We are now more than six months after the new Belgian Company Code (BCC) was voted in Parliament in February this year. Though the genesis and legislative process was lengthy and the eventual vote in Parliament was postponed a number of times, the BCC already entered into force on 1 May 2019 for new companies and associations created as from this date. For the more than 1 million companies (legal entities) and non-profit organizations (NPO) and foundations, certain rules will become applicable as from 1 January 2020. That is in less than four months’ time … So, all Belgian companies, NPOs and foundations should get the ball rolling and assess the impact of the BCC on their organization. For those that have not yet had the time to dive into the matter, here are some thoughts I’d like to share with you.

Some principles of the current company code date back to as early as the Napoleonic era. Since society has evolved in many ways (hey, aren’t we all driving electric cars? And aren’t we only communicating through social media?), the ultimate purpose of the legislator was to modernize Belgian company and association law and also to increase the competitiveness of the Belgian economy by offering a cutting-edge framework for companies and associations and, by doing so, attract e.g. more foreign investors. With this in mind, the legislator revised the legislative framework by simplifying it, making it more flexible and adjusting it to the progress of European law.

In my opinion, the new BCC has opened up a plethora of opportunities for Belgian organizations.

Let’s take a helicopter view of what has changed.

The BCC has revamped the 17 existing business structures to just the following 4 basic forms:

• the private limited liability company (BV/SRL);
• the public limited liability company (NV/SA);
• the cooperative company (CV/SC); and
• the partnership (maatschap/société simple).

By limiting the number of possible forms, the Belgian corporate landscape will become more transparent. If you can’t find your current company form in the above list, it is time to assess if you need to take action to convert your company form as some current company forms have indeed been abolished (such as CVBA/SCRL, Comm.VA/SCA).

Take for example the (new) BV/SRL which, in my opinion may be the best option for many businesses, offers limited liability linked to simple and flexible management. Another interesting twist is that non-profit organizations, which surprisingly enough is the form adopted by many large organizations such as hospitals, educational institutions and recreational undertakings, will also be permitted to carry out unlimited profit-making activities in the future, if their articles of association explicitly allow this. This will then have tax consequences and these types of non-profit organizations will be taxed as ordinary commercial companies. 

The Code will also make companies more flexible. For example, the BV/SRL will no longer be required to have a minimum capital amount that must be fully or partially paid. This will be replaced by initial net assets which may consist of several things: money, a contribution-in-kind, such as property or computers, and a contribution of labor. The last is not without risk: after all, it is unclear how such a contribution of labor will be taxed.

The new legislation also seeks to be better aligned with how things are evolving in Europe. For example, a Dutch company with its main center of activities and management in Belgium may continue to apply Dutch company law in Belgium. Until now, in Belgium, the real registered office determines which national law applies to a company. Under the BCC the location of the registered office will ultimately determine which law applies (so, Belgian law accepts that foreign company law continues to apply if the registered office is abroad even when the main center of activities is in Belgium). This means that Belgium will no longer hinder the free movement of companies in the EU and we will become more attractive to foreign investors and companies.

Another new development is that every dividend to shareholders within a BV/SRL will be subject to a double test. There is the net assets test, whereby no payment may be made if the net asset is, or will become, negative. There is also the liquidity test and it must be demonstrated that a company can pay outstanding debts in the next 12 months, taking into account the dividend paid out. An in-depth analysis must be performed for every payment. This is particularly important: for example, if a company goes bankrupt less than a year after a dividend payout, the directors may in some cases be held liable or what has been paid out must be returned.

My advice to businesses that want to benefit to the maximum of the new BCC - make an analysis to see whether your current company form, shareholder structure, financial plan, accounting system and other matters are aligned with the new Code and, more important, are best suited to the needs of your business.