New Company code | Part 4 : Governance and seat theory

— Updates | Other — 4 minutes read

This article aims to highlight the major changes made by the new Code of Companies and Associations with regards to the governance of companies.

As a reminder, the rules regarding the incorporation of a company have been modified. In fact, the obligation of a certain base capital for the creation of an SPRL/BVBA is no longer necessary for the SRL/BV (same change applies for the SC/CV). A capital of €61,500 is however still applicable for the SA/NV. With regards to changes affecting both the SA/NV and the SRL/BV, we now note that they can now be founded by only one person, who can either be a legal entity or a natural person. This change is not applicable in the case of the SC/CV for which it is always required that a minimum of 3 people participate in the foundation of the company, or for partnerships for which a minimum of 2 founders is required.

Voting rules have also been altered. As of now multiple voting is allowed in unlisted SRLs/BV's and SA's/NV's. As a general rule, each share grants its holder the right to one vote, but the bylaws may derogate from this rule and stipulate that:

i. Some shares have multiple voting rights
ii. Some shares have no voting rights
iii. Some shares have voting rights only in specific situations

In addition, for the SA/NV, the bylaws may also provide a double voting right as a reward for loyal shareholders. Finally, the shares can be granted at different values. All these changes make it possible to distribute the control and power in the company in a more flexible way. It is however necessary to note with regards to listed companies, that changes in the bylaws concerning the right to vote must be approved by a majority of 75% of the votes. For unlisted companies, this majority is 66%. In addition, the maximum number of votes per share is 2 and these votes must be held by the concerned shareholder for two consecutive years.

For the directors, the new Code reduces their responsibility in order to attract foreign entrepreneurs to Belgium and to enhance Belgium's competitive advantage. For example, the new Code now requires a double test of liquidity and net assets before distributing the profits, in order not to place too much responsibility on the directors. In addition, when it comes to management misconduct or violations of the law and bylaws, the director's liability is now subject to a minimum amount and a maximum amount depending on the size of the company. In fact, the director's liability for companies considered as "large" may for example can be capped at a maximum of €12 million. However, the ceilings provided by the new law do not apply in certain cases, such as serious tax fraud, for example.

Another major change is the change from the doctrine of the real seat to the doctrine of the statutory seat (incorporation theory), which entered into force automatically on May 1st, 2019. Previously, the applicable company law depended on the "principal establishment" of the legal person. Like many neighboring countries (United Kingdom, The Netherlands, Switzerland, Ireland, Germany), Belgium will now also apply the incorporation theory. The legal person is henceforth governed by the company law of the country where its statutory seat is. This change has a dual purpose: to allow Belgian entrepreneurs to take their company abroad and to increase the attractiveness of Belgium as a country of establishment for foreign companies. Practically speaking, this means that Belgian companies that move their "principal establishment" abroad can still remain subject to Belgian law. Similarly, foreign companies that move their principal establishment in Belgium will not automatically be subject to Belgian law, but will remain within the scope of the law of their state of origin. Companies can now choose which right is applicable to them according to their needs and preferences, which results in bigger freedom of establishment and more legal certainty. However It is important to note that this major change in company law has no impact on other areas of law, including tax law. In fact, the real seat remains the decisive factor in determining whether a company should be considered as a Belgian tax resident.

A new article about the new Company Code will be posted each week, stay tuned!