Geens´s jump - Abolition of the THV

With his memorandum of 6 December 2016 ("The jump to the law for tomorrow – recodifying the basic legislation"), Minister of Justice Koen Geens is planning a thorough reform of the company law, the civil law and the criminal law. Our firm has been closely following the developments in the first two fields.

In an earlier newsflash we sketched the broad outlines of how company law more generally will be changing. In this one we focus on a single specific company form which appears destined to disappear: the tijdelijke handelsvennootschap (THV in short, or "société momentanée" in French), a kind of temporary private unlimited company for commercial activities.

One of the spearheads of the reform is that the number of company forms should be drastically reduced. The belief is that this will make the world simpler for start-up companies. In that respect, the THV - which in academic circles is often regarded as a legal-historical curiosity - was probably one of the first forms to perish.

Although it is perhaps rarely used by starters and also less in the general commercial practice, this form does occur often in the contracting of construction works. For many projects, contractors (and others) come together in a THV so as to join forces and contract with the builder. In so doing, they jointly organise the division of tasks and costs and the appropriation of profit amongst the shareholders / partners in the THV contract.

In order to assess the impact of the "disappearance" of the temporary commercial company, it is important to keep in mind what this company is now. It is a company:

• without legal personality – which means that it does not hold rights of its own and cannot act in court itself; instead, this must rely on its partners; and
• with unlimited liability - which authorises creditors to directly sue the partners;
• that is temporary - which limits it in time to a single company / project or to a single predefined duration; and
• that has a commercial character - which enables the company to engage in business, but which also dictates the joint and several obligation of its partners, in opposition to the obligation of partners to a civil partnership.

If we compare these characteristics with the maatschap (= partnership - an existing company form that will be surviving the proposed reform), the "disappearance" of the THV has to be taken with a grain of salt. The THV has its first two characteristics in common with the partnership. This company form too is characterised by the absence of legal personality and the unlimited liability of the partners. Moreover, numerous partnerships (already) have a commercial purpose (or already conduct commercial activities) as a result of which they are commercial companies.

If you consider that nothing impedes partners from setting up a partnership for a limited term or for a certainly-ending project, a partnership that resembles a temporary commercial company in every way, is perfectly conceivable. Academically one could actually reduce every THV to a partnership with specific modalities and a clearly distinct name. The added value of this name "THV" is limited.

Even after the reform, moreover, it would remain possible to form tailor-made partnerships that have a commercial purpose and are limited to a certain project or in time. What is presented as an "abolition" will thus, in practice, basically come down to a name change.

In other words, although after the reform there will no longer be any legal description of the THV, the parties can once again create a type of THV around the legal skeleton of the partnership. If contractors (or others) thus will combine for a certain project, the legislature will shortly oblige the parties to use the label and the form of "partnership", on what in their experience will still be able to have the characteristics of a THV.

Rather than a simplification, this is essentially a useful clarification. Founders of new partnerships, will have a clearer idea of what they are setting up. As to the fate of existing THV´s, we will have to keep an eye out for the transitional arrangement.  We are continuing to monitor this for you.

For more information on this subject, you can consult Joost Van Riel and Siegfried Busscher (authors) and Gwen Bevers (unit head).