Code of Companies and Associations: What changes on 1 January 2020?

Since May 2019, Belgium prides itself on a modern Code of Companies and Associations (CCA). The legislature provided for a gradual entry into force of the new Code. This newsletter discusses what changes on 1 January 2020.
The CCA entered into force on 1 May 2019 for newly incorporated companies, associations and foundations. It was not yet applicable on those which already existed at that time. However, such existing companies, associations and foundations could voluntarily choose to “opt-in” and already render the CCA applicable through a modification of their articles of associations.

1. Entry into force for existing companies, associations and foundations

As of 1 January 2020, the CCA is applicable to all companies, associations and foundations (i.e. not only the new ones). This means, first, that all provisions in their articles of association which conflict with the CCA’s mandatory rules are null and void and that, second, the CAA’s non-mandatory rules are also applicable, however, only to the extent that the articles of association do not deviate from these.

As a consequence, as of 1 January 2020, the following rules e.g. automatically apply:

  • Companies have to use the new denominations and abbreviations of their corporate forms in all communication and acts. This obligation exists even if the articles of association have not been amended to reflect the new denomination. g., a private limited liability company (“BVBA” or “SPRL”), is now called a private company (“BV” or “SRL”); a limited liability cooperative company (“CVBA” or “SCRL”) is now called a cooperative company (“CV” or “SC”).
  • The paid-up part of the capital of a private company (“BV” or “SRL”) and the paid-up part of the fixed capital of a cooperative company (“CV” or “SC”), as well as their legal reserve are in the company’s accounts automatically abolished and without any formality transformed into a statutory unavailable equity account. The unpaid part of the capital of a private company and the unpaid part of the fixed part of a cooperative company are similarly transformed into a separate equity account “unclaimed contributions”.
  • Private companies (“BV” or “SRL”) can only distribute profits applying a double test: a net assets and a liquidity test. This means g. that the directing body which decides on the distribution must establish that the company will have sufficient cash to meet its obligations for the next 12 months. This requirement correlates with the abolishment of the concept of capital in private companies.
  • Directors in private companies (“BV” or “SRL”) and public limited liability companies (“NV” or “SA”), as well as the members of the management board and the supervisory board in public limited liability companies, may not exercise their mandate under an employment contract. This is a generalisation of the existing prohibition, which applied to directors of public limited liability companies.
  • The new general provision that a director who has a conflict of interest is not allowed to participate in the deliberation of that decision applies to all directors of private companies (“BV” or “SRL”), public limited liability companies (“NV” or “SA”) and non-profit associations. This means that a director who has an interest of a patrimonial nature, which conflicts with the company’s interest (g. he wants to rent real estate to the company), is not allowed to participate in the deliberation on that decision. If all directors have a conflicting interest, the decision is submitted to the general meeting.
  • The new provisions on voting at the general meeting and the neutralisation of abstentions in extraordinary general meetings apply. The latter means that abstentions are not taken into account in the calculation of the special majority. Under the old regime, abstentions were treated as votes against the proposed decision.
  • Private companies (“BV” or “SRL”) and public limited liability companies (“NV” or “SA”) have to draft a special report in case of issuance of new shares and file it with the enterprise court registry. This report must contain a justification of the issue price and a description of the consequences on the patrimonial and membership rights of the shareholders. Up until now, such a report was only required in public limited liability companies when these new shares were issued below the fractional value of the old shares.

2. Obligation to bring articles of association in conformity

Companies, associations and foundations are obliged to bring their articles of association in conformity with the CCA. When they modify their articles of association after 1 January 2020, e.g. to issue new shares or to change the governance structure, they must in principle use this occasion to bring their articles in conformity. For companies, associations and foundations which do not modify their articles of association, there is the ultimate deadline of 1 January 2024 to bring their articles of associations in conformity with the CCA. Failure to do so will give rise to joint and several liability of the directors.

