Business Law Reform at cruising speed. ´Merchants´ soon to be entirely a thing of the past.

business law Reform at cruising speed. ´Merchants´ soon to be entirely a thing of the past

Business law is rapidly evolving. On 1 January 2018, the new Pledge Act finally entered into force (including the National Pledge Register). On 1 May 2018 it will be the turn of the new Insolvency Act (Book XX of the Economic Law Code (ELC)). At the beginning of 2018 the government launched a draft Companies and Associations Code. In the meantime, the bills for adapting the Civil Code with regard to property law, the law of obligations and the law of evidence have become available.

Within the context of these reforms, on 7 December 2017 the “Bill reforming the business law” was submitted to the Parliament. Its key points are the following.

A first key point is the further dismantling of the Commercial Code. This primarily concerns the rules relating to :

1) the bill of exchange and the promissory note, the protests and the cheque. These are added to Book VII of the ELC (´Payment and credit services´) under a new Title 6/1 (´Securities´);
2) the carriage contract; these find their place at the end of Book X ELC, after the generally compulsory provisions concerning commercial agency, commercial cooperation (franchising) and sales concessions;
3) proof by and against ´enterprises´ (new art. 1348bis of the Civil Code).

There are few substantive changes. Only the law of evidence is slightly modified. For example, an accepted invoice no longer constitutes proof solely for a purchase-sale; it now applies for all types of agreements. After this dismantling, the Commercial Code is receiving a different heading: “Code for maritime transport, inland shipping and containing miscellaneous provisions”.

A second key point is that the enterprise concept is being revised. An especially broad concept of “enterprise” was introduced with the new Insolvency Act. This concept is now the generally applicable one: for the ELC, the Civil Code and the Judicial Code. The classic concept of “merchant”, which had already lost a great deal of importance, is now also formally disappearing from the legal order. Along these same lines, the distinction between a commercial company and a civil company is also being abolished (art. 2 of the Companies Code).

The new definition uses more formal instead of material criteria. The following three categories thereby qualify as an enterprise:

1) any natural person who independently exercises a professional activity, thus including practitioners of a liberal profession;
2) any legal entity, regardless of either the way its activity is defined in its articles of association or the activity that it actually exercises in practice; Certain public-law entities (e.g. the Federal State) are excluded, as well as "any legal entity governed by public law that does not offer goods or services on a market”;
3) any other organisation without legal personality, unless it has no intention to make payouts and does not in fact make any payouts. Concretely this means that partnerships and other companies without legal personality do fall within the scope of application, but the so-called “de facto associations” [feitelijke verenigingen] do not.

All of this is supposed to increase legal certainty, but time will tell if that proves to be the case. The Council of State has already noted that the concept of ´professional activity´ is not defined anywhere. In addition, associations where in fact concealed payouts are made can nevertheless still be characterised as an "enterprise". In any event, uniformity is not going to be attained. The existing point of nexus (economic activity) remains for important parts. This applies in particular for Book IV (´Protection of competition´) and Book VI (´Market practices and consumer protection´). For a number of other parts the enterprise concept is either irrelevant (e.g. Book X) or, in addition to it, they continue to use their own concepts (e.g. ´registered entity´, ´party obliged to register´ [inschrijvingsplichtige], or ´enterprise obliged to keep accounts´ [boekhoudplichtige onderneming]- Book III). The Payment Arrears Act of 2 August 2002 uses yet another concept of enterprise.

A third key point concerns the reform of the Crossroads Bank for Enterprises and introduces amongst other things an expanded registration duty for companies without legal personality.

A fourth key point relates to the reform of the Commercial Court. The material jurisdiction of this court for ´merchants´ was already expanded earlier to (disputes between) ´enterprises´. This now becomes enterprises in the expanded sense. As the capstone of this evolution, the very name of this court is being changed to “Enterprise Court”. This entails a number of terminological changes in the Judicial Code and in the ELC.

Finally, there is the repeal of Book XIV ELC (“Market practices and consumer protection concerning practitioners of a liberal profession”) and the corresponding enforcement provisions from Book XV and XVII ELC. Several elements are however transferred and retained, e.g. with regard to the safeguarding of professional confidentiality. Otherwise the so-called “specific provisions” for the practitioners of the liberal professions do not deviate substantively from what is generally applicable. The practical impact of its repeal is therefore negligible.

For more information on this topic, you can consult Dave Mertens (author) and Gwen Bevers (unit head).