The Companies and Associations Code (CCA) enters into force on 1 May 2019.
As you will already have read, the CCA retains the partnership (maatschap/société simple) as the basic form of partnerships (personenvennootschappen/sociétés de personnes). It is also the only partnership without legal personality, the general partnership (VOF/SNC) and the ordinary limited partnership (CommV/SCS) being the types with legal personality.
Therefore, anyone wishing to adopt the form of a company without legal personality after 1 May 2019, will still have to do this by means of a partnership (maatschap).
1. The partnership under the new CCA
Over recent years, the partnership (maatschap/société simple) has become a hugely popular company form for family estate and succession planning, but, this form is equally interesting for professionals wishing to work in cooperation.
Under the new CCA, the silent and the temporary trading company permanently disappear. They are accommodated under the partnership without legal personality.
1.1 The partnership (without legal personality)
The flexible nature of the partnership permits adaptation to a "silent" or a "temporary" partnership.
Under the new regime, the partnership may be "silent" if it is managed by a business manager acting in his own name, without further mention of the other (silent) partners.
In addition, this company form can still be "temporary", and entered into for the period of a specific operation (building site, project, etc.).
1.2 The general partnership (VOF/SNC) and the ordinary limited partnership (CommV/SCS)
These forms are not abolished under the new regime. However, from now on they will be classed as partnerships with legal personality.
A partnership will be designated a general partnership if all partners have unlimited joint and several liability for the undertakings of the partnership.
In the event of the addition of further partners with limited liability, who are only liable for the amount of their contribution, the partnership is regarded as an ordinary limited partnership.
For the most part, therefore, the CCA rules applicable to this company form, match the existing rules, with little change in style.
However, we should straight away add that the reformed company law (see Point 2) did create a minor upheaval for the partnership.
2. The partnership as an enterprise, since the reformation of corporate law
Since the introduction of the Reformed Corporate Law, with phased entry into effect on 1 May and 1 November 2018, the partnership is also regarded as an enterprise.
This actually led to the silent demise of the traditional civil-law partnership (origin: Civil Code).
2.1 The Reformed Corporate Law imposes new duties on the partnership
A partnership will still be able to be formed privately (without the intervention of a notary public).
However, the Reformed Corporate Law ensures that from now on the partnership, like any other company under Belgian law, (inter alia) must satisfy the following conditions:
- registration in the Crossroads Bank for Enterprises (KBO);
- (simplified or double-entry) accounts, and;
- registration of the ultimate beneficial owners of a partnership in the UBO Register.
Please Note! For partnerships formed from 1 November 2018 in, the Reformed Corporate Law is immediately applicable. Partnerships which existed prior to 1 November 2018 have until 1 May 2019 to comply. (E.g. registration in the CBE (10,000 euro fine), accounts, etc.).
2.2 Business manager of the partnership
The Reformed Corporate Law also makes it clear that the business manager is competent to act on behalf of the partnership. This is a positive development, as there was some debate concerning this in the previous legislation.
2.3 The partners are jointly and severally liable
From now on, all partners of a partnership are jointly and severally liable for all debts of the partnership (contracted from 1 November 2018), whereas this was previously only the case for the partners of a commercial partnership. This is a new risk for the partners of a civil-law partnership, although in practice partnerships rarely have debts.
Consequently, each creditor may collect his entire debt from any partner, in most cases this will be the most solvent partner.
It is important to know that this joint and several liability can be deviated from, both in the articles of association and in contracts. For instance, the articles of association may stipulate that the business managers may not conclude agreements which lead to the joint and several liability of the partners. This kind of deviation clause may also be foreseen when concluding a contract with third parties.
2.4 Enterprise Court is competent
Another major consequence of the Reformed Corporate Law is that all disputes relating to this company form will henceforth be handled by the Enterprise Court.
3. Omnipotence ruptured
In addition, the Ghent Court of Appeal seriously ruptured the omnipotence of the business manager under the articles of association (i.e. often the mother or father of the family wishing to organise the family assets). The Court confirmed the appointment of a provisional administrator in a family partnership to manage a control package in an operational company. The business manager a partnership has a fiduciary mandate that he must exercise in the interest of the partnership, and thus, not solely in his own interest.
Taking account of this, and the new conditions imposed by the Reformed Corporate Law, we can conclude that the partnership has straight away lost its main advantages as regards estate planning (discretion, formality-free format, certainty with regard to management).
In this context, it will be more expedient to set up a construction of (private) agreements, family pacts (agreements) and well-considered gifts. The renewed foundation may also provide some solace in this regard.
Previously, partnerships could be set up without respecting any formality, and therefore very discretely. Therefore, this form of company was very popular for estate and succession planning.
Since the arrival of the new legislation, the partnership must, amongst others, be registered in the CBE (KBO/BCE), and must register its ultimate beneficial owners in the UBO Register, thus revealing its existence and thereby losing discretion.
Nevertheless, the partnership still provides numerous advantages, and assurance of its continued existence.
This, because except for the renewed foundation, there is no alternative company form which provides the formality-free incorporation and confidential nature of the former partnership.
However, as previously mentioned, it is possible to achieve a result similar to a partnership, using an elegant combination of private (shareholder) agreements, appropriate use of the new types of shares provided for in the CCA, gifts, family pacts (agreements) and succession agreements.
Our specialists will be happy to help you with this. Feel free to contact them.
In a following article, we will explore in depth the Private Limited Company (BV), the spearhead of the new CCA.