Corporate Governance 2020

Last Updated June 22, 2020

Belgium

Law and Practice

Authors



Liedekerke Wolters Waelbroeck Kirkpatrick is one of Belgium’s foremost business law firms. Based in Brussels, with offices in London, Kinshasa (DRC) and Kigali (Rwanda), and independent since its creation in 1965, the firm has established an international reputation based on its unique experience and unchallenged expertise acquired in all areas of business law. Liedekerke’s clients are active in a broad range of industries, to which it offers first-rate, creative and personalised full-service advice. The firm has a strong advisory practice based on sector expertise and an in-depth knowledge of Belgian and European law. It represents clients in complex litigations before national, European and international courts – both judicial and arbitral – the Court of Cassation, the Council of State and the Belgian Constitutional Courts. With over 100 lawyers, including 29 partners, Liedekerke is commonly recognised for its ability to quickly mobilise competent, flexible and multidisciplinary teams anywhere.

Since the entry into force of the new Companies and Associations Code on 1 May 2019 (for newly incorporated companies) and 1 January 2020 (for all companies existing prior to 1 May 2019), the principal forms of corporate/business organisations in Belgium are the private limited liability company (besloten vennootschap (BV)/société à responsabilité limitée (SRL)) and the public limited liability company (naamloze vennootschap (NV)/société anonyme (SA)).

The BV/SRL is the “default” Belgian company form and replaces the BVBA/SPRL which existed under the former Companies Code. All BVBAs/SPRLs, incorporated prior to 1 May 2019, are automatically deemed to be BVs/SRLs as of 1 January 2020. Unlike the BVBA/SPRL, the BV/SRL no longer has a statutory (minimum) capital. When incorporating a BV/SRL, its founders are instead required to ensure that the BV/SRL has sufficient financial means (either through a contribution by the founders or through other financial means such as shareholder loans or external debt) in an amount justified by its contemplated activities. For the NV/SA, the existing rules continue to apply and the founders have to make an initial contribution to the share capital of the company of at least EUR61,500.

The BV/SRL is the most flexible and most easily accessible company type for most businesses, while the NV/SA remains the preferred company type for larger and listed companies.

The main sources of corporate governance requirements for Belgian companies are the Companies and Associations Code, the company’s articles of association and, for listed companies only, the 2020 Belgian Corporate Governance Code and the listed company’s corporate governance charter. For non-listed companies, another corporate governance code has been adopted (Code Buysse III), which contains non-binding recommendations.

The 2020 Belgian Corporate Governance Code replaces the 2009 Belgian Corporate Governance Code and applies to listed companies as from their financial year that started on or after 1 January 2020.

The Companies and Associations Code contains several corporate governance requirements for listed companies that are mandatorily applicable to them. Their board of directors or supervisory board (as applicable) must comprise at least three directors that qualify as being independent and at least one third of the board members must be of the opposite sex. Their board of directors or supervisory board (as applicable) is also obliged to set up an audit and a remuneration committee. Furthermore, listed companies must take into account specific rules for transactions with related parties.

The annual report of listed companies must include a corporate governance statement referring to the 2020 Belgian Corporate Governance Code and the other corporate governance practices that are applicable. If a listed company does not comply with the entire set of rules imposed by the 2020 Belgian Corporate Governance Code, its corporate governance statement must indicate where the company deviates from the requirements of the code and provide legitimate reasons for its deviation. The corporate governance statement must also include other information such as, a description of the diversity policy and of the most important characteristics of the internal audit and risk management systems in the context of the financial reporting process, as well as information on the composition and operation of the management bodies and their committees. Further, the corporate governance statement must include a remuneration report containing the remuneration policy of the company and the remuneration details of the CEO, directors and officers.

In addition, listed companies must make a corporate governance charter available on their website. The corporate governance charter must describe the main aspects of the listed company’s governance, such as its governance structure, the terms of reference of the board and its committees and any other important matters.

In general, the key corporate governance rules and requirements can be found in the Companies and Associations Code and, for listed companies only, in the 2020 Belgian Corporate Governance Code.

In addition, specific rules and requirements apply to listed companies and, as applicable, their directors and officers, such as the rules regarding insider dealing and the disclosures of transactions in the company’s securities by its directors and officers under the EU Market Abuse Regulation and the requirements regarding the provision of information by listed companies to the market and to their shareholders.

Furthermore, specific legislation also exists for the governance of financial service providers such as credit institutions, insurance companies, investment firms, etc.

Belgian corporate governance rules and requirements have recently undergone several major revisions.

Most importantly, the former Companies Code has been replaced by the new Companies and Associations Code which entered into force on 1 May 2019 for newly incorporated companies and on 1 January 2020 for all companies existing prior to 1 May 2019 (see 1.1 Forms of Corporate/Business Organisations). The Companies and Associations Code has thoroughly reformed the legal regime for companies in Belgium, including the corporate governance rules and requirements. Subject to some exceptions, all existing companies will need to make their articles of association compliant with the Companies and Associations Code at the time of their next amendment (for example, in case of a capital increase decided by the general meeting of shareholders) and, in any case, by 1 January 2024. Not complying with this obligation can lead to directors’ liability.

In order to align the Belgian Corporate Governance Code with the new Companies and Associations Code, the existing code has been substituted by the 2020 Belgian Corporate Governance Code. This new code applies to listed companies as from their financial year that started on or after 1 January 2020.

The Belgian Companies and Associations Code has recently been amended to implement the EU Shareholder Rights Directive II. The implementing law introduces new obligations for listed companies, in particular with respect to remuneration of the CEO, directors and officers and with respect to transactions with related parties.

