1. Under the present law
Despite slight reluctance to an NPO having an equity holding in a commercial company, today this
is possible, provided specific rules of thumb are respected.
1. An NPO can only own shares in a limited liability company. The NPO cannot be a shareholder
of an unlimited liability company, as this would mean it acquiring the capacity of trader, which
would fundamentally conflict with the NPO status.
2. The articles of association of the NPO are intended to make it possible to have an equity
holding in a commercial company.
3. Only the competent body within the NPO can decide whether to acquire, retain or reject such
an equity holding, or not. If the articles of association mention nothing concerning it, this
authority falls to the Board of Directors. Depending on the significance of the equity holding, it
may be advisable to consult with the General Meeting.
4. The equity holding must form part of the achievement of the NPO’s aim. Any payments
received on the basis of this equity holding (e.g. dividends) must remain within the NPO, and be
used in order to realise its statutory aim. Purely speculative equity holdings are not permitted.
If the NPO makes profit and distributes it amongst its members, it can be categorised as a
partnership, which means the members are jointly liable for the debts of the NPO, even after
departure (for up to 5 years).
5. A more delicate question is whether an NPO can take a majority equity holding in a
commercial company. If you do not wish to take any risks, it is best to make do with a minority
equity holding. If an NPO has a controlling equity holding, which is completely in line with the
statutory activity of the NPO, we see no fundamental objections to this. AN NPO which controls
company policy via a controlling equity holding, does not perform deeds outside the description of
its aim. The company in which the NPO has a controlling holding is and remains the company which
performs commercial activities.
6. It is difficult to justify an NPO investing the majority of its assets in one or more equity
holdings in companies. A commercial company can go bankrupt, and in the given circumstances, this
could prove fatal for the NPO in question.
2. Under the future law – Upcoming reforms in association law
In December 2016, Minister of Justice Geens presented his ambitious reforms in “De sprong naar
het recht van morgen” (The leap towards the law of tomorrow). The aim is to modernise all of the
basic codes of Belgian law. This includes legal persons law, companies and associations.
What are the key aspects of the reform so far?
The basic principle, in addition to a simplification of the number of company forms, is the focus
of the different types of legal persons. The following amendments are proposed:
1. Distribution of profits becomes the distinguishing criterion be-tween companies and
associations. The ‘non-profit’ principle disappears and is replaced by the new, sole difference
between association and company: ‘no distribution of profits’.
Meanwhile, associations and social-profit organisations have added a condition to this ban on the
distribution of profits, i.e. payment of profit to members or third parties – whether financial or
material, direct or indirect – shall be forbidden, unless the members or third parties form part of
the beneficiaries of the altruistic aim of the NPO. This addition was accepted by the
2. The opening-up of association law, or the unrestricted admission of economic activities for
associations, however, in the service of specific altruistic aims (see Point 3 below). The
restriction to secondary economic activities disappears.
3. In addition to the ban on paying-out profits, a second, positive criterion is added to the
definition of an NPO: each NPO must have one or more well-defined “altruistic” aims.
4. Associations will fall under bankruptcy law, subject to certain adjustments. They will
therefore be able to seek protection from their creditors too.
3. What might this mean for an NPO holding equity in a commercial company now?
The reform is still in a preparatory phase, so there are no final texts yet.
On the basis of the documents available now, an NPO will also be able to have equity holdings in
a commercial company in the future.
The rules of thumb mentioned under 1 and 2 disappear, subject to Rule of Thumb No. 4. Rule of Thumb
No. 3 remains fully applicable.
Rule of Thumb No. 4 must therefore be read in the sense that an equity holding in a commercial
company must serve an altruistic aim, as defined in the articles of association of the NPO in
question. Any payments received on the basis of this equity holding (e.g. dividends) must remain in
the NPO and be used for the achievement of its altruistic aims, unless this ‘profit’ is
distributed to members or third parties, in as much as this fits in with the context of the
altruistic aim of the NPO.
The same applies for Rule of Thumb No. 5.
As NPOs will fall under bankruptcy law just like companies, Rule of Thumb No. 6 articulates a
general rule of thumb which applies to all (natural person, or legal person (company and/or