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3 reasons to amend your company statutes before 1 January 2024

Wednesday 10/02/2021
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On 1 May 2019, Belgian company law changed significantly as a result of the phased introduction of the new Belgian Code on Companies and Associations ("WVV" – “BCCA”).

As far as existing companies are concerned, the following two deadlines are still important:

  • 1 January 2020: The mandatory provisions imposed by the BCCA will apply from 1 January 2020 to companies and associations already in existence on 1 May 2019, even if the opt-in procedure has not yet been completed. Any statutory provisions that contravene the mandatory provisions of the BCCA shall be deemed unwritten. Additional provisions of the BCCA shall only apply if they are not excluded by a statutory provision;
  • 1 January 2024: all statutes must be brought into line with the provisions of the BCCA by 1 January 2024 at the latest.

This article sets out a number of good reasons to opt voluntarily for an integral amendment of the statutes in order to comply with the BCCA before 1 January 2024.

Clarity

On 1 January 2020, the mandatory provisions of the BCCA became applicable to all companies. However, the BCCA is not clear about which provisions are mandatory rules. The Explanatory Memorandum states that this concerns, amongst other things, new names and legal forms, the rules on profit distribution, the composition, operation and liability of management bodies and the rules on liquidation.

Since the law does not clearly state which provisions are mandatory rules, there is a real risk that, if your articles of association are not amended, discussion could arise as of 1 January 2020 about which rules apply: the rules incorporated in the articles of association or the rules of the BCCA. It will be necessary, therefore, to verify whenever a decision is made whether or not it is influenced by a mandatory rule of the BCCA.

Moreover, CVOAs, limited partnerships with share capital, economic partnerships and agricultural companies will not be included in the BCCA. As of 1 January 2020, they are also subject to the mandatory provisions applicable to the most closely resembling type of company.

CVBA (Cooperative company with limited liability) will be reserved for a cooperative company form, in which companies truly promote a cooperative idea. Since 1 January 2020, 'inappropriate' CVBAs have been subject to the mandatory rules of a BV (private limited company) and such companies will eventually be required to convert to a BV.

Company forms of this nature may already have experienced undesirable consequences since 1 January 2020.

Validity of your decisions

The BCCA includes many mandatory provisions relating to the management and decision-making within companies.

The most significant aspect is that, as of 1 January 2020, there has been a ban on cumulative tasks; one person can no longer have different capacities in one administrative body, e.g. in their own name and as the permanent representative of a legal entity-director. Moreover, the BCCA has introduced a cascade ban, as a result of which a company-director must immediately appoint a natural person as permanent representative, whereas until now a management company was often appointed as permanent representative, which in turn appointed a natural person. Whereas under the old rules the permanent representative was required to have a link with the legal entity-director, the BCCA leaves out this mandatory connection. A company-director is completely free to choose their permanent representative.

The term daily management is expanded under the new BCCA. Any daily activities and decisions and non-daily activities or decisions of minor importance or not urgent enough to justify convening the board of directors shall be regarded as daily management activities by the BCCA. Previously the legislation stipulated that daily management only covered non-daily activities that were not urgent and of minor importance.

The BCCA also introduces a new alarm bell procedure for BVs. This change is a consequence of the disappearance of the notion of capital in a BV. The procedure must be applied as soon as the equity of the BV is, or threatens to become, negative or if the company will no longer be able to meet its debts for at least twelve months. The managing body will have to convene a general meeting within two months to decide on the dissolution of the company and the measures announced in the agenda in order to safeguard the company’s continuity.

The BCCA also incorporates a more comprehensive and stricter regulation pertaining to conflicts of interest. An article on this subject has been published on our website, so if you need further clarification, please refer to the article.

Now is the time to take a good look at the composition and functioning of your administrative body. After all, a violation of the BCCA could result in decisions made by the administrative body being declared null and void.

Opportunities

Adapting your articles of association to the BCCA also offers certain opportunities. However, if your articles of association have stricter provisions, you will still have to adhere to them.

Under the BCCA, for example, both NVs and BVs can be established by a sole shareholder, which means that groups of companies can be structured in a much simpler way.

Moreover, the BCCA also provides new options for the organisation of the management of an NV. Whereas under the old law a board of directors always had to be composed of (in principle) at least three directors, the BCCA offers the possibility for an NV to be managed by one director.

The profit distribution options for your company have also been expanded. Whereas previously only an NV and a limited partnership with share capital employed a system of interim dividends, now the managing body within a BV can be authorised to distribute the profit of the current financial year as dividend, providing it is stipulated accordingly in the articles of association.

Shares can be issued under the BCCA system with multiple voting rights. The former principle of each share - one vote, becomes an additional right. This means that several share types can be created, whereby shares of one type can be assigned more voting rights than shares of another type. Different shares in the profit can also be allocated to different types of shares. The main benefit here is that tailor-made modulation is possible, e.g. a ‘pater familias’ (head of household) can already transfer a substantial shareholding to his children but still retain control over the company.

Should you have any further questions, please do not hesitate to contact our experts.

Contact one of our experts

Bert Lutin

Bert Lutin

Partner Tax & Legal Services

Tanja De Naeyer

Tanja De Naeyer

Senior Manager Tax & Legal Services

Carl Boudewyn

Carl Boudewyn

Senior Manager Tax & Legal Services