Large companies exceeding certain financial and employee number thresholds must include an analysis of the development and the results of the company in their annual report. In so far as necessary, such analysis also discusses non-financial essential performance indicators including environmental and employee matters.

Listed companies have much wider obligations in this respect. In addition to the requirements stated above, their annual report must include a corporate governance statement that deals with topics such as the company’s diversity policy in relation to the members of its management body and details of the remuneration of the members of the management body.

In addition, listed companies and other public interest entities (such as credit institutions and insurance undertakings) that exceed certain financial and employee number thresholds must include additional information in their annual report in so far as necessary for a good understanding of the company’s development, its results and position, as well as the effects of its activities on social, environmental and employee matters, respect for human rights and anti-corruption and bribery issues. Such additional information should include a description of the company’s policy in relation to the aforementioned matters, the results of this policy, the most important risks related to these matters in the context of its business activities and the non-financial essential performance indicators relevant to its specific business activities.

The Belgian government has issued a special Royal Decree on the organisation of general meetings of shareholders that must be convened or held between 1 March 2020 and 30 June 2020 (but this might be extended after the date of publication of this contribution).

Because of the prohibition to organise public gatherings in light of the COVID-19 crisis, companies are given several alternative options for their general meetings as set out below.

  • General meetings can be held behind closed doors, implying that shareholders must either cast their vote in advance in writing by way of a letter, or grant a power of attorney with voting instructions to a single proxy holder that is appointed by the company. Companies can exceptionally opt to organise their general meetings in this way even if their articles of association do not expressly allow for it.
  • General meetings can also be held by way of telephone or videoconference, exceptionally even if the articles of association require the meetings to be held physically.
  • A company can decide to postpone its annual general meeting by a maximum of ten weeks after the latest possible date on which the annual general meeting should have been held in accordance with the Companies and Associations Code. For companies whose financial year ends on 31 December, this means that, subject to any further extensions after the date of this publication, the meeting should be held at the latest on 8 September 2020 (instead of on 30 June 2020).

The Royal Decree also allows meetings of the management body to be held by way of a teleconference or videoconference or by way of unanimous written resolutions, even if the articles of association do not expressly allow these options.

Belgian companies have, in principle, the following corporate bodies:

  • a general meeting of shareholders;
  • a management body, which can take several forms (see 4.1 Board Structure): in an NV/SA, the Companies and Associations Code now allows companies to opt for a one-tier governance structure (board of directors or one single director) or a two-tier governance structure consisting of a supervisory board and a management board; and
  • optionally, one or more daily managers.

In addition, the management body can delegate specific tasks to special proxy holders or establish an informal (ad hoc) executive committee to which specific tasks are delegated.

The board of directors or, in a two-tier structure (thus, in an NV/SA), the supervisory board, also have the right to establish one or more advisory committees consisting of one or more board members, such as an audit committee, a remuneration committee or any other type of committee. Such advisory committees do not have any decision-making powers. 

Listed companies are, on the other hand, obliged to establish an audit committee and a remuneration committee. In addition, the Corporate Governance Code requires listed companies to also establish a nomination committee, but companies can depart from this rule by providing an explanation in their corporate governance statement.

General Meeting of Shareholders

The Companies and Associations Code lists the (exclusive) competences of the general meeting of shareholders. These include:

  • the approval of the annual accounts;
  • the allocation of the results;
  • the appointment and dismissal of the members of the management body and the granting of discharge to them for the exercise of their mandate;
  • the increase or decrease of the capital and, possibly, the issuance of new shares related thereto (in the NV/SA) or the issuance of new shares (in the BV/SRL);
  • the amendment of the company’s articles of association;
  • the decision to merge or demerge the company; and
  • the decision to convert or dissolve the company.

The articles of association may grant additional powers to the general meeting of shareholders, but such allocation of powers is only valid internally and cannot be enforced against third parties.

Management Body

The management body can take all actions and decisions required or useful for the realisation of the object of the company, except for those actions and decisions that fall within the scope of the powers granted by law or the articles of association to the general meeting of shareholders. In addition, under the articles of association, the management body may be delegated the power to increase the capital by way of the authorised capital for a (renewable) limited period in time and up to a maximum amount (in the NV/SA) or to issue new shares (in the BV/SRL) and to distribute interim dividends.

As stated above, the management body of an NV/SA can now be established as a two-tier structure consisting of a supervisory board and a management board. The supervisory board will be responsible for the general policy and strategy of the company, for all actions that are reserved to the board of directors in a one-tier system (such as the drawing up of the annual accounts and of any reports required by law) and for the supervision of the management board. The management board will have all management powers that are not reserved to the supervisory board or to the general meeting of shareholders by the Companies and Associations Code.

The management body may delegate the day-to-day management of the company to one or more daily managers. The daily managers are authorised by law to take all actions and decisions that do not exceed the daily needs of the company, as well as all actions and decisions that do not justify the intervention of the management body because of their minor importance or their urgent character.

General Meeting of Shareholders

The general meeting of shareholders must be convened by the management body at least 15 days prior to the meeting for non-listed companies and 30 days for listed companies, but the shareholders are allowed to unanimously waive the convening formalities. In principle, there is no attendance quorum and the general meeting can take decisions by way of simple majority of the votes cast. However, the Companies and Associations Code imposes an attendance quorum and special majority thresholds for specific matters listed therein (such as amendments of the articles of association, mergers or demergers, dissolution, etc). The articles of association may provide for stricter attendance quorums and/or stricter majority thresholds for all or specific decisions. This is usually done in joint venture structures to reflect, and make enforceable against third parties, what has been agreed in shareholders agreements.