3. Abolished corporate forms

The objective of the legislature to simplify the existing corporate forms has led to the abolishment of several corporate forms. The only Belgian forms that remain are: the simple company without legal personality (“maatschap” or “société simple”), the general partnership (“VOF” or “SNC”) or a limited partnership (“CommV” or “SComm”), the private company (“BV” or “SRL”), the public limited liability company (“NV” or “SA”), and the cooperative company (“CV” or “SC”).

As for a cooperative limited liability company (“CV” or “SC”), the use of this company form is abolished for companies that do not pursue a cooperative ideal (e.g. law firms and accountancy firms).

Until these legal persons have converted into one of the remaining corporate forms, the former rules remain applicable on them. However, as of 1 January 2020, the mandatory rules of their “equivalent” corporate form have become applicable.

Legal persons whose corporate form is abolished can voluntarily convert into their “equivalent” corporate form. This requires a modification of their articles of association. Although it is recommended that such legal persons convert into one of the remaining corporate forms as soon as possible, the due date to do so is 1 January 2024. If such a conversion has not taken place before 1 January 2024, these legal persons will be automatically converted on that day.

4. Easier change of registered seat

The CCA makes it possible to change the registered seat more easily, i.e. without changing the articles of association. This is because the articles of association no longer have to indicate the address of the registered seat of the company. Now it is sufficient that the articles indicate in which region the seat is located without specifying the exact address.

This gives the flexibility to the directing body to relocate the registered seat within that region without having to change the articles of association.

For existing legal persons, the legislature provided the following transitional rules:

(i) Legal persons, whose articles of association already provide that the directing body can transfer the registered seat without intervention of the general meeting, can transfer their registered seat without a modification of the articles of association. The address of the registered seat is deleted upon the first coordination of the articles of association and replaced by an indication of the region in which the registered seat is situated.

(ii) Legal persons, whose articles of association do not grant such power to the directing body, need to modify their articles of association to transfer the registered seat. However, the directing body has the power to decide upon such modification.

5. Specific issues

Not all rules are applicable as of 1 January 2020. For several specific issues, the entry into force is organised differently:

  • Companies that have a direction committee (“directiecomité” or “comité de direction”) shall continue to apply the rules of the old Companies Code on the direction committee until they bring their articles of association in conformity with the CCA, the due date being 1 January 2024.
  • Under the old rules, a non-profit association could not pursue commercial activities. The CCA abolishes this restriction and allows such associations to pursue the same activities as a company. However, this restriction is only lifted for existing associations after a modification of their articles of association to include such commercial activities.

The provisions on director’s liability (including the caps on such liability) are only applicable to such damaging acts, which take place after the date on which the CCA has become applicable. This means that those provisions will apply on damaging acts as of 1 January 2020, unless the company decided to opt-in earlier. For damaging acts that occurred before that date, the old rules will continue to apply, even when the director’s liability is invoked later.

***

Steven Callenssca@simontbraun.eu
Sander Van Loocksvl@simontbraun.eu
+32 (0)2 543 70 80

For any question, please contact the authors or any other member of Simont Braun’s Corporate team.

Simont Braun assisted Rewe in one of the largest mergers in the European retail sector

Simont Braun has advised Rewe, the second largest German supermarket chain, on the Belgian legal aspects of the purchase of Lekkerland/Conway, a major wholesaler specialised in consumption on the go, supplying gas stations, kiosks, convenience stores, etc. The transaction was signed on 28 May 2019 and the parties are now waiting for clearance by the competition authorities.

As both Rewe Group and Lekkerland are active in several European countries, their merger implied substantial cross-border aspects and the active cooperation of several top tier law firms, principally in Germany (lead), Belgium, Switzerland, the Netherlands and Spain.

Simont Braun’s Corporate M&A team advised Rewe on the Belgian legal aspects of the transaction, in particular by carrying out a legal due diligence on the Belgian target companies and assisted on the related legal and regulatory questions surrounding the transaction.

