Formerly known as SPRL (in French) or BVBA (in Dutch), the new “Société à responsabilité limitée / besloten vennootschap” (SRL/BV) is intended to become the main corporate form for doing business in Belgium, mainly because of the many flexibilities it will give to investors.

As a result, the SRL/BV form may be used for both small and big companies. It may even be used for listed companies. Below are the main new features and rules applicable to an SRL/BV.

One shareholder

An SRL/BV can now have just one (legal entity) shareholder throughout its operation. Sole shareholdership by a legal entity will no longer entail the joint liability of such shareholder–legal entity for the debts of the company in which it holds shares.

No more share capital

One of the flagship amendments of the reform is that an SRL/BV will no longer have share capital. Instead, it will have “equity”. This is the main feature of the flexible nature that now characterizes an SRL/BV.

The removal of share capital has various consequences:

  • The released portion of the share capital and the statutory reserve of an existing SPRL/BVBA will be automatically converted into unavailable equity after the entry into force of the new Companies Code. To unlock such equity, the shareholders of an SRL/BV will have to amend its bylaws and adapt them to the new Companies Code.
  • Upon incorporation, an SRL/BV must have an “initial patrimony” (instead of share capital) that is sufficient for its planned activities. Such “initial patrimony” may consist of assets, cash, loans, etc. The greater freedom of the founders of an SRL/BV to decide what amounts to “sufficient initial patrimony” is counterbalanced by the requirement to provide a detailed financial plan upon incorporation. The content of such financial plan is now restricted by the new Companies Code and requires a greater degree of sophistication than before.
  • Shares are no longer representative of the “equity” of an SRL/BV.
  • The test for distribution (of dividends, liquidation proceeds, etc.) and for the alarm bell procedure has been adapted (see below).

Contribution in services now authorized

A contribution in services (e.g. performance of services, works etc.) remunerated by shares is now authorized in a SRL / BV and assimilated to a contribution in kind. Both require that the contribution be valued by an auditor and management (as is currently the case for a contribution in kind). Shares may therefore be issued as remuneration for a contribution in services.

A contribution in services are released alongside performance. Nothing is provided if the service provider fails to provide the services to the SRL/BV (and thus fails to contribute). Therefore, the founders of an SRL/BV should have specific provisions in the bylaws for this situation and its impact on the shares (for instance, the suspension of voting or dividends rights attached to the shares).

Flexibility of rights attached to shares

The rule of “one share equals one vote” becomes supplementary.

The value of the contributions made by the founders of an SRL/BV no longer has to match the rights granted in consideration of such contributions. The sole requirement is that an SRL/BV must issue at least one share and at least one share must have a voting right attached to it.

Shareholders will have much more freedom to decide which rights, and how many, to attach to the shares of their SRL/BV. It will thus be possible to issue shares with multiple voting rights or preferred dividend rights attached to them.

As a result, the importance of a shareholder of an SRL/BV no longer depends on how much cash he/she brings to the table. For instance, a shareholder who contributes “only” an idea or concept could receive more shares or more rights attached to his/her shares. This will probably result in an increased margin for negotiations when someone is considering investing in the equity of an SRL/BV.

Since a greater asymmetry of rights is now allowed, those rights will have to be made more public, notably through recording them in the company’s share register.

In addition, whenever there is a capital increase (in cash or in kind), the board will have to draft a special report on the issuing price and the effect of the capital increase on the rights of existing shareholders. This report will have to be confirmed by the company’s auditor, if any.

Broad range of securities

An SRL/BV is now allowed to issue essentially the same types of security as the SA/NV. It means that shares, subscription rights, bonds (convertible or not), warrants and certificates may now be issued by an SRL/BV. However, issuing beneficiary shares is still not allowed, simply because a contribution in services may now be remunerated by shares, which was not the case under the old regime.

No longer characterized by its closed nature

An important change is that an SRL/BV is no longer “closed” in nature. Indeed, it is now allowed to provide for unrestricted transfer of its shares in its bylaws, which was not the case under the former regime. Imposing a restriction on transfers of shares does, however, remain possible. The shareholders of an SRL/BV therefore have plenty of scope as to whether they want a “closed” or “open” nature for their company. If the shareholders decide to restrict transfers of shares in the bylaws, such restrictions will have to be detailed in the company’s share register.

Acquisition of own shares

The rule that a maximum of 20% of the shares of an SRL/BV may be acquired by the company itself has been abolished. An SRL/BV can therefore now purchase its own shares without any limitation. Acquisition by an SRL/BV of its own shares must be approved by its shareholders with the special quorum and majority required for amending the bylaws (i.e. 75% voting rights, instead of 80% in the former regime).

The acquired shares may be destroyed or held by an SRL/BV but, in any case, all rights attached to such shares are suspended until the latter are sold or destroyed.

Transfer of non-released shares

If a non-released share of an SRL/BV is transferred, both the transferor and the transferee are liable to the SRL/BV and the third parties for the release of that share. If there are successive transfers of the non-released share, all transferees will be jointly liable with the transferor(s).

Distributions subject to a new two-tier test

Since there is no longer any capital, distribution (of dividends or liquidation proceeds, for instance) will be subject to a new two-tier test in an SRL/BV.

First, no distribution can occur if the net assets, as determined based on the latest approved annual accounts or a more recent balance of assets and liabilities, are negative or would become negative after the distribution (the net asset test).

Second, no distribution can occur if such distribution prevents the company from paying its debts on their due date during a 12-month period after distribution (the liquidity test). The board will have to justify the compliance with such liquidity test in a special report to be confirmed by the company’s auditor, if any.

Distribution of interim dividends now possible

Distribution of interim dividends is now possible. It means that, as long as the two-tier test for distribution is satisfied, and if the bylaws provide for such an option, the directors may decide to distribute the profit of the current financial year, or the profit of the previous financial year with annual accounts not yet approved, or the profit carried forward.

Moreover, distribution of dividends during the first six months of the financial year is now allowed, without compulsory waiting periods between two distributions.

Distribution of interim dividends by the management body must however be expressly allowed in the bylaws.

New test for the alarm bell procedure

The so-called alarm bell procedure (to be triggered in case of substantial losses) is now subject to the new test applied for distribution.

It means that, as soon as the net asset of an SRL/BV is – or carries the risk of being – negative (the net asset test) or it is uncertain whether the SRL/BV will be able to pay its debts when they fall due over a period of 12 months (the liquidity test), the directors will have to convene a shareholders’ meeting within two months to decide upon the dissolution of the SRL/BV or, otherwise, on measures to ensure the company’s continued operation.

Withdrawal right and exclusion now possible

It is now possible to provide in the bylaws of an SRL/BV for the shareholders to have the right to withdraw, or be excluded for good causes, from the company. In such case, the company itself must purchase the shares (whatever the percentage) of the withdrawing or excluded shareholder, subject to the company’s financial means to do so.

This change is important as it introduces a feature that was only possible for cooperatives in the old regime.

It is worth noting that such withdrawal cannot occur before the end of the third financial year after incorporation of the SRL/BV. In addition, and unless otherwise provided in the bylaws, a shareholder can only withdraw from all of its shares (which will then be annulled) and the withdrawal must occur during the first half of the financial year.

Governance rules largely unchanged

Governance of an SRL/BV does not dramatically change: it is still possible to have a sole director or several directors, acting as a board or not. The new Companies Code does however introduce some new features while clarifying certain rules (explore further under the Governance checklist).

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