The articles of association can authorise the shareholders to vote by way of a letter or electronically. In addition, the general meeting is allowed to take all decisions in writing by way of unanimous vote, with the exception of decisions that must be passed before a notary public.

Management Body

If the management body is structured as a collegial board, a meeting must be convened in accordance with the articles of associations of the concerned company. The members of the board can waive the convening formalities. Unless otherwise provided in the articles of association, a board meeting is validly composed if at least half of its members are present or represented and the board can take decisions by way of simple majority. The articles of association can, however, impose stricter attendance quorum and/or voting majority thresholds with respect to specifically listed decisions. Again, this is usually done in joint venture structures.

Board meetings can be held by way of a teleconference or videoconference and a collegial board can take all decisions in writing by way of unanimous vote (except for those decisions excluded in the articles of association).

The management body of a BV/SRL can take the following forms:

  • a single director;
  • multiple directors, each having the individual power to act on behalf of the company; or
  • a collegial board of directors consisting of at least two members.

The possible forms of the management body of an NV/SA are slightly different and the following structures are possible:

  • a single director;
  • a collegial board of directors consisting of at least two members if there are no more than two shareholders or at least three members if there are more than two shareholders; or
  • a two-tier structure consisting of a supervisory board and a management board. The supervisory board and the management board are both collegial bodies consisting of at least three members. The members of the supervisory board cannot be members of the management board and vice versa(see 3.2 Decisions Made by Particular Bodies).

So far, the two-tier structure is rarely used in Belgium. Therefore, we will focus on the one-tier structure in this contribution and will only refer to the two-tier structure when relevant or useful.

In addition, some companies that have opted for a one-tier structure have established a so-called informal executive committee. This committee is not a formal corporate body of the company, but instead consists of a group of directors and/or officers that have received certain delegations of powers from the board of directors. Any powers that the board has delegated to the informal executive committee can still be exercised by the board of directors (unlike the division of exclusive responsibilities between the supervisory board and the management board in a two-tier structure ‒ see 3.2 Decisions Made by Particular Bodies).

The board of directors and, in a two-tier structure, the supervisory board and the management board act as collegial bodies and any division of duties amongst their members is unenforceable against third parties.

This being said, a board will in principle appoint a chairman to whom specific powers can be granted in the articles of association of the company concerned (such as a casting vote in case of a tie or the right to convene a board meeting).

The 2020 Belgian Corporate Governance Code also entrusts specific tasks to the chairman of the board of directors or, in a two-tier structure, of the supervisory board, such as setting the agenda of the board meetings, ensuring that board members are provided with accurate, concise, timely and clear information prior to a meeting, ensuring effective communication with the shareholders, etc. The Code further stipulates that, in a one-tier structure, the chairman of the board of directors and the CEO cannot be the same individual.

Furthermore, members of the board of directors or, in a two-tier structure, of the supervisory board can be appointed as members of an advisory committee (see 3.1 Bodies or Functions Involved in Governance and Management).

Members of a management body can either be physical persons or legal entities. If a legal entity is appointed as a member of the management body, it must appoint a physical person as its permanent representative. This physical person can only represent one single director-legal entity and may not be a member of the management body in person in order to avoid one and the same person having two votes within the management body.

In listed companies, at least one third of the members of the board of directors or, in a two-tier structure, of the supervisory board must be of the opposite sex. At least three members of the board of directors or, in a two-tier structure, of the supervisory board must qualify as independent in accordance with the criteria set forth in the 2020 Belgian Corporate Governance Code.

The 2020 Belgian Corporate Governance Code further requires that the majority of the board of directors of a listed company consists of non-executive directors. In a two-tier structure, the supervisory board must entirely consist of non-executive directors.

In general, the board(s) of listed companies should have a composition appropriate to the company’s purpose, its operations, phase of development, structure of ownership and other specifics, allowing the company to gather sufficient expertise in its areas of activity as well as sufficient diversity of skills, background, age and gender.

For directors in regulated sectors (such as financial institutions), additional criteria apply.

Directors or, in a two-tier structure, members of the supervisory board are appointed by the general meeting of shareholders by way of simple majority of the votes cast. If a board position becomes vacant, following a resignation or otherwise, the remaining board members have the right to co-opt a board member. The next general meeting of shareholders will have to confirm (or not) the mandate of the co-opted board member. If it refuses to do so, the mandate of such board member will end immediately following the end of the general meeting.

Correspondingly, the general meeting can remove a director or, in a two-tier structure, a member of the supervisory board by way of simple majority of the votes cast. However, the general meeting has the right (but not the obligation) to grant a notice period or an indemnity in lieu of notice. That being said, the articles of association can provide that dismissal always requires a notice period or an indemnity. In any case, even if the articles of association contain such provision, dismissal without notice or indemnity remains possible in case of a “justified cause”.

However, when there is a single director, he/she may be designated in the articles of association and irrevocable by the general meeting of shareholders (unless in case of a “justified cause”).

The members of the management board in a two-tier structure are appointed and dismissed by the supervisory board by way of simple majority of the votes cast.

According to the 2020 Belgian Corporate Governance Code, a nomination committee must lead the nomination process in listed companies. Such committee should recommend suitable candidates to the board of directors or, in a two-tier structure, to the supervisory board, on the basis of which the board should make appointment proposals to the general meeting of shareholders.

The officers and the daily managers are appointed and removed by the board of directors or, in a two-tier structure, by the management board by way of simple majority of the votes cast.

