Part V: The cooperative company
The rules for the cooperative limited liability company (“CV/ SC”) are stated in Book 6 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 CV/SC will be reserved for the cooperative purposes as laid down in the ICA principles. Following 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.’ The CV/SC’s main purpose should therefore be to meet the needs of its shareholders or interested third parties (including parent and group companies) and/or to develop their economic and social activities, for example by purchasing products from its shareholders, providing services to the shareholders. The cooperative goal and values should be stated in the articles of association, possibly complemented by internal regulations or a charter.
Under existing law, the CV/SC is sometimes chosen for its flexibility: there are few mandatory provisions and it allows easy entrance and exit of shareholders. Under the new Code, the private limited liability company (BV/Srl) provides more flexibility and should be chosen if the primary goal is to model the company to the needs of its shareholders.
Capital/ Founders/ Distributions/ Directors
Similar to the BV/Srl, the CV/SC will have no capital. However, the founders of a CV/SC must provide for sufficient equity, taking into account the envisaged activities and all other financing sources. A financial plan is required and we refer to our newsletter on the BV/Srl, which appeared on 29 March 2019, for a description of its contents and importance.
As under current law, the cooperative company requires three founders. A CV/SC can only issue shares and bonds and upon incorporation, at least three shares with voting rights should be issued. It will be possible to issue shares as a compensation for labour or services performed for the company.
The articles of association should state the criteria for admission of a shareholder and, unless otherwise provided, it is the board of directors which decides on such admission.
The existing distinction between shares in the fixed and variable capital is abolished: any issue of shares can be done without amendment of the articles of association (and thus no notarial deed is required).
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. The rules on distributions, as well as the application of the so-called ‘alarmbelprocedure’ are similar to those of the BV/Srl and we refer to our newsletter dated 29 March 2019 for a description thereof.
The CV/SC must have at least one director and each director is entitled to individually represent the company. The rules on dismissal of directors, conflicts of interest and day-to-day management are largely the same as for the BV/Srl, we refer to our newsletter of 29 March 2019.
Withdrawal
It is mandatory that a shareholder in a CV/SC has a right to withdraw from the company, although the exercise of such right is subject to limitations. A withdrawal of the founders will only be allowed as of the third financial year of the company and, unless otherwise provided in the articles of association, shareholders can only withdraw 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 if the company does not meet the net asset and/or liquidity test, but has priority over all other distributions to shareholders. No interest is payable in case of late payment.
CVs with social purpose
Under existing law, a company with social purpose can adopt several legal entity forms. Under the new Code, only the cooperative company can be recognised as a company with social purpose.
The conditions to qualify as a CV/SC with social purpose have been simplified. Only the following three conditions must be met:
the main purpose must be to pursue a positive societal impact on human beings, environment or society;
distributions to shareholders may, at the maximum, amount to 6% (currently) over the amount actually paid-up on the shares;
any assets remaining upon liquidation must be distributed to a comparable social purpose.
The existing requirement that employees must be entitled to acquire shares and the limitations on voting rights will be abolished under the new Code.
Recognition of CV/ SC
As is currently the case, a CV/SC can be recognised by the Nationale Raad voor de Coöperatie (National Council for Cooperatives).
Book 8 of the new Code contains the rules on the recognition of cooperative companies. Under the new Code, a CV/SC can be:
A recognised CV (“erkende CV/ SC agréée”) if its main purpose is to give its shareholders an economic or social benefit in satisfaction of their professional or personal needs;
A CV recognised as social company (“CV erkend als SO/SC agréée comme ES”); or
A recognised CV recognised as a social company (“Erkende CVSO/ SCES agréée”), if it fulfils both the conditions under (i) and (ii).
In the newsletter appearing on Friday 19 April, we will discuss the public limited liability company (NV/SA) under the new Code.
Please contact the Curia Corporate and Non-profit team with any questions:
Yvette Verleisdonk, partner (yvette.verleisdonk@curia.be)
Sarah Verschaeve, partner (sarah.verschaeve@curia.be)