Limited Liability Company (SRL)

Public Limited Liability Company (SA)

Cooperative Company (SC)


What is the main source of law authorising this entity form?

Belgian Companies and Associations Code, Book 6, articles 6:1 through 6:128 (Wetboek van Vennootschappen en Verenigingen/Code des Sociétés et des Associations) (hereafter BCAC).


Give a brief summary of this entity form, including

Does the entity possess separate legal personality?

The CV/SC has legal personality.

(Maximum) period of existence

There is no maximum period of existence, although the Articles of Association can provide for a limited duration.

Governing document(s)

The CV/SC is governed by its Articles of Association (contained in the notarial deed of incorporation, with the subsequent modifications published in the Annexes to the Belgian Official Gazette (Bijlagen tot het Belgische Staatsblad/Annexes au Moniteur belge) (hereafter BOG) – consolidated version available at the clerk of the Enterprise Court or via a publicly available database for consolidated Articles of Association as from May 1st, 2019.

Liability of incorporators / shareholders

Liability of founders (oprichter/fondateur) if bankruptcy occurs during the first three (3) years and if it is proven that the contributions at the time of the incorporation considering all financial means made available to the company were not sufficient to carry out a normal activity during the first two (2) years.

Liability of shareholders (aandeelhouders/actionnaires) is limited to their participation in the company.

(Governing) bodies

NA

Other particularities

NA


Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?

Under Belgian law, it is possible for a CV/SC to enter into legal mergers (whereby the company ceases to exist by operation of law and its assets are acquired under universal succession of title) and demergers of all or a portion of its assets and liabilities (with universal succession of title to the relevant assets), and conversions (changing into another legal form without ceasing to exist).

International restructurings like the above are possible, however, only pursuant to specific legal provisions contained in the BCAC.


Can this type of entity be publicly listed or held?

No.


Can this type of entity be used for a non-profit or charitable organization?

No, it cannot. Non-profit or charitable organisations opt for specific legal forms such as the (international) non-profit association ((Internationale) Vereniging Zonder Winstoogmerk or (I)VZW/Association (Internationale) Sans But Lucratif or A(I)SBL), the foundation of public utility (stichting van openbare nut/fondation d’utilité publique) or the private foundation (private stichting/fondation privée), described in the BCAC.

However, Recognition as a "cooperative company approved as a social enterprise" (SC agréée comme ES/ CV erkend als sociale onderneming or SC approved as SE) is possible pursuant to article 8:5 §1 of the BCAC: The main goal of the cooperative company approved as a social enterprise is not to provide its shareholders with an economic or social benefit, but rather to pursue societal objectives such as "the general interest, to generate a positive societal impact for man, the environment or society".





Give a brief summary of the process of incorporation, formation, or organization, including

Main documents required

A notarial deed of incorporation must be executed in front of a Belgian notary public and published in the Annexes to the BOG. The deed can be executed pursuant to a power of attorney of the founder(s).

Submission of a financial plan to the Belgian notary public preferably to be prepared by an accountant or statutory auditor indicating that the company’s equity will be sufficient to conduct the business of the company for at least the first two (2) years of its existence.

In the event of a contribution in-kind, the founders must draft a special report relating to the interest of the contribution for the company which they must communicate to the auditor they appoint.

The auditor draws up a special report in which he examines the description made by the founders of each contribution in-kind, the valuation adopted, and the valuation methods applied.

Involvement of notary, company register, governmental authorities

The CV/SC must be registered with the Crossroads Bank for Enterprises (Kruispuntbank van Ondernemingen or KBO/Banque-Carrefour des Entreprises) (hereafter CBE) and must file its notarial deed of incorporation and other subsequent modifications, as prescribed by the BCAC, with the clerk’s office of the relevant Enterprise Court (Ondernemingsrechtbank/Tribunal de l’entreprise). The legal personality is acquired as from the filing of the notarial deed of incorporation with the aforementioned clerk’s office.

Timing (estimate)

The incorporation is not subject to any waiting periods.

