CODE OF COMPANIES AND ASSOCIATIONS ENTERING INTO FORCE ON 1st MAY 2019 – WHAT ARE THE CHANGES? WHAT NPOs NEED TO DO TO COMPLY WITH THE NEW LEGISLATION?

The new Code of Companies and Associations (“Code des Sociétés et des Associations”  - “Wetboek van Vennootschappen en Verenigingen” hereafter ”CCA”) has been adopted by the Belgian parliament and will enter into force on 1st May, 2019.
This new set of rules applies to the non-profit organizations subject to the law of 27 July 1921 (non- profit organizations, International non-profit organizations and foundations).
The new rules will apply to the existing non-profit entities as from 1st January, 2020. The existing non-profit entities may opt to make the adjustments prior to such date.  
The existing non-profit entities have to adjust their articles of association at the first General assembly deciding on an amendment of the articles after the 1st January, 2020 and at the latest by the 1st January, 2024. 

 

I. MAIN CHANGES APPLYING TO ALL NON PROFIT ENTITIES

 

1. DEFINITION - SCOPE AND ACTIVITIES


The prohibition to carry out commercial or industrial activities is removed. The NPO can perform commercial or industrial activities insofar the statutory purpose remains disinterested and there is no direct nor indirect distribution of any patrimonial advantage to the founders, the members, the directors or any third party (except when such distribution falls within the purposes of the non-lucrative statutory purpose).     
The indirect distribution of any patrimonial advantage is defined as any operation that results in a reduction of the assets or an increase of the debts without any counterpart or when the counterpart is not proportional to the services provided.
However, the members may still benefit from some services offered by the NPO.  
Any operation that violates this provision will be declared null. 

TO DO: as the Law of 21 June 1921 expressly prohibits to carry on commercial or industrial activities, it is advisable to amend the articles by cancelling any reference to this law.  If the reference to the law is provided in the statutory purpose, the amendment will require a notarial deed and be subject to approval by the Ministry of Justice. 

DEADLINE: at the first GA deciding on an amendment of the articles after 1st January, 2020 and at the latest by 1st January, 2014. 


 
2.  DECLARATION OF THE ULTIMATE BENEFICIAL OWNER (“UBO”)

The CCA recalls the obligations provided in the Law of 18 September 2017 (implementing the Directive 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing).  
Non-profit entities are required to: 

  • collect and keep accurate, adequate and current information on the Ultimate Beneficial Owner of the entity;
  • notify this information to the UBO register held with the Ministry of  Finance (online application).   


Concretely for NPOs, it means that the board should collect and notify the following information to the said administration:

  • the name, date of birth, nationality of the board members, daily managers, the individuals (or the category of individuals to the benefit of which the NPO was created) or the individual who controls the entity. 

    TO DO: the board is to collect, keep and notify the data to the Ministry of Finances.

DEADLINE: at the latest on 30 September, 2019.

 

3. COMMITMENTS ON BEHALF OF AN NPO UNDER INCORPORATION 

The persons who have taken commitments on behalf of an NPO when the NPO was not yet incorporated shall be personally and jointly liable for those commitments unless:

  • the legal personality is acquired with the next two years after the commitment has been taken; and
  • the NPO has ratified those commitments within the next three months after the acquisition of the legal personality.

TO DO: to ensure that the commitments were ratified by the NPO in due time.

DEADLINE: 3 months after the acquisition of the legal personality (date of filing of the articles with the Court for NPOs and private foundations, date of the Royal decree of approval for INPOs and foundations of public utility).  

 

4. MANAGEMENT

Important changes relate to the management of the non-profit entities.
The CCA provides that the remuneration and the conditions of the termination of the mandate of the board members fall under the exclusive competence of the GA. The CAA imposes a special duty on the Board of directors. If serious and concurrent occurrences are likely to jeopardize the continuity of the NPO, the board must convene and deliberate on the measures that have to be taken to ensure the continuity of the NPO for the next 12 months.
The liability of the board members could be called upon in case of non-compliance.
The financial liability of the board members is capped (caps are based on the yearly average turnover during the last three financial years and the annual average balance sheet over the same period).