As set forth above, the board of directors or supervisory board (as applicable) of listed companies should comprise at least three directors that qualify as independent. A board member is deemed independent if he or she does not have any ties with the listed company or with an important shareholder that jeopardise his or her independence. In order to fulfil this condition of independence, a candidate-board member must meet the independency criteria set forth in the 2020 Belgian Corporate Governance Code.

The Companies and Associations Code sets out the procedure to be followed if a member of the board of directors or, in a two-tier structure, of the supervisory board has a personal conflict of interest of a financial nature. In such case, the conflicted board member must promptly inform the other board members of the conflict and has to abstain from taking part in the deliberation and vote on the matter of conflict. If all members of a board are conflicted, the general meeting of shareholders will have to decide on the matter. If, in a two-tier structure, one or more members of the management board have a conflict of interest, the supervisory board will have to decide the matter.

When a company is, in the context of an equity raise, cancelling pre-emptive rights of existing shareholders to the benefit of pre-identified existing shareholders or other investors, any director de facto representing a person that is subscribing to such selective capital increase must abstain from voting at the board meeting (even if such person does not have a personal financial conflict of interest). In addition, the concerned shareholder must abstain from voting at the general meeting if he/she holds more than 10% of the shares.

The 2020 Belgian Corporate Governance Code sets out additional requirements for listed companies and stipulates that each board member (of the board of directors or, in a two-tier structure, of the supervisory board and the management board) should inform the board of any conflict of interest (not per se of a financial nature) that could, in their opinion, affect their judgement. In general, the board should act in such a manner that a conflict of interest, or the appearance of such a conflict, is avoided.

Each member of a management body or daily manager is liable towards the company for the proper execution of his or her mandate.

Furthermore, case law and legal doctrine impose several general duties on the directors of a company as outlined below.

  • Duty of diligence – a director must exercise his/her mandate in the same way as a reasonably prudent and diligent director in the same circumstances would do.
  • Duty of skill – a director must have the knowledge, experience and skills required to exercise his/her mandate in the context of the specific company in which he/she is appointed as director.
  • Duty of loyalty – a director must be loyal to the company in which he/she exercises his/her mandate as director.
  • Duty of discretion – a director cannot disclose information obtained solely through the exercise of his/her mandate as director and of which the disclosure could negatively affect the company.

In addition to these general principles, the Companies and Associations Code imposes several specific duties on the directors, such as the preparing of the annual accounts, the convening of the annual general meeting of shareholders, the reporting requirements in the context of several specific operations (including, but not limited to, mergers or demergers, capital increases by way of a contribution in kind, amendments of the corporate purpose of the company, changes of the company’s legal form, etc) and so on.

Directors owe their duties to the company, but can also be held liable by third parties (mostly individual shareholders, creditors and, in case of bankruptcy, the bankruptcy trustee) for faults committed in the exercise of their mandate.

The directors must always act in the interest of the company. The Belgian Supreme Court has ruled that the interest of the company is determined by the collective profit interests of the current and future shareholders, meaning that the interest of the company is focused on the continuity of the company and, therefore, must be interpreted in a dynamic and forward looking manner.

Directors can be held liable for breaches of their management duties by the company and, provided that the relevant breach of duties results in a liability under torts law, by third parties. They are only liable for decisions, acts or behaviours that manifestly fall outside the range within which normally prudent and diligent directors, placed in the same circumstances, can differ in opinion. This consideration is, however, not applicable in cases where the law, the articles of association or any other regulations require a specific behaviour.

In principle, the general meeting of shareholders decides whether a claim for breach of duties is to be initiated against the management body (or one or more specific members thereof). However, minority shareholders holding at least 1% of the voting rights or shares representing a fraction of the capital equal to EUR1,250,000 (in the NV/SA) or 10% of the shares (in the BV/SRL) also have the right to initiate such claim on behalf of the company.

In a two-tier structure in an NV/SA, the supervisory board decides whether a claim for breach of duties will be initiated against the management board (or one or more specific members thereof).

Finally, third parties – including the bankruptcy trustee – can also file a claim against the management body (or one or more specific members thereof) with respect to a breach of management duties, but only to the extent that the relevant breach of duties results in a liability under torts law.

If the management body of the company is a collegial body, the liability of the directors is in principle joint and several. Even if the management body is not a collegial body, the different individually acting directors will in principle all be jointly and severally liable towards the company and third parties for breaches of the Companies and Associations Code and the articles of association of the company. However, a director can be exonerated from liability for faults in which he/she did not take part if he/she reports the fault to all other members of the management body.

Belgian law provides a number of specific grounds for liability claims against directors, such as the failure by the company to pay payroll tax or VAT, manifest gross negligence contributing to bankruptcy or the continuation of a loss-making activity or a company that is hopelessly beyond redress.

The Companies and Associations Code has introduced a cap on the liability of directors (including liability based on tort law). The amount of the liability cap varies between EUR125,000 and EUR12,000,000 depending on the company's turnover and balance sheet total calculated over the three financial years preceding the initiation of the claim for damages. The liability cap applies per underlying fact for all directors collectively (so not individually per director), regardless of the type of liability (contractual or extra-contractual) and the number of claims and/or claimants. The impact of the liability cap is however limited as it nearly only applies to minor occasional mistakes.

The company, its subsidiaries or any other entities controlled by the company may not exonerate or indemnify in advance the directors against their liability towards the company or third parties. Any provision creating such indemnification right will be null and void. It is, however, permitted to grant an indemnification after the occurrence of the facts leading to directors’ liability or to have a hold harmless undertaking by the parent company or another group entity that is not controlled by the relevant company. In addition, it is recommendable for companies to enter into D&O insurance to further mitigate any personal impact of a liability claim on the directors.

