The Belgian House of Representatives recently passed the Act of 12 January 2010 creating a new variant on the so-called starter BVBA/SPRL or S-BVBA/SPRL (“Act”). The Act was published in the Belgian State Gazette on 26 January 2010; its date of entry into force will be determined by royal decree.
Justification
With this new type of private limited-liability company, the Belgian government wishes to stimulate entrepreneurship. The government therefore decided to introduce a corporate form which offers some of the advantages of a BVBA/SPRL, such as limited liability and a lower tax rate, without the same required capital, as least for an initial period of up to five years or until the company has the equivalent of five full-time employees. Indeed, the capital requirements for limited-liability companies are generally considered too burdensome for young entrepreneurs, especially when coupled with tight credit markets. The government was also concerned by the growing number of companies incorporated by Belgians abroad, such as British limited companies, which are often active solely in Belgium. Indeed, pursuant to the European Court of Justice’s case law, a national of an EU Member State can exercise an economic activity in his or her state through a company established in another Member State. To this end, EU nationals can choose to set up a company using a corporate form from another Member State, one for which for example no financial plan is required or which has no minimum capital or founders’ liability.
Rather than introduce a new corporate form, the Belgian government decided to modify the existing private limited-liability company, at least for an initial period. The general rule is that all rules applicable to the private limited-liability company also apply to the starter BVBA/SPRL, unless the Act provides otherwise.
The main characteristics of the starter BVBA/SPRL are discussed below.
Founders
A starter BVBA/SPRL can only be incorporated by one or more natural persons, i.e., not legal entities, who do not hold shares representing more than 5% of the voting rights of another limited-liability company.
Natural persons can only found or acquire shares in a single starter BVBA/SPRL. They will be held jointly and severally liable for the liabilities of any other starter BVBA/SPRL they found or whose shares they acquire until that other company is no longer a starter BVBA/SPRL or is liquidated.
Finally, a starter BVBA/SPRL must employ fewer than five full-time equivalents.
Corporate name
Like any other company, the founders are free to choose the name of the starter BVBA/SPRL, as long as it includes the word “starter”.
Capital
One of the main characteristics of the starter BVBA/SPRL is that no minimum capital is required upon incorporation, contrary to the current statutory minimum of EUR 18,550 for the BVBA/SPRL. This means that it should be possible to incorporate a starter BVBA/SPRL with as little as one euro, making it comparable to the British limited company, for example. However, this possibility is rather theoretical as the Act requires that the capital be justified in a financial plan which must meet criteria determined by the government. Moreover, the Act also requires that the founders be assisted by an external expert, such as an accountant, auditor or recognised institution or organisation, and it is unlikely that such an expert will approve a financial plan providing for capital of only one euro. In the case of a BVBA/SPRL with at least two members, EUR 6,200 of the subscribed capital must be paid up upon incorporation, or EUR 12,400 if the BVBA/SPRL has only one member. By contrast, only one euro of the subscribed capital of a starter BVBA/SPRL need be paid up upon incorporation.
The capital of a starter BVBA/SPRL must be increased to at least EUR 18,550 within five years from its incorporation or when the company reaches the equivalent of five full-time employees. The Act does not indicate the consequences if the starter BVBA/SPRL’s capital is not raised to at least EUR 18,550 when it is required to do so.
A starter BVBA/SPRL is not allowed to reduce its capital.
Liability
As is the case with a regular private limited-liability company, the founders of a starter BVBA/SPRL can be held liable for the company’s debts if the company declares bankruptcy within three years following its incorporation, provided certain conditions are met. Moreover, from the expiry of this three-year period until the starter BVBA/SPRL raises it capital, the members are jointly liable with the company to any interested third party for the difference between EUR 18,550 and the starter BVBA/SPRL’s actual capital.
Statutory reserve
In order to make up for the low capital requirement, the Act states that the annual general meeting must set aside annually at least 25% per cent of the starter BVBA/SPRL’s net profit in a statutory reserve until this reserve reaches an amount equal to the difference between the company’s capital and EUR 18,550. The reserve can be incorporated into the starter BVBA/SPRL’s capital.
Management
A starter BVBA/SPRL must be managed by one or more (paid or unpaid) natural persons. A legal entity cannot serve as manager of a starter BVBA/SPRL.
Transferability of shares
The shares of a starter BVBA/SPRL can be freely transferred to other natural persons but not to legal entities. Legal entities can only become members in a starter BVBA/SPRL once its capital has been increased to EUR 18,550.
