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Repair of the Companies and Associations Code by the Law of 28 April 2020: 10 changes


The Law implementing Directive (UE) 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/CE as regards the encouragement of long-term shareholder engagement (SRD II) and making various provisions relating to companies and associations has been adopted on 28 April 2020, and published on 6 May 2020.

The first part of the Law implements SRD II and introduces new obligations for listed companies, in particular with respect to remuneration of directors and managers and to decisions and transactions with related parties. The second part repairs the Companies and Associations Code (CAC). Beyond the correction of clerical mistakes, it resolves controversial issues.

This newsletter is dedicated to the second part of the Law. We have selected 10 changes relating to NV/SA, BV/SRL and/or CV/SC (for the other topics, introduced by the first part of the Law and specific to listed companies, please refer to our other newsletters). 


Changes specific to NV/SA:

1.  Introduction of loyalty shares: It is well known that the introduction of loyalty shares by listed companies requires a decision by the shareholders’ general meeting at a two-third majority. Now the Law specifies that this majority applies even if the Articles of Association provide for other conditions of majority unless they expressly refer to the introduction of loyalty shares (CAC, art. 7:53).

2.  Abolishment of loyalty shares: The CAC was mute on the majority to abolish loyalty shares. The Law requires the same two-third majority (CAC, art. 7:53).

3.  Sole director (legal entity) and conflict of interests: In the event that a company is managed by a sole director (legal entity) of which all the directors are conflicted, it is clear that they have to submit the decision to approval by the shareholders’ general meeting, but of which company ? The Law settles the issue in favor of the shareholders’ general meeting of the company which is managed (CAC, art. 7:102, § 1, par. 2).

4.  Voting agreements: The Law repeals the rule according to which voting agreements that are not of a limited duration are void (CAC, art. 7:56). Such agreements can be terminated with reasonable notice.


Changes specific to BV/SRL and/or CV/SC:

5. Non-voting shares (BV/SRL): Currently, non-voting shares entitle to one vote per share at least in the cases provided for by the law (modification of the respective rights attached to the shares, conversion, cross-border merger resulting in the dissolution of the company, and cross-border conversion). That seems to imply that the Articles of Association may provide for other cases when non-voting shares enjoy voting rights. It will no longer be possible as the Law provides that non-voting shares entitle to one vote in the cases provided for by the law only (CAC, art. 5:47, § 1er). 

6.Transfer of shares (BV/SRL): While, among the transfers of shares not submitted to the prior approval by the other shareholders in the absence of specific provisions in the Articles of Association, the CAC includes transfers of shares to the spouse of the transferor, it does not include transfers to the legal partner (“wettelijk samenwonende partner/cohabitant légal”). The Law corrects this omission (CAC, art. 5:63).

7.Statutory restrictions on transfers of shares (BV/SRL and CV/SC): Statutory restrictions on transfers of shares have to be mentioned in the shares register (CAC, art. 5:25, par. 1, 5° and 6:25, par. 1, 5°) but what if the shares register does not mention such restrictions? The Law specifies that transfers contrary to statutory restrictions are not enforceable towards third parties, even when the restrictions are not mentioned in the shares register (CAC, art. 5:67 and 6:56).

8.Representation of the company (BV/SRL and CV/SC): The Articles of Association of BV/SRL and CV/SC can either provide for a double signature clause (like in the NV/SA) or specifically designate the directors empowered to represent the company. This second option will no longer be possible (CAC, art. 5:73, § 2 and 6:61, § 2).

9.Test of liquidity and conflict of interests (BV/SRL): The issue has arisen as to whether, when it applies the liquidity test to the decision of the shareholders’ general meeting to distribute dividends, the administrative body has to apply the procedure of conflicts of interests (when some directors are also shareholders and thus likely to benefit from that distribution). The Law expressly sets aside these rules in that case (CAC, art. 5:143).

10.Conversion of the capital of CVBA/SCRL: The drafting of the CAC left doubts as to whether the capital of all CVBA/SCRL was converted in unavailable reserves on 1 January 2020. The Law settles this issue: the capital of CVBA/SCRL that meet the definition of the new CV/SC only was converted (art. 234 of the Law), which implies that false CVBA/SCRL retain their capital until their conversion into a company without capital.

Entry into force – Subject to item 10, these new rules will be applicable as from the tenth day after the publication of the Law in the Belgian State Gazette, i.e. as from 16 May 2020.