Pursuant to the new Code of Companies and Associations approved by the Belgian Parliament on 28 February 2019, which entered into force on 1 May 2019, the principal forms of corporate/business organisations with limited liability in Belgium are the private limited liability company (BV/SRL) and the public limited liability company (NV/SA). The BV/SRL has recently been considerably modified and rendered more flexible, and is characterised by the absence of capital while still benefiting from limited liability. Both the limited liability company (BV/SRL) and the public limited liability company (NV/SA) may be incorporated by one single shareholder and may issue shares with multiple voting rights (with the exception of listed companies, which may only provide in their articles of association for loyalty shares granting double voting rights after a minimum holding period of two years).
Consequently, the BV/SRL should become the standard form of company while the SA/NV is likely to remain the corporate organisation of choice for larger and listed companies.
The corporate governance requirements for companies in Belgium can mainly be found in the Code of Companies and Associations as well as, for listed companies, in the Belgian Code on Corporate Governance. The Code on Corporate Governance is currently being revised and a new code is expected to be published shortly, entering into force on 1 January 2020. In addition, a specific corporate governance code has been published for non-listed companies (Code Buysse III), which is applicable on a voluntary basis.
Listed companies (ie, companies whose shares are listed on a regulated market) are obliged to refer to the Belgian Code on Corporate Governance in their corporate governance statement (which is a specific section of their annual report) and, where they choose not to apply certain provisions of the code, they are required to explain the reasons for deviating from it.
The key corporate governance rules and requirements are set out in the Code of Companies and Associations and in the Belgian Code on Corporate Governance. In addition, listed companies must also comply with listing rules as well as with other specific obligations imposed to listed companies, such as the Market Abuse Regulation (MAR).
The key topical issue is the approval of a new Code of Companies and Associations by the Belgian Parliament on 28 February 2019, which entered into force on 1 May 2019. Indeed, since this date, all new companies, associations or foundations must conform to the new regime. For existing companies, however, the new code will only apply from 1 January 2020. Such companies will have to modify their articles of association to the new code at the occasion of the first modification of their articles of association and, in any case, by 1 January 2024.
The Belgian Code on Corporate Governance is currently being revised in line with the new Code of Companies and Associations and a new code is expected to be published shortly to enter into effect on 1 January 2020.
An additional development expected in relation to corporate governance in Belgium is the implementation of the 2017 amendments to the shareholders’ rights directive which covers, inter alia, related party transactions, remuneration policy and identification of shareholders. A new bill is being prepared as the directive will have to be implemented by EU member states in June 2019.
Typically, there are three types of bodies involved in the governance and management of a company:
The management body may be – and in the case of listed companies must be – assisted by an audit committee and a remuneration committee. Other committees may also be set up by the board of directors.
The shareholders' meeting appoints the members of the management body, which can in turn delegate the daily management of the company to one or more directors or to other persons.
As explained below (see 4.1 Board Structure), the new Code of Companies and Associations provides an optional two-tier board structure for public limited liability companies (NV/SA).
The management body has the authority to make all decisions regarding the company, except those which are by law (or the articles of associations) reserved to the shareholders' meeting.
The shareholders' meeting shall, inter alia, vote on:
The articles of association may delegate to the board of directors the power to issue new shares and to distribute an interim dividend.
The new Code of Companies and Associations introduced a statutory definition of 'daily management' which creates a significant extension of the powers of daily manager(s). The daily management encompasses all actions or decisions which relate to the needs of the daily life of the company or do not justify the intervention of the board of directors due to their limited importance or their urgency.
As a matter of principle, any collegial corporate body can only make decisions after being duly convened in accordance with its articles of association and the Code of Companies and Associations. This code does not contain any minimum convening period for management bodies. However, for the shareholders' meeting, the convening period must be at least 15 days for non-listed companies and 30 days for listed companies.
