Private limited company

The private limited company (BV) presents a number of characteristics of a partnership (personenvennootschap), given that the focus with this company is mainly on the identity of the individual shareholders. The persons with whom  you cooperate are key,  so that for a private limited company it is much easier to stipulate in the articles of association who can be shareholder of the company and who cannot be a shareholder. Mainly small and medium-sized enterprises opt for the  private limited company form.

The private limited company (BV) is also more flexible than its predecessor, the private company with limited liability (BVBA). The law allows, in particular, to depart, at different places, from the articles of association, so that you can create a more customized company.

You may set up a private limited company through an authentic deed at a notary.

Incorporation formalities

Founders

You can incorporate a private limited company alone or with two or more persons. Both natural persons and legal persons can incorporate a private limited company.

Financial plan

If you wish to incorporate a private limited company, you must, then, draw up a financial plan. In the financial plan you set forth which sources of financing you shall use to endow the private limited company with capital. This financial plan has a statutorily required minimum content. The financial plan is an important document, because a judge shall use it in assessing the founder’s liability in case of a bankruptcy. For that reason, founders often seek assistance from an accounting professional for drawing up a financial plan. You hand over your financial plan to a notary, who shall keep it on file.

If your private limited company goes bankrupt, you will, then, be able to prove with the financial plan that you have sufficiently thought through the risks of your business and the sources of financing which you would need for such an activity.

Contribution

For each share in the private limited company, you will have to contribute something. You can proceed with a contribution in cash, in kind or in the form of industry (such as labour or know-how). In the case of a contribution in kind or in the form of industry, a certified auditor shall have to assess the contribution.

A private limited company has no real minimum capital, although you are obliged to provide a private limited company with an apparently sufficient initial capital. If your private limited company has an apparently insufficient initial capital to conduct its business activity for a period of  two years, then you bear founder’s liability, if a judge orders the bankruptcy of the private limited company within three years after the incorporation.

As a shareholder, your founder’s liability is, nevertheless, limited to the contribution you have committed to at time of incorporation. It is possible to avoid bearing any founder’s liability as a founder, if you appear in the deed as an ordinary subscriber/shareholder, although there are conditions related thereto. Ordinary subscribers/shareholders cannot possess together more than two-thirds of the shares, must proceed with a contribution in cash and cannot enjoy directly or indirectly a special advantage.

Articles of association

The articles of association of a private limited company are a reflection of the rules to which the company is subject. From a legal-technical standpoint,  however, they are much more complex, because, depending on the case, the articles of association can also govern the rights and obligations between shareholders mutually, between shareholders and the company, between directors and the company and between the company and other third parties. The articles of association must comply with the law.

In order for third parties to have access to a minimum set of information about the company, the law imposes a number of mentions which need to be included compulsorily in the articles of association.

Set forth below is  a brief description of these legally compulsory indications to be included in  the articles of association. To the extent permitted by law, the parties can also govern additional matters in their articles of association.

1. Legally compulsory indications to be included in the articles of association

a) Legal form, name and office

The articles of association must indicate the legal form of the company (BV) and its name. This name must be unique, since a legal person must bear a name which differs from any other legal person.

In the articles of association, you must also include the Region where the office of the company is situated. It is not required to include the address of the private limited company in the articles of association, since it may be made public simply by extract in the Annexes to the Belgian Official Gazette. In this manner, it can be easily changed, if needed, afterwards.

b) Shares

The articles of association must also indicate a number of things with regard to shares.

Thus, you must mention the number of issued shares and the possible transfer restrictions. If there are classes of shares, you must also indicate the number of shares for each class, the possible transfer restrictions and the rights per class.

c) Term
In the articles of association, you must also write whether your private limited company has an indefinite or fixed term. The standard term is the indefinite term.

d) Financial year
In the articles of association of your private limited company, you must indicate the start date and end date of the financial year.

e) Directors and their powers
Irrespective of whether a private limited company is managed by one or more directors, you shall have to indicate a number of things in the articles of association with regard to the management of the company.

If the private limited company also opts to include a day-to-day administration in its articles of association, then mainly the same key points apply.

Thus, the articles of association determine:

• The number of (executive) directors;
• How you will appoint them;
• Whether the (executive) directors are competent to represent the private limited company as a body, alone or jointly;
• How the powers are divided between the different bodies.

f) objects
In the articles of association you must  also  include the objects of the private limited company. The objects of the private limited company are mainly a description of the activities which the company may conduct or may not conduct.