It applies:

  • or management errors, errors in the performance of the mandate, other cases of liability …;
  • in case of liability towards the NPO or third parties;
  • for contractual or extra-contractual liability;

It shall not apply:

  • in case of fraud or willful misconduct;
  • in case of joint liability for tax and VAT debts..

Liability cannot be exonerated and is not likely to be guaranteed by a third party upfront.  
The thresholds cannot be lower.
Any derogation shall be deemed null and void.

TO DO: t to check if the manager’s liability risk is sufficiently covered by an insurance policy. To amend the article relating to the powers of the GA if not compliant with the powers granted in relation to the end of mandate of the board members and the financial conditions of the mandate.  
DEADLINE: As from 1st January, 2020.

 

5. INTERNAL RULES

Internal rules cannot contain provisions that:

  • are contrary to mandatory legal provisions or to the articles of association;
  • relate to matters for which a provision in the articles is required;
  • relate to the rights of the members, to the powers of the organs or to the organization and functioning of the GA.

TO DO: to review the internal rules.

DEADLINE: at the latest by 1st January, 2024. In case the articles need to be adjusted accordingly, at the first GA deciding on an amendment of the articles after 1st January, 2020.

 

6.  RESTRUCTURING AND TRANSFORMATION PROCEDURES

Contrary to the former set of rules, the CCA contains detailed rules relating to the  restructuring procedures that apply to non-profit entities (mergers and split-ups).
The CCA also allows non-profit entities to be changed into other forms of legal bodies (NPO into an INPO and vice-versa, transformation of an NPO into a “société cooperative”, transformation of a private foundation into a foundation of public utility).  A company may also be transformed into a NPO or an INPO. 

 

II. CHANGES RELATING TO EACH FORM OF NON PROFIT ENTITY

1) ASBL – VZW (“Association sans but lucratif” - “Vereniging zonder winstoogmerk”) 


1. Number of member

There always must be at least 2 members (instead of 3 under the Law of 1921). 

2. Vacancy of positions in the board

Unless prohibited by the articles of association, vacancies can be filled in by the Board of Directors. The appointment should be confirmed at the next AG.
A failure of confirmation results in the end of the mandate unless it would affect the regularity of the Board.

3. Conflict of interests

The CCA organizes a procedure in case a board member has an interest conflicting with the interests of the NPO. Failure to comply with such procedure could lead to the annulment of the decision of the board.  

4. Definition of the daily management

Daily management is defined and covers acts and decisions that fall within the scope of the daily life of the entity and/or which, due to their minor importance or their urgent nature do not require a decision of the board.

5. General assembly

A member may represent another member to the General assembly. The articles may allow a representation by a non-member.   

 

2) AISBL – IVZW (“Association internationale sans but lucratif” – “Internationale vereniging zonder winstoogmerk”)

1. Powers granted to the General assembly

The General assembly shall decide about the end of the mandates and the financial conditions of the mandate of the Board members.

 

3) FOUNDATIONS

1. Board of directors

There is no limitation concerning the number of the Board members.

2. Conflict of interests

The CCA organizes a procedure in case a board member has an interest conflicting with the interest of the NPO. Failure to comply with such procedure could lead to the annulment of the decision of the board.  

3. Definition of the daily management

Daily management is defined and covers the acts and decisions that fall within the scope of the daily life of the entity and/or which, due to their minor importance or their urgent nature do not require a decision of the board. 

TO DO: check the articles and the internal rules in order to assess the necessity to make adjustments
DEADLINE: at the latest by 1st January, 2024. In case the articles have to be adjusted, at the first GA deciding on an amendment of the articles after 1st January, 2020.

 

 

Dominique BOGAERT
Partner