The new Belgian Code on Companies and Associations (hereinafter the ‘BCCA’) officially entered into force on 1 January 2020 for all not-for-profit associations which had not yet amended their statutes to it. Since 1 January 2020 the mandatory provisions thus apply to all not-for-profit associations, but associations have until 31 December 2023 to amend their statutes.
From now on, just like companies, not-for-profit associations will be regarded as ‘enterprises’ under this code. Not-for-profit associations are therefore no longer governed by separate legislation but integrated into the BCCA. They are subject to a number of common provisions in book 2 and 3 and to book 9 for not-for-profit associations and book 10 of the BCCA for international not-for-profit associations. This will result in greater harmonisation between companies and not-for-profit associations.
What are the specific consequences of this? We outline a number of them for you.
The topics which we discuss below are prescribed by law and thus important to monitor carefully. The statutes may not depart from mandatory law, and in the case of associations already in existence before 1 May 2019 and which have not yet had their statutes amended, the provisions of the statutes in breach of the mandatory provisions of the BCCA will be automatically overwritten.
Under the old legislation, not-for-profit associations or international not-for-profit associations were not allowed to engage in any industrial or commercial activities unless these were incidental to their purpose. The criterion of ‘profit motive’ under the old legislation has been changed to ‘profit distribution’ under the BCCA. Under the BCCA, (international) not-for-profit associations may perform commercial activities and generate profits, but they may only distribute this profit to the extent that this is necessary to achieve the disinterested purpose. Please note that as long as the statutes have not yet been brought into line with the BCCA, this prohibition will continue until 31 December 2028. So now is the time to take a good look at your statutes!
But what about corporation tax?
This has no fiscal impact in itself: the existing criterion of the incidental nature of the economic activity is retained. In order to know whether your not-for-profit association is subject to legal entity tax or corporation tax and can therefore benefit from favourable tax status or not, you must therefore take into account the incidental nature of your economic, commercial activity.
Do not start commercial activities too enthusiastically. If you end up within the scope of corporation tax as a result of commercial activities, this will have consequences for working with volunteers. Also take your government subsidies into account: many decrees require a ‘non-commercial’ legal form as a condition for awarding subsidies and this has not yet been brought into line with the BCCA.
Number of members and directors
From now on there are only 2 mandatory members instead of 3. There is no mandatory ratio between the number of members and directors, in other words the general meeting no longer needs to be larger than the governing board. The BCCA no longer mentions different types of member (founders, associate members) either, although this statutory distinction is still possible.
The BCCA now also regulates access to the register of members, which is now always permitted, regardless of whether a trustee has been appointed.
If there are only 2 members, then having only 2 directors is permitted. Moreover, co-option is now also possible, unless statutes preclude this.
Directors: two hats and cascades
As of 1 January 2020, a natural person can only sit on the governing board in a single capacity.
This means that if you sit on a governing board in your own name, you can no longer act as a permanent representative of a company and vice versa. The sanction for this is that board decisions may possibly no longer be validly taken as of 1 January 2020.
In addition, the ‘cascade’ of representations is also eliminated. As of 1 January, only a natural person can be a permanent representative of a company, i.e. not-for-profit association. A legal person will therefore not be able to appoint a legal person as a permanent representative.
We therefore advise you to check whether your governing board is aligned with the above and can take valid decisions.
Thresholds for accounting obligations
Since 1 May 2019 the following criteria have applied:
- There is talk of a micro not-for-profit association if no more than one of the following criteria is exceeded:
- Maximum annual turnover of €700 000 (excl. VAT)
- Maximum 10 FTE
- Balance sheet total of €350 000
->From 2021, a “micro-scheme” will be available for the annual accounts, until then the abbreviated schedule of the annual accounts can be used.
- There is talk of a small not-for-profit association if no more than one of the following criteria is exceeded:
- Maximum annual turnover of €9 000 000 (excl. VAT)
- Maximum 50 FTE
- Balance sheet total of €4 500 000
-> As soon as more than one of the aforementioned thresholds has been exceeded, there is talk of a large association. Then a trustee must be appointed within the not-for-profit association. Double-entry accounting is then also employed and the complete schedule of the annual accounts including the auditor’s report is used.
