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Conflicts of interest in the new Companies and Associations Code

Tuesday 21/05/2019

The new Companies and Associations Code (CAC) entered into force on 1 May 2019. The CAC provides for broader and stricter regulations concerning conflicts of interest that may arise within an organisation. Broadening the scope of regulation means that the directors of cooperative companiesnon-profit organisations (ASBL/VZW) and foundations are also expressly required to follow the procedure for conflicts of interest. The strengthening of the regulations concerns the extension of the duty to refrain, where there may be a question of a conflict of interest. 

 The ‘old’ Companies Code allowed for the business managers and directors of a SPRL/BVBA (private limited liability company) and a private SA/NV (public limited company) to participate in deliberation and voting on these activities. Directors of a public SA/NV were required by law to refrain from this. This distinction has now been dispensed with. From now on, a duty to refrain will apply to the directors of a limited liability company (BV/SRL), a new cooperative company (SC/CV) and a SA/NV (both private and public), sitting as a Board of Directors or an Executive Board. As a result, they may no longer participate in deliberation and voting on these activities.  

Even where the directors do not sit as a Board, the other directors must take the decisions and carry out the activities. The director concerned may not be involved in deliberation here either. In such an event, no agent ad hoc should be appointed as was previously the case for the SPRL/BVBA.  

Where all directors have a potential conflict of interest, the activities must be presented to the general meeting, which should decide upon these. Should the general meeting approve the activities or the decision, the governing body can then carry it out. The general meeting will also need to give its opinion on the activities where the issue concerns only a single director. Where the only director is also the only shareholder, they may still take the decision and carry out the activities. Given the fact that the SA/NV can now be run by a single director, this is now a possibility for these companies also. 

Regarding the publication of the conflict of interest, the same formalities should be observed as in the Companies Code. The conflict of interest must be described in the minutes with the necessary justification and include the proprietary consequences. In the case of a sole director who is also the sole shareholder, they will need to produce a special report on this in which they should also include the agreement reached between themselves and the organisation. The minutes or the special report will be included in the annual report in their entirety or in a document submitted along with the annual accounts. 

Furthermore, from that point onward, not only the organisation, but also any stakeholder will be able to bring a claim for the decision to be nullified if the rules have not been observed. 

There is no equivalent procedure for the directors of foundations. As regards non-profit organisations, the procedure to be followed will depend upon the size of the association.  

The new rules have been in force for all organisations founded since 1 May 2019. As regards existing companies, the rules on conflicts of interest will apply from 1 January 2020, unless the company's articles of association are adjusted for the new legislation earlier.  

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Bert Lutin
Bert Lutin
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