Code on Companies & Associations

Distribution of capital under the new Belgian Code on Companies and Associations

Published on 7th Dec 2018

The new BCCA reforms the rules on capital reductions and distributions of profit to shareholders. In this article, we discuss those changes in relation to both the limited liability companies (naamloze vennootschap/société anonyme) (NV/SA) and the private limited liability companies (besloten vennootschap met beperkte aansprakelijkheid/société privée à responsabilité limitée, renamed besloten vennootschap/société à responsabilité limitée under the BCCA) (BV/SRL).


Abolishment of "capital" in the BV/SRL

NEW: The capital reduction and distribution rules are significantly impacted by the legislator's decision to abolish the concept of "capital" in the BV/SRL. References to the value of shares (nominal value, par value, issuance premiums) also disappear.

The abolition of share capital for the BV/SRL applies immediately as of the entry into force of the BCCA for new BVs/SRLs or as of 1 January 2020 for existing BVs/SRLs that did not choose to immediately opt-in to the new regime.

As soon as the new rule applied, the share capital and legal reserves of existing BVs/SRLs was automatically converted into statutory unavailable equity accounts. The part of the share capital that was not fully paid-up was automatically converted into a statutory unpaid contribution account. Should the BV/SRL wish to distribute (reimburse) the paid-up contributions or release the shareholders from their unpaid contribution, the statutory unavailable accounts should first be made available. This can be done by an amendment of the articles of association as approved at the shareholders' meeting. Afterwards the BV/SRL has to apply the double-test as set out below before any distribution can be made.

Instead of share capital, the BV/SRL's equity is comprised of (i) the contributions of shareholders, (ii) reserves and (iii) profit carried forward that serves as protection for creditors. In addition, the minimum share capital requirement is replaced by the obligation for the shareholders of a BV/SRL to ensure that the company has sufficient funds upon incorporation to carry out its envisaged activities.

Consequently, under the new regime:

  • Capital reductions in BVs/SRLs as we knew them previously have disappeared.
  • The BV/SRL is not only able to distribute profits or available reserves to its shareholders, but is also able to distribute contributions in cash or in kind (if on available accounts) previously made by its shareholders without a modification of the articles of association.

Dividends in BV/SRL and NV/SA

Types of dividends

As under the previous Companies Code, distributions could take place in the form of dividends or other transactions, such as the purchase of own shares and financial assistance. Under the new BCCA, if expressly permitted by the articles of association, the BV/SRL is also able to proceed with a distribution in case of the withdrawal or exclusion of a shareholder charged to equity to which specific rules will apply. This way one of the most important features of the cooperative company today has been integrated in the BV/SRL.

Going forward, three types of dividends are available for distribution:

  • Annual dividends;
  • Intermediary dividends; and
  • Interim dividends.

New rules for distribution of dividends

Under the BCCA, it continues to be the shareholders' meeting that decides on the allocation of profits and distribution of dividends. This could be  during the annual shareholders' meeting that decides on the approval of the annual accounts (annual dividend) or at any time during the financial year based the profit carried forward and the reserves as set out in the last approved annual accounts (intermediary dividend).

Previously, the articles of association of an NV/SA could furthermore delegate to the board of directors the power to distribute profits of the ongoing financial year (if applicable, decreased with the loss carried forward or increased with the profit carried forward) by way of an interim dividend. The possibility of interim dividends did not exist in an BV/SRL.

NEW: The BCCA introduces three important innovations:

  • For both the NV/SA and the BV/SRL, the new BCCA allows the shareholders' meeting to distribute a dividend based on the profit of the ongoing financial year;
  • The BCCA allows explicitly that the interim dividends can also be based on the profit of the previous financial year, as long as the annual accounts of that financial year are not yet approved and excluding, as the case may be, any withdrawal from the existing reserves and taking into account the reserves that have to be constituted by law or statutory provisions; and
  • The articles of association of a BV/SRL can - similar to the NV/SA - delegate to the board of directors the power to distribute profits by way of interim dividends of a BV/SRL.

