Are you looking for a simple, fiscally transparent and flexible control structure? Then the general partnership ("maatschap"/"société simple") is often the ideal answer. Repeated legislative intervention, however, is forcing the general partnership to give away anonymity. And the end is not yet in sight. So it is time to take stock and look ahead.
The act of 15 April 2018 on the reform of the enterprise law
Solidarity amongst partners – Since 1 November 2018, the old distinction between civil and commercial matters has finally been consigned to the history books. In this way, the difference between civil and commercial companies has also been eliminated. For a general partnership, this means that the partners are now always jointly and severally liable vis-à-vis third parties for the debts of the partnership, regardless of the size of their participation (article 52 of the Companies Code). In the past, this joint and several liability only applied within commercial general partnerships, i.e. general partnerships whose object was to carry out commercial acts. From now on, third parties can hold any partner of a general partnership liable for the payment of the entire debt of the partnership. The partner who has paid the debt must then, in turn, address his partners in order to obtain repayment of their share of the debt. Although the act does not specify anything in this respect, it seems plausible that this joint and several liability only applies to debts incurred as from 1 November 2018 and therefore not to old debts of a former civil general partnership, for which the partner only had to pay "for his share".
Bankruptcy – The modernisation of economic law forced the general partnership to increasingly subordinate its contractual origin to its new vocation as an "enterprise". This is important, among other things, for the rules regarding evidence (proof against a general partnership can now be delivered by all legal means) and insolvency law. Since 1 May 2018, a general partnership can also be declared bankrupt, regardless of the nature of its activities. As the general partnership does not have legal personality, this may at first sight be surprising. On closer inspection, however, this constitutes the procedural recognition of the separate estate of each general partnership: only the creditors of the general partnership can have recourse to the general partnership's estate. As such, in the event of insolvency, it is not entirely illogical to open insolvency proceedings for a bankrupt general partnership. Nevertheless, it is doubtful whether this change was necessary for all general partnerships (including those that have no need for such "entity" status). Of course, a general partnership can only be declared bankrupt if the court finds that each of the partners (who have unlimited liability) is also in a state of insolvency.
Registration with the CBE – It feels even more uncomfortable that the general partnership must henceforth also register with the Crossroads Bank for Enterprises (CBE). After all, this structure was often chosen for its private, purely contractual nature. The mandatory transition to the "enterprise idea" now means that the general partnership must necessarily come out of the woodwork. New general partnerships are immediately confronted with this obligation to register; general partnerships established before 1 November 2018 are given until 30 April 2019 to comply. The fact that this obligation seems to apply to any general partnership without distinction is undoubtedly an anomaly. After all, the silent general partnership, which is intended to remain hidden from the outside world, would also need to be registered with the CBE. The same applies to the sub-general partnership (or "croupier" relationship) within the meaning of article 4:6 of the draft CCA.
Hopefully the legislator will quickly nuance this matter and limit the publicity obligations to those general partnerships that voluntarily opt in or that want to take legal action via their common representative.
Although the act provides for a broad list of information required to register a company in the CBE, the Federal Public Service Economy seems satisfied with less in practice. In any case, the following are required: the name of the general partnership (if one does not want to be overly exposed, it is therefore best to choose a name without reference to the family name), the address, the activities carried out, the start date and the details of the manager (for general partnerships in which no manager has been appointed, the names of all the partners will need to be stated).
Non-compliance with the registration obligation can result in criminal fines (article XV.70 iuncto article XV.77 of the Economic Law Code) and in the inadmissibility of legal action of the general partnership.
Accounting – From now on, general partnerships must also keep accounts in accordance with the usual double-entry bookkeeping rules. The amended article III.85 of the Economic Law Code does, however, allow a general partnership to keep single-entry accounts if the turnover in the last financial year does not exceed the threshold of EUR 500,000. The amended rules on accounting requirements for existing general partnerships apply from the first full financial year starting from 1 May 2019 (i.e. from 1 January 2020 onwards if the financial year coincides with the calendar year).
Both the registration with the CBE and the obligation to keep double-entry accounts obviously presuppose that one is aware of the existence of the general partnership. In practice, however, it cannot be ruled out that a contractual cooperation may be classed as a general partnership without the participants being fully aware of this a priori.
The anti-money laundering act of 18 September 2017
In addition, general partnerships must comply with the recently introduced obligations regarding the UBO Register, which were introduced by the act of 18 September 2017 on the prevention of money laundering and terrorist financing and on restriction of the use of cash.
General partnerships, too, must collect and maintain adequate, accurate and up-to-date information on their ultimate beneficial owners, including details of the economic interests held by the ultimate beneficial owners. This information must include at least the name, date of birth, nationality and address of the ultimate beneficial owners and the nature and extent of the economic interest held by the ultimate beneficial owners (article 14/1 Companies Code).
The Royal Decree of 30 July 2018 establishing the operating procedures of the UBO Register provides for a transitional period until 30 November 2018, during which the parties responsible for providing information can communicate the information to the Register for the first time. However, in an FAQ document, the Federal Public Service Finance indicates that the time limit for registering ultimate beneficial owners for the first time is 31 March 2019. For more information about the UBO Register, see Eubelius Spotlights September 2018.
Future law: the new Code of Companies and Associations
Finally, the new Code of Companies and Associations ("CCA") will also introduce some limited clarifications regarding the legal framework of the general partnership. The provisions concerning the general partnership, contained in book 4 of the new CCA, mainly constitute a consolidation of the existing law, with the aim of greater clarity. After all, the scope of the old provisions, which date back to the Civil Code of 1804, is not always clear. The fact that the personification of the general partnership – despite the lack of legal personality – is never far away can be seen from the possibility for any interested party to request the appointment of a judicial liquidator over the estate of a dissolved general partnership.
The draft CCA was approved at a second reading by the competent committee of the Chamber of Representatives on 27 November 2018 and is still pursuing its way through Parliament.