Our team is delighted to have contributed to such a landmark European cross-border transaction, in close cooperation with Taylor Wessing Germany (lead firm). Our demonstrated capabilities to act in the framework of international transactions make us a go-to law firm for such matters on the Belgian market. Our integrated multidisciplinary structure and strong linguistic skills were clearly a plus,” highlights Axel Maeterlinck, partner in Simont Braun’s Corporate M&A department.

The Rewe Group generated a turnover over € 61 billion last year, courtesy of its 360,000 employees in 22 European countries. With the merger with Lekkerland, a new European powerhouse is born in the convenience segment. Lekkerland has about 4,900 employees in Europe and generated a turnover of € 12.4 billion euro last financial year. In Belgium, the group operates under the name Conway and its 400 people generate a turnover of € 1.5 billion (source: www.retaildetail.be).

The Simont Braun team was led by partner Axel Maeterlinck, together with partners Fernand de Visscher, Steven Callens and the assistance of counsel Pierre Van Achter and associates Tine Bauwens, Laura Grauer, Julie Kever and Peter Blomme.

The new Code of Companies and Associations enters into force as from tomorrow

The new Code, which was published in the Official Journal on 4 April 2019, will gradually come into force as from tomorrow.

The date of entry into force of the new Code is 1 May 2019. As from this date, each newly incorporated entity will have to comply with all the provisions of the new Code.

For existing companies and associations, the general rule is that the new Code will come into force on 1 January 2020, with a final deadline for adapting the articles of association on 1 January 2024. However, existing entities may choose an early opt-in and thus, through an amendment to their articles of associations, render the new Code fully applicable as from 1 May 2019.

Also to note: the Royal Decree dated 29 April 2019 implementing the new Code has been published today. This Royal Decree merges into a single text the regulatory provisions of various existing Royal Decrees. It contains nine books and is available here.

For any query, do not hesitate to contact a member of our corporate team.

Another novelty in the Belgian judicial landscape: the future Brussels International Business Court (“BIBC”)

On 15 May 2018, the Belgian Government filed a draft law concerning the implementation of a new specialised English-speaking court in Brussels: the Brussels International Business Court (“BIBC”).

The Belgian Parliament is currently reviewing the draft law. The Government intends to ensure the entry into force of the law on 1st January 2020 at the latest.

The Government’s objective and motivation

The recent economic and politic evolutions both at the national and international levels, combined with the Brexit, will lead to an increase of international commercial disputes.

For Brussels to maintain its central position on the European and international business scene, the Government has considered necessary to set up a new English-speaking State Court, which will give the opportunity to business actors to bring their cross-border disputes in the capital of Europe.

In other words, inspired by similar initiatives in the Netherlands and other European countries, the Belgian Government is hoping to make Brussels the new hub for international commercial disputes.

Overview of the BIBC based on the draft law

1) Jurisdiction

The BIBC will have jurisdiction over disputes meeting the following cumulative conditions:

(i) International disputes, i.e.:

  • When parties have their usual residence or establishment in different States;
  • When the location where a substantial part of the commercial obligations or the location with which the dispute has the closest links is established in another State than the state of the principal residence/establishment of the parties;
  • When parties expressly agree on the international character of their dispute; or
  • When the dispute must be solved using foreign law;

(ii) between enterprises (i.e. any person who pursues an economic goal, including public enterprises) and concerning an economic act (performed in pursuing this economic goal);

(iii) and over which another court does not have exclusive jurisdiction;

(iv) provided that all parties have agreed on the BIBC’s jurisdiction, e. when the BIBC jurisdiction has been provided for in (a clause of) the agreement or when the case is referred to the BIBC by another court that acknowledged the parties’ agreement on its jurisdiction.

2) Composition

The BIBC will be composed of:

(i) One professional judge: the “President”, who will be elected amongst Belgian judges and;

(ii) Two non-professional judges: the “Judges in the BIBC”, who will be chosen by the President amongst Belgian and foreign experts in international business law.

