The New Companies and Associations Code: How Does it Affect You?
On Wednesday 1 May 2019 the new Companies and Associations Code (WVV or Wetboek Vennootschappen en Vereniging) came into effect. This new legislation on companies and associations is the crowning piece in the recent reform of Belgian business law.
You may remember the introduction of the new insolvency law and the abolition of the distinction between commercial and civil actions.
How will the new companies legislation affect your architectural practice? By when should your architectural practice be compliant and what about the special rules? These are just some of questions that will undoubtedly concern you. We provide answers below.
Purpose of the reform
The reform is designed to make Belgian companies law more attractive and to enable it to compete with the other countries of the European Union. The key words are flexibility and freedom of choice. It gives all companies, architectural firms included, the choice to include in their company articles the most appropriate arrangements for the company they have in mind. Nonetheless, the new companies legislation provides for a clear arrangement when none are specified. This might the case with start ups and business enterprisers who omit to regulate certain matters in their company articles.
Some of the new ideas introduced
Reduced number of corporate structures
The new companies legislation drastically reduces the number of corporate structures available to a company. Whereas the old Companies Code of 7 May 1999 identified 18 corporate structures, the Companies and Associations Code contains just 4 basic ones: the private limited company (BV), the public limited company (NV), the cooperative company (CV) and the partnership.
the new Companies and Associations Code abolishes several existing corporate structures, such as the limited liability cooperative company (CVOA), the temporary trading company and the limited share partnership (Comm. VA). Secondly, it no longer recognises some of the structures as basic, as they can be formed by modulating a basic structure. Thus, by adding legal personality, a partnership can modulate to a private partnership (VOF) or a limited partnership (Comm. VA).
The BV replaces the BVBA and becomes the basic, all-purpose corporate structure. Its flexibility makes it appropriate for companies large and small. Only the biggest architectural practices are expected to opt for the NV.
Sole founder of the BV or NV
It is no longer a requirement that the majority of companies, such as BVs and NVs, be set up by at least two founders. One will now suffice.
Abolition of (minimum) capital requirement for the BV
Under the new companies legislation the minimum capital requirement of EUR 18,550 to set up a BVBA is abolished for the BV. In the BV, equity takes the place of capital. The company's equity consists of the partners' contributions and the profits. The effect of abolishing the capital concept is that shareholder rights are no longer linked to the portion of the capital they represent. However, companies may still volunteer to share the company's rights according to the values contributed.
To offset the abolition of the capital concept the founders of a BV are required to ensure that the company's starting equity is sufficient for it to conduct business. It is now down to the founders of a BV to decide for themselves the equity needed to conduct the company's business and to do so on the basis of a more detailed financial plan. Distributions from the profits or reserves are subject to balance sheet and solvency tests.
Multiple voting rights
It is now possible to assign multiple voting rights to shareholders in a BV or NV. The basic rule that each share gives entitlement to one vote may be amended in the company articles or by agreement.
Company purpose becomes company object
The old companies legislation spoke of a company purpose and a company objective. The purpose covered the full range of business that a company was authorised to transact. The objective was to distribute the profits among the shareholders. The new companies legislation changes the meanings of these terms. The company object replaces the company purpose and is the range of business that a company is authorised to transact, whilst the purpose (formerly the objective) is to distribute the profits. Bear this terminology in mind when writing the company's articles of association.
Limited liability of directors
Directors' liability is limited to certain sums that are dependent on a company's size, and it ranges from EUR 250,000 to 12,000,000. With this provision the legislator aims to improve the insurability of a director's liability, as it enables a better assessment of a director's exposure to financial risk.
Applicability to the architectural firm
The new companies legislation applies to architectural practices set up after 1 May 2019.
For companies formed before 1 May 2019 the legislator provides a transitional regulation. The new companies legislation applies to existing architectural practices after 1 January 2020. After 1 January 2020 the company's articles must be aligned on the occasion of the next amendment of the company articles and at the latest by 1 January 2024. If alignment is not made within this period the company's directors can be held jointly and severally liable. Existing architectural practices are at liberty to bring their articles in order before 1 January 2020.
Bear in mind that the new companies legislation contains imperative regulations which take precedence over the company articles after 1 January 2020. These imperative regulations come into force automatically after 1 January 2020 with no need to amend the company articles to that effect.
If the corporate structure of your existing architectural practice is now outdated by the new companies legislation we recommend that you adapt it as soon as possible after 1 January 2020. This will stop you falling under both the old and the new legislations. Seek assistance from a corporate law solicitor or advice from your notary public.
No end to the current rules on architectural legal entities
The introduction of the new companies legislation does dissolve the special rules for architectural legal entities entered to one of the rolls of the Order of Architects. These special rules are set out in Article 2, §2 of the Act of 20 February 1939 on the protection of the title and profession of architect.
One implication, for example, is that multiple voting rights are assignable to one or more shareholders in an architectural legal entity, provided that at least 60% of the total voting rights are in the possession of architects who are entered to one of the rolls of the Order of Architects and permitted to practise architecture. So too, the free transfer of shares in an architectural legal entity must not lead to a situation in which more than 40% of the shares are owned by persons not registered with the Order of Architects. An architectural legal entity may be set up as an NV, but it is a requirement that the shares be registered. Finally, the board of an architectural legal entity must not comprise legal persons or natural persons that are not registered with the Order of Architects.
Conclusion
The key reform elements in the companies and associations code are freedom of choice and flexibility. The reduced number of corporate structures and the flexible structure of the BV are examples of these. Architectural practices can introduce provisions to their company articles that offer the best match for the aims they have in mind. Nonetheless, the companies legislation offers a clear arrangement for cases where the articles make no provisions. The special rules governing architectural legal entities continue to apply.
The new Companies and Associations Code applies to all architectural practices set up after 1 May 2019. Architectural practices set up before 1 May 2019 are not required to adapt their articles to the new companies legislation until they next amend their company articles after 1 January 2020.
If you have questions or comments please feel free to get in touch with our legal department at juridische.dienst@ordevanarchitecten.be.
For more information see the brochure entitled “Business and Corporate Law Reforms – How Do They Affect Me?” (in Dutch) by the Federal Public Service for Justice.