Through the platform, you can select the desired activities. If you do not find any appropriate category or are not sure where to classify it, do not hesitate to consult your notary for advice.

g) Annual meeting
The articles of association of the private limited company must also contain information with regard to the annual general meeting. Therefore, you must indicate the place, day and time of the annual meeting. Apart from that, you must also stipulate in the articles of association the conditions under which terms shareholders can be admitted to the general meeting and the conditions for the exercise of their voting rights.

2. Optional information to be included in the articles of association

In  addition  to  the legally compulsory indications to be included in the articles of association, there are also a large number of other matters you can optionally establish in the articles of association, such as:

• the effect under the articles of association of the pre-emptive right;
• the rights and obligations of the usufructuary-shareholder and the bare owner-shareholder;
• the possibility for a written or electronic general meeting;
• the transfer of shares and transfer restrictions;
• the creation of classes of shares with different rights;
• the remuneration of directors;
• complex constructions in the field of representation and internal management;
• a regulation to provide a framework for contributions in industry;
• the agreements about profit allocation;
• the rules for the voluntary retirement and forced exclusion of shareholders at the expense of the company’s net asset
• ….

Language

The deed of incorporation and other company documents of the private limited company are drawn up in one of the official languages of the language region where the company has its registered office. Non-compliance with this obligation leads to the nullity of the deeds.

For a company which is incorporated in the bilingual region of Brussels-Capital (the 19 municipalities of Brussels), the deeds and documents may be drawn up  either in Flemish, or in French, or in bilingual form (e.g. in 2 columns).

For a company which is incorporated with an office in the Flemish-speaking region, even in a municipality with language facilities, all deeds and documents must be drawn up compulsorily in Flemish.

For a company which is incorporated with an office in the French-speaking region, all deeds and documents must be drawn up compulsorily in French.

For a company which is incorporated with an office in the German-speaking region, all deeds and documents must be drawn up compulsorily in German.

Identification of persons

When you take part in the incorporation as a founder or ordinary shareholder, or are designated as director, you must be identified in the deed.

This identification comprises your last name and first names, your place and date of birth and your domicile. In addition to this, your unique identification number is also included, which is the Belgian national register number, if you have one, or otherwise your number in the bis-register of the Crossroads Bank for Social Security.

The directive also further provides that you must identify yourself with an eIDAS-conformable means of identification of your member state.

Formalities after the incorporation

After having signed your deed of incorporation, you must still complete a number of formalities before the private limited company can conduct its business activities.

The notary will file the deed of incorporation and the excerpt of the deed of incorporation at the registry of the commercial court where the registered office of the private limited company is located, within thirty days after the signing  of the deed. Within ten days after the filing, the publication of the excerpt in the Annexes to the Belgian Official Gazette takes place.

In addition to this, the private limited company must be registered at the Crossroads Bank for Enterprises. Through this registration, the authorities are informed that your company shall participate in legal transactions as an undertaking.

The text of the articles of association shall also be filed separately in a database of articles of association which can be publicly consulted

In such database, the provision of the articles of association concerning the power of representation of the directors shall also be included and can be consulted.

The private limited company shall, furthermore, have to apply for a VAT-number. This application must be issued by the company itself.

Management

Forms of management

A private limited company can be managed by one or more directors, who may be natural or legal persons, who may or may not form a body.

In principle, each director of a private limited company is authorized to exercise individually the powers of the management body, unless the articles of association limit the power of each director or stipulate that the directors constitute a collegial management body.

In the private limited company, the following forms of management are, thus, possible:

• a sole director;
• several directors who are each individually/severally competent; or
• several directors who constitute a body together.

The directors are appointed in the deed of incorporation or in a later resolution passed by the general meeting.

The day-to-day administration of the private limited company can be assigned by the management body to one or more persons. The day-to-day administration comprises, on the one hand, decisions which do not go beyond the everyday life needs of the company. On the other hand, it concerns decisions which do not require the management body’s intervention, because they are of lesser importance or very urgent.

Conditions

In principle, the general meeting can appoint any legally capable person as director. There are, in other words, no legal appointment conditions. The directors can be either legal or natural persons, may or may not be shareholders, and also their nationality is of no importance. The articles of association of the company in question can, however, set  certain appointment conditions, provided that the general meeting still maintains freedom of choice as regards the appointment.

Although there is great freedom with regard to the appointment of directors, the law still imposes restrictions in specific cases. This is the case, for example, for companies which conduct regulated business activities or listed companies. Moreover, some persons cannot be appointed director, because of their position, such as public officials, magistrates, military personnel,….

A legal person which is appointed director, must always designate a permanent representative. That permanent representative is charged with the performance of the director’s mandate in the name and on behalf of the director-legal person. Outside of the fact that this permanent representative must be a natural person, there are no special appointment conditions which apply in such regard. It is, however, not possible to be appointed to the management body both in one’s own name and the capacity of permanent representative.

