The new corporate law: what are the changes?

We saw in detail what reforms the Michel government has carried out in the area of modernising the law of succession and matrimonial law.  But corporate law has also undergone a thorough overhaul.  The new corporate law is in fact the outcome of the economic law reform of Minister Koen Geens, who had already reformed insolvency law and business law in 2018.  The project was already completed in December 2018, but the fall of the government had caused uncertainty about the introduction of this reform.  This time, the decision has been made.  On 28 February 2019, Parliament made a decision: the Code of Companies and Associations (CSA) came into force on 1 May 2019.

Objective

The purpose of this law was to modernise and simplify the economic life of the one and a half million companies, the more than 600,000 one-person businesses and the 230,000 non-profit organisations in our country.  The aim was also to stimulate business creation.  As the Minister said:  "This in-depth reform will make it possible to create more companies in Belgium."

From now on, there are only companies 

To allow this simplification, the law has removed the former distinction between commercial companies– for commercial purposes – and civil law associations – for non-commercial purposes.  According to the new Company Code, there are now only companies.  All companies, associations and foundations are now companies.  As a result, the commercial court has disappeared, and has been replaced by the company court (tribunal de l’entreprise).

Simplification of the number of companies 

Over time, more and more types of company had been created: SPRL, company with a social purpose, SCRL, temporary company, silent partnership, SA, SC, and many others.  There were 17 in all.  

The following types of company have disappeared.  Since 1 May 2019, it is therefore no longer possible to create a new company in one of these former legal forms:

• the silent partnership
• the temporary company
• the cooperative company with unlimited liability (SCRI)
• the cooperative company with limited liability (SCRL)
• the economic interest grouping (GIE)
• the agricultural company (SAGR)
• the single-person private limited liability company (SPRLU)
• the private limited liability company start-up (SPRL-S)
• the limited partnership with shares (SCA)
• the social purpose company (SFS)

However, it is not because these types of company have disappeared that their characteristics have also disappeared. These companies will now be of a different type.

Note that we cannot foresee all cases here. It is always possible that one of the existing types may be transformed into something other than the type mentioned above. 

Four basic types of company 
This simplification leads to four basic types of company:
1. the public limited company (SA– société anonyme) 
2) the private limited liability company (SRL- société privée à responsabilité limitée)
3) the cooperative company (SC- société coopérative)
4. the unincorporated or incorporated simple company (a partnership (SNC -société en nom collectif) and the limited partnership (SCS- société en commandite simple))

The public limited company (SA - société anonyme) is the typical legal form for large companies. The purpose of the SA is to raise enough capital to build a large company.  The amount of capital is still 61,500 euros.

The private limited liability company (SRL - société privée à responsabilité limitée) (formerly SPRL) is the typical form of company for small and medium-sized companies.  The new SRL is very similar to the SPRL.  The new SRL also protects the entrepreneur's private assets so that they cannot be seized by creditors.  The initial capital of 18,500 euros has been eliminated for the SRL, so there is no longer any minimum capital required.  However, this does not mean that it is no longer necessary to have an initial capital. The law provides for "sufficient initial assets". It is also possible for human capital such as knowledge, experience and work, to be starting capital for the company. From now on, a SRL, like a SA, will be able to transfer shares in a flexible way and even be listed on the stock market.  In this respect, a SRL is more flexible than a SPRL.

The cooperativecompany (SC- société coopérative) now only exists in the form of a limited liability cooperative company.  The SC has (once again) become a true cooperative company which must take care of the needs of its shareholders and the development of its activities. The current "false" SCs will have to opt for one of the other forms of company, with the SRL being the most likely.

The simple company is the basic type of partnership and is the only unincorporated form. As an alternative, there are two forms of incorporated simple company, namely the partnership (SNC- société en nom collectif) and the limited partnership (SCS-société en commandite simple).  These two forms of simple company could be considered as a fifth basic form.

European law 

Apart from that, we cannot forget the types of company under European law.  They depend on European law and therefore cannot be modified by a reform of Belgian law. These are the European company (EC), the European cooperative company (ECC) andthe European economic interest grouping (EEIG).

Note: for existing companies

If you have a company, you do not have to rush to change everything.  The first phase (1 May 2019) concerns mainly new companies which are being created. During this first phase, existing companies may change their statutes voluntarily by a decision at their general meeting.  These new statutes then come into force at the time of their publication.  On 1 January 2020, the second phase will begin.  The binding provisions will then be immediately applicable to existing companies, even if their statutes have not yet been adapted.  However, this complete adaptation must be made at the time of the next amendment of statutes.  Existing companies which have not completed the necessary steps by 1 January 2024 will be transformed automatically into the closest legal form (see above) during the third phase.  By that date, the reform will be completed.  
Note that the companies which will be transformed automatically on 1 January 2024, will then have six months left to convene a general meeting in order to amend their statutes. Members of the management bodies who do not comply with this obligation may be held personally, jointly and severally liable for damage suffered by the company or third parties as a result of this non-compliance. 

 Some other important changes 

• E-mails will now have probative value and legal value.  An e-mail address can be included in the statutes, thus becoming a valid means of communication for communicating with shareholders and members.
• With the new company law, you can create a company (SRL or SA) alone. Previously, it was necessary for there to be at least two people.
• A SC must have at least 3 shareholders and a simple company, at least 2 partners.
• In a SA and a SRL, each share normally has one vote, but the statutes may deviate from this and provide for multiple voting shares, non-voting shares and voting shares under certain conditions.  For this, however, the company's statutes must be adapted. For unlisted companies, multiple voting rights may be adopted by 75% of the votes, and for listed companies, by 66% of the votes.
• If a company is created in Belgium and opts for Belgian law (registered office in Belgium), it will now always be considered as a Belgian company, even if its management is abroad.  This should make Belgium more attractive to companies.
• The liability of directors is capped according to the size of the company.  The amounts range from 125,000 to 12 million euros. This restriction does not count for minor but frequent misconduct, serious misconduct and fraudulent intent, and non-payment of social security contributions, VAT and payroll tax.                                                                    

These are the main changes introduced by the new company law.