Major changes further to New Belgian Company Code

The objective of the New Code is twofold: on the one hand a modernization and simplification of the Belgian corporate law and, on the other hand making the Belgian corporate landscape more attractive and competitive for foreign investors and businesses.

As from when?

… 2019, 2020 or 2024? The New Code entered into force on the 1st of May 2019. As from this date, all new companies, associations and foundations will fall under the New Code.

Existing companies, associations and foundations should comply with the New Code as of the 1st of January 2020, even if they have not yet amended their Articles of Association. Companies, associations and foundations always have the possibility to voluntarily choose (“opt-in”) to apply the New Code prior to this date. For a number of companies it can be advised to “opt-in”, as the new Code offers them some interesting opportunities.

As of the 1st of January 2020, the rules of the New Code apply to all the new and existing companies, associations and foundations. Existing companies, associations and foundations must adapt their Articles of Association to the New Code before the 1st of January 2024.

Since the New Code has also reduced the amount of the legal forms, some existing companies will have to change their legal form in case they operate under an abolished legal form. If a company has not been converted into a new legal form, these companies will be converted automatically into a legal form determined by the legislator.

Some of the most important changes

Reducing the corporate forms – As said, the New Code reduces the seventeen corporate forms to four basic forms. The private limited liability company (BV/SRL) should become the “standard” legal form in the Belgian corporate landscape. However, the public limited liability company (NV/SA) will probably remain the corporate form of choice for larger companies. Existing companies whose legal form is abolished will have to adopt into another legal form before 2024.

Single-headed incorporation – Both the BV/SRL and NV/SA can now be incorporated by a single legal entity or individual. This will give some company groups the opportunity to simplify the current group structure. Currently, the shareholdership of a company is often spread (for example: 1% – 99%), with the sole reason to comply with the “old” condition to incorporate the company (NV/SA) with at least two (legal) persons. As of the New Code, only the cooperative limited liability company CV/SC still requires a multi-headed incorporation and at least three directors.

No capital – The most notable and important change in the New Code is the abolition of the minimum capital for the BV/SRL. The minimum capital requirement will be replaced by initial net assets. The initial net assets can be a contribution in cash, a contribution-in-kind or and/a contribution of labour. These changes to the funding of a company will also have an accounting and tax impact.

Financial plan – The New Code preserves the obligation of a financial plan, which the founder must submit to the notary, but tightens the regulation. The New Code provides a regulatory minimum that must be included in the financial plan.

Distribution of profits – The net asset test is replaced by a double test: a balance test and a liquidity test. Both tests apply to all distributions in the broad sense of the BV/SRL. The balance test, to be performed by the General Meeting of Shareholders, is quite similar to the net asset test. A distribution should not take place if the company’s equity is negative or would become negative as result of the distribution. The liquidity test implies that the profits may only be distributed if it can be reasonably expected that the company will be able to pay the debts payable in the period of at least 12 months after said distribution. If the directors unjustifiably distribute profits, they will be held jointly liable with respect to the company and third parties for all damages resulting from their decision.

Multiple voting rights – In the NV/SA and BV/SRL it is possible to issue shares with a multiple voting right. The company’s Articles of Association should be amended/drafted accordingly.

Limitation of director’s liability – Director’s liability will be limited by law, depending on the size of the company. The limitation of liability does not apply in case there is fraudulent intent or there are unpaid social contributions, VAT or company withholding taxes.

Statutory seat theory – The real seat theory has been changed to the statutory seat theory. The companies, associations and foundations will fall under the scope of Belgian corporate law if their statutory seat is located in Belgium, regardless of whether they actually operate in Belgium. However, this is only the case from a legal point of view. From a tax point of view, the real seat theory is still applicable. Meaning that a company can still be considered as a tax resident of Belgium when there is sufficient substance in Belgium.

Call for action

The New Belgian Company Code will have a significant impact on all entities having their seat in Belgium. In case you are currently assisting a company (group) with presence in Belgium, it would be worthwhile to assess the impact of the reform and explore the various opportunities for your client.

Of course, we are here to guide you along the road. Feel free to reach out to us!
We are happy to assist with a.o. the following:

• Analyse the current corporate form and advise whether this can be maintained or what will be the most suitable corporate form;
• Analyse the current Articles of Association and adapt it in order to comply with the new Company Code;
• Assist with various registrations with the Belgian Authorities;
• Assess the tax impact of the New Code on the Belgian entity.

Should you have any questions, please do not hesitate to contact us!

Reminder: UBO register

Based on the European Directive, Belgium requires companies to register and file accurate information about their Ultimate Beneficial Owner (“UBO”).
The “UBO” can be defined as any natural person(s) who ultimately own or control the legal entity. This is the natural person(s) who:

• ultimately own or control a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that entity. Any ownership of more than 25% of the shares or voting rights will be regarded as an indication of a sufficient percentage;
• exercise control over the legal entity through other means (e.g. shareholders’ agreement, the power to appoint members of the management board, veto right);
• hold(s) the position of senior managing official(s), if none of the aforementioned persons is identified.

The required information had to be provided by 30th of September 2019. Nonetheless the government has adopted a policy of tolerance until the 31st of December which means no fines will be imposed. If the members of the managing body fail to meet this obligation, they expose themselves to fines ranging from 250 EUR to 50.000 EUR.
Should you wish more information on the UBO register, feel free to contact us.