Revised Companies and Associations Code
It is common knowledge that, on 1 January 2020, the Belgian Companies and Associations Code (CAC) went into effect for all Belgian legal entities. Before the Code had even entered into force, the Chamber had already received a proposal for the revision of various provisions. That proposal has now been accepted. So, what are the most relevant corrections?
Author: Ruben Ruysbergh, Senior Consultant BDO Legal
The proposed revisions were already submitted to the Chamber on 4 October 2019. On 16 April 2020, the Chamber adopted the revised legislation. This was then officially published in the Belgian Official Gazette on 6 May 2020, with the revisions taking effect that same day. Most of the changes aim to rectify omissions and material errors (such as incorrect cross-references and terminology), to ‘clarify’ certain items, and to bring the French and Dutch versions of the Code into closer alignment. However, more significant corrections are included as well, some of which we will highlight here.
Private and public limited companies with one shareholder
One shareholder is sufficient to set up a private or public limited company. Such companies may also come to have a sole shareholder in the course of their existence. For public limited companies, the Code (Article 7:231) already stipulated that the fact that one person holds all of the shares as well as the identity of the sole shareholder must be disclosed in the company file. This obligation now also extends to private companies and is anchored in Article 2:8, §4 CAC. Article 7:231 CAC has therefore been removed.
Dissolution and liquidation of national and international NPOs
The regime for the dissolution and liquidation of national and international non-profit organisations now aligns more closely with the regime for companies. Prior to the revision, re-opening the liquidation of a national or international NPO was subject to two conditions:
- The liquidation must have ended in a shortfall.
- One or more assets are revealed to have been overlooked after the closure of the liquidation.
For companies, re-opening a liquidation does not require a shortfall. The revised legislation aligns the regime for national and international non-profit organisations with that for companies. Therefore, to re-open the liquidation of a national or international non-profit, only the second condition currently applies.
The rules regarding day-to-day management bodies at private and public limited companies, co-operatives, non-profit organisations and foundations have been harmonised. Firstly, the legislator has changed the provision for private companies and co-operatives. Prior to the revision, the Companies and Associations Code stipulated that private companies and co-operatives had to regulate the appointment and dismissal procedures and competences of persons entrusted with the day-to-day management in the articles of association. The revised legislation removes this stipulation, bringing the rules in line with those for public limited companies, non-profit organisations and foundations. Articles of association are therefore no longer required to describe the appointment and dismissal procedures and competences of persons entrusted with the day-to-day management. This creates greater clarity. After all, from the initial provision, one could derive a de facto requirement for authorisation from the articles of association to establish a day-to-day management body. But that was certainly not the intent.
Furthermore, the revised legislation amends the rules on day-to-day management for foundations and non-profit organisations, again aligning these more closely with those for private companies, co-operatives and public limited companies. In other words, the explicit requirement of authorisation in the articles of association for the delegation of day-to-day management has been abandoned. This means that, on the grounds of its residual competence, the management body can establish a day-to-day management body and appoint and dismiss its members, even in the absence of a provision in the articles of association.
The revision also clarifies the liquidity test applying to payments by private companies and co-operatives. Payments that occur in violation of the net assets and/or liquidity test can be recovered not only from shareholders, but from any beneficiary. This means that, if a director’s bonus was awarded without observing the net assets and liquidity test, this can be reclaimed from the director in question.
Furthermore, the revised legislation clarifies that, when carrying out the liquidity test, the rules concerning directors’ conflict of interest do not apply.
Thirdly, the criminality of payment rules violations is clearer. According to the revised legislation, only the management body’s decision to make payments endangering company liquidity is considered criminal. In itself, failure to perform the liquidity test is not punishable by criminal law.
“Payments by private companies and co-operatives that violate the net assets and/or liquidity test can be recovered from any beneficiary.”
Modified transitional SCRL/CVBA provision
The revised legislation states that existing SCRLs/CVBAs that fail to meet the definition of a co-operative company (as interpreted by Book 6 CAC) must continue to use the old ‘SCRL/CVBA’ designation. Until 1 January 2024, that is, as they will be automatically converted to private companies on this date.
For SCRLs/CVBAs that do meet the definition of a co-operative company, the fixed portion of the capital and the legal reserve were automatically converted into an ‘unavailable shareholders’ equity account’ on 1 January 2020. For SCRLs/CVBAs that do not meet the definition, this will not occur until 1 January 2024, when they are automatically converted to private companies. In the meantime, these SCRLs/CVBAs can continue to make use of the fixed and variable capital. Therefore, in contrast to private companies and SCRLs/CVBAs that do meet the definition of a co-operative, they needn’t work with an ‘unavailable shareholders’ equity account’.
After all, in accordance with Article 41 of the Companies and Associations Code, until their conversion, existing SCRLs/CVBAs remain subject to the ‘old’ Companies Code with regard to the rules on capital and the resignation and exclusion of shareholders. However, in other areas they are subject to the rules for private companies in book 5.
“For public limited companies, one person holds all of the shares. This now also applies to private companies.”
Do you have questions about the revised legislation for the Companies and Associations Code? Do you need advice on the conversion of your company form? If so, please do not hesitate to contact the specialists from our Legal team: email@example.com.
Be sure to also read the article on the new Companies and Associations Code in To The Point 02/2019, and the FAQ entitled “CCA establishes new rules for payments and annual accounts” in To The Point 01/2020.