If you run an organisation in Belgium – and industry association, an NGO, or a company – you have a bit of admin overhead coming your way: you will have to change the legal form of your organisation to comply with a new Belgian company law that has just been adopted.
Fortunately, you have some time: you’ll need to have done this by 1 January 2024.
On the other hand, if you are thinking of setting up a new organisation, you might want to wait until 1 May of this year – just a few weeks away – because that is the date from which all new organisations will be set up according to the new law. Waiting and doing it the new way will save you having to re-do it later!
The reform has been in the pipeline for a number of years now, but it didn’t really get legs until last year. And even until mid-February, nobody knew when it would be finally adopted by the Belgian Parliament. Well, that has now happened – and the final dates for compliance are known: 1 May this year for new organisations, and 1 January 20204 as the deadline for existing organisations to re-do their statutes in compliance with the new law.
Why the Reform is Happening
There are three main principles driving the change in law:
- To simplify company law in Belgium
- To provide more clarity and flexibility to companies and associations
- To modernise company law and keep pace with overall European trends
There’s no doubt about it: thousands and thousands of European and international associations have settled on Belgium as their home, despite the relatively complex and intricate legal requirements of the country.
With the reforms, Belgium should increases its attractiveness as a place for doing business and maintain its position as a main location for industry associations and NGOs.
The Key Changes in Company Law
Saying Goodbye to the “Real Seat” Theory
There are two possible approaches to determine which jurisdiction a company falls under: the “real seat theory” and the “incorporation theory”. In the “real seat theory”, the jurisdiction of the company is the country the business is actually operating in – that’s where the work is being done, where the staff are, etc. On the other hand, the “incorporation theory” sees the jurisdiction as the country the company is registered in.
At the moment, Belgium law defines the nationality of a company or association based on where the “real seat” is located.
If the court finds the “real seat” of a foreign association is in Belgium, it must abide by Belgian company law. [
Let’s take a French patisserie owner as an example. After years of lovingly learning their craft in the rustic villages of Southern France, let’s say the pastry chef decides to set up a shop in the cobbled back streets of Belgium. They register the business in France but, if any legal disputes were filed against the patisserie, they would be tried under Belgian company law as this is where their physical business is located.
The BCCA will change this, instead bringing in the “incorporation theory”.
This essentially means that the law applied to a company or association will be based on where the business was incorporated, regardless of whether the physical business or place of management is located in Belgium.
Not only will this increase flexibility for international company owners, but it will also:
- Give Belgian companies and associations the chance to transfer abroad without having to change nationality and the laws they abide by
- Provide Belgian companies and associations with more certainty regarding the applicable law
A Simplified Set of Legal Structures
Whereas Belgian company law has been pretty complex in the past, things are set to become simpler and give company founders fewer different legal forms that they have to choose from when setting up their companies – reducing the number from seventeen to four.
ASBLs will soon be able to transform into AISBLs (international associations) and vice versa, giving directors more power over where their associations are based and what company laws apply to their business.
We mentioned earlier that now is the time to cast an eye over your statute and governing processes, but the reform also means that your statute will also become much clearer.
While the law will require most businesses to update their statues, you might also need to review the roles and responsibilities of board directors and implement any necessary changes.
You’ll need to run a fine tooth comb through your statute, as well, to pick up on any outdated laws and legislations that need to be changed or replaced.
More Funding Opportunities
In the name of giving company and association owners more flexibility, the reform will allow them to carry out any type of activity with no limits – and this includes profit-making or fundraising pursuits.
However, the profits gained from these activities must be reinvested into the social objective of the association in order to keep the clear distinction between associations and profitable enterprises.
Your statute will need to be changed to reflect any increase in association activities. If you fail to update your statutory purpose in regards to funding opportunities, your association will be limited to carrying out ancillary economic activities.
Clearer Rights and a “Court for All”
While we’re on the topic of updating your statute, you’ll also need to add in the specific rights and obligations of members. On top of this, the new law requires that members are heard, and gives them the right to defend themselves in the case of resignation or exclusion from the association.
We’re also looking at an impending end to the current divide between civil and commercial company law. This will essentially mean we’ll have a single court – called the Company Court – which will give association and company owners access to specialist judges who are familiar with all the new laws around associations.
Liability for Directors
When the reform comes into play, board members will be responsible for any gross mismanagement mistakes made while carrying out tasks and activities to fullfil their mission. Board members will also be liable towards the association for any other damage or misdemeanours that violate the code or the association’s statutes.
This means that now is the perfect time to invest in a director’s liability insurance, particularly if you’re running a medium to large-sized association.
The changes listed here are just the tip of the iceberg in the new reform. Contact us if you are interested in a complete point-by-point explanation of the changes.