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#Partnerships #Crossroads Bank for Enterprises #Code of Economic Law (CEL) #Company #Companies and Associations Code #CBE

Substantial changes in the obligations for partnerships

Wednesday 27/06/2018
Two people looking at graphs

The Company Law Reform, published on 27 April 2018, is making a number of changes in the Companies Code and the Code of Economic Law. These new regulations will enter into force on 1 November 2018. A few rules will also change for partnerships. Although some clarifications will still be published, we would already like to provide the following guidelines.

The Company Law Reform, published on 27 April 2018, is making a number of changes in the Companies Code and the Code of Economic Law. These new regulations will enter into force on 1 November 2018. A few rules will also change for partnerships. Although some clarifications will still be published, we would already like to provide the following guidelines.

Changes in the Companies Code
A first terminological change will take place where “partnership” will no longer be called “société de droit commun” (civil law company) in French, but “société simple” (simple partnership). More importantly will be the elimination of the distinction between companies exercising a commercial activity and companies exercising a civil activity, which means that the distinction between commercial and civil partnerships will also fall away. As a result, partners of a partnership will remain jointly and severally liable to third parties for all of the partnership’s debts. 

Changes in the Code of Economic Law 
Where the civil partnership was not considered a “company” before, partnerships under the new law will henceforth be considered as “companies” as well. However, the qualification of “company” has a number of consequences which will soon be noticeable, in particular because of the new obligations that will apply to the (managers of) partnerships.

  • Registration in the Crossroads Bank for Enterprises (CBE)
    From 1 November 2018, new partnerships will have to register in the CBE through an Enterprise Counter before becoming operational. However, existing partnerships do not yet have to act immediately. They are required to register in the CBE by latest 30 April 2019 unless the King decides to bring this date forward…
  • Submitting to accounting obligations
    Partnerships will be required to keep accounts. Depending on their turnover, accounts can be kept on the basis of a simplified accounting scheme or a double-entry accounting system. If turnover is less than € 500,000, the simplified accounting scheme will be applied. If turnover exceeds this limit, the complete, double-entry accounting system is required. Based on our experience, we know that many partnerships already use a simple accounting system and prepare annual financial statements. Only small interventions could possibly suffice to meet the legal requirements.

The new obligation applies in principle from 1 November 2018, except in the case of already existing partnerships. Existing partnerships should fulfil this obligation from the first full financial year commencing after the expiry of a period of six months, from 1 November 2018. For partnerships whose financial year runs with the calendar year, the first “accounting obligation” commences in 2020 (subject to any other date by Royal Decree).

At present, it is still unclear whether partnerships are also required to publish their annual financial statements. Based on the Companies Code, the reference in Article III.90 of the Code of Economic Law is unclear on this matter. The Companies Code only requires legal persons to publish and not partnerships. In the meantime, we also assume that no obligation to publish will be required by the new law. 

Decision
It is clear that this new legislation will have an impact on the partnership’s operations. We will keep you abreast of further developments.

Changes in the Companies Code

A first terminological change will take place where “partnership” will no longer be called “société de droit commun” (civil law company) in French, but “société simple” (simple partnership). More importantly will be the elimination of the distinction between companies exercising a commercial activity and companies exercising a civil activity, which means that the distinction between commercial and civil partnerships will also fall away. As a result, partners of a partnership will remain jointly and severally liable to third parties for all of the partnership’s debts. 

Changes in the Code of Economic Law 

Where the civil partnership was not considered a “company” before, partnerships under the new law will henceforth be considered as “companies” as well. However, the qualification of “company” has a number of consequences which will soon be noticeable, in particular because of the new obligations that will apply to the (managers of) partnerships.

  • Registration in the Crossroads Bank for Enterprises (CBE)
    From 1 November 2018, new partnerships will have to register in the CBE through an Enterprise Counter before becoming operational. However, existing partnerships do not yet have to act immediately. They are required to register in the CBE by latest 30 April 2019 unless the King decides to bring this date forward…
  • Submitting to accounting obligations
    Partnerships will be required to keep accounts. Depending on their turnover, accounts can be kept on the basis of a simplified accounting scheme or a double-entry accounting system. If turnover is less than € 500,000, the simplified accounting scheme will be applied. If turnover exceeds this limit, the complete, double-entry accounting system is required. Based on our experience, we know that many partnerships already use a simple accounting system and prepare annual financial statements. Only small interventions could possibly suffice to meet the legal requirements.

The new obligation applies in principle from 1 November 2018, except in the case of already existing partnerships. Existing partnerships should fulfil this obligation from the first full financial year commencing after the expiry of a period of six months, from 1 November 2018. For partnerships whose financial year runs with the calendar year, the first “accounting obligation” commences in 2020 (subject to any other date by Royal Decree).

At present, it is still unclear whether partnerships are also required to publish their annual financial statements. Based on the Companies Code, the reference in Article III.90 of the Code of Economic Law is unclear on this matter. The Companies Code only requires legal persons to publish and not partnerships. In the meantime, we also assume that no obligation to publish will be required by the new law. 

Decision

It is clear that this new legislation will have an impact on the partnership’s operations. We will keep you abreast of further developments.

Contact one of our experts
Bert Lutin
Bert Lutin
Partner Tax & Legal Services