Constitutional Court offers BVBA creditors equal protection

In an earlier newsflash we announced that the Constitutional Court was called upon to decide on a recent amendment to the Companies Code. Through this amendment the creditors of an NV ("naamloze vennootschap" or limited liability company) are able to demand protection in case of a capital reduction, even if their debt claim was challenged by the NV in court (or via arbitration). Creditors of a BVBA ("besloten vennootschap met beperkte aansprakelijkheid" or private limited liability company), however, did not have this possibility. As expected, the Constitutional Court did not accept this distinction.

Question before the President of the Commercial Court

The question was submitted to the Court as part of a dispute between the NV Debtor and a municipality about a concession agreement. This dispute was submitted to the Court of First Instance of Antwerp. During the course of the proceeding, however, many changes took place ´within´ the NV Debtor.

At a general meeting shortly after the start of the proceeding, the NV Debtor was converted into a BVBA, after which the capital was reduced by more than 200,000 euros in order to bring it to the BVBA minimum of 18,550 euros.  

The municipality promptly reacted and asked the President of the Commercial Court to impose additional securities on its debtor since, in application of the Act of 22 November 2013 ^[i], the protection of creditors in the event of a capital reduction was extended to claims subject to court proceedings.    

However, this extension applied solely for the creditors of an NV. The protection was not extended to creditors of a BVBA. Because this distinction was given no justification whatsoever in the Parliamentary preparations, it was assumed that it was simply an omission on the legislature’s part. Had the BVBA remained an NV, the municipality could have demanded protection.   

Nevertheless, the judge was obliged to apply the rules for a BVBA in the case at hand. At the time that the proceeding was introduced, the conversion to a BVBA had already been published in the Belgian Official Journal and so was opposable to third parties, including creditors.

The municipality/creditor was thus bound by the rules for a BVBA, but it objected on the basis of the constitutional principle of equality. Concretely it argued (amongst other things) that creditors of a BVBA suffered discriminatory treatment in comparison to creditors of an NV. The President of the Commercial Court proved receptive to this argument and sent the question up to the Constitutional Court.

Answer of the Constitutional Court

In a decision of 9 June 2016, the Court found that indeed no analogous provision had been introduced for the BVBA. The Court could not find any explanation whatsoever for this distinction in the Parliamentary preparations. Despite attempts by the Council of Ministers, no adequate justification was given for the distinction in the hearings before the Court either.

For the Court, the pure modality of the legal form (BVBA or NV) did not constitute a relevant criterion for a different treatment of the creditors of the company. The legislature therefore could not extend the protection of NV creditors, while leaving that for creditors of a BVBA unchanged - at least, not without providing an adequate justification.

Thus, in application of this reasoning, creditors who are involved in a proceeding with a BVBA now also qualify for protection if the BVBA reduces its capital.

^[i] Act of 22 November 2013 amending the Companies Code relating to creditors´ guarantees in case of a capital reallocation, Belgian Official Journal 16 December 2013, 98.849.

For more information you can consult Joost van Riel (author) and Gwen Bevers (unit head).