Part III: The BV/ SRL

The rules applicable to the BV/ Srl (private limited liability company) are stated in Book 5 of the new Code. They are complemented by the general provisions, applicable to all legal persons, stated in Books 1 -3. Under the new Code, the BV/Srl is intended to become the standard legal person. Given that most of the rules of the new Code are applicable by default, the BV/Srl can to a large extent be tailored to the specific needs of its shareholders.

No capital

An important difference with existing law is that the BV/Srl will have no capital. However, the new Code does require that, at incorporation, the equity and other financing (such as loans) of the company are sufficient in the light of its envisaged activities.

The requirements for the financial plan, which must be provided to the notary at incorporation and will be kept by him, are laid down in the new Code. The financial plan must describe the financial situation of the company during the first two years of its existence. The existing liability of the incorporator(s) is maintained and will potentially apply if the BV/Srl goes bankrupt within three years and the financial means of the company were manifestly insufficient for its activities during the first two years.

Under the new Code, a BV/Srl can be incorporated by a single incorporator (individual or legal entity) and it will be possible to issue shares as a compensation for labour performed for the company.

Distributions to shareholders

Distributions to shareholders (e.g. dividends, redemption of shares, compensation upon withdrawal or exclusion) can only be made if the company has sufficient net assets and liquidity. Firstly, no distribution is allowed if the net assets of the company are negative or would become negative as a result thereof (net asset test). Secondly, the company must be able, taking into account the developments that can reasonably be expected, to pay the debts that become due and payable during the next twelve months (liquidity test). It will be the responsibility of the board of directors to assess whether these two tests test are met.

Withdrawal

Under the new Code, a shareholder in a BV/Srl is entitled to withdraw from the company, comparable to the current arrangement for the cooperative company, if the articles of association so provide. A withdrawal of the incorporators will only be allowed as of the third financial year of the company and, unless otherwise provided in the articles of association, during the first six months of the financial year and with all shares. The compensation payable to the withdrawing shareholder will be the amount paid up (and not yet repaid) on its shares, with a maximum of the net asset value of the shares based on the most recently approved annual accounts. Payment of the compensation will be (partially or entirely) suspended of the company does not meet the net asset and/or liquidity test, but has priority over all other distributions to shareholders.

Voting rights and transferability

The BV/Srl introduces more freedom in terms of voting arrangements and restrictions on the transferability of shares. The company is required to issue at least one share with one vote, but the traditional rule of “one share, one vote” is abandoned. Shares can have multiple voting rights, no voting rights or voting rights only in specific circumstances.

The existing limitations on the transferability of shares in a BV/Srl are also set aside and become the default rules. Under the new Code, if the articles of association so provide, the shares in a BV/Srl can be freely transferred to shareholders and third parties.

Finally, it is specified that the company may not recognise share transfers which violate transferability restrictions.

Board of directors

The BV/Srl must have at least one director and the standard remains that each director is entitled to individually represent the company. A director may not, in his capacity of director, be an employee. The current rule that a director can be dismissed by the shareholders meeting at will (ad nutum) remains applicable by default, but it will be possible to provide otherwise in the articles of association. The directors can always be dismissed, without compensation or notice, on legal grounds (‘wettige redenen’).

In case of a conflict of interest of a director, the conflicted director must abstain from participating in the deliberation and voting and the other, non-conflicted, directors will decide on the matter. If all directors are conflicted, the decision must be submitted to the general meeting of shareholders. A sole director and sole shareholder may take the decision and implement it.

Finally, the interpretation of ‘day-to-day management’ is clarified and includes any decisions which are (i) part of the daily life of the company, or (ii) of lesser importance or (iii) urgent.

The grounds for directors’ liability and the creation of a cap on the liability of directors will be discussed in one of the next newsletters.

In the newsletter appearing on Friday 5 April, we will discuss the new rules for foundations and international associations.

Your contacts of the Curia Corporate and Not-for-profit team:

Yvette Verleisdonk, partner (yvette.verleisdonk@curia.be)

Sarah Verschaeve, partner (sarah.verschaeve@curia.be)