Three years after the corporate law reform : What formalities must be completed before 1 January 2024?

By November 16, 2023 No Comments
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Three years after the corporate law reform : What formalities must be completed before 1 January 2024?

On May 1st, 2019, the corporate law reform came into force. As a result of this reform, the rules governing the life of companies have been thoroughly revised. The main objective was to make company law more flexible, modern and simple, which resulted in the disappearance of certain types of companies (1). As a result of the disappearance of certain categories, existing companies must, if necessary, change their legal form before January 1st, 2024 (2).  This newsletter aims at providing some practical information you might need in this respect (3).
 
 
 

1. The disappearance of the various company forms

 
 
 
Among the company forms that have been the subject of this Big Bang, we can mention the following:
 
  • All private limited liability companies (sociétés privées à responsabilité limitée – SPRL), must be transformed into limited liability companies (sociétés à responsabilité limitée SRL). Therefore, the limited liablity company becomes the  “basic company form”. Moreover, the concepts of capital and minimum capital requirement have disappeared. Finally, from now on, limited liability companies can also be formed by a single shareholder.
 
  • Cooperative societies which no longer fulfil the cooperative purpose must also change their form. The reform requires that the “cooperative” character of these companies must be effectively ensured.
 
  • Partnerships limited by shares (société en commandite par action – SCA), temporary companies as well as cooperative companies with unlimited liability (société cooperative à responsabilité illimitée – SCRI) have also disappeared. Companies that existed in this form and continue to exist must be converted.
 
In summary, only four forms of company remain: the public limited company (société anonyme – SA), the limited liability company (société à responsabiltié limitée – SRL), the cooperative company and the simple partnership.
 
 
 

2. Formalities to be performed by January 2024

 
 
 
2.1. Amendment of the articles of association so as to change the legal form of the company
 
 
 
The transformation must be made by amending the articles of association. This amendment must be performed either at the same time as the first amendment to the articles of association before the entry into force of the reform (provided that this amendment takes place before January 1st, 2024), or by an amendment to the articles of association specifically organised for this purpose.
 
Please note that if you intend to amend your articles of association in the near future, you have no choice but to convert your company at the same time of the amendment. You cannot amend your articles of association and postpone the conversion of your company. For example, if on October 15th, 2023 you wish to change the object of your limited partnership with shares, you must amend your articles of association in order to do so. When amending your articles of association to change the object of your company, you must also change the form of your company, even if the deadline of January 1st, 2024 has not yet been reached.
 
If such an amendment to the articles of association is not made before December 31st, 2023, the company will automatically acquire the legal form that most closely resembles the old form. For example :
 
  • All partnerships limited by shares  will become public limited companies  with a sole director. Attention should be paid to the fact that, as a result of this conversion, the unlimited liability of the former managing partner will be limited. However, the managing partner will remain liable for the debts existing before the conversion.
 
  • Cooperative limited liability companies  will become cooperative companies  if the cooperative character is present or limited liability companies  if there is no evident cooperative character.
 
  • Private limited liability companies  such as one-person SPRLs (SPRL unipersonnelles – SPRLU) and Starter SPRLs (SPRL-S) will be transformed into limited liability companies .
 
  • Cooperative companies with unlimited liability  will in principle opt for either a cooperative company , a limited liability company  or a general partnership (société en nom collectif – SNC).
 
  • Temporary partnerships can be converted into simple partnerships (société simple – SS), which can also be composed of passive partners. Be aware that if your temporary company was formed without written articles of association, you must still state in all your communications that your company has been converted into a simple partnership. In addition, you will have to register your simple company with the Crossroads Bank for Enterprises (Banque Carrefour des Entreprises – BCE).
 
If not known, this conversion mechanism can have important legal consequences as it changes the legal form of the company (and therefore the rules applicable under the Companies and Associations Code).
 
It should be noted that even if the conversion is made automatically on January 1st,  2024, the directors of the company concerned will still have to make the actual amendment to the articles of association and convene a general meeting within six months (i.e. by June 30th, 2024 at the latest).
 
If these rules are not complied with, the directors will be personally and jointly and severally liable for any damage suffered by the company or by third parties as a result of this negligence.
 
 
 
2.2 Amendment of the articles of association to comply with the Companies and Associations Code (Code des sociétés et des associations – CSA)
 
 
 
 
Companies whose legal form does not need to be changed must still amend their articles of association to comply with the new CSA.
 
Indeed, since May 1st, 2019, there is an opt-in possibility: each company is free to amend its articles of association to adapt them to the new CSA rules. Nevertheless, all the binding provisions of the Code came into force as of January 1st, 2020, even if they are not reflected in the articles of association.
 
 

3. Practical information

 
 
 
3.1 How do you replace the Articles of Association of your current company with those of the new legal form?
 
 
 
As with any change to the Articles of Association, you will need to convene a General Meeting. The members present at the general meeting will have to formally decide on the conversion of the company and the adaptation of the Articles of Association accordingly.
 
Then, once the decision of the general meeting has been taken, the transformation must be published in the Belgian Official Gazette. This publication is not mandatory for all companies. We can mention for example :
 
  • Temporary companies which are converted into simple companies do not have to publish their modification in the Belgian Official Gazette;
 
Although such publication is not mandatory, it is nevertheless advisable to inform your customers, business partners and main suppliers that your company has changed its legal form.
 
 
 
3.2. Do you have to call in a notary? 
 
 
 
It is not always necessary to involve a notary to adapt a company’s articles of association to the new Code. Indeed, its involvement depends on both the old and the new legal form of your company. For example:
 
  • Temporary companies that are converted into simple companies will not need to call in a notary;
 
  • The same goes for cooperative limited liability companies  that convert into general partnerships  .  On the contrary, SCRIs that convert into cooperative companies  or limited liability companies  will have to involve a notary;
 
  • Partnerships limited by shares  which are converted will necessarily have to call in a notary, regardless of the legal form they have chosen.
 
In principle, if the company has been incorporated by deed, the Articles of Association must be amended before a notary.
 
 
 
 
 
 

4. Our advice: don’t rush into anything

 
 
You still have a few months left to change the legal form of your company. Therefore, there is no point in rushing. However, given that the amendment of the articles of association requires a decision by the general meeting and that publication in the Belgian Official Gazette is necessary, you should still foresee for a certain amount of time before your company is actually transformed.
 
Do not hesitate to think about the different legal structures available to you with your partners and shareholders. Don’t forget that it is often mandatory to involve a notary and that even if you have not modified your articles of association, the mandatory provisions of the CSA are applicable to your company.
 
Philippe & Partners will be pleased to assist you and to determine with you which legal form best suits your company’s features.