On 28 February 2019, the Belgian parliament approved the new Code on Companies and Associations (hereinafter, the “Code“). What does the new Company Code mean for your company? Do you have to rush to the notary to amend your articles of association? What are the risks? … We provide hereunder a brief overview of the transition process and the steps you will have to take.
1. You have a company of which the form remains (Public Limited (NV-SA), Private Limited (BVBA-SPRL), General partnership (VOF-SS), Co-operative company (CVBA- SCRL)*)
A. Entry into force – 1 May 2019
The date of entry into force, 1 May 2019, is important because from then on you can choose to be regulated by the new regime (“Opt-in”). As the new Code provides for “increased flexibility”, it may be interesting to opt-in (e.g. to insert multiple voting rights, exclusion from participation in the loss, protection against dismissal of directors, etc.).
B. In force on existing companies – 1 January 2020
As from 1 January 2020, the new Code will apply to all existing companies. The mandatory provisions will supersede the provisions of your articles of association. It is therefore advisable to timely review your articles of association for clarity’s sake.
Note that the mere decision to use the new abbreviations (e.g. BV/SRL instead of BVBA/SPRL) in the articles of association does not require the intervention of a public notary.
* Pay attention with co-operative companies! The new Code introduces a strict definition for co-operative companies, under which your Company most likely will not fall (unless you are a “genuine co-operative”). As a result, your co-operative company will be considered a private limited company and the mandatory provisions regulating private limited companies will apply as of the entry into force of the Code. In the long run, transforming your co-operative into a private limited company and clarifying the articles of association is the best solution.
C. Transitional arrangements – till 1 January 2024
The Code provides for a smooth, step-by-step transition period. The following moments are important:
- The next amendment to the articles of association: If you amend your articles of association after 1 January 2020, you are forced to bring them in line with the new provisions of the Code at the same time. The reasons for the decision to amend your articles of association (e.g., capital increase, capital decrease, name change, transfer of registered office, etc.) are irrelevant.
- Deadline 1 January 2024: The draft law was amended several times on the topic slowly reducing the transition period from 10 years, to five then to four. The transitional period is now reduced to 4 years. If, after that date, your articles of association are not compliant with the Code, the directors will be held jointly liable.
- Establishment of a new company: It goes without saying that every new company established after 1 January 2020 will be governed by the new Code from the outset.
2. You have a company of which the form disappears (Co-operative company with unlimited liability (CVOA-SCRI), Limited partnership with share capital (Comm.VA-SCA), Agricultural company (LV-SAGR), EP (ES/GIE), Social Purpose Company (VSO-SFS))
If you have a co-operative company with unlimited liability, a limited partnership with share capital, an agricultural company, an economic partnership or a company with a social purpose, the situation is slightly different.
In principle, these companies remain subject to their own rules, as set out in the current Companies Code, until conversion to the new, similar company form. Nevertheless, the mandatory rules of the new company forms will apply immediately from 1 January 2020 (Example 1: the mandatory rules for the Public Limited company are immediately applicable to the Limited Partnership with share capital. Example 2: The mandatory rules for the general partnership are immediately applicable to the Co-operative company with unlimited liability, etc.).
The step-by-step transition period will be slightly different:
- The obligation to bring your articles of association in line with the provisions of the Code whenever you amend your articles of association automatically means that you must convert your company into a form that continues to exist.
- A legal conversion will take place on 1 January 2024 and the general meeting will have to be summoned within six months, under penalty of director’s liability.
Do you have to worry about formalities that you have to accomplish in the short term? Not immediately. But…. you would do well to consider whether you would like to opt-in for the flexibility offered by the new Code as from 1 May. In addition, you must take into account the mandatory provisions that will govern your company as from 1 January 2020. It may be wise to start cleaning up your articles of association as soon as possible and not wait till the big rush.