offering a large amount of flexibility. This flexibility will allow businesses to tailor their company to their needs in terms of governance, funding and distribution of profits. Some examples of this flexibility include sole shareholdership, the possibility of exclusion and withdrawal of shareholders and the possibility of free transferability of shares.
The abolishment of share capital has a vast impact on the functioning of this particular company type, including new rules on dividend distributions (e.g.: a net asset test and liquidity test) and flexibility in the allocation of voting rights to shares (e.g.: shares without, with multiple or conditional voting rights). The tax consequences are important as well. Since the concept of share capital is embedded in various income tax provisions, amendments to the Income Tax Code will ensure these corporate changes can take place in a tax-neutral manner. The question arises whether the changes on the corporate and tax level will have an impact on the application of the Check-the-Box regulations for entities with a US-Belgian link. We expect that this will not be the case.
The legal framework of the NV/SA has been simplified where possible, taking into account the European limitations. The NV/SA will therefore not have the same level of flexibility as the BV/SRL. However, some important changes are to be noted, including sole shareholdership, a large degree of flexibility with respect to governance and a possibility to issue shares with multiple voting rights. For listed companies, this flexibility will be limited to an optional double voting right for loyal shareholders who have owned their shares for a consecutive period of at least two years.
REGISTERED OFFICE AS BENCHMARK FOR DETERMINING APPLICABILITY OF BELGIAN COMPANY LAW
Belgian company law will apply to any company whose registered office is located in Belgium. This should enable Belgium to export its own company law abroad and allow foreign companies to choose a Belgian legal form by establishing their registered offices in Belgium, without the need to conduct business within the Belgian territory. Belgian corporate income tax, however, still adheres to the place of effective management. Therefore, monitoring the place of effective management for tax purposes may become even more important after the introduction of the registration criterion under corporate law.
About the author
Robrecht works in Loyens & Loeff’s Corporate and M&A department and heads the firm’s multidisciplinary and cross-office Start-up and Venture Capital Team. He specializes in international and domestic M&A, joint ventures, private equity and venture capital transactions.