New company law also applicable to existing companies

On 1 May 2019 the new company law entered into force.

The law was immediately applicable to companies founded after this date.

For companies existing before the aforementioned date, the measures became applicable as of 1 January 2020. Such companies will have to adjust their statutes to the new law before 1 January 2024 (by Notary deed).

Some provisions of the law are anyhow mandatory, having an immediate effect on your company. Panis highlights them below.

1. Corporate forms

The number of company forms is reduced.The BV (Besloten Vennootschap/Private limited company) is the standard form for companies, replacing the BVBA (Besloten Vennootschap met Beperkte Aansprakelijkheid/Private limited liability company).

As a result of this change, it is better to use the abbreviation “BV” instead of “BVBA” on all type of company documents from 2020 onwards.
There are no penalties if the company does not comply with the new rule immediately.

2.  No minimum capital for BV

Incorporating a BV no longer requires a minimum amount of capital. However, the founders must provide sufficient equity for financing the envisaged activities. All of this must be document by an extensive financial plan.

For existing companies the general accounts of “capital” and “legal reserve” will be converted automatically into “unavailable equity”.

3. Net asset test and liquidity test for dividend distribution

In case a company wants to distribute a dividend, it has to ensure that this operation does not result into a negative or low net asset value (total assets less liabilities).

Moreover a dividend distribution may not lead to a situation where a company lacks funds to pay its short term liabilities during the first coming 12 months.

4. Director’s liability

The company law specifies that each director should act within the reasonable margin of what a normally prudent and cautious director would do in the same circumstances.

Depending on the size of the company, a director can be held personally responsible for an amount between 125.000 EUR and 12.000.000 EUR in case of occasional light faults.

In case of recurrent light faults, gross faults and fraud the personal responsibility of the director is unlimited.

The director is also personally responsible for unpaid social contributions, VAT and salary taxes.

5. Directors have a status as independent

The new company law stipulates that a director acts as an independent in her/his capacity of director and not as an employee; a director cannot be registered anymore on the payroll for employees.

6. Conflict of interest

A conflict of interest arises when a director needs to make a decision which affects her/his as a private person as well as the company’s financial situation, like for example loan agreements and rental contracts between the director and the company.

A director with a conflict may not participate in the deliberation and voting. If she/he is the only director, or if all the directors have a conflict of interest, then the decision must be taken by the general meeting of shareholders.

If the director and the shareholder are the same person, the director can still take the decision her-/himself.

7. Composition board of directors

As from 2020 onwards, a director cannot longer act in the board of directors as an individual director and, at the same time, as a permanent representative of a legal person (only applicable if a company-legal person is represented by another legal person).