Geens´s jump - New company law

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

In this newsflash we focus on company law.

There are several reasons for reforming our company law at this point in time. For example, it has been argued for many years that company law must be simplified. For instance, start-up companies now get to choose from over ten different company forms under Belgian law and three company forms under European law. The cautious contractor who, from amongst these, opts for the limited liability of a (small) BVBA, finds himself saddled with the same rules for the protection of share capital initially written for a large NV.

Added to this is the fact that, under the case-law of the European Court of Justice, companies are moving ever more freely throughout Europe. Many European starting entrepreneurs have therefore chosen in recent years e.g. for limited liability partnerships under the law of the United Kingdom. This phenomenon encouraged other European countries to also create more accessible company forms (for example, the Flex-BV in the Netherlands). Belgium has been limping behind in this competition for the most competitive company law.

Accordingly, the leading ideas in reforming company law are intended to make it "simpler" and more "flexible" .

The aspect of "simplifying" company law is expressed for example by ending the distinction between companies and associations in two legal codes, and ending the distinction between civil companies and commercial companies. This follows the broader trend in which "civil" organisations also engage in economic activities.

The most striking simplification is the planned abolition of a number of company forms. The ultimate objective is to end up with just four (national) company forms (along with the existing European forms, which the Belgian legislature cannot touch in any case):

• Maatschap / société simple, as the sole company form with unlimited liability;
• BVBA / SPRL, as the standard form for cooperations with limited liability;
• CVBA / SCRL, as the company form for companies with a cooperative ideal; and
• NV / SA, as the company form reserved for large and listed companies.

To accommodate all existing manners of collaborating in these four company forms, the counterpart of this simplification is that company law would become significantly more flexible.

The maatschap / société simple, the sole remaining form of partnership, will e.g. be able to be temporary (as a THV) or silent (as a silent partnership). Some partners would also be able to limit their liability (as in a Comm.V.).

Another indication of the more flexible approach is that the applicable company law would follow the European evolution in which all companies are becoming more mobile, primarily by making applicable company law depend on the registered office (to be freely chosen by the company) instead of the ´actual headquarters´ (objectively dependent on the company’s centre of interests).

The practically most relevant flexibilisation is undoubtedly the creation of a "new" BVBA / SPRL. Because the NV will be reserved for really large companies^[i], this new BVBA / SPRL would have to become the very generally applied standard. However, the current BVBA / SPRL is not well-suited for playing this role.

Under the new law, BVBA´s / SPRL's would therefore be little comparable to what we presently know as a BVBA / SPRL. Concretely, there would no longer be any required share capital; all shares could be made freely transferable; shareholders would be able to enter and exit (more) smoothly; and the composition of the board and its decision-making methods could be freely regulated.  

The abolition of the share capital in particular is quite radical. This abolition presumes that all rules relating to capital (contribution, capital increase and capital reduction, debtor protection, share creation, appropriation of profits, etc.) will have to be rethought, and raises the pertinent question of precisely what will be replacing them. Because the equilibria after the reform are no longer dictated in compelling rules, but rather entrusted to shareholders and directors, several sources suggest a stronger emphasis on the liability of the players involved (founders, shareholders and directors).

Just how the transition to this new company law will take place is still very murky right now. However, it is clear that, once the new rules are in place, this will serve as a reason (or excuse?) for many involved parties to put already-existing agreements up for debate . . .

The drafts legal texts are announced for the spring of 2017, expected for around February. To be continued, undoubtedly.

You can find our newsflash on the recodification of property law and the law of obligations here.

^[i]Amounts that are currently circulating are: 250 employees; balance sheet total of over 43 million euros; net annual turnover of more than 50 million euros.

For more information on this topic, you can consult Christine Heeb, Joost Van Riel (authors) and Gwen Bevers (unit head).