In principle, the general meeting of shareholders determines the remuneration of the members of the management body and the management body determines the remuneration of the officers.

The Companies and Associations Code provides specific measures for the remuneration of directors and officers in listed companies.

Listed companies must establish a remuneration committee within their board of directors or, in a two-tier structure, within their supervisory board, consisting only of non-executive board members of which a majority must be independent directors. The remuneration committee makes proposals to the board of directors or, in a two-tier structure, to the supervisory board regarding the remuneration policy and the individual remuneration of the CEO, board members and officers and prepares the remuneration report.

Furthermore, the Companies and Associations Code sets forth specific limitations regarding variable remuneration, stock option plans and golden parachutes granted to (executive) directors in listed companies.

The law implementing the Shareholder Rights Directive II – as recently adopted by the Belgian parliament – grants shareholders of listed companies an effective say on the remuneration policy by submitting it to a binding vote of the general meeting of shareholders. The general meeting will be required to vote after each significant amendment and at least every four years. Subject to some limited exceptions, listed companies will at all times be obliged to pay their CEO, directors and officers in accordance with the remuneration policy approved by the general meeting.

The remuneration policy must be submitted for the first time to the general meeting of shareholders resolving on the financial statements relating to the first financial year that starts after 30 June 2019.

Large companies exceeding certain financial and employee number thresholds must disclose in their annual financial statements the amount of direct and indirect remuneration granted to their CEO, directors and officers, provided that such disclosure does not relate to one single identifiable person.

In addition, the Companies and Associations Code provides that listed companies must include a remuneration report in the corporate governance statement, which is to be published as a part of the annual report.

The law implementing the Shareholder Rights Directive II introduces new requirements for the remuneration report. The company will now have to explain how the total remuneration complies with the remuneration policy and contributes to its long-term performance. Furthermore, the remuneration report must include additional information, including the details of the remuneration of the CEO, directors and officers on an individual basis and the ratio between the highest remuneration of the CEO, directors and officers and the lowest remuneration of the employees.

Unlike the vote on the remuneration policy, the vote of the general meeting of shareholders on the remuneration report remains consultative but the company will have to explain in its next remuneration report in what way it has taken this vote into account.

The new rules will be applicable for the first time to the remuneration report relating to the first financial year that starts after 30 June 2019.

Moreover, listed companies will be obliged to publish their remuneration policy on their website as soon as their general meeting approves it for the first time (see 4.10 Approvals and Restrictions Concerning Payments to Directors/Officers).

The shareholders of a company act through the general meeting of shareholders. The Companies and Associations Code sets out the rules and requirements governing the relationship between a company and its general meeting of shareholders.

The powers of the general meeting of shareholders are limited to those explicitly set forth in the Companies and Associations Code and, as the case may be, in the concerned company’s articles of association (see 3.2 Decisions Made by Particular Bodies). If a company only has one shareholder, that shareholder will exercise all powers of the general meeting.

The shareholders have the right to be convened to all general meetings, to receive the documents and information listed in the Companies and Associations Code and to ask questions to the members of the management body and to the statutory auditor in relation to any items on the agenda of a specific general meeting. The members of the management body or, as the case may be, the statutory auditor must respond to such questions, unless this would harm the company or breach a confidentiality obligation by which the company is bound.

The company must ensure that all shareholders that are in the same circumstances must be treated equally, it being specified that certain shareholders can have additional rights based on the number or class of shares they hold or because of provisions in the articles of association or, under certain conditions, in a shareholders' agreement.

The management body and, as the case may be, the statutory auditor are obliged to convene a general meeting at the request of one or more shareholders holding at least 10% of the outstanding shares in a BV/SRL, or representing at least 10% of the share capital in an NV/SA, with the agenda items proposed by the shareholders.

In listed companies, one or more shareholders together holding at least 3% of the capital of that listed company, have the right to require the management body to add certain items to the general meeting’s agenda and to submit proposed resolutions on items included in the agenda.

Furthermore, the 2020 Belgian Corporate Governance Code sets outs rules on how listed companies should deal with their shareholders, including the requirement for boards to ensure an effective dialogue with shareholders and potential shareholders through appropriate investor relation programmes.

The shareholders are not directly involved in the management of the company. Shareholders that are entitled to have a director appointed among candidates proposed by them, either because they have a majority at the general meeting or because the articles of association or, under certain conditions, a shareholders' agreement grant them such right can, however, to a certain extent, have an influence on the company’s management. A director appointed on the proposal of a shareholder should nevertheless always act in the interest of the company and such interest should prevail over the interests of the represented shareholder.

Furthermore, the articles of association may grant additional powers to the general meeting of shareholders (or to certain shareholders) such as veto rights in relation to certain management decisions (for example, the granting of loans or the investment in assets exceeding a certain financial threshold). Nevertheless, such allocation of powers is only valid internally and cannot be enforced against third parties (see 3.2 Decisions Made by Particular Bodies).

For listed companies with one or more significant or controlling shareholder(s), the 2020 Belgian Corporate Governance Code provides that the management body should encourage these shareholders to clearly express their strategic objectives to the board in a timely manner, and also to make a careful use of their position, take special care to prevent conflicts of interests and respect the rights and interests of minority shareholders.

Each company must hold at least one general meeting per year, on the date and time set forth in the articles of association, to decide on the approval of the annual accounts, the allocation of the results and the discharge to be granted to the members of the management body and, as the case may be, the statutory auditor.

