On 25 May 2018, the Federal Council of Ministers approved at the second reading the draft Companies and Associations Code proposed by Minister of Justice Koen Geens. Final approval by the Parliament is expected in the autumn of 2018.
In the federal coalition agreement of 9 October 2014, the Michel Government undertook to work towards the simplification and modernisation of Belgian corporate law (see Eubelius Spotlights December 2014). The Minister of Justice, Koen Geens, is charged with this task. In this context, a draft Companies and Associations Code ("CAC") was prepared within his cabinet by four experts affiliated with the Belgian Centre for Company Law ("BCV"/"CDS"), including Marieke Wyckaert. Alain François, Frank Hellemans, Matthias Wauters and Felix Dobbelaere have also assisted with this ambitious project.
Approximately one year ago, on 20 July 2017, the Federal Council of Ministers initially approved the draft Code. Subsequently, the draft Code was submitted to the Legislation Section of the Council of State for its advice.
The draft Code that was approved by the Council of Ministers at the second reading on 25 May 2018 therefore takes into account the comments made by the Council of State in its advice. However, the main key points of the modernised corporate law (simplification, flexibility and adjustment to European developments and trends – see also Eubelius Spotlights March 2016) remain the guiding principles. The texts are now public (click here).
Ten important innovations
The draft CAC contains numerous innovations in comparison to current law. Here are some of the most striking new features:
- The number of company forms will be reduced from 17 to 4 basic forms (albeit with variants). Existing companies whose legal form is abolished (such as partnerships limited by shares, cooperative companies with unlimited liability, agricultural companies and (Belgian) economic interest groupings), will have to adopt another legal form before 2024. However, the rules of mandatory law for the legal form which fits them most closely will already apply as from 2020.
- The current private limited liability company will be replaced by the BV/SRL (private company), which is characterised by a light and flexible regime (and the least possible mandatory law). The private company can be established without capital, and the transfer of shares can be regulated freely. The private company could even be listed in the future.
- The cooperative company will return to its roots and will in future be reserved for companies which embody the cooperative philosophy. The cooperative company could therefore serve as an appropriate company form for the social economy. Other companies can opt for the flexibility of the private company. The individual recognition of certain cooperative companies based on the criteria of the National Cooperation Council will continue to exist.
- As far as possible, the specific rules for public limited liability companies that have solicited savings from the public and for public-interest entities are abolished. In principle, the specific legal provisions for listed companies will be limited to companies whose shares are listed.
- The management of the public limited liability company (NV/SA) is substantially eased and modernised. In future, the management can be single-headed, and the directors can be protected against dismissal. The partnership limited by shares thus becomes redundant. On the other hand, it is possible to choose to have a real dual board system with a separate supervisory board and executive board.
- It will be possible to issue shares with multiple voting rights in the public limited liability company and the private company. In listed companies, this will only be possible in the form of so-called loyalty shares granting double voting rights.
- Director's liability will be limited by law, depending on the size of the company. Exceptions will be made for cases where there is fraudulent intent, and for unpaid social contributions, VAT or company withholding taxes.
- The possibility for incorporation of a company by a single person, which currently only exists for the private limited liability company, will be generalised to the public limited liability company and the private company.
- Association law is structurally integrated into the CAC. In this way, association law obtains a firmer basis, but with respect for its specific characteristics. Associations may pursue profitable activities without any limitation; unlike for companies, however, it is absolutely forbidden for associations to distribute their profits.
- The real seat theory is definitively abandoned in favour of the statutory seat theory. This is a logical consequence of the case law of the Court of Justice of the European Union.
The new Code has now reached the home stretch. The next steps are submission to the Federal Parliament, discussion, and the vote. The hearings should still be scheduled before the summer recess, and the Government aims to have final parliamentary approval in the autumn of 2018. The impact of this on the date of entry into force and the transitional law will soon become clear.