In addition, it is possible under Belgian law for these bodies to make decisions in writing without the requirement to actually hold a meeting, except, for the shareholders' meeting, if the decisions require the intervention of a public notary. These written decisions can only be taken by unanimous consent of the members of the relevant body.
In the public limited liability company (NV/SA), the traditional corporate governance system is a one-tier system where the company is managed by a board of directors of at least three or, if there are only two shareholders, two directors. One of the key innovations of the new code with respect to the NV/SA is the possibility to be managed by a single director and the fact that the director(s) may be irrevocable, except for proper grounds (justes motifs).
In addition, the new code introduced the possibility for NV/SA to set up a two-tier system. The two-tier governance structure consists of two separate governance bodies, the supervisory board and the management board. The supervisory board is responsible for the general policy and strategy of the company, as well as for all the acts specifically reserved by the Code (such as the approval of the annual accounts to be submitted to the shareholders’ meeting or the convening of the shareholders’ meeting). In addition, the supervisory board appoints the member of the management board and is responsible for the supervision of the management board. The management board exercises all management powers not reserved by law to the supervisory board or the general shareholders’ meeting.
In the BV/SRL, there is a choice between three governance structure:
The Code on Corporate Governance applicable to listed companies recommends that the board be composed of both executive and non-executive directors.
While executive and non-executive directors are part of the same collegial body, they each have a specific and complementary role to play on the board.
Executive directors should provide all relevant business and financial information for the board to function effectively.
Non-executive directors should constructively challenge and help develop strategy and key policies proposed by the executive management. Also, non-executive directors should scrutinise the performance of the executive management in meeting agreed goals.
The committees set up by the board, such as the remuneration or audit committee are composed of non-executive directors.
In addition, at least three directors of listed companies must be independent (see 4.3 Board Composition Requirements/Recommendations and 4.4 Appointment and Removal of Directors/Officers, below).
Finally, the chairman of the board and the chief executive officer (CEO) should not be the same individual.
For listed companies, pursuant to the current Code on Corporate Governance, at least one half of the board should comprise non-executive directors and at least three of them should be independent.
Directors are appointed by the shareholders’ meeting. In the event of vacancy, eg, following a resignation, the remaining directors may designate an interim director. Such director will be appointed until the next annual meeting at which the shareholders must decide on the official appointment of the director.
The officers (including the daily manager) are appointed by the board of directors.
Pursuant to the new Code of Companies and Associations, the principle of the 'ad nutum' dismissal of directors, ie, dismissal at any time without prior notice or justification, is no longer mandatory. Consequently, in both the limited liability company (BV/SRL) and the public limited liability company (NV/SA), it is now possible to appoint a ‘statutory’ director or impose other restrictions on the revocability of the mandate of a director.
Pursuant to the current Code on Corporate Governance, independence of judgment is required in the decisions of all directors, executive and non-executive alike, whether the non-executive directors are independent or not.
According to the new Code of Companies and Associations, a director of a listed company can be considered independent if he or she does not maintain relationships with the company or one of its main shareholders which are liable to jeopardise the director's independence. To verify if this condition is met by independent directors, specific criteria will be provided in the new Code on Corporate Governance.
However, the company may appoint as independent director a candidate who does not fulfil all the specific criteria set out in Code on Corporate Governance, as long as the board of directors explain to the shareholders’ meeting the reasons why it considers that candidate nevertheless fulfil the general criterion of independency.
The new Code of Companies and Associations has reinforced the rules applicable in cases of conflict of interests. A director who has a conflict of interests of a patrimonial nature with the company may not participate in the deliberation and vote on the matter in connection with which this conflict has arisen. The rule which already existed for listed companies is thus now applicable to all companies. If all the directors are conflicted, the decision will have to be deferred and taken by the shareholders' meeting. In a two-tier system, it is the supervisory board which will make the decision if there is a conflict of interests at the level of the management board.
According to the new Code of Companies and Associations, each member of a management body is liable towards the company for the good execution of its mandate. This means that each director must perform its mission without any misconduct.
