What if your articles of association have not yet been amended?

Since January 1, 2020, the new Companies and Associations Code applies to all companies and associations

With the turn of the year, the second phase of the entry into force of the new Code of Companies and Associations (CCA) is also announced. From January 1, 2020, the CAC will apply to every company and association [*1]. However, this does not mean that all companies had to adapt their articles of association to the CAC by 1 January 2020. The legislator allowed time until 1 January 2024 for this [*2]. But is this delay a curse or a blessing?

HOWEVER, MANDATORY LAW TAKES PRIORITY OVER YOUR ARTICLES…

If you have not yet amended the articles of association of your company, caution is advised. The mandatory provisions of the CAC that relate to your company will from now on take precedence over your articles of association. So inform yourself in good time about the legal validity of your articles of association under the new law, and do not just assume that the decisions of your administrative body or your general meeting have been legally taken under the new CAC.

Some striking changes for the bvba

A BVBA is automatically subject to the mandatory provisions of the BV. Uncertainty is an advantage in this area: after all, the legislator did not determine in an exhaustive manner which provisions are mandatory in nature. The Explanatory Memorandum to the CAC does provide a certain direction.

  • From now on, every bvba must use the legal form BV on invoices and other documents.
  • Directors of companies and associations are now jointly and severally liable for all errors made by the directors in the performance of their duties. Under the old regime, joint and several liability only existed for violations of the law or of the statutes. Although the liability of the directors is limited in scope, please read in our previous post that the cap seems to be a measure for nothing. Moreover, statutory exoneration clauses or indemnification clauses are no longer valid in any case. So definitely consider insurance for your directors' liability.
  • Directors are no longer allowed to participate in the deliberation and voting on the agenda items in which they have a conflict of interest. They must disclose this conflict of interest to the other directors in advance. In addition, to prevent abuse, the abstention must be explicitly noted, under penalty of – in certain circumstances – the nullity of the board decision and the liability of the directors involved.
  • From now on, directors can no longer be associated with the company in that capacity by an employment contract.
  • Attention for boards of directors in which a person sits in several capacities (eg on the one hand as a natural person and on the other hand as a permanent representative of a legal person). This is no longer valid. The permanent representative must be a natural person who is not yet seated in another capacity, on pain of the invalidity of the board decision. So appoint a new permanent representative in good time!
  • A BV can only make a profit distribution if it passes the net asset test and the liquidity test, ie if its net assets do not become negative after the distribution and if the company can still pay its reasonably foreseeable debts after the distribution for a period of twelve months. It is recommended that every decision of the governing body to distribute profits is thoroughly documented. Wrongful distributions can be recovered from shareholders. The directors also risk being held liable.
  • The issue of new shares requires, on pain of nullity, a report prepared by the board of directors in which the determined issue price is justified and the consequences for the equity and membership rights of the shareholders are described. If the company has a statutory auditor, he must confirm the financial and accounting data from this report. Shareholders may waive this reporting obligation for the board of directors, except in the case of a contribution in kind.
  • Statutory transfer restrictions must be reported in the share register and conflicting transfers are not objectionable to the company or to third parties. If a shareholders' agreement contains transfer restrictions, these must be entered in the share register at the request of a shareholder. Don't forget to do this!

Some notable changes for the cvba

  • Under the new code, the cvba will become a CV. Consequently, from now on a cvba must use the legal form CV on invoices and other documents.
  • What is new in the CAC, however, is that this legal form is reserved for companies with a genuine cooperative idea [*3]. The non-cooperative CVBAs must convert into a BV (or another legal form) before 1 January 2024.

Pending this transformation, the mandatory provisions of the BV (and therefore not the CV!) apply to the non-cooperative CVBAs. In other words: without an amendment to the articles of association, a non-cooperative cvba will thus have to call itself a CV, but will be subject to the mandatory provisions of BV law (as described in the previous point). Cooperative CVBAs, on the other hand, must apply the mandatory provisions of the CV.

Are you unsure whether you should apply the provisions of the BV or the CV from now on? Inform yourself in good time.

…BUT YOUR ARTICLES STILL TAKE PRIORITY OVER THE ADDITIONAL LAW!

The provisions of the CAC that are not mandatory in nature do not yet automatically apply. Your articles of association may therefore still deviate from the new law. Mind you, in view of the modernization and flexibility that the new code entails, this is not necessarily a good thing. The more flexible provisions of the CAC do not apply if your articles of association paraphrase the old, usually stricter law.

Consider, for example, the written decision-making of the administrative body. The new law provides that the board of directors may meet in writing, subject to unanimity, unless the articles of association prohibit this. Under the old law, a board of directors could only meet in writing under exceptional, urgent circumstances motivated in the light of the company's interests, and then only if the company's articles of association allowed this. If your articles of association allow written decision-making, they will probably have adopted these (strict) conditions. In that case, you cannot now invoke the more flexible new law.

The CAC provides for a number of other optional provisions that will only come into effect as soon as your articles of association provide for this, e.g. free transferability of the shares in the BV, multiple voting rights, preferential dividends, cancellation of the pre-emptive right in the BV, exclusion and withdrawal at the expense of the company's assets, etc.

If you want to fully enjoy the benefits of the CAC, you must therefore adjust the articles of association of your company.

IN SHORT: TIME IS (NOT) ON YOUR SIDE

The phased entry into force of the CAC gives companies and associations sufficient time to adapt their articles of association to this change. However, time is not necessarily a blessing in this context. The complexity surrounding the applicable legal rules (see point 1) and the statutory stumbling blocks that stand in the way of the application of the usually modern, flexible new law (see point 2) may do your company more harm than good.

OUR ADVICE?

Join the story of the WVV. Have your articles of association examined and opt for clarity, flexibility and modernisation. In the end, no one escapes an amendment to the articles of association, and in our opinion it is absolutely true: better early than late.

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[*1] Companies and associations that were established after 1 May 2019 or that have since voluntarily submitted to the CAC (the so-called opt-in) fall outside the scope of this contribution. Only the CAC applies to these companies and associations. Associations are also not included in this contribution.

[*2] On the understanding that these companies must conform their articles of association to the CAC with the next amendment of the articles of association from 1 January 2020.

[*3] Article 6:1 of the CAC defines the cooperative idea as meeting the needs of its shareholders or third interested parties and/or developing their economic and social activities, including by concluding agreements with them on the supply of goods, the provision of services or the execution of works in the context of the activity that the cooperative company carries out or has carried out.

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