The new Belgian Code of Companies and Associations (‘CCA’) abolishes several forms of companies for the sake of simplification. Among these is the limited partnership by shares (the ‘LPS’).
The LPS, which is much less frequent than the NV/SA or the BVBA/SPRL, had nevertheless been the subject of renewed interest since the 1990s. It is now commonly found in the field of collective investment schemes (public, institutional or private), regulated real estate companies or crowdfunding.
LPSs are constituted by one or more general partners who are responsible and jointly and severally liable for the company’s commitments, and one or more limited partners, who only commit their contributions. The general manager also has a veto right for decisions of the general meeting and amendments to the articles of association.
That’s why the LPS is interesting for investor/investment manager relations.
Given its characteristics, the LPS is also very interesting in terms of the transfer of family businesses.
The fact is that the limited partnership by shares:
- ensures the anchoring and stability of the managing partner;
- allows flexible determination of the balance of powers and the distribution of profits among the shareholders;
- provides legal certainty by referring to the provisions governing the NV/SA.
At present, a person can thus transfer the (bare-)ownership of all the shares of a family LPS to his children while reserving for himself the status of manager-associate.
It is also possible to appoint deputy managers in accordance with the articles of association to replace the managers who may pass away.
There are also two-tier structures with a holding company constituted as an LPS holding the shares of a patrimonial or operating company. In this case, the manager has control similar to that of the administratiekantoor under Dutch law.
Do these possibilities disappear with the new Code?
Not quite. According to the explanatory memorandum, the flexibility provided by the legislator to the NV/SA regime makes it possible to set up a tailor-made system to meet the concerns of the managers of the current LPSs.
Based on a NV/SA structure, most of the characteristics of LPSs can be maintained in the articles of association. The CCA provides :
- that the corporation may be managed by a single director;
- that his successor may be designated in the articles of association;
- that the articles of association may provide for unlimited liability;
- that a statutory veto right may be granted regarding amendments to the articles of association, the distribution of profits or its own revocation.
However, under the new regime, the statutory veto right of the single director is necessarily and doubly limited. On the one hand, the single director may always be excluded by the general meeting for legitimate reasons and under the quorum and majority conditions required for any amendment to the articles of association (50% attendance and 75% of votes). On the other hand, shareholders representing 10% of the voting rights (or 3% of the capital in a listed company) can unanimously appoint a special mandatary who can demand the dismissal of the sole director for legitimate reasons.
In addition, the CCA now allows voting rights and profits to be distributed freely and in an unbalanced manner among shareholders.
What happens to existing LPSs?
Since May 1, 2019, it is no longer possible to incorporate a limited partnership by shares.
From January 1, 2020 and until they are transformed into another corporate form, existing LPSs will continue to be subject to the current Company Code but will simultaneously be subject to the mandatory provisions of the CCA concerning a NV/SA with a single director.
This joint reading of the two Codes will likely complicate the company’s operations and create confusion in the law applicable to it, especially since, in the event of a conflict, the CCA prevails over the Company Code.
In addition, as from January 1, 2020, any amendment to the articles of association triggers the obligation for the LPS to comply with the new CCA and, therefore, to transform itself into another corporate form.
LPSs that have not yet adopted a new corporate form by January 1, 2024 will automatically be transformed into a NV/SA with a single director. It should be noted that the legislator has not considered the case where the LPS is administered by several general partners and that there is therefore uncertainty in this respect.
Almost all the advantages of the LPS can be kept in an NV/SA structure. However, this will require several changes to the articles of association in order to adapt the new structure as closely as possible to the needs of the company and its shareholders.
Therefore, and in view of the above, it is recommended that the transition to the new regime is implemented quickly, both to avoid the complications of a joint reading of the Codes and to make the most of the new opportunities offered by the CCA.
Deminor accompanies you through each step of your transition to the new regime.
Do not hesitate to contact Stéphanie Abiraad for any further information.
