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The permanent representative of a director - legal entity

Green chair showing permanent representative

According to current legislation, when a legal entity has been appointed as a member of a governing body of a company with legal personality, it should appoint a permanent representative to carry out the mandate in the name of, and on behalf of, such legal entity. The permanent representative must meet the same conditions and shall be liable, from a civil and criminal law perspective, as if they would carry out the mandate in their own name and behalf, without prejudice to the joint and several liability of the legal entity they represent.

The aforementioned principles are maintained in the new Belgian Company Code (BCC). However, the BCC also foresees different amendments and clarifications concerning the permanent representation:

1. First of all, the BCC now provides that for any legal entity appointed as part of any corporate body, a permanent representative must be appointed.

2. Secondly, the BCC expressly provides that the permanent representative has to be a physical person. Therefore, the permanent representative can no longer be a legal entity that on its turn appoints a permanent representative. The current legislation stipulates that the legal entity has to appoint its permanent representative from among its shareholders, managers, directors, members of the management board or employees; whereas the BCC only determines that the permanent representative has to be a physical person. So there are no longer any additional qualitative conditions imposed.

3. Furthermore, the BCC also confirms that the conflict of interests procedure for the members of the governing body, also applies to the permanent representative having a personal financial conflict of interests, irrespective of whether the director-legal entity has a conflict of interests.

4. Moreover, a ban is introduced on the situation whereby a physical person participates in the governing body in both its own name and as the permanent representative of a director-legal entity, which is today market practice.

5. Regarding the permanent representative of the director-legal entity, the BCC stipulates that if there are no other directors appointed in the governed legal entity, a substitute permanent representative can be appointed, who shall act when the permanent representative is prevented from acting and to whom all aforementioned principles are applicable.

6. The BCC also clarifies that the physical person, whom is appointed as the permanent representative of a liquidator-legal entity, needs to be appointed on the same conditions as the permanent representative of a director-legal entity, except that the appointment of a permanent representative of a liquidator-legal entity has to be confirmed by the general meeting of the dissolved legal entity and is therefore not an exclusive power of the liquidator-legal entity, as is the case for a director-legal entity.

7. Finally, all rules regarding the permanent representative are also applicable to mandates assumed by a legal entity in an (international) non-profit association and foundation.

Given the different amendments, a lot of companies, (international) non-profit associations and foundations will have to verify the appointments of their directors and daily managers in order to meet the requirements of the new legislation.

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