Main costs, including registration and similar fees (excluding legal fees)

Lawyers’ fees;

Notarial fees; and

Publication fees (VAT incl.): approx. EUR 270 (electronic submission) or EUR 335 (paper submission).


Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

The corporate objects/purpose must be stated in the Articles of Association and the VAT activities code must be stated in the CBE upon registration of the company.


Minimum number of incorporators / shareholders and residency requirements

There must be at least three shareholders (aandeelhouders/actionnaires), which can be natural persons or legal entities.

There is no residency requirement.


Minimum number of directors (or other applicable officers) and residency requirements

There must be at least one director (bestuurder/administrateur). There is no residency requirement.


Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

The concept of ‘capital’ no longer exists, as a consequence of which there is no minimum capital requirement at the incorporation. However, the founders are required to put sufficient equity at the disposal of the CV/SC to conduct the envisaged activities, taking account of all financial means made available to the company (such as shareholder or bank loans).

The adequacy of the financial means (in equity and in debt) must be established by the founders in a detailed financial plan, the content of which will have to be more elaborate than in the part.

This plan is not publicly available, but it can be consulted if the CV/SC becomes insolvent within three (3) years of its incorporation: if the court finds that the founders clearly put insufficient means at the disposal of the company for normal operation of the CV/SC for at least two (2) years, the founders may be held liable for all or part of the uncovered liabilities.


Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?

No, the execution of the notarial deed may be carried out by virtue of a power of attorney.


Is a tax identification number, or equivalent, required? If so, how is it obtained?

Yes, it is obtained upon registration with the CBE.





What is the title of the applicable company registry?

Crossroads Bank for Enterprises (Kruispuntbank van Ondernemingen or KBO/Banque-Carrefour des Entreprises or BCE).


What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles , Ownership identification (direct and/or indirect ownership, 'beneficial owners') , Group structure , Share capital , Directors , Accounts , Insolvency, good-standing, liquidation , Liens and encumbrances on the shares , Liens and encumbrances on assets of the entity , Other (e.g. litigation, tax matters)

The information listed below must be filed at the clerk’s office of the relevant Enterprise Court and/or published in the Annexes to the BOG and/or with the National Bank of Belgium and is publicly available –

  • Articles of Association (extract from the notarial deed of incorporation and modification);
  • Any variation in the company’s equity;
  • Appointment and dismissal of directors;
  • Annual accounts;
  • Insolvency and liquidation;
  • Mergers and de-mergers;
  • VAT activity code(s); and
  • Registered office.

In addition to the foregoing, legislation entered into force in 2019 regarding the mandatory identification of the ‘ultimate beneficial owners’ of Belgian companies with the Federal Public Service of Finance – the UBO Register (UBO-register/Registre UBO).

Additional information can be provided, such as contact details.





What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

Director(s) (bestuurder(s)/administrateur(s)) shall –

  • carry out all acts either necessary or useful to the achievement of the company’s purpose;
  • represent the company towards third parties or for judicial purposes;
  • have the residual powers, i.e. all the powers that are not specifically granted by the BCAC or the articles of association to another body of the company.

How are the members of the executive body appointed, dismissed and replaced?

The shareholders of the CV/SC can appoint one (1) or more persons as director(s), acting individually or as a board. If a legal entity is appointed as director, it has to designate a permanent representative who must no longer be included amongst its shareholders, managers, directors, or employees. The identity of the permanent representative subject to a publication requirement in the Annexes of the BOG and the CBE.

The director(s) may delegate the daily management powers to one (1) or several persons.

Directors may be appointed for a limited or unlimited duration. Dismissal at the will of a director by the shareholders remains the standard, but directors can enjoy protection against dismissal under provisions that may be included in the Articles of Association.

Note: Any changes must be registered with the CBE.


Is it possible to appoint corporate directors or must all directors be natural persons?

See question 17 above. However, it is possible to delegate the daily management to one (1) or more director(s) and/or third party(ies).


Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

N/A.


What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The body of shareholders is referred to as the General Meeting of shareholders.

The General Meeting of shareholders notably appoints and dismisses directors, approves the annual accounts, modifies the Articles of Association and the company’s purpose, resolves on issuance of shares, equity reductions, distributions, and on the dissolution and liquidation of the CV/SC.


