Restructurings under the new Belgian Code on Companies and Associations
Published on 7th Dec 2018
The new Belgian Code of Companies and Associations (the "BCCA") aligns the Belgian restructuring procedures with European practice. It goes even one step further by increasing the flexibility in various procedures in comparison to other jurisdictions.
So, what are the main changes?
Abandonment of the real seat theory
The BCCA abandons the real seat theory and introduces the incorporation theory: The law applicable to an enterprise is now based on the jurisdiction in which the enterprise was incorporated, regardless of whether the effective place of management is located in Belgium or not.
The introduction of the incorporation theory is a tool for exporting Belgian company law abroad and brings with it a major increase in flexibility. This is translated in the following elements, amongst others:
- Belgian enterprises have the possibility of being transferred abroad and foreign enterprises can be transferred to Belgium without a change of nationality; and
- Belgian enterprises will benefit from more certainty regarding the applicable law in major corporate restructurings (the risk that a judge redefines the applicable law disappears).
International transfer of seat: cross-border emigration and immigration
Although international transfers had become a common practice in Belgium, the Companies Code contained no formal rules to ensure legal certainty.
The BCCA now has express provisions on international transfers. These rules aim to ensure the continuity of the legal personality and the protection of creditors and shareholders of the concerned enterprise during a cross-border emigration or immigration.
Emigration and immigration procedures are only possible if the relevant enterprise is not involved in an insolvency procedure.
Emigration (an enterprise leaving Belgium)
When a Belgian enterprise leaves for a foreign country, its legal form needs to be adapted to the foreign law requirements. The emigration procedure can be summarised as follows:
- a report summarising the reasons and the legal and economic consequences of the transfer of seat is drawn up by the board of managers of the emigrating enterprise;
- a report is drawn up by the auditor on the financial statements of the emigrating enterprise;
- an extraordinary shareholders' meeting of the emigrating enterprise is held in front of a Belgian notary public to pass a resolution on the transfer of seat;
- the emigrating enterprise can only be removed from the Crossroads Bank of Enterprises once proof of its registration with the foreign register has been provided.
Immigration (an enterprise arriving in Belgium)
When a foreign enterprise arrives in Belgium, its legal form needs to be adapted to Belgian law requirements. The immigration procedure can be summarised as follows:
- the transferred enterprise will have to prove to the Belgian notary public that the foreign law requirements for the transfer have been fulfilled (for example, by a notarial deed) and provide recent financial statements;
- based on these documents, the Belgian notary public will amend the articles of association of the enterprise as necessary to adapt it to the Belgian law requirements;
- the transfer will only enter into force once the immigrating enterprise has been registered with the Crossroads Bank for Enterprises.
The BCCA introduces clear rules on partial splits. These rules are aligned with the common practice that has been developped over the years in Belgium.
Amongst other things, the BCCA regulates the application by a Belgian entity of the split procedure with a foreign enterprise. In order to ensure the continuity of the legal personality, such cross-border splits will have to be regulated in both jurisdictions and the respective laws will apply in a distributive way.
Only limited and mostly formal amendments are introduced by the BCCA in relation to the Belgian merger procedure. The existing regime is maintained.
The BCCA also introduces clear rules on mergers/split for not for profits (see more on contribution on non-profits).
Once more, the BCCA increases the flexibility and number of different possibilities in the dissolution and liquidation procedures. At the same time, it completely rearranges the structure of the companies' code regarding liquidations by, for example:
- profoundly amending the liquidation procedure;
- limiting the role of the Court of Enterprises and its President to the situation where a "control" of the dissolved/liquidated enterprise is needed;
- increasing the role of the shareholders themselves in the dissolution/liquidation process;
- decreasing the majority requirements;
- extending the situations where a dissolution/liquidation in one deed/day is possible; and
- introducing a precise regime for assets and debts forgotten during the liquidation procedure.
As in the past, the following dissolution procedures exist:
- voluntary dissolution: at any time, upon the decision of the shareholders;
- automatic dissolution (dissolution de plein droit/ ontbinding van het recht): through expiration of time or through the fulfilment of an express resolutory condition; and
- judicial dissolution: through a decision of the President of the Court of Enterprises.
Whereas the BCCA does not change much in the two first dissolution procedures, more changes have been introduced in the judicial dissolution procedure. These changes include the following:
- the introduction of a definition of "proper grounds" (justes motifs) enabling the president of the Court of Enterprises to declare the judicial dissolution. These proper grounds are
- the failure of the shareholders to fulfil their obligations;
- the inability of a shareholder to fulfil his obligations; and
- any other situation where the normal pursuit of the social affairs of the enterprise is compromised (such as for example serious and continuous disagreement between the shareholders).
- Introduction of a one-month term as from the publication of the judicial decision of dissolution in the Belgian State Gazette for any opposition or appeal.
The liquidation procedure of a Belgian enterprise can be conducted with zero, one or several liquidator(s).
The turbo liquidation procedure, enabling the dissolution and the liquidation of the enterprise in one single deed/day, is extended to loss-making enterprises provided that the unpaid creditors agree to it.
The turbo liquidation is possible under the following conditions:
- no liquidator is appointed;
- an auditor's report with regards to the reimbursement of any debts or consignment of the sums necessary for settling all debts of the enterprise is drawn up (except for the creditors - shareholders or not - who expressly agreed not to be included in the reimbursement or consignment); and
- the general assembly votes in favour of the dissolution and liquidation (unanimity of the votes representing at least half of capital for an SA and at least half of the issued shares for an SRL).
The normal liquidation remains applicable with the following amendments:
- unless if the shareholders are the sole creditors and agree otherwise, if the summary of the assets and liabilities of the enterprise shows that not all creditors will be entirely reimbursed, the choice of liquidator needs to be submitted to the President of the Court of Enterprises for his approval;
- in the other cases, the general meeting of the shareholders appoint the liquidator(s) by simple majority;
- after the closure of the liquidation, the shareholders become undivided owners of the remaining assets, even if these are not identified at that moment;
- any debtor whose debt has not been settled in its integrity may ask for the re-opening of the liquidation procedure;
- a specific liability regime for the liquidators is now described in detail in the BCCA;
- the liability of the shareholder(s) towards the unsettled debts is limited to the amount they received in the framework of the liquidation.
By introducing the above described changes, Belgium chose to play a leading role in the international market and has opted for market-oriented corporate rules.
If you have any questions or would like additional information on restructuring in Belgium, do not hesitate to contact one of the lawyers listed below.