The corona crisis is putting the financial position of numerous companies under severe pressure. As a result, many companies are cancelling their planned dividend distribution for the financial year 2019. Belgian companies that do wish to make a dividend distribution can only do so if the distribution passes a two-pronged test:
- Firstly, the distribution must satisfy the net asset test applicable to the relevant type of company.
- Secondly, the management body must verify whether, according to reasonably foreseeable developments, the company will still be able to pay its debts as they fall due for at least twelve months following the distribution (the so-called “liquidity test”).
Although the liquidity test is only expressly regulated in relation to the BV/SRL, its principles arguably also apply to other types of companies, in particular the NV/SA. Indeed, also in the NV/SA, a distribution that has led to foreseeable payment difficulties may constitute a voidable transaction (which may be set aside by means of a so-called actio pauliana) and/or a breach of fiduciary duty. Hence, as Gillis Lindemans has recently argued, in both the NV/SA and the BV/SRL a violation of the test gives rise to directors' liability and, in certain cases, the obligation for the shareholder to repay the distributed dividend (see G. LINDEMANS, “Een dubbele bodem: de actio pauliana als uitkeringstest”, TRV-RPS 2019, 882-892).
The corona crisis therefore calls for great caution. Indeed, uncertainty about the further course of the corona pandemic makes it more difficult than ever to determine which developments are "reasonably foreseeable", and certainly over a period of twelve months. At the same time, the risk has increased considerably that creditors might successfully contest the distribution in the event that the company does indeed run into liquidity problems. After all, never before has the cause of the liquidity problems been so clearly and specifically determinable for so many companies. Especially in cases where the distribution would lead to the company’s bankruptcy, its directors (and, in certain cases, shareholders) run a serious liability risk, which is not necessarily limited to the amount of the distributed dividend.
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