What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

By default, the majority and quorum requirements follow the principle of the simple majority (the majority of the expressed votes – excluding blank votes and abstentions – among attendees is required).

The BCAC provides for special quorums and majorities for the following decisions –

  • Modifications of the Articles of Association and the dissolution of the CV/SC requires the attendees to represent at least half of the shares and a voting quorum of at least three-quarters of the votes;
  • Modifications of the company’s purpose require the attendees to represent half of the shares and a voting quorum of four-fifths of the votes;
  • Modifications of rights associated with titles require the quorum and majority conditions for the modification of the Articles of Association to be respected in each title category.

The Articles of Association can contain provisions derogating from the above quorums –– i.e. the Articles of Association can impose higher presence and voting quorums.


Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

Only true cooperative ventures that pursue the cooperative spirit can be governed by this legal form.

Under Belgian law, there is a special large company regime. If a company meets more than one (1) of the following three (3) threshold requirements, then it must comply with the provisions as set out in that regime. The threshold requirements include:

  • having an annual turnover (VAT excluded) of at least EUR 9 million;
  • having at least 50 employees; and
  • having a total balance sheet of at least EUR 4.5 million.

Under the special regime, the company must appoint a statutory auditor (commissaris/commissaire) and have a Works Council (Ondernemingsraad/Conseil d’Entreprise).


What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

Each year, the balance sheet, the profit and loss account and the annexes (i.e. the annual accounts), and an annual report must be prepared by the director(s) and submitted for approval to the General Meeting of shareholders.

The annual accounts must then be filed with the National Bank of Belgium.

It must be noted that small companies and micro-companies, as defined by the BCAC, may submit simplified versions of the aforementioned documents and do not have to draft an annual report.


Is the entity permitted to determine its own financial year?

Yes. The financial year must not coincide with the calendar year.


Is the entity subject to any statutory (external) auditor obligations?

In large companies, as defined by the BCAC, a statutory auditor shall be appointed by the General Meeting of shareholders for three (3) financial years (renewable).

Small companies can either appoint an accountant or grant a right of investigation and control to each shareholder, or voluntarily appoint a statutory auditor.


Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

No.





What is the title designated for ‘ownership interests' (e.g. shares, quota, interests, membership)?

Shares (aandelen/ actions).


Are different classes of ownership interests possible? If so, what are some examples of different classes?

Yes, different classes of ownership are possible.

  • Shares (aandelen/actions)
  • Bonds (obligaties/obligations).

What documentation is required for the transfer of ownership interests?

Bonds and shares are transferred through registration in the shares/bonds register of the company. This registration is a condition for the effectiveness of the transfer towards the company and towards third parties. Both registers must be kept at the registered office of the company or through an electronic register.


Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

By default, transfers of shares are free. The Articles of Association can, however, restrict the free transfer of shares by stipulating a pre-emptive right, prior approval (instemming/agrément) of the transferee of the shares, etc.

Shares may only be transferred to third parties to the extent that they belong to the categories determined by the Articles of Association and meet the statutory requirements for becoming a shareholder.

The administrative body has the power to decide on this matter, unless the Articles of Association provide that this power belongs to the General Meeting of shareholders.

The Articles of Association may also provide that the competent body may refuse a proposed purchaser, provided that it gives the reasons for its refusal.


Are there any applicable stamp duties imposed when transferring ownership interests?

No.


How are shares issued? (including information on payment obligations, registration requirements)

Shares are issued at the time of the company's incorporation or upon equity increase, respectively by a decision of the founders or by the General Meeting of shareholders, which must be held before a notary public and is published in the Annexes to the BOG. The issue of shares must be registered in the share register.


Further information on equity contributions, e.g. , Non-cash payments on shares; (Share premium) contributions without issuance of shares , Can partially paid shares/ownership interests permitted and what are the restrictions on them?

In-kind contributions are possible for any asset which can be economically valued, excluding work or services.

In the event of in-kind contributions, a special report on their economic value and the valuation techniques must be drafted by an auditor.