Furthermore, the management body and, as the case may be, the statutory auditor are obliged to convene a general meeting at the request of one or more shareholders holding at least 10% of the outstanding shares in a BV/SRL, or representing at least 10% of the share capital in an NV/SA, with the agenda items proposed by the such shareholders.

The members of the management body and the statutory auditor, if the general meeting deliberates on the basis of a report prepared by the latter, must attend the general meeting.

The rules that govern the holding and conduct of such meeting are set out above (see 3.3 Decision-Making Processes).

The general meeting of shareholders can file a claim for breach of duties against members of the management body on behalf of the company. In addition, minority shareholders holding at least 1% of the voting rights or shares representing a fraction of the capital equal to EUR1,250,000 (in the NV/SA) or 10% of the shares (in the BV/SRL) also have the right to initiate a claim on behalf of the company.

In addition, each individual shareholder (and any other person having an interest to do so) has the right to file a claim against members of the management body with respect to a breach of management duties, but only to the extent that the relevant breach of duties results in a ground for a liability claim under torts law (see 4.8 Consequences and Enforcement of Breach of Directors’ Duties).

Each shareholder of a listed company (acting alone or in concert with another shareholder) is obliged to disclose to the company and to the Financial Services and Markets Authority (FSMA) the number and the percentage of the voting rights attached to shares held by him or her each time the voting rights attached to those shares meet, exceed or fall below the threshold of 5% (or a multiple thereof) of the total number of outstanding voting rights in the company.

The articles of association of the concerned listed company can provide additional thresholds of 1%, 2%, 3%, 4% and 7.5% of the total number of outstanding voting rights in the company, requiring a disclosure as described above. The concerned company must notify such additional thresholds to the FSMA.

Persons discharging managerial responsibilities in listed companies, and persons closely associated with them, must also notify the FSMA of any transactions in securities of the company in question (irrespective of whether certain thresholds are exceeded).

In addition, the law implementing the Shareholder Rights Directive II – that was recently adopted by the Belgian parliament – requires institutional investors and assets managers holding shares in listed companies to publicly disclose their engagement policy and their share investment strategy.

Each year, the management bodies of all companies must draw up an inventory, as well as annual accounts consisting of the balance sheet, the profit and loss accounts and an explanatory note. The annual accounts must be submitted to the general meeting of shareholders for approval within six months from the end of the relevant financial year.

Furthermore, the management bodies of large companies exceeding certain financial and employee number thresholds must produce an annual report with a mandatory content as determined by the Companies and Associations Code.

The annual accounts and, as the case may be, the annual report and the report of the statutory auditor must be filed with the National Bank of Belgium at the latest within seven months of the end of the relevant financial year. These documents will be publicly available on the National Bank’s website.

Listed companies must publish their yearly financial report, including the audited annual accounts, the annual report and the statutory auditor’s report within four months of the end of their financial year. Furthermore, they must publish a half-yearly report on the first six months of the financial year, including short-form financial statements, within three months of the end of the six-month period.

The annual report of listed companies must include a corporate governance statement citing the 2020 Belgian Corporate Governance Code, and any other corporate governance practices that are also applied (see 1.3 Corporate Governance Requirements for Companies with Publicly Traded Shares). In addition, the corporate governance statement must include the remuneration report and all other information required by the Companies and Associations Code.

All companies are obliged to file the following with the registry of the competent business court:

  • extracts of all deeds or minutes recording changes in the composition of their management bodies;
  • changes of their auditor;
  • changes of the registered office;
  • the concentration of all shares in the hands of a single shareholder;
  • amendments to the articles of association;
  • capital increases or decreases; 
  • issuance of new shares, mergers and other company restructurings;
  • decisions of the general meeting of a listed company to grant rights to third parties with an important influence on the assets of the company or creating a debt or undertaking for the company if the exercise of such rights depends on the launch of a public take-over bid on the company or a change of control; and
  • any other transactions listed in the Companies and Associations Code.

These filings are published in the annexes to the Belgian Official Gazette and are publicly available on the Belgian Official Gazette’s website.

The appointment of a statutory auditor is mandatory if a company does not qualify as a small company based on certain financial and employee number thresholds. However, a small company will also be obliged to appoint a statutory auditor if it is part of a group in which consolidated accounts are established.

The statutory auditor is appointed by the general meeting of shareholders on proposal of the management body or, in companies with a works council, on proposal of the works council for a renewable term of three financial years (with a maximum total duration of 18 years and in certain cases 24 years for listed companies and other public interest entities). The statutory auditor can only be dismissed during this term for legitimate cause, which cannot be a difference in opinion on the applicable accounting principles or audit procedures.

The statutory auditor produces a report on the annual accounts in which it assesses whether the annual accounts provide a true and fair view of the company’s financial situation and of its results and confirms whether the annual accounts comply with the provisions of the Companies and Associations Code and the articles of association of the company concerned.

Large companies exceeding certain financial and employee number thresholds must include in their annual report a description of the main risks and uncertainties facing the company.

In a two-tier structure, the management board must, at least once a year, provide a written report to the supervisory board on, among other issues, the general and financial risks and the control and risk management systems of the company.

In addition, listed companies must include in their annual report a description of the most important characteristics of their internal control and risk management systems in the process of financial reporting. Companies required to draw up consolidated annual accounts have the same obligation with respect to the annual report on the consolidated accounts if a listed company is part of the consolidation.

The audit committee of a listed company must monitor the effectiveness of the company’s internal control and risk management systems and the internal audit (if any).

