Belgium Enacts Historic Corporate Law Reform

by Jones Day

Jones Day

In Short

The Background: On February 28, 2019, the Belgian Parliament approved a historic company law reform.

The Result: The new Belgian Code of Companies and Associations ("BCCA") becomes applicable on May 1, 2019, with staggered effect. The reform impacts all Belgian legal entities, including nonprofit associations that are now governed by a separate law.

Looking Ahead: The BCCA will benefit Belgian companies by enhancing flexibility and making Belgium a more attractive place for companies to do business.


The reform of Belgian company law was principally driven by the existing regime's unnecessarily strict, unclear, and complex features, which harmed Belgium's standing as a competitive and preferred place to do business compared to other European countries.

The BCCA modernizes Belgian company law by simplifying and clarifying rules, and introduces more flexibility.

This Commentary focuses on several topics expected to be of particular relevance for any company present in Belgium or contemplating future business activities in Belgium. The present discussion is limited to the most commonly used company forms—i.e., the joint stock corporation (Naamloze Vennootschap (NV) or Société Anonyme (SA)) and the private limited liability company, which the BCCA now renames as Besloten Vennootschap (BV) or Société à Responsabilité Limitée (SRL).

Entry into Force

The BCCA will apply with immediate effect to any company formed or incorporated on or after May 1, 2019, and any existing company that explicitly opts in to the new rules.

For all other companies existing prior to May 1, 2019, a transitional period will apply from January 1, 2020, until January 1, 2024, during which all mandatory BCCA provisions will apply, regardless of provisions to the contrary in their articles of association. All nonmandatory provisions will apply by default, but only to the extent that these are not contrary to their articles of association.

These existing companies must bring their articles of association in line with the BCCA no later than January 1, 2024. However, if any modifications to their articles of association are made during the transitional period, the entire articles of association must then comply with the BCCA. For instance, a capital increase or decrease during the transitional period will trigger the obligation to make the articles of association fully compliant with the BCCA.

The BCCA introduces important changes particularly in relation to the below areas:

Shareholders and Shareholder Meetings

Abolishing the two shareholder requirement. The BCCA will make it possible to have a sole shareholder in the NV/SA and the BV/SRL without losing the benefit of limited liability. Currently, in company groups, one share in Belgian entities is often assigned to another group entity in order to meet the two shareholder requirement under existing company law. This creates additional paperwork for shareholders' resolutions, dividend distributions, and corporate restructurings and sometimes leads to mistakes, when such single share is omitted in the group chart and other company documents.

Abolishing the one share, one vote rule. The strict "one share, one vote" rule is also dismantled, enabling multiple voting rights. This can be a useful instrument when establishing joint ventures or private equity structures in Belgium. Another innovation are the so-called "loyalty shares," whereby listed companies may grant a double voting right to shareholders that continuously hold registered shares for at least two years.

Protecting shareholders from company losses. The BCCA will also make it possible to fully exclude a shareholder from a company's losses. This change from the current regime will eliminate long-standing uncertainties as to the validity and enforceability of put option schemes to protect shareholders against downside risk.

Other lightened requirements. Further notable changes under the current regime include (i) lifting the obligation to invite the holders of nonconvertible bonds to shareholders' meetings, and (ii) allowing companies to include an official website and e-mail address in their articles of association and to send official shareholder notices and communications via e-mail.

Board of Directors and Directors' Liability

New governance structures. From a governance perspective, the BCCA will allow the appointment of a sole director instead of a board of directors, which will provide greater flexibility in decision-making in group companies. For an NV/SA, a "true" two-tier management will become possible, with a supervisory board nominated by the shareholders' meeting and a management board nominated by the supervisory board.

Expanded applicability of director liability. Under the BCCA, the rules on director liability have a broader scope and apply not only to directors who have been formally appointed, but also to persons who in fact act as directors of the company and to the daily managers. The authority of the daily manager(s) appointed by the board of directors will be slightly broadened, and it also will become possible to appoint such daily manager(s) in the BV/SRL.

Modified dismissal of NV/SA directors. Currently, there is a strict "ad nutum" dismissal rule, by which directors of an NV/SA can be dismissed at any time without cause and without notice or compensation. Under the BCCA, companies may deviate from that rule, such that notice periods and severance agreements can be freely negotiated with directors before or during their term.

Tightening conflict of interest rules. Conflict of interest rules are also strengthened. Presently, a conflicted director is subject to a disclosure obligation only whereas, under the BCCA, such director will be excluded from discussions and decision-making on matters for which he/she is conflicted.

Another practical improvement is that board of directors decisions may now be made by unanimous written consent.

New (but limited) liability cap. The BCCA introduces a liability cap for directors. This cap applies irrespective of the number of plaintiffs or the number of directors involved, as long as it relates to the same set of facts. Depending on the size of the company (determined on the basis of revenue and assets), the liability of its directors will be capped at EUR 250,000, EUR 1,000,000, EUR 3,000,000, or EUR 12,000,000. The cap does not apply if one or more directors have committed fraud, gross negligence, or repetitive minor misconduct. The specific directors' liability rules relating to withholding tax, value-added tax, or social security contributions are also not affected by the liability cap.