No more time restrictions

NEW: Under the BCCA, the decision of the board of directors of an NV/SA to issue an interim dividend is no longer subject to the expiration of a six month waiting period as from the closing of the preceding financial year nor is there a three month waiting period between two decisions to declare an interim dividend.

Double-test for distributions

Previously, no distribution of dividends can be made if, on the closing date of the last financial year, the net assets, as shown in the annual accounts, had decreased or could decrease as a result of the distribution below the amount of the paid-up or, if higher, of the called-up capital increased with all reserves not distributable by law or the articles of association. "Net assets" means the total amount of the assets as shown in the balance sheet minus provisions, debts, any pending depreciation of costs of constitution and expansion and, save in exceptional cases to be mentioned and justified in the notes to the annual accounts, any pending depreciation of the R&D costs.

In addition, the annual shareholders' meeting deciding on the allocation of the profit was obliged to allocate at least 5% of the net profits to the legal reserve of the company. This obligation ended from the moment the legal reserve equaled 10% of the amount of the capital of the company.

Moreover, the distribution of an interim dividend in the NV/SA was subject to determination by the board of directors (reviewed by the auditor if the NV/SA has one) that the profit was sufficient to distribute an interim dividend.

NEW: As a counterbalance to the increased flexibility to distribute equity and following the abolition of share capital in a BV/SRL, the BCCA introduces a new safety-mechanism for any type of dividend distribution by the BV/SRL: the solvency (net-asset) test and the liquidity test, i.e. the double-test.

  • Solvency test
    • No distribution may occur when the net assets of the company are or would become negative.
    • Net assets = assets minus provisions, debts and, save in exceptional cases to be mentioned and justified in the notes to the annual accounts, (i) any pending depreciation of costs of constitution and expansion and (ii) R&D costs.
    • If the company has equity which is unavailable (due to law or the articles of association) no payment may occur if the net assets are or would become lower than the amount of the unavailable net equity amount.
    • The solvency test will be based on the last approved annual accounts or, if available, a more recent audited balance sheet.
  • Liquidity test
    • The decision of the shareholders' meeting (or the board of directors) to distribute profits only has effect after the board of directors has established that the company, based on reasonably expected developments, is able to continue to fulfil its payments obligations after the distribution.
    • This test needs to be assessed with regard to the company’s debts over a period of at least twelve months after the date of distribution. If the board of directors is aware of circumstances that could have an impact on the company's financial situation beyond the twelve month period, these should also be taken into account.
    • The analysis of the board of directors must be recorded in a special report (without any publication requirement) and reviewed by the auditor if the BV/SRL has appointed one.
    • Only when the results of the liquidity test are positive may the board of directors proceed with the payment of the distributed dividends.

NEW: Contrary to the BV/SRL, the BCCA does not extend the requirement for a liquidity test to distributions of dividends of a NV/SA.

NEW: The legal requirement for the BV/SRL to allocate 5% of the profit to the legal reserve has been abolished.


  • Non-compliance with the restrictions on the dividend distribution can result in joint and several liability of directors towards the BV/SRL and NV/SA and third parties for any damage they might have suffered as a result. The liability of directors has, however, been capped under the BCCA. Please see our article on directors' liabilities for more details.
  • Moreover, the BV/SRL and NV/SA or its creditors can claim the invalid distributions back from the shareholders, regardless of whether the latter acted in good or bad faith.
  • Under certain circumstances, non-compliance with restrictions on the dividend distribution can result in criminal penalties.

Key take-aways

  • Under the new company law framework, the BV/SRL is promoted as the most flexible company form for limited liability companies.
  • The abolishment of the notion of capital for the BV/SRL and the waiting periods for interim dividends increases flexibility for the distribution of dividends.
  • To safeguard the interests of creditors, new checks and balances are introduced, such as the double-test prior to the distribution of dividends in a BV/SRL and increased sanctions in case of non-compliance.


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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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