Simplified accounting :
- Not-for-profit associations that exceed more than one of the criteria listed below must employ double-entry accounting and file their annual accounts with the Central Balance Sheet Office of the National Bank of Belgium within 30 days of the general meeting and have this added to the company records at the Registry of the Ondernemingsrechtbank:
- Annual average number of employees: 5 or more
- Other than non-recurring revenue: €334,500 or more (excl. VAT)
- Assets: €1,337,000 or more
- Liabilities: €1,337,000 or more
If eligible for simplified accounting, then this only needs to be filed at the registry of the Ondernemingsrechtbank within 30 days after the general meeting.
As a reminder: the annual accounts and the budget of the following financial year must be submitted to the general meeting for approval within six months after the closing date of the financial year. The governing board draws up an inventory every year.
The accounts must now be filed for all not-for-profit associations within 30 days after approval by the general meeting.
The rules of procedure are now called “internal regulations”. The governing board can enact these internal regulations if it has statutory authorisation to do so. This authority can also be reserved for the general meeting. The statutes contain a reference to the version of the internal regulations most recently approved.
Conflict of interest scheme
The BCCA has introduced a conflict of interest scheme for not-for-profit associations.
When the governing board has to make a decision or decide on a transaction that falls within its competence, whereby a director has a direct or indirect interest relating to property rights that conflicts with the interests of the association, the director concerned must inform the other directors before the governing board takes a decision. His statement and explanation of the nature of this conflict of interest are recorded in the minutes of the meeting of the governing board which must take the decision. This director may not participate in the deliberations of the governing board and must abstain from voting on this point.
In a large not-for-profit association, the governing board must describe the nature of the decision or transaction to which reference is made and the property consequences thereof for the not-for-profit association in the minutes. Lastly, the final decision is also accounted for in the minutes. The part of the minutes on the conflict of interest is included in the annual report or in the document that is deposited together with the financial statements. If the not-for-profit association has appointed a trustee, the minutes of the meeting shall be communicated to him.
Directors’ liability extended
In addition to the liability rules already applicable, joint and several liability now applies to directors for errors made in the exercise of the directorship if the board violates the statutes or the BCCA. Liability is limited and can range from €125,000 to €12,000,000, depending on the average balance sheet total and the average turnover for the three financial years before the liability claim is filed.
The statutes can no longer indemnify the directors against liability towards the not-for-profit association or third parties. In addition, directors’ liability is now also extended to actual directors.
Ensure that your directors’ liability is well insured!
Other mandatory provisions
The BCCA has a number of mandatory provisions that have been applicable since 1 January 2020 and that even overwrite the statutes if the statutes have not yet been brought into line with the BCCA.
We list a few for you below:
- Remuneration of the directors must in future be determined by the general meeting, this is no longer a residual power of the governing board.
- From now on, documents emanating from the not-for-profit association must include the following information:
- The name
- Legal form
- Address of the registered place of business
- Company number
- Inclusion of the words “register of legal persons” or the abbreviation “RLP”, followed by the court of the legal person’s seat
- If official: e-mail address and website
- If applicable: that the not-for-profit association is in liquidation
- Rules regarding decision-making procedures by the governing board:
- Written decision-making by the governing board is possible if this is not explicitly excluded in the statutes.
- The minutes of the governing board are signed by the chairman and the directors who so request.
- Power of attorney can only be transferred to another director in the event of absence at the meeting of the governing board.
- Conflict of interest scheme
- Liability: directors can no longer indemnify the statutes against liability towards the not-for-profit association or third parties.
- Powers of the general meeting have been extended:
- Remuneration of directors;
- Establishment of association claim against the directors and trustee;
- Conversion of the not-for-profit association;
N.B.: Your statutes must be brought into line with the new list of powers as stated in the BCCA.
- The rules regarding the procedure of the general meeting have also been amended:
- The invitation to the general meeting must be delivered at least 15 days in advance, but may also be sent by e-mail now;
- Even directors who are not members of the general meeting and trustees must now always be invited to the general meeting to answer questions that relate to the agenda items;
- The discharge of directors and trustees must now be explicitly voted on;
- Only votes cast count: absent, void votes and abstentions do not count and nor do they count as a negative vote;
- New scheme to exclude a member.
Impact on your statutes – screen these thoroughly
We recommend that you check the status of your not-for-profit association and bring it into line with the new legislation. If you have any questions about this, please do not hesitate to contact us.