The corporate and association law reform will take place through the implementation of a new
Code of Companies and Associations.
As with company law, the changes to the association law are based on three pillars:
transparency, simplicity, and harmonization.
The new legislation is still in the design phase and can therefore still be subject to
Hereafter are the main points highlighted, which are already known through the literature and
publications of the Minister of Justice.
Please note however, that the changes in insolvency law that apply to non-profit organisations
already take effect from 1 May 2018.
1. From non-profit to non-benefit
First the reform act aims to put an end to an undesirable effect of the current law on
non-profit organisations dating back from 1921. In the current law, the non-profit organisation is
described as "the association that does not carry out industrial or commercial activities and
that does not try to provide a material benefit to its members".
The first condition in this definition, "not driving commercial activities", is
loosely interpreted in practice. It is now accepted that a non-profit organisation carries out
economic activities, if these activities are of an "ancillary nature". For example, the
local youth association that organises a fundraising activity and sells food. But also bigger
businesses, such as professional associations, football clubs, have adopted the status of
non-profit organisation and carry out commercial acts that tie in with their activities.
This flexible interpretation created legal uncertainty. Where is the limit of this
"ancillary nature" after all? A restaurant or a bar of a non-profit organisation can
generate so much revenue that a "non-profit" stamp seems far-fetched. In addition, many
illegitimate non-profit organisations operate under this name, and misuse their main not for profit
purpose for conducting commercial activities.
Therefore, the "ancillary nature" criterion is too arbitrary. Because of that, the
distinction between civil and commercial acts will disappear. From the original definition, only
the prohibition of benefit distribution remains intact.
2. A not for profit corporate object
To avoid that every company that does not make a profit distribution (e.g. start-ups in the
first financial years after the incorporation) is classified as an association within the scope of
the new law, the additional criterion is that the non-profit organisation needs to have one or more
mentioned above, distribution or granting benefits to members or third parties is prohibited,
unless the members or third parties are part of the beneficiaries of the “disinterested” purposes
of the association (which, for example, can be the case with associations for people with a
particular disease, where people with this disease are members or directors of this
3. How about the corporate tax?
The introduction of the new law will not cause adjustments or changes to the tax treatment of
the non-profit organisations.
The criterion of the secondary nature of the economic activity therefore remains important to
determine whether the non-profit organisation is subject to corporation income tax or income tax on
legal entities, and whether or not it can benefit from a (favorable) tax treatment.
Non-profit organisations are subject to corporate income tax if the economic activities exceed
the limit of the ancilliary nature criterion. The tax authorities and eventually the court will
base their judgment on factual elements.
According to current information, the ancillary nature criterion will not change in tax law,
even after the introduction of the new company and association law.
4. The non-profit organisation as an enterprise: a minor change with major consequences
Another important point in the reform of corporate law is the replacement of the concept of
"merchant" by a broader “enterprise” concept.
As a result, non-profit organisations will also be qualified as enterprises. This has an impact
on both insolvency law and the law on directors' liability.
4. 1 The non-profit organisation can be declared bankrupt
On 1 May 2018, the new insolvency law will come into force and the Code of Economic Law will be
supplemented with Book XX "Insolvency of Enterprises".
Due to the fact that the non-profit organisation will be deemed to be an "enterprise",
the non-profit organisation can be declared bankrupt as from 1 May 2018 onwards. But also a
judicial reorganisation of the non-profit organisation, in accordance with the Insolvency law will
4.2 Directors' liability also applicable to directors of non-profit organisations
Finally, the qualification of the non-profit association as an "enterprise" means that
the rules regarding the directors' liability, which previously only applied to companies, now
also apply to the non-profit organisations and their directors.
The directors of the non-profit organisation will be held jointly and severally liable under the
new legislation for mistakes made by the board, acting as a collegial body in the exercise of their
The only way to avoid director's liability is to prove that the director did not participate
in a wrongful act, for example by mentioning this in the minutes of the board meeting.
Special bases for liability will also be applicable to directors of the non-profit organisation.
For example, the liability for violation of the new Company Code will be a basis for liability as
well as the liability in the event of bankruptcy, if it is established that an obvious gross error
by the directors has caused the bankruptcy.
With the forthcoming reform, the non-profit organisation will be considered as an
This has consequences in respect of insolvency (the non-profit organisation can be declared
bankrupt, or can apply for the judicial reorganisation procedure) and for the scope of the
liability of the directors of the non-profit organisation, is broader, similar to the current
director's liability applicable in companies.
By abolishing the "ancillary nature" criterion for commercial activities, the
non-profit organisation will be able to carry out unlimited economic activities, as long as it does
not distribute or grant material benefits to its members or directors. However the matter rule
doesn't apply if the directors or members are beneficiary of the non-profit organisation's