Peter De Ryck
Private Equity & Venture Capital
Insolvency and Restructuring
(Non-exhaustive) overview of subjects henceforth regulated by mandatory provisions for legal persons that already existed on 1 May 2019
The new denominations and abbreviations of companies will become mandatory for all existing companies, without any prior amendment of the articles of association. This implies the following:
The code strengthens the provisions concerning the permanent representation of directors that are legal persons. A so-called “prohibition of cumulation” is introduced. This entails that it is no longer possible for a person to hold different capacities in an administrative board. He/she can thus no longer be a board member in his own name and as permanent representative of a director that is a legal person and/or by acting as permanent representative for several directors that are legal persons.
Next, the code features the introduction of the famous cap on director’s liability. Facts committed by directors after 1 January 2020 will fall under this relaxation. The code also introduces stricter provisions with regard to director’s liability. For example, it will be extended to “factual (de facto) directors”, and a presumption of joint and several liability will henceforth apply to decisions and negligence of the board of directors.
The code also explicitly states that directors and members of the management board and the supervisory board can only exercise their mandate on a self-employed basis. Previously, this rule was only to be found in jurisprudence and doctrine, but it has now been confirmed in the CCA. This provision only applies to the above mandates. A director who is also, for example, an accountant in the company may enter into an employment contract for his specific function as an accountant.
From now on, the CCA also provides the private company (BV/SRL) with the possibility of working with a body of day-to-day management. In addition, the code provides a legal definition of the term day-to-day management: “All day-to-day actions and decisions and non-day-to-day actions or decisions whose minor importance or urgency do not justify convening the board of director” are considered under the CCA as acts of day-to-day management, whereas jurisprudence previously stated that day-to-day management only covered the non-day-to-day actions that were both of minor importance and urgent.
A duty to abstain has been introduced for the directors of a public limited company (NV/SA), a private company (BV/SRL) or a cooperative company (CV/SC), who have a conflict of interests with the company. The director with a conflict of interests must always abstain from the voting and the deliberation of the board of directors concerning the transaction in which a conflict of interests exists. The rules on who can take the decision in the event of a conflict of interests have been standardised. For a public limited company (NV/SA), a private company (BV/SRL) and a cooperative company (CV/SC), the general rule is that the decision can be taken by the non-conflicted directors. As a result, the mandatory appointment of an ad hoc proxy holder (lasthebber/mandataire) disappeared.
The notion of “capital” disappears for private limited liability companies (BVBA/SPRL) and cooperative limited liability companies (CVBA/SCRL). These companies automatically become private companies (BV/SRL) and cooperative companies (CV/SC) without any capital. As from 1 January 2020, the paid-up part of the capital and the legal reserve are converted into a statutory non-distributable equity account by operation of law.
The abolition of the capital in these company forms has led to the previous legal provisions linked to the concept of capital being amended. Due to the abolition of capital, for instance, a double test, namely a “net assets test” and a completely new “liquidity test”, must be carried out before profit distributions.
The net assets test implies that distributions are not possible if the net assets are negative or if the distribution would result in the net assets becoming negative. The liquidity test means that the management body must check whether, in accordance with the company’s reasonably foreseeable development, the company will remain able to pay its debts as they fall due over a period of at least twelve months as from the date of the distribution.
Furthermore, the “alarm bell procedure” is adjusted in function of the disappearance of the concept of capital (in the private company and the cooperative company). The management body must convene the general meeting within two months to decide on the dissolution of the company or on the measures announced in the agenda to safeguard the continuity after it has determined that: the net assets are negative or in danger of becoming so, or when there is a liquidity threat, which means that it is uncertain that the company will be able to pay its debts for at least twelve months.
When shareholders representing one tenth of the number of shares issued request this, the management body and, if applicable, the statutory auditor must convene the general meeting within three weeks. At least fifteen days before the general meeting, the convocation notice must be communicated to the shareholders, the holders of registered convertible bonds, of registered subscription rights or of certificates issued with the company’s cooperation, the members of the management body, and, if applicable, the statutory auditor.
An important innovation of the CAC is the neutralisation of blank votes within the deliberations of the general meeting. In the private company (BV/SRL), the cooperative company (CV/SC) and the public limited company (NV/SA), blank votes will no longer count to determine whether a certain voting quorum has been reached. This means that only the votes “for” and “against” count to determine whether there is a majority. Nonetheless, blank votes (or abstentions) count to determine the attendance quorum.
As an exception to the general rule, the rules on dispute settlement already apply since 1 May 2019 for all companies and associations. Both the procedure for the exclusion and for the exit of a shareholder are regulated in a mandatory manner. The procedure is conducted before the president of the enterprise court, presiding as in interlocutory proceedings, and that the president can settle all related disputes with regard to the financial relations between the parties and the company or its affiliated companies or persons, in particular disputes relating to loans, current accounts and securities and to non-competition clauses, as well as all disputes in relation to part or all of the ownership rights to the securities.
Private Equity & Venture Capital
Insolvency and Restructuring