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The “new” cooperative company under the microscope

Friday 22/11/2019
De nieuwe CV onder de loep genomen

The cooperative company is characterised by the cooperative philosophy that underpins it. Whereas, under the (former) Companies Code, the cooperative requirement had come to play a less crucial (enforceable) role over the years, the legislature has resolutely chosen to return to a strict interpretation of this concept in the new Code of Companies and Associations (CCA).

Back to basics

Up to now, the cooperative company, whether or not with limited liability, had been the ideal legal form for joint ventures with a need for smooth entry and withdrawal arrangements. Indeed, this is the legal form under which a great many liberal professions have organised their collaboration.

Under the CCA, however, the cooperative form of company is returning to its original footing. Only true joint ventures that strive towards the cooperative philosophy may come under this legal form.

The earlier cooperative company with unlimited liability is disappearing. Only the cooperative company with limited liability will remain, although it will be re-dubbed the cooperative company (CV/SC), as such.

According to the CCA, the principal goal of the CV/SC must be to meet the needs of the shareholders and/or the development of their economic/social activities. The articles of association must explicitly include the cooperative finality, as well as the values of the company.

Based on this definition, it could be argued that a professional joint venture among liberal professions could also come under this, given that shareholders in such joint ventures will join forces to collectively develop their economic activities. However, the explanatory memorandum for the CCA clearly refers to the ICA principles (voluntary and open membership, democratic control by the members, economic participation on the part of the members, autonomy and independence, education, training and providing information, collaboration between cooperative societies and consideration for the community), to which few such professional joint ventures would adhere. Additionally, the Minister of Justice has issued a clarification regarding this in response to a parliamentary question, by clearly expressing that the CV/SC will no longer be appropriate for practising a liberal profession under the CCA.

This means that the majority of existing CVBA/SCRLs today will no longer be able to use the legal form of the CV/SC under the new CCA. In order to satisfy the wishes of these companies, however, the ability to withdraw with a separation share payout from the company's equity was added to the BV/SRL, and entry was simplified by providing the ability for the governing body to issue shares.

For the sake of completeness, we should mention that the ability to obtain recognition of the cooperative company will remain. The ability to obtain recognition as a social enterprise will also remain.

Typical features

The legislature has not tinkered with the typical features of the CV/SC all that much. After all, its formation still requires at least 3 founders and will be nullified if this requirement is not met. Should the CV/SC end up with fewer than 3 shareholders over the course of its existence, then this may lead to its legal dissolution (unless the situation is regularised within the term permitted by the judge). Shares in a cooperative company can be freely transferred among shareholders. Shares can only be transferred to third parties where these fall under the categories stipulated in the articles of association and meet the statutory requirements for becoming a shareholder. Failing an alternative arrangement in the articles of association, the governing body is authorised to made decisions about such transfers.

Just as with the BV/SRL, the requirement for minimum capital has been dropped for the CV/SC. The requirement is now that the company, at the time of formation, owns a sufficient amount of its own equity in the light of its intended activity.

Shareholders in the CV/SC can still subscribe to shares without altering the articles of association. The ability for a shareholder to withdraw at the expense of the company's equity will also remain.

Strict adherence to the cooperative philosophy

As mentioned earlier, one of the principal reforms to the cooperative company is the strict adherence to the cooperative philosophy. It is therefore professional partnerships, which in modern times often used to associate themselves in the form of a CV/SC owing to the ability to exclude partners and to have them withdraw at the expense of the company's equity, that will meet with the greatest impact of this now very strict interpretation.

The requirement for close adherence is further highlighted by the ability provided for in the CCA for any shareholder, the public prosecutor or any interested third party to sue for dissolution where the company does not meet the definition included in the CCA.

Adaptation to fit the CCA

Should an existing cooperative company take no action, it will legally come under the mandatory rules for the most similar legal form under the CCA from 01/01/2020.

For an ‘improper’ CVBA/SCRL, this is the BV/SRL - for the CVOA/SCRI, this is the VOF/SNC. Furthermore, they will be legally converted into one of these legal forms on 01/01/2024.

For the provisions that are not legally binding, however, these companies will continue to come under the old rules from the Companies Code until their adaptation to fit the CCA.

If no action is taken, an ‘improper’ CVBA/SCRL will therefore find itself with an unclear status, whereby it should apply the mandatory provisions regarding the BV/SRL while applying the Companies Code for the other provisions. However, this will lead to additional complexity given that the CCA does not contain a clear list of rules that are legally binding, potentially prompting some discussion as to which rules should or should not be applied.

In order to avoid such a grey area, it is therefore recommended to pro-actively convert the company into the most appropriate legal form under the CCA before 01/01/2020.

With that said, even if your company does strive towards a strict cooperative philosophy, it is recommended that you take action before 1 January 2020 and ensure that the cooperative goal is clearly mentioned in the articles of association. If not, you run the risk of your company unintentionally ending up under the rules for the BV/SRL.

Contact one of our experts
Liesl Aegten
Liesl Aegten
Associate Tax & Legal Services
Carl Boudewyn
Carl Boudewyn
Senior Manager Tax & Legal Services