The revision of the Company Code forms part of a major overhaul of Belgian corporate law. Since the Middle Ages, merchants (and companies with a commercial purpose) have been subject to specific laws, which do not apply to non-merchants including the liberal professions and the non-profit sector. This has led to substantial differences in the status applicable to merchants and others.
It has long been argued that this distinction is no longer relevant. Indeed, liberal professionals such as lawyers, physicians and company auditors as well as mid-sized and larger non-profit organizations and foundations also function as companies. Like merchants, they offer goods and services to the public. There is thus no compelling reason to treat them differently than merchants.
In view of the foregoing, the current government has been working on a uniform legal framework applicable to all persons engaged in commercial activity, regardless of whether they are active as merchants, liberal professionals or self-employed persons. A first step in this direction was made withthe reform of the insolvency legislation. Thus, as from 1 May 2018, all businesses, regardless of their form, will be able to be declared bankrupt or request judicial reorganization.
The special provisions on commercial transactions, which are completely outdated as a defining criterion, will soon be abolished. A bill to do so has already been brought before Parliament. One of the most important proposed changes is that the commercial courts will become business courts, with jurisdiction to hear all disputes concerning companies with or without legal personality. An act of 26 March 2014 already declared that the commercial courts have jurisdiction over all disputes between companies, i.e. entities that pursue an economic objective on a long-term basis, relating to actions carried out in the framework of achieving their corporate purpose (Article 573 Judicial Code).
Along with the reform of commercial law, the government aims to introduce a completely new statutory framework for all legal persons, companies, associations and foundations regardless of their purpose. The new rules will be set out in a new Company Code, which is currently being prepared. Since the new code will also contain rules governing foundations, it would perhaps be better to refer to it as the Code of Companies, Associations and Foundations.
The bill has been brought before Parliament and is expected to be adopted by the fall of this year, at the latest. The new code will be immediately applicable to newly created entities but will only apply to existing companies, associations and foundations as from 1 January 2020. Thus, in 2019, pre-existing companies, associations and foundations will still be subject to the old code, while new companies, associations and foundations will be governed by the new rules. As from 1 January 2020, all companies, associations and foundations must comply with mandatory provisions of the new code.
By means of the new code, the government hopes to achieve three main objectives: simplification, greater flexibility and more competitive company law.
Simplification will be achieved primarily through a substantial reduction in the number of corporate forms, from 14 to 8. The distinction between companies with and without a commercial purpose will be abolished. The sole criterion to distinguish between companies and associations will be whether the entity can distribute profits: a company can do so, while associations and foundations cannot (unless the distribution would contribute to the fulfilment of their charitable objective). The concept of companies that make a public call for savings will be abolished. There will still be a distinction between listed companies (whose securities are admitted to trading on a regulated market) and companies whose securities are traded on a multilateral trading facility, as this distinction exists under European law, but the rules applicable to listed companies can be extended to the latter by royal decree. The rules applicable to legal persons, whether they are companies, associations or foundations, will be harmonised and the sanctions simplified: civil liability will be the rule and criminal sanctions the exception.
Greater flexibility will be achieved by making numerous rules waivable or non-mandatory and giving the founders more freedom to determine the (voting and dividend) rights attached to shares and other securities. Both the SA/NV and the SRL/BV will be able to have their securities traded on a stock exchange, and it will be possible to waive the private nature of the SRL/BV. The SRL/BV will no longer be subject to a minimum capital requirement, and the rules on profit distributions will be relaxed if the necessary guarantees are provided for creditors. The founders will be free to determine the structure of the board; they can provide in the company's articles of association for management by a sole director, a board of directors and/or statutory directors. The SA/NV will be able to opt for either a one-tier or a two-tier management structure.
Finally, the government wishes to make Belgian company law more competitive and attractive not only to Belgian undertakings but also to foreign companies and investors. Thus, pursuant to the new code, the applicable company law will be determined by the location of the company's registered office rather than by the real seat theory. In this regard, it will suffice for the articles of association to stipulate that the registered office is in Belgium, regardless of whether the head office is located here or whether activity is conducted in Belgium. Foreign entrepreneurs will thus be able to opt for the application of Belgian company law, without having to have their management or the bulk of their activity in Belgium. In this way, Belgium is joining the ever-growing number of European countries that, following the case law of the Court of Justice on freedom of establishment, use the registered office as the starting point for lex societatis.
