Modification of the articles of association by 31 December 2023

With the entry of the Code of Companies and Associations at the beginning of 2020, a number of rules have changed for many companies. For example, today a public limited company can only have one shareholder, there are more options for administration of enterprises and it is possible for shareholders to have fundamentally different (voting, profit sharing and other) rights. The new legislation often has an impact on the articles of association of companies, in particular companies that have been around for some time. Certain “old” clauses are no longer in line with the new mandatory legislation (i.e. legislation from which no derogation can be made).

Necessary amendment?

Most companies are aware that they have to amend their articles of association. The deadline for this, according to the Belgian legislator, is 31 December 2023.

“Young” companies sometimes ask the question whether they too are obliged to amend their articles of association or not.

For example, a BVBA (private company) founded in 2018, with a classic management board consisting of 3 directors and where there are no special restrictions on the transfer of shares. Apart from the company form “BVBA”, this particular company appears perfectly in line with the new legislation.

The question arises as to whether such companies should also amend their articles of association and what sanctions may arise in the absence of this. Are there sanctions if a BVBA (an abolished legal form) does not convert to a “BV” (the new company form, equal to a private company)? We list everything once again at the light of the approaching deadline.

Preservation of the company form

Companies that only need to update their company form have the least work. They do not have to follow a full conversion procedure. They can change their company form and name, by means of a simple amendment of the articles of association. This does not require a statement of assets or control report (as opposed to a real conversion – see below).

Nevertheless, an amendment to the articles of association often entails a cost. For each company incorporated by notarial deed, the articles of association must also be amended by notarial deed.

Example: Every old ‘BVBA’ was established by notarial deed at the time. These ‘BVBA’s’ will now also have to amend their articles of association by notarial deed.

New company form

For limited partnerships on shares, companies with a social purpose, agricultural companies, economic joint ventures and cooperatives with (un)limited liability there is a “middle ground”. Their legal form no longer exists under the new legislation. Nevertheless, the Belgian legislator has determined which new legal forms are most appropriate for them.

These companies can voluntarily “convert” themselves into the legal form determined by law (see above).

In that case, there is no need for a conversion procedure either and only a limited amendment to the articles of association is necessary. The name and legal form need to be adjusted. In these cases, too, the deadline of 31 December 2023 applies.

If you opt for a legal form other than that prescribed by law (see above), the rules and procedure for full conversion will apply. In that case, it is assumed that the company will structurally change its shape, structure and approach. Certain stricter formalities therefore apply, such as a statement of assets, control report, etc.

Lack of timely amendment or conversion: automatic conversion & directors’ liability

Companies that do not amend their articles of association or convert their legal form timely will be converted “by operation of law”. That means, they will be assumed to have switched to the legal form determined by the legislature.

A Comm.VA. (limited partnership with a share capital) is therefore deemed to be a NV (public company) with one director from 31 December 2023, a cooperative society with unlimited liability, a VOF (general partnership), etc.

In this case, the board members are jointly and severally liable for:

• Any damage,
• That is suffered by the company or third parties,
• Due to the lack of conversion and/or amendment of the articles of association.

In other words, directors are not just, by definition, liable. It must be demonstrated that the company or third parties have actually suffered damage.

Example: The “old” AoA contain rules about the functioning of and voting within the board. These “old” rules are not in line with current legislation. As a result, the board is not regularly composed today, neither does she decide lawfully. The validity of the decisions of such an administrative body may be called into question. Approved transactions may be found null and void. All this with the necessary consequences.

Example: the “old” articles of association contain restrictions on the transfer of shares, which are too strict under current legislation. However, they are taken into account, as a result of which a certain share transaction with a prospective buyer did not go through. It was thought that the transaction was legally not allowed due to the transfer restrictions. Both the buyer and the seller have wrongly taken these transfer restrictions into account and both have – also wrongly – missed the chance of a successful transaction.

This matter therefore seems especially important for “older” companies, whose articles of association go several years back in time. There is a real chance that their articles of association contain certain articles and/or rules that are no longer valid. Among other things, companies in general would do well to formally adjust their legal form (also from “BVBA” to “BV”). On this occasion, their adviser or notary can immediately review the other provisions of the articles of association and, where necessary, adjust them.

By Dries Van Duffel

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Dries Van Duffel

Lawyer

• Corporate law
• Asset Management