Now or never? Last chance for mandatory update of your bylaws to the new legislation
Summer vacation is already over, and though we would have welcomed a bit more sunshine - we're still entertaining the idea of opening an office in Cuba 😉 -" we are diving into the new judicial year with charged batteries - and yes that started on September 1, because lawyers like to complicate things. Our to-do list is already well stocked, and hopefully there is still a spot on yours that can be filled with "amend bylaws." Perhaps not the most exciting agenda item - although we think otherwise 🤓 - but it is urgent and, moreover, it also offers your company or association opportunities. Read along:
Legal Requirement
Let's take a moment to look back: The Companies and Associations Code, CAC, (“Wetboek van Vennootschappen en Verenigingen”, WVV, in Dutch) came into effect in 2019. It provides that companies have 4 years to adapt their bylaws to this new law. This transition period will end on December 31, 2023. Therefore, by January 1, 2024, at the latest, your company's bylaws must be following the provisions of the CAC. High time to act on this if it has not already happened.
Who can rest easy?
If your legal entity was established on or after May 1, 2019, its articles of incorporation automatically comply with the CAC."
If you incorporated your legal entity before that, but have since changed your articles of association, you were in principle obliged to conform your articles of association to the CAC at that time. A check that your bylaws are complying and that nothing has been overlooked may suffice in that case.
Who needs to take urgent action?
If you have not amended your articles of association since May 1, 2019, now is the time to take action and update your bylaws to comply with the CAC. After all, as a director, you risk director liability for any damages resulting from the late amendment of your company's articles of association.
What is required to be adapted?
The CAC contains several new obligations from which you cannot deviate (mandatory provisions). These provisions apply automatically as of January 1, 2020. Any provisions in your articles of association that conflict with these provisions have since then been deemed non-written. It concerns, for example, the designations and abbreviations of company forms - for example, BVBA (private limited liability company, PLLC) automatically becomes BV (Ltd.; private company)- the double distribution test for profit distributions, the tightened obligations for the permanent representative of the director-legal entity, the limitation of directors' liability...
For legal certainty, it is advisable to remove the conflicting provisions from your company's articles of association to avoid further discussions. In addition, it can also be useful to mention mandatory provisions in the articles of association, even though they apply automatically, so that you, as a shareholder or director, are aware of them. We are thinking here, for example, of the provision concerning the conflict-of-interest regulation or the digital general meeting.
In addition, the CAC also imposes matters that you must mention in your articles of association. It's mandatory to specify the region where your company's registered office is located in your bylaws. Consequently, it is advisable to remove the specific address of your company from the articles of association to avoid an amendment of the articles of association in case of a move of the registered office within the same region.
Finally, the CAC has also significantly reduced the number of company forms: only the VOF (general partnership), CommV (limited partnership), BV (private company), CV (cooperative partnership) and NV (limited liability company) remain. If your company has a form that no longer exists in the CAC, you must convert your company to a new legal form. If you do not do so, on January 1, 2024, your company will be converted by operation of law to the most appropriate new legal form, followed by the mandatory adaptation of the articles of association to this new legal form by June 30, 2024, at the latest.
What new opportunities does the CAC offer?
The CAC offers many new opportunities for your company. In particular, the Ltd (BV) has undergone a metamorphosis. There is now much more flexibility to adapt this form of company to the needs of your business. For example, it is possible to include in the articles of association of a Ltd (BV) an arrangement concerning the resignation or exclusion of a shareholder at the expense of the company's assets, you can create different categories of shares, each with their own rights (voting rights, profit rights), you can issue shares without voting rights, you can provide a more flexible arrangement concerning the transfer of shares or you can provide that the directors carry out their mandate without remuneration...
In addition, it is also important to check that your articles of association are not stricter than what the CAC prescribes, which may cause you to miss out on more flexible arrangements.
Thanks to the CCC, your company's bylaws can now be customized and an amendment of the articles of association does not have to be boring or formalistic at all but can be a perfect moment to take a moment to reflect on how you see the operation and form of your company in the longer term.
LegalDirect is happy to help you with this and, in any case, puts the amendment of your company's articles of association high on its to-do list. For further questions, please do not hesitate to contact us!
Good luck!
Lize Beeckmans
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