3) Main characteristics of the proceedings

Language: exclusively in English.

Procedural rules sensu stricto: application mutatis mutandis of the UNCITRAL Model Law on International Commercial Arbitration[1].

Rules on the merits: either the law chosen by the parties or, in the absence of choice, the law that is applicable pursuant to the relevant conflict of law rules.

Interim measures? The BIBC can take interim measures.

Costs: Self-financing via substantial registration fees (to be determined by Royal Decree). Hence, the BIBC’s procedural costs will be much higher than before other Belgian courts.

Appeal? No appeal against a BIBC’s decision. The judgments can only be challenged through extraordinary appeals (e.g. third-party proceedings, appeal on points of law before the Court of Cassation…).

Conclusion

The Council of State pointed out some drawbacks of the BIBC and of its procedural rules, notably in light of the constitutional principles of equality and non-discrimination.

In this regard, they noted, in particular:

  • the use of a unique language which is not one of the three Belgian national languages,
  • the absence of a right to appeal,
  • the very high costs of the proceedings.

However, the Government seems determined to have this new English-speaking State Court enter into action in a very near future.

Needless to say, we will keep you posted.

For any question or assistance, please contact Fanny Laune, Rafaël Jafferali or Steven Callens

fanny.laune@simontbraun.eu
rafael.jafferali@simontbraun.eu
steven.callens@simontbraun.eu
+32 (0)2 543 70 80

[1] The Belgian code of civil procedure will not be applicable except when expressly provided.

A step forward for the draft new Companies and Associations Code

On 25 May 2018, the Council of Ministers approved the draft new Companies and Associations Code which aims at modernising the regime applicable to companies and associations.

The draft Code will now be submitted to the Federal Parliament for discussion and vote. We expect parliamentary approval in the autumn of this year.

One of the four legal experts chosen by the Minister of Justice Koen Geens to work on this project is Paul Alain Foriers, partner in our Corporate M&A department. Hence, Simont Braun is well aware of the reform and is able to guide companies through the upcoming challenges and opportunities.

For any question or assistance, feel free to contact Paul Alain Foriers, Sandrine Hirsch or Nikita Tissot.

Modest changes to the Belgian Arbitration Act

With effect as of January 1st, 2017, the Act of 25 December 2016 (known as the “Pot-Pourri IV Act”) amended among other things certain provisions of Part Six (i.e. articles 1676 to 1723) of the Belgian Judicial Code. This Part Six contains the provisions on arbitration (the so-called “Belgian Arbitration Act” or “BAA”). The amendments are mostly a matter of fine-tuning, clarification and simplification. Still, some of them are noteworthy.

Firstly, art. 1676, §7 BAA, on the territorial application of the BAA and the jurisdiction of the Belgian courts in arbitration matters, is redrafted. It is now clearly confirmed that the BAA is applicable and Belgian courts have jurisdiction when (i) the seat of the arbitration is located in Belgium or (ii) the parties have agreed on this. Note however that even when the seat is located in Belgium, parties are still allowed to derogate from those BAA provisions which are non-mandatory.

Secondly, new paragraphs are inserted in art. 1696 BAA, which describe in more detail the procedure to obtain the recognition and enforcement of interim measures ordered by an arbitral tribunal.

Thirdly, art. 1702 BAA provides that the starting point of an arbitration is no longer the reception by respondent of the request for arbitration, but is now the communication by the claimant of the request for arbitration.

Fourthly, in seeking to simplify formalities and increase the efficiency of arbitration, the Belgian legislator also amended articles 1713 and 1714 BAA. Once the arbitral tribunal has rendered its award, it is no longer required to file the award with the clerk of the court of first instance. This formality was deemed cumbersome without having any significant added value.

 

For more information on arbitration, please do not hesitate to contact Rafaël Jafferali (rafael.jafferali@simontbraun.eu) or Steven Callens (steven.callens@simontbraun.eu).

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