To Opt-In or not To Opt-in? That is the question
On 1 January 2020 the new Belgian Company Code (BCC) will apply to all existing companies.
A company can however decide to apply the BCC as early as 1 May 2019 by modifying its articles of association and making use of the “opt-in” mechanism.
What does this mean? Below are a number of reasons why a company might consider to opt-in:
+ More dividend distributions are possible (a private limited liability company will also be able to distribute interim dividends)
+ The possibility of having only one shareholder for a private and public limited liability company
+ More discretion to allocate profits and introduce multiple voting rights
+ Broader field of application for the contribution of labor
+ The so-called leonine clause becomes more limited in scope (i.e. a shareholder can be exempted from any losses and is excluded from certain enterprise risks)
+ A public limited liability company can be managed by one director
+ A public limited liability company can be managed by a dual board (i.e. a supervisory board and an executive board)
+ Withdrawal by/exclusion of shareholders at the expense of the company’s assets becomes possible
+ Enforceability between the parties on price determination clauses of shares in the event of disputes
+ Broader application of written resolutions
+ Less restrictions on share buybacks
+ Rules on the dismissal of directors ad nutum become less strict
+ Shares of a private limited liability company can be freely transferred
+ Simplification on the rules to call the general meeting.
Choosing for an opt-in brings along some consequences, such as:
- The application of tighter rules on the appointment of directors
- The introduction of a liquidity test in the event of distributions in a private limited liability company
- The permanent representative of a director must always be a physical person
- The occurrence of joint director’s liability in the event of negligence
- A hold harmless clause in the event of director’s liability will no longer be possible
- Stricter abstention rules in the event of a conflict of interest apply.
K law will gladly assist you in this process. Please also visit our website: https://www.klaw.be/rethink-belgian-companies