In addition to this general obligation of good conduct, each director has a duty of loyalty, which implies, inter alia, a duty of discretion, and a duty of care. He or she must also have the necessary competence and availability to fulfil their functions.
As a matter of principle, the directors owe their duties to the company but they can also be held liable vis-à-vis third parties, in particular creditors and shareholders. This may happen, for instance, in cases of breach by the directors of the company’s articles of association or of the Code of Companies and Association (which includes breach of accounting rules), in cases of wrongful trading or if their behaviour is considered as also being in breach of the general duty of care, giving rise to extra-contractual liability.
The directors must act in the interest of the company, which has been defined by the Belgian Supreme Court as the interest of present and future shareholders. The interest of future shareholders may include the interest of the stakeholders (such as employees and creditors).
As a matter of principle, liability action against directors on behalf of the company must be enforced by the shareholders' meeting. A minority action can also be filed against directors on behalf of the company by shareholders holding 1% of the voting rights (in the SA/NV) or 10% of the shares (in the BV/SRL). In cases of bankruptcy of the company, liability actions may be filed against directors by the trustee.
To the extent that directors are liable vis-à-vis a third party, the injured third-party may file a claim against the directors.
One of the main change brought by the new Code of Companies and Associations is the introduction of a cap on the liability of directors.
The liability is capped between EUR125,000 and EUR12 million depending on the company’s turnover and balance sheet total calculated over the three financial years preceding the introduction of the action for damages or over the period since the incorporation, if fewer than three financial years have passed since the incorporation.
The cap applies to companies as well as third-parties. The cap is an aggregate cap that applies to all directors together and that is to be shared between all creditors. This cap is calculated with respect to a wrongful act or set of wrongful acts leading to liability, regardless of the number of creditors or actions. The cap applies to any type of liability but will not apply in case of repeated minor faults, gross negligence or fraudulent intent or intent to cause harm. The cap will not apply either to liability towards the tax or social security administration.
Liability of directors may be insured but not limited by the company beyond the liability cap provided by the law.
Remuneration of the members of the board is decided by the shareholders' meeting and the remuneration of the officers by the management body, eg, the board of directors.
For listed companies, the Code of Companies and Associations contains several specific measures regarding the remuneration of directors and executive managers. Listed companies are obliged to set up a remuneration committee composed of non-executive members of the board of directors (a majority of whom must be independent). This committee is entrusted with the task of formulating proposals regarding the remuneration of directors and executive managers as well as preparing the remuneration report. Specific rules also apply to golden parachutes (limited to 12 or 18 months' remuneration, unless approved by the shareholders’ meeting), variable remuneration and stock options plans.
Remuneration must be accounted for on an aggregate basis in the annual accounts. In addition, specific disclosure requirements apply to listed companies.
The corporate governance statement to be published by listed company (see 6.2 Disclosure of Corporate Governance Arrangements, below) must contain, as a specific section, the remuneration report to be prepared by the remuneration committee. The remuneration report must contain a description of the company’s remuneration policy for the members of its management bodies. In particular, the amount of the remuneration and other benefits granted directly or indirectly to directors, by the company or its subsidiaries should be disclosed on an individual basis. This disclosure should indicate the split between basic remuneration and variable remuneration. The remuneration report is put to a vote by the shareholders’ meeting.
The role of the shareholders' meeting is governed by the Code of Companies and Associations which defines, inter alia, the powers of the shareholders' meeting, the convening formalities as well as the information to be communicated prior to each meeting.
The powers of the shareholders' meeting are limited to those listed in the Code of Companies and Associations and the company’s articles of association (see 3.2 Types of Decisions Made by Governing Bodies, above). The remaining decisions fall under the power of the management body (board of directors or individual directors).
The shareholders are entitled to receive the information pertaining to the company set forth in the Code of Companies and Associations and other relevant financial regulations.
