A new year, a new beginning… and new rules?
Changes as of 1 January 2020
The CCA changes the name of the BVBA/SPRL to "BV/SRL" (private limited liability company) and of the CVBA/SCRL to "CV/SC" (cooperative company with limited liability). As from 1 January 2020, these company forms must use the new name on all deeds, invoices, announcements, notices, letters, orders, websites and other documents, even if their bylaws have not yet been adapted to the CCA.
As of 1 January 2020, companies, associations and foundations that have not yet amended their bylaws are subject partly to the 'old' applicable legislation (the Companies Code, the Law of 27 June 1921 on Not-for-Profit Associations, Foundations and European Political Parties and Foundations (hereafter the NPO-Law) and the Law on Trade Associations) and partly to the CCA. The mandatory provisions of the CCA apply to these legal entities as from 1 January 2020. Provisions in the bylaws that are contrary to these mandatory provisions of the CCA will be considered as unwritten as of this date. As of 1 January 2020, you may therefore no longer blindly rely on (unamended) bylaws. In addition, the non-mandatory provisions of the CCA will also apply, unless the bylaws contain a deviating provision. An example hereof is the transferability of shares in a BV/SRL. Whereas under the 'old' Companies Code shares of a BVBA/SPRL could only be transferred under strict conditions, the transferability of shares in a BV/SRL under the CCA is not mandatorily regulated. However, if the bylaws still prescribe the limited transferability, the stricter provisions of the bylaws will have to be applied, although the CCA allows for more flexibility in this respect.
Companies and associations whose legal form is being abolished (such as the “commanditaire vennootschap op aandelen”/”société en commandite par actions” (partnership limited by shares), “coöperatieve vennootschap met onbeperkte aansprakelijkheid”/”société coopérative à responsabilité illimitée” (cooperative company with unlimited liability) and “beroepsverenigingen”/” associations professionnelles” (trade associations)) have until 1 January 2024 to convert into a new legal form and until then they will be subject to the 'old' applicable legislation, unless these provisions would conflict with certain mandatory provisions of the CCA.
It should also be noted that any existing company, association or foundation must bring its bylaws in line with the provisions of the CCA on the occasion of the first amendment of the bylaws after 1 January 2020. For example, if a NV/SA (public limited liability company) decides to increase its capital (except in the framework of the authorised capital) after 1 January 2020, it will have to bring its entire bylaws in line with the CCA.
Mandatory provisions of the CCA
What are the mandatory provisions that will apply as from 1 January 2020? Although it is to be expected that there will still be some discussion on this subject, to a large extent this is already clear. The most important ones are listed below.
Companies, associations and foundations
In principle, the following applies to all companies, associations and foundations.
The procedure regarding conflicts of interest has become more strict for many companies, in the sense that the conflicted director may no longer participate in the deliberations and voting.[1] In addition, from now on a conflicts of interest procedure must also be applied by not-for-profit associations and foundations. It should be noted, however, that the conflict of interests procedure provided for in the CCA does not apply to international associations. Evidently, international associations can voluntarily integrate such a procedure in their bylaws should they wish to do so.
The rules on the permanent representation of directors-legal entities have been extended. The permanent representative needs to be a natural person and cannot simultaneously sit on the board of directors in his own name or as the permanent representative of another director-legal entity. The construction whereby a management body consists of the director Jan Peeters BVBA/SPRL, represented by Jan Peeters, the director Jan Peeters and the director Peter Janssens will no longer be possible under the CCA. Jan Peeters may no longer sit on the board of directors in two different capacities. Legal entities to which the daily management is delegated must also appoint a permanent representative. Furthermore, these rules equally apply to (international) associations and foundations.
The daily management powers have been broadened: these are now all actions and decisions that do not exceed the needs of the daily life of the legal entity, as well as all actions and decisions that do not justify the intervention of the board of directors, either because of their minor importance or because of their urgent nature. Since discussion is still possible on the interpretation of these criteria, we recommend that the scope of the powers of the person(s) entrusted with the daily management is clarified in the delegation decision. The powers of the person(s) entrusted with the daily management already in office will automatically be extended as from 1 January 2020.
As from 1 January 2020, if a legal entity has internal rules, these can no longer include provisions that affect the rights of the partners, shareholders or members, the powers of the bodies or the organisation and working methods of the general meeting. The bylaws must authorise the board of directors to draw up such internal rules and must also contain a reference to the date of the last approved version of the internal rules. The board of directors is allowed to amend and publish this reference in the bylaws.