Powers

The management body may perform all acts which are useful or expedient for the realization of the objects of the company, except for those for which, by law, the general meeting is competent. The articles of association can limit the power of the management body and can possibly transfer some powers to other bodies.

Each director, or in case of a collegial management body, the management body, is authorized to represent the private limited company towards third parties. The articles of association can, nevertheless, grant the power to one or more directors to represent the company alone or jointly.

The management body can assign the day-to-day administration to one or more persons. The day-to-day administration comprises, on the one hand, decisions which do not go beyond the everyday life needs of the company. On the other hand, it concerns decisions which do not require the management body’s intervention,  because they are of lesser importance or very urgent.

Disqualifications applicable to directors

In some cases the judge can impose a prohibition on exercising the function of director. Such a prohibition can be imposed on the occasion of a criminal conviction, or within the framework of a judicial dissolution or a bankruptcy. The violation of a director’s disqualification can be sanctioned by a prison sentence and a fine.

Disqualification from a profession deriving from criminal law
The judge can impose upon a person who is convicted as an offender or accomplice for certain criminal offenses as additional punishment the prohibition on performing during a specific period a director’s mandate or a function with the power to bind the company. The judge can also prohibit a person from performing a director’s mandate in a Belgian branch of a foreign company. This prohibition can be imposed upon  both natural and legal persons. The criminal offenses in question concern, among other things, the falsification of documents, bribery, extortion, fraud, breach of criminal tax provisions. The complete list of criminal offenses can be found in art. 1 of the Royal Decree of 24 October 1934 regarding the injunction imposed upon some convicted persons and bankrupt persons prohibiting them from exercising some offices, professions or activities. The term of the criminal disqualification from a profession is determined by the judge who imposes it and cannot be less than 3 years or more than 10 years.

In addition to this, the criminal court judge can impose the prohibition, in case of a fraudulent bankruptcy or misuse of corporate assets, on conducting trade personally or through an intermediary.   This prohibition can also not be less than 3 years and more than 10 years.

If a person has been convicted abroad of  one of the above-mentioned criminal offenses, the Indictment division can still pronounce the disqualification from a profession.

Disqualification from a profession within the framework of a judicial dissolution
The commercial court can impose a disqualification from a profession upon a director who refuses to cooperate with the liquidation of a judicially dissolved company. Upon the closing of the liquidation the prohibition can be imposed, in that case, on exercising the position of director personally or through an intermediary. If the dissolution of the company was pronounced abroad, this power accrues to the commercial court of Brussels. The term of this disqualification from a profession cannot exceed 3 years.

Disqualification from a profession deriving from insolvency law
If a business goes bankrupt and the judge finds that an apparent major error by the bankrupt person has contributed to the bankruptcy, the court can impose a prohibition upon the bankrupt person from running a business personally or through an intermediary. This prohibition can also be imposed upon a director of a bankrupt business whose removal was not made public one year before the declaration of bankruptcy, or upon the person who actually managed the business (without having been appointed as director). In addition to this, the prohibition can also be imposed on performing any mandate which entails the power to legally bind a legal person. The court shall establish the term of the prohibition, subject to a maximum of 10 years.

If the bankruptcy was pronounced abroad, the insolvency court of Brussels is authorized to impose such a prohibition.

The court can also impose the prohibition on exercising the function of director upon directors of a bankrupt company who have not given their full cooperation to the bankruptcy trustee. In such case, the duration of the imposed disqualification cannot exceed 3 years.

Register
The existence of a disqualification from a profession is not indicated in the Crossroads Bank for Enterprises or another central register. The information about this can only be found in the Belgian Official Gazette.

Closing a business

A company can be dissolved in three ways:

• by a dissolution automatically by law  (e.g. after the expiry of the term of the company);
• by a judicial decision; or
• voluntarily by a decision of the shareholders.

During the dissolution, a liquidator will sell the assets of the company to pay off the creditors with the proceeds. The balance which remains after payments to the creditors, accrues to the shareholders of the company. Upon the conclusion of the liquidation, the company loses its legal personality and ceases to exist.

A voluntary dissolution can also occur in a simple manner through the procedure of dissolution and liquidation in one deed. Through this procedure, the shareholders decide unanimously to dissolve at a moment in which all debts have already been paid  to the creditors. No liquidator is appointed and the remaining assets accrue, after the dissolution, automatically to the shareholders.

Additionally, it is also possible that the company may be declared bankrupt by the commercial court. The bankruptcy order can be issued if the company can no longer pay its debts and no longer obtains  credit from its creditors.