Shareholders may question directors during the shareholders' meetings with respect to any points on the agenda. Directors must answer, except if to do so would be contrary to the company’s interest.
As a general rule, shareholders do not have a direct involvement in the management of the company. They act through their representatives at the board level.
Every company is required to hold a meeting of shareholders at least once a year to vote on the approval of the annual accounts, the allocation of the results and to (re)appoint the directors and grant release to the directors and the statutory auditor.
In addition, the shareholders' meeting may be convened to vote on any decision falling within its powers, by either the management body or the auditor. The management body and the auditor must convene the shareholders’ meeting at the request of one or more shareholders holding at least 10% of the share capital.
The shareholders acting through the shareholders' meeting may file claims against directors in the name of the company. Minority shareholders have the possibility to file a minority action on behalf of the company (see 4.8 Breach of Directors' Duties, above).
Besides these actions brought on behalf of the company, each shareholder may individually file a liability claim against directors if they can bring proof that:
Shareholders of listed companies must disclose to the company and the Financial Services and Markets Authority (FSMA) the number and the percentage of the voting rights that they own when the voting rights attached to the shares meet, exceed or fall below 5% (or a multiple thereof) of the total outstanding voting rights in the company.
The articles of association of the company can determine that the disclosure requirements also applies to lower or higher thresholds, it being understood that only 1%, 2%, 3%, 4% and 7.5% can be used.
In addition, the amended shareholders’ rights directive which must be implemented by EU member states by June 2019 gives listed companies the right to identify their shareholders so they can, if they choose to, communicate with them directly. The directive provides that any intermediary in the holding chain will be required to communicate to the company without delay such information regarding the holder’s identity in its records, upon the company’s first request. Member states are allowed to restrict the scope of the identification right of listed companies to shareholders holding more than a certain percentage of shares or voting rights, but this percentage cannot exceed 0.5%.
In all companies, after the annual meeting of shareholders has been held, the annual accounts, the annual report of the board of directors and the auditor's report must be filed with the Belgian National. Such documents are publicly available on the Belgian National Bank’s website.
Listed companies are in addition required to publish yearly and half-yearly financial reports.
The annual report of the board of directors of listed companies must include a corporate governance statement which shall designate the corporate governance code applicable to the company (ie, the Code on Corporate Governance) as well as a description of any corporate governance practices applied by the company in addition to those contained in the code and other applicable legal regulations.
If a company chooses not to apply certain provisions of the Code on Corporate Governance, it must disclose which provisions and the reasons for this exception.
In addition to the filing of the annual accounts with the Belgian National Bank, each company must publish, in the annexes of the Belgian Official Gazette, each modification of the composition of its management bodies as well as any amendments to its articles of association. These decisions are publicly available on the Belgian Official Gazette’s website.
If certain thresholds are met so that a company is not considered a 'small company' under Belgian law, then it is required by law to appoint a statutory auditor. Each year, auditors must issue a report on the annual accounts, in which they confirm that such accounts comply with the provisions of the Code of Companies and Associations and the articles of association and indicate whether the accounts give a true and fair view of the company’s financial situation.
Listed companies must publish in their annual report a description of the main features of the internal control and risk management systems.
A similar description must be included in the annual reports attached to consolidated accounts, if a listed company is part of the consolidation.
The audit committee in listed companies is in charge of monitoring the efficiency of the internal control and risk management systems.
Pursuant to the Code on Corporate Governance, the board should at least approve a framework of internal control and risk management set up by the executive management. This framework should be clear, define the meaning of 'internal control' and 'risk management' and help the executive management to put internal control and risk management systems in place. The board should review the implementation of this framework, taking into account the review carried out by the audit committee. The monitoring of the effectiveness of the company's internal control and risk management systems set up by the executive management should be done at least once a year, with a view to ensuring that the main risks (including those relating to fraud and compliance with existing legislation and regulations) are properly identified, managed and disclosed according to the framework approved by the board.