31 December 2023: deadline for aligning articles of association with Code of Companies and Associations

The ‘new’ Code of Companies and Associations (hereafter, the “CCA”) entered into force on 1 May 2019 and is by now so well established that we no longer use the term ‘new’.

The transitional regime provided that companies, associations and foundations had to bring their articles of association in line with the CCA at the next amendment of the articles of association after 1 January 2020. Even if this has not yet been done, the mandatory provisions of the CCA already apply from 1 January 2020. Provisions in the articles of association that conflict with these mandatory provisions will be held to be unwritten. The non-mandatory l provisions of the CCA will also apply from the same date, insofar as the articles of associations do not exclude them.

For legal persons that have not yet amended their articles of association, this entails that these articles of association may sometimes no longer be applied. It is always necessary to first verify that the CCA does not contain deviating (mandatory) provisions.

In addition, a transitional period applied, expiring in a few months, on 1 January 2024. By 1 January 2024, the articles of association of companies, associations and foundations must be brought in line with the provisions of the CCA.

The date of 1 January 2024 should be particularly watched by companies and associations operating under one of the legal forms abolished under the CCA. After all, they may wake up under a different legal form on 1 January 2024.

In this blog, we describe the steps to be taken in connection with the end of the transition period and the consequences for the company, association or foundation that does not amend its articles of association in time.

Disappearing legal forms

The CCA is cutting back on the number of company and association forms. In particular, the limited partnership on shares, the cooperative company with unlimited liability, the company with a social purpose and the trade association will disappear, along with a number of other less common legal forms. To the extent that the conversion has not yet taken place on 1 January 2024, they will be converted automatically into the form stipulated in the transitional regime from that date. For example, a limited partnership on shares automatically becomes a limited liability company with a sole director, a cooperative company with unlimited liability a general partnership, a trade association (or federation thereof) a non-profit association. It may therefore be worth considering, for example, a switch from a limited partnership to a private company, rather than being uninvitedly converted into a limited liability company: there is no longer a minimum contribution required for a private company and one shareholder suffices.

Slightly different arrangements apply to the cooperative company with limited liability and the social purpose company.

Under the CCA, the legal form of a cooperative company may only be used by a so-called “proper” cooperative company that meets the essential characteristics of a cooperative, as laid down in the CCA and in the seven principles of the International Cooperative Alliance (“ICA”). These companies become a cooperative company under the CCA. A company that does not meet these conditions will be converted into a private company, either through an earlier amendment to the articles of association or by operation of law on 1 January 2024. In practice, meanwhile, it appears that the ICA principles in particular leave room for different (legal) interpretations so that the line between a ‘proper’ and ‘improper’ cooperative company is far from always clear. When in doubt, the private company is the safe choice.

Until 1 January 2024, all companies with a social purpose are presumed to be recognized as a social enterprise. But a company with a social purpose (now social enterprise) in the form of, for example, a private company or a limited liability company (since that possibility existed under the old Companies Code), must be converted into a cooperative company no later than 1 January 2024, under penalty of losing its recognition as a social enterprise. If it wants to keep its recognition as a social enterprise, it is therefore essential to make the conversion prior to 1 January 2024.

Non-profit association (VZW/ASBL) and international non-profit association (IVZW/AISBL)

For (international) non-profit associations, there may be an additional reason to amend the articles of association, in particular their object. This is because until this is done, the ‘old’ restriction on commercial activities remains applicable and this until 1 January 2029. An (international) non-profit association without an amended object thus remains restricted in its permitted economic activities until 1 January 2029.

What next?

In a nutshell: the directors must convene the general meeting to vote on an amendment to the articles of association by 1 January 2024. For a non-profit association, this can be done without the intervention of a notary; for other entities, a notarial deed is (almost always) required.

Even if the company or association has to be converted, this can be done through a simple amendment of the articles of association. The procedure of conversion included in Book 14 CCA, which requires, among other things, a report by the statutory auditor or a company auditor, does not apply.

What if?

What if the directors fail to convene a general meeting by 1 January 2024? In that case, according to the CCA, they will be personally and jointly and severally liable for any resulting damage suffered by the company, association, foundation or by third parties. Such damage may result, for example, from conflicts arising between shareholders and the company as to exactly which legal regime applies.

For those companies and associations that have to be converted (for any of the reasons set out above), there is an additional rule and penalty. If not done earlier, they will be converted to the new legal form by operation of law on 1 January 2024. No later than 30 June 2024, the management body must then convene the general meeting with on the agenda the adaptation of the articles of association to the new legal form. Again, each member of the management body is personally and jointly and severally liable for the damage suffered by the company, association, foundation or by third parties if the general meeting is not convened in time.

An existing company with a social purpose that fails to convert to a cooperative company (if it was not already) by 1 January 2024 will lose its recognition as a social enterprise.

If the 1 January 2024 deadline is missed, there is not necessarily reason to panic. After all, it is possible that sitting idle will not cause any (provable) harm in practice. But surely, a prudent director will not let the 1 January 2024 date slip by just like that…

If you have questions or if you want more information, please contact: yvette.verleisdonk@aurionlaw.be or sarah.verschaeve@aurionlaw.be