With regard to the convening of and the vote at the general meeting, the CCA has also introduced some changes. For example, the management body of the NV/SA, the BV/SRL and the CV/SC is obliged to convene a general meeting if shareholders representing one tenth of the capital (NV/SA) or representing one tenth of the number of shares (BV/SRL and CV/SC) so request. In the not-for-profit association, the existing rule continues to apply that obliges the board of directors to convene a general meeting at the request of one fifth of the members. With regard to voting in the extraordinary general meeting of companies, not-for-profit associations and foundations, the law now explicitly stipulates that abstentions are not taken into account (neither in the numerator nor in the denominator). These rules automatically apply as from 1 January 2020, even if the bylaws contain provisions to the contrary.
Also the directors' liability regime has changed since 1 January 2020. Insofar as the board of directors is a collegiate body, the directors will in principle be jointly and severally liable for the errors committed in their mandate. Furthermore, the CCA has also introduced quantitative liability limitations, the so-called "caps". These caps depend on the turnover and balance sheet total of the legal entity concerned and apply to damage causing events occurring after the date on which the CCA becomes applicable to the legal entity concerned (for further explanation, also regarding the in practice rather broad exceptions to the “caps”, we refer to our newsletter on governance).
Another novelty of the CCA is that directors and persons entrusted with the daily management can now choose their domicile at the registered office of the legal entity in order to avoid having to reveal their private address (e.g. in publications in the Annexes to the Belgian State Gazette). In addition, foreign directors, person(s) entrusted with the daily management, auditors and liquidators, who have their domicile abroad, are deemed to have chosen domicile at the registered office of the legal entity for the entire duration of their mandate.
For the NV/SA, the BV/SRL and the CV/SC, the mandatory entries in the shareholders’ register have been extended. A new feature is that from now on, among other things, statutory transfer restrictions and, if one of the parties so requests, contractual transfer restrictions must be recorded in the shareholders’ register.
Associations
A practical consequence of the CCA is that as of 1 January 2020, the notice period for the general meeting of members of not-for-profit organisations has been extended from minimum eight to minimum fifteen days.
As long as a vzw/asbl (not-for-profit association) or an ivzw/aisbl (international not-for-profit association) has not changed its object, it may only engage in commercial activities that are incidental according to the rules of the 'old' NPO-Law. This prohibition expires by operation of law on 1 January 2029, even if the object has not been changed in the meantime.
BV/SRL and CV/SC
As of 1 January 2020, a number of specific aspects have been changed radically for the old BVBAs/SPRLs and CVBAs/SCRLs. The fully paid-up part of the capital and the legal reserve of the BVBAs/SPRLs and the fully paid-up part of the fixed part of the capital and the legal reserve of the CVBA/SCRL have been transformed automatically, without fulfilling any formality, into a statutory non-distributable reserve. The non-paid-up part of the capital in the BVBA/SPRL and the non-paid-up part of the fixed part of the capital in the CVBA/SCRL have been converted on that date into a reserve "uncalled contributions ".
In addition, the CCA introduces the net assets and liquidity test for the BV/SRL and the CV/SC. A distribution is prohibited if the net assets of the company are negative or would become negative pursuant to the distribution (net assets test) or if, according to reasonably foreseeable developments, the company would no longer be able to pay its due debts for at least the next twelve months (liquidity test). In addition, the renewed alarm bell procedure will be applied if it appears that one of the two tests is no longer satisfied. For further information we refer to our newsletter about the BV/SRL.
CV/SC and CVSO/SCFS
Under the CCA, a CV/SC may only be used for cooperative purposes according to the ICA principles. According to these principles, a CV/SC is ‘an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.’ It needs to be awaited how (strictly) this principle will be interpreted, but a CV/SC that does not comply with this principle (under the 'old' law, the CVBA/SCRL was sometimes chosen because of its flexibility), remains a CVBA/SCRL until it is converted into a BV/SRL (no later than 1 January 2024) and falls under both the 'old' rules of the CVBA/SCRL and the mandatory new rules of the BV/SRL as from 1 January 2020. The board of directors of the company must take a decision on this matter.
Existing companies with a social purpose are presumed to be recognised as a social enterprise. The Minister of Economy draws up a list of these companies and can rebut the presumption. Companies with a social purpose that do not have the form of a cooperative company (and that wish to remain a social enterprise) must convert into a CV/SC no later than 1 January 2024.
New bylaws: sooner rather than later
We advise existing companies, associations and foundations to bring their bylaws in line with the CCA as soon as possible to avoid ending up in a grey zone as far as applicable law is concerned. By doing so, these legal entities, and in particular the BV/SRL, will also be able to benefit from the flexibility offered by the CCA.
If you have any questions, you can contact the Curia Corporate and Not-for-profit team: Yvette Verleisdonk, partner (yvette.verleisdonk@curia.be) and Sarah Verschaeve, partner (sarah.verschaeve@curia.be).
[1] This was already the case for the listed NV/SA