This unique feature was intended to become the main argument to attract new companies to Belgium. However, at the last minute an amendment was introduced and approved excepting "gross negligence and repetitive minor misconduct" from the cap. In practice, this negates much of the relevance of the liability cap, which was intended to serve as a main element in attracting new companies to Belgium.

In tandem with the introduction of the liability cap, the BCCA prohibits companies from limiting or excluding the liability of their directors and from providing them with indemnification. However, a parent company may continue to provide indemnification for these directors, and a company may still pay D&O insurance premiums for its directors and shareholders.

Capital and Distribution

Shift from "capital" to "equity" concept for BV/SRLs. The BCCA abolishes the "capital" concept in the BV/SRL. Now, "equity" (i.e., the difference between total assets and total liabilities) will become the relevant concept from a company law perspective. This will impact decision-making in distributions.

Prior to any distribution, the BV/SRL must now perform both of the following tests:

(i)       Under the net asset test, a distribution cannot be made if the company's equity would become negative due to such distribution.

(ii)      Under the liquidity test, after the contemplated distribution, the company must be able to pay its debts timely for at least a 12-month period, taking into account reasonably expected developments.

These new tests are a welcome change from the existing rules, as they bring corporate concepts more in line with economic reality.

As BV/SRLs will no longer have any capital, the requirement to accumulate a reserve equal to 10 percent of the share capital will also disappear. The existing capital and legal reserve will automatically be converted into a statutory unavailable reserve as of January 1, 2020.

Unchanged regime for NV/SAs. For NV/SAs, existing capital requirements and the net asset test will remain unchanged, in line with EU Directives. Thus, no distribution can be made if this would result in the equity falling below the sum of the statutory capital and the unavailable reserves. This evaluation is based on the last annual accounts. Although the NV/SA is not subject to a liquidity test as such, as part of its general duty of care, the board of directors must consider the company's viability company going forward and refrain from any distributions that might endanger it.

Greater latitude for interim and quarterly dividends. Another improvement is increased flexibility in terms of interim dividends decided upon by the board of directors. The board of directors of both NV/SAs and the BV/SRLs may distribute profits of the previous financial year, if the shareholders have not yet approved the accounts. Furthermore, interim dividends based on the profits of the current financial year will be less strictly regulated and will become possible in the BV/SRL as well. This opens the door to introducing quarterly dividends.


Elimination of minimal capital requirement. By removing the "capital" concept, the "minimum capital" requirement of EUR 18,550 will disappear. Instead, to ensure that a BV/SRL is sufficiently capitalized at the time of its incorporation, the BCCA will require founders to establish a detailed financial plan justifying the amount of the initial funds, taking into account the contemplated activities over a period of at least two years. A similar requirement already exists under the current company law regime, but the financial plan will become more detailed and substantive (e.g., cash-flow projections).

In case of bankruptcy within three years of incorporation, the founders can be held liable for any losses that third parties incur. However, this will only be the case if such losses result from the company being "manifestly underfunded" for the ordinary conduct of activities contemplated at the time of incorporation.

Additional new features. BV/SRLs will also become more flexible, as it will be able to issue all types of securities, including warrants and convertible bonds, and its securities may be publicly listed.

A transfer of shares of the BV/SRL remains subject to prior consent of a specific majority of the shareholders as a default rule, but the articles of association can provide for free transferability.

Finally, the BCCA also introduces "daily managers" in the BV/SRL.


The BCCA simplifies and enhances the flexibility of Belgian company law, thereby improving the attractiveness of Belgium as a place of establishment for businesses. In the course of the next weeks, Jones Day will publish more detailed Alerts focusing on selected key changes relevant to our clients.

For further information on the BCCA, see our June 2018 Commentary "Loyalty Shares for Belgian Listed Companies: Fundamental Change on the Way"; our September 2018 Commentary "Greater Flexibility for Belgian Companies Issuing Bonds"; and our December 2018 Commentary "Greater Flexibility Slated for Equity Financing in Belgium."

Three Key Takeaways

  1. The BCCA modernizes Belgian company law by simplifying and clarifying rules and introducing more flexibility on both the shareholders' and directors' level.
  2. The capital concept is abolished in the BV/SRL, which will impact decision-making in distributions. Prior to any distribution, the BV/SRL must now perform both a net asset test and liquidity test. The BV/SRL will become much more flexible, as it will be able to issue all types of securities.
  3. 3.    The BCCA will apply with immediate effect to any company formed or incorporated on or after May 1, 2019, and any existing company that explicitly opts in to the new rules. For all companies existing prior to May 1, 2019, a transitional period will apply from January 1, 2020, until January 1, 2024.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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