In accordance with the 2020 Corporate Governance Code, the executive management must put internal controls in place (ie, systems to identify, assess, manage and monitor financial and other risks). The board of directors or, in a two-tier structure, the supervisory board must approve the framework of internal control and risk management proposed by the executive management and review the implementation of this framework.

Liedekerke Wolters Waelbroeck Kirkpatrick

Boulevard de l’Empereur 3 Keizerslaan
1000 Brussels
Belgium

+32 2 551 15 15

+32 2 551 14 14

info@liedekerke.com www.liedekerke.com
Author Business Card

Trends and Developments


Authors



Liedekerke Wolters Waelbroeck Kirkpatrick is one of Belgium’s foremost business law firms. Based in Brussels, with offices in London, Kinshasa (DRC) and Kigali (Rwanda), and independent since its creation in 1965, the firm has established an international reputation based on its unique experience and unchallenged expertise acquired in all areas of business law. Liedekerke’s clients are active in a broad range of industries, to which it offers first-rate, creative and personalised full-service advice. The firm has a strong advisory practice based on sector expertise and an in-depth knowledge of Belgian and European law. It represents clients in complex litigations before national, European and international courts - both judicial and arbitral - the Court of Cassation, the Council of State and the Belgian Constitutional Courts. With over 100 lawyers, including 29 partners, Liedekerke is commonly recognised for its ability to quickly mobilise competent, flexible and multidisciplinary teams anywhere.

Belgian corporate governance rules and requirements have recently undergone several major reforms. Most importantly, a new Companies and Associations Code has been introduced which entered into force with staggered effect on 1 May 2019 for newly incorporated companies and on 1 January 2020 for all companies existing prior 1 May 2019.

The new Companies and Associations Code has most recently been updated to implement the EU Shareholder Rights Directive II. The implementing law introduced new obligations for listed companies, in particular with respect to remuneration of directors and officers and with respect to transactions with related parties.

In order to align the Belgian Corporate Governance Code with the new Companies and Associations Code, the existing code has been replaced by the 2020 Belgian Corporate Governance Code. This new code applies to listed companies as from their financial year that started on or after 1 January 2020.

The Companies and Associations Code

The new Companies and Associations Code has thoroughly reformed the legal regime for companies in Belgium, including the corporate governance rules and requirements. The reform is aimed at making Belgian companies law more attractive for foreign investors by simplifying it and by adding more flexibility to the regime.

The number of different company forms was significantly reduced in order to eliminate those company forms that were not frequently used, such as the co-operative company with unlimited liability. The principal company forms with limited liability are now the private limited liability company (besloten vennootschap (BV)/société à responsabilité limitée (SRL)) and the public limited liability company (naamloze vennootschap (NV)/société anonyme (SA)).

BV/SRL

The BV/SRL is considered to be the “default” Belgian company form and is the most flexible and most easily accessible company form for most businesses. It replaces the BVBA/SPRL which existed under the former Companies Code. All BVBAs/SPRLs, incorporated prior 1 May 2019, are automatically deemed to be BVs/SRLs as of 1 January 2020.

Unlike the BVBA/SPRL, the BV/SRL no longer has a statutory (minimum) capital. When incorporating a BV/SRL, its founders are instead required to ensure that the BV/SRL has sufficient financial means (either through a contribution by the founders or through other financial means such as shareholder loans or external debt) for an amount justified by its contemplated activities.

The “default” legal regime of the BV/SRL is simple and clear-cut. The BV/SRL has one or more shareholders and is managed by one or more directors, constituting or not a collegial board (depending on the articles of association). The shares of a BV/SRL have identical voting and profit-sharing rights and are not freely transferable.

The articles of association of a BV/SRL can however deviate from this “default” regime so that the BV/SRL can easily be tailored to the needs of any business. Options include, for example, attaching multiple voting rights to certain shares, issuing preference shares (at the condition that none of the shares can be entirely excluded from sharing in the profits), making the shares freely transferable, setting up a retreat and exclusion regime for shareholders based on the regime for co-operative companies, etc.

NV/SA

The NV/SA was less profoundly reformed given the mandatory European rules applicable to it. The main changes relate to its governance structure. Whereas the collegial board of directors was the only possible governance model under the former Belgian Companies Code, there is a lot more flexibility now. The NV/SA can now be managed by:

  • a single director;
  • a collegial board of directors; or
  • a two-tier board structure consisting of a collegial supervisory board and a collegial management board.

The members of the supervisory board cannot be members of the management board and vice versa. The supervisory board is responsible for the general policy and strategy of the company, for all actions that are reserved to the board of directors in a one-tier system (such as the drawing up of the annual accounts and of any reports required by law) and for the supervision of the management board. The management board has all management powers that are not reserved to the supervisory board or to the general meeting of shareholders by the Companies and Associations Code.

The two-tier board structure is rarely used in Belgium, with the main reason being that the managing director or CEO cannot be part of both the supervisory board and the management board. Consequently, companies tend to set up an informal executive committee consisting of a group of directors and/or officers that have received certain delegations of powers from the single-tier board of directors.

Voting shares/rights

The mandatory provision of “one share, one vote” has been abandoned in the NV/SA and the BV/SRL, but non-listed companies must, in any case, issue at least one share with voting rights. By default, each share in the NV/SA is entitled to a number of voting rights in proportion to the fraction of the capital represented by such share and each share in the BV/SRL is entitled to one vote.

The articles of association can, however, grant (unlimited) multiple voting rights to certain shares in general or for specific key decisions and/or under certain conditions. Furthermore, shares without voting rights can now be issued without the requirement that a preferential dividend right be attached to them.