Any requirements with respect to share cancellation, share repurchase and other capital reductions

Repurchase of shares is forbidden.

Resignations or exclusions for just cause of shareholders, which result in the cancellation of their shares by the company, are possible in a CV/SC, notwithstanding any contrary provision of the Articles of Association. Subject to certain mandatory rules provided for by the BCAC, the Articles of Association regulate the modalities of such resignation/exclusion. The resigning or excluded shareholder is entitled to the payment of the value of his/her shares as determined in the Articles of Association, this payment being considered as a "distribution" and therefore subject to the limitations applicable to distributions (cf. infra).


Any requirements with respect to distributions to shareholders?

Since 1 January 2020, a new regulation applies to distributions in a CV/SC. Any distribution is subject to the so-called "double distribution test" that includes a net asset test and a liquidity test.

The double distribution test applies to every CV/SC, even if the company has not yet been formally converted from a CVBA/SCRL to a CV/SC.

Net asset test

The first test is the net assets test/the balance sheet test. A CV/SC cannot carry out any distribution if its net assets are negative or would become negative as a result of the distribution or, in case the company has unavailable equity, if the net assets are less than the amount of such unavailable equity or would become so as a result of such distribution. This is the responsibility of the General Meeting of shareholders.

Liquidity test

The second test is the liquidity test. A CV/SC can only carry out a distribution if it appears that following the distribution, the company may, based on reasonably expected developments, continue to pay its debts as they become due for a period of at least 12-months from the date of the distribution.

Any distributions made in violation of the ‘double test’ is subject to reimbursement to the company, whether or not the recipient of such distribution is in good faith.


Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes, provided it complies with the Articles of Association and the BCAC.





Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

The company must maintain its business address and have one (1) or more director(s). Each year, the shareholders must hold their annual general meeting (or adopt a resolution in writing).

In addition, annual accounts must be prepared and adopted each year and the applicable tax filings must be made and filed.


What are the general corporate tax rates? (Specify if there is a national versus local distinction).

The general corporate tax rate is 25 %, although ‘small’ companies can benefit from a lower tax rate of 20 % on the first EUR 100,000 of taxable income.





Summary of any specific matters, e.g. recent or prospective major legal developments

The (new) BCAC has entered into force on 1 May 2019 for newly incorporated companies.

Under the BCAC, the form of the cooperative company returns to its original foundation meaning only true partnerships, which aspire to the cooperative ideology, can take on this legal form. The Articles of Association must explicitly mention the cooperative purpose and values of the company.

Most existing CVBA/SCRL do not meet the new definition of the CV/SC. Pending the amendment of their Articles of Association (to be carried out at the latest by 1 January 2024), they will be subject to the mandatory provisions of the BCAC with respect to the private limited companies (BV/SRL) and if their Articles of Association have not been amended by 1 January 2024, they will be automatically converted into a BV/SRL.

One of the important changes included in the updated BCAC concerns the directors’ liability. In short, directors’ liability is limited to a maximum amount, which depends on the company’s turnover and balance sheet total. However, the liability of a director cannot be further limited than what is provided for in the BCAC.

This liability limitation applies both to the company itself and to third parties, regardless of the (contractual or non-contractual) basis of the liability claim.

The maximum amounts also apply to all directors together. They apply to each fact separately or to a whole of facts that may give rise to liability, regardless of the number of claimants or claims.

However, the liability limitation does not apply in the following instances –

  • in the event of a minor fault of a habitual rather than accidental nature, gross negligence, fraudulent intent, or with malice aforethought on the part of the person responsible;
  • to obligations that have to do with the subscription and paying up of shares or a capital increase;
  • to joint and several liability with regard to overdue wage withholding tax and VAT; and
  • to joint and several liability with regard to overdue social security contributions.

A director's liability insurance could protect the company’s directors against all financial damages claims by third parties suing them for errors committed as a director. The insurance company then pays the damages claim and might pay for the costs of the director’s defence as well if such coverage would be included in the insurance policy.




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Pierre Willemart
van Cutsem Wittamer Marnef & Partners
Belgium