Listed companies are more restricted when it comes to granting voting rights. The articles of association can only grant a double loyalty voting right to shareholders for all of their shares that are fully paid and that have been registered in the share register in their name for an uninterrupted period of at least two years. The shares are no longer entitled to such double loyalty voting right in case they are transferred to a third party or, if the shareholder is a company, in case of a change of control over the shareholder (subject to limited exceptions).

Incorporation theory

Another significant change under the new Companies and Associations Code is the shift from the real seat theory to the incorporation theory effective as from 1 May 2019. This shift should make Belgium more attractive as a country of establishment and eliminate its competitive disadvantage compared to countries that were already adhering to the incorporation theory (such as, but not limited to, the Netherlands and the UK). A company can now explicitly choose to be subject to Belgian company law by establishing its registered office in Belgium (by incorporation or by way of a cross-border conversion) regardless of where its “principal establishment” is located.

The other way around, foreign companies can now move their “principal establishment” to Belgium and continue to be governed by the law of their country of origin.

The 2020 Belgian Corporate Governance Code

A revision of the former Belgian Corporate Governance Code proved to be necessary taking into account multiple changes to Belgian and European company law since its publication, the reform of Belgian company law and, otherwise, new insights gained on the sound management of listed companies.

The 2020 Belgian Corporate Governance Code takes into account the recently introduced possibility for the NV/SA to establish a two-tier board structure. The Code obliges listed companies to make an explicit and informed decision on which governance structure is most appropriate for them and to regularly reassess this decision in light of the company’s evolution and environment.

Sustainable value creation

An important topic in the 2020 Belgian Corporate Governance Code is sustainable value creation with a focus on the long term. In order to ensure that the interests of the board members and, as the case may be, the executive management are aligned with those of long-term shareholders, the Code imposes that a part of the remuneration of the board members must be paid out in shares that must be held for a specified period in time and that the board sets a minimum number of shares that must be held by the members of the executive management during the term of their mandate.

The 2020 Belgian Corporate Governance Code furthermore sets explicit expectations in relation to diversity, talent development and succession planning and imposes additional requirements for the annual reporting on non-financial matters.

Trends

It is still very early to observe trends or tendencies following the recent reform of Belgian company law.

Some existing companies already opted into the new Companies and Associations Code prior to 1 January 2020, but most existing companies have only been subject thereto since that date. Although companies still have the time to update their articles of association in order to make them compliant with the Companies and Associations Code (with the final deadline being 1 January 2024, or earlier, at the first amendment of their articles), today only 5% of Belgian companies have effectively updated their articles of association to the new regime.

First impressions

In the coming months and years, it will become clear which new options provided by the Companies and Associations Code are widely used and which options are less popular. This being said, one trend became very clear from the start. Newly incorporated companies more often opt for a BV/SRL form, whereas in the past, at least for the larger corporate groups, the NV/SA form was considered the go-to form.

Since the entry into force of the new Companies and Associations Code, about 96% of the newly incorporated Belgian companies have taken the form of a BV/SRL and the number of newly incorporated NV/SAs has decreased by 20% in the same period. 

Listed companies

Listed companies were allowed to apply the 2020 Belgian Corporate Governance Code to reporting years beginning on or after 1 January 2019 and are obliged to do so for reporting years beginning on or after 1 January 2020. The application of the 2020 Belgian Corporate Governance Code will be externally monitored through listed companies’ Corporate Governance Charter, published on their websites, and their Corporate Governance Statement, included in their annual report.

Liedekerke Wolters Waelbroeck Kirkpatrick

Boulevard de l’Empereur 3 Keizerslaan
1000 Brussels
Belgium

+32 2 551 15 15

+32 2 551 14 14

info@liedekerke.com www.liedekerke.com
Author Business Card

Law and Practice

Authors



Liedekerke Wolters Waelbroeck Kirkpatrick is one of Belgium’s foremost business law firms. Based in Brussels, with offices in London, Kinshasa (DRC) and Kigali (Rwanda), and independent since its creation in 1965, the firm has established an international reputation based on its unique experience and unchallenged expertise acquired in all areas of business law. Liedekerke’s clients are active in a broad range of industries, to which it offers first-rate, creative and personalised full-service advice. The firm has a strong advisory practice based on sector expertise and an in-depth knowledge of Belgian and European law. It represents clients in complex litigations before national, European and international courts – both judicial and arbitral – the Court of Cassation, the Council of State and the Belgian Constitutional Courts. With over 100 lawyers, including 29 partners, Liedekerke is commonly recognised for its ability to quickly mobilise competent, flexible and multidisciplinary teams anywhere.

Trends and Development

Authors



Liedekerke Wolters Waelbroeck Kirkpatrick is one of Belgium’s foremost business law firms. Based in Brussels, with offices in London, Kinshasa (DRC) and Kigali (Rwanda), and independent since its creation in 1965, the firm has established an international reputation based on its unique experience and unchallenged expertise acquired in all areas of business law. Liedekerke’s clients are active in a broad range of industries, to which it offers first-rate, creative and personalised full-service advice. The firm has a strong advisory practice based on sector expertise and an in-depth knowledge of Belgian and European law. It represents clients in complex litigations before national, European and international courts - both judicial and arbitral - the Court of Cassation, the Council of State and the Belgian Constitutional Courts. With over 100 lawyers, including 29 partners, Liedekerke is commonly recognised for its ability to quickly mobilise competent, flexible and multidisciplinary teams anywhere.

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