The Code of Companies and Associations (hereinafter: “CCA”) provides for a number of far-reaching changes relating to “capital increases” in the private limited company (the former BVBA/SPRL, hereinafter: “BV/SRL”). In general, we can state that in the future there will be more possibilities regarding to additional contributions in the BV/SRL. The rules of the game are to a large extent similar to what is already possible under current law in the public limited company (NV). In this article Deminor gives you an overview of the novelties.
Additional contribution without issue of new shares: no amendment to the articles of association
Under the old law, a capital increase always implied an amendment to the articles of association, and the decision to do so had to be taken with three-quarters of the votes. This is no longer the case in the CCA: in the BV/SRL, the general meeting can more easily decide with a simple majority to make an additional contribution without issuing shares. This additional contribution still requires an authentic certification by a notary.
The ratio for this change is double. On the one hand, the CCA abolishes the capital concept in the BV/SRL, as a result of which the amount of the company’s authorized capital no longer appears in its articles of association. On the other hand, the number of shares issued remains unchanged after this intervention. A contribution without an issue of shares therefore no longer makes it necessary to amend the articles of association on these points.
Contribution with issue of new shares: issue report
Under the old law, the BV/SRL only required a special report from the administrative body in the case of a capital increase involving a contribution in kind. The CCA now requires the administrative body to account for the issue price in a report each time new shares are issued. The consequences for the property rights (such as profit and liquidation surplus rights) and membership rights (such as voting rights) of the existing shares must also be explained in this report. In this way, the purpose of the CCA is to adequately inform the shareholders, who must vote on the proposal to issue new shares at the general meeting, of the consequences of this transaction. Without an issue report, the resolution of the general meeting is void.
Moreover, when convertible bonds or subscription rights (the new name for the current warrants) are issued, the issue report must also justify the transaction itself, given its particular nature.
Issuance premium disappears
Under the old law, the issuance premium was used as an accounting figure to assign a correct value to existing shares in the event of a capital increase. Issuance premiums are recorded in a company’s accounts to reflect the difference between the issue price of new shares and the nominal or fractional value of existing shares. Since the capital concept has been abolished and the issue price of new shares can now be freely determined, the figure of the issuance premium is no longer relevant.
Preferential subscription right
With regard to contributions in cash, the CCA stipulates that the preferential subscription rights of existing shareholders must be exercised per category of security and per type of share. In the BV/SRL types of shares were already possible for some time, but the CCA ensures that the BV/SRL can now also issue all securities that are not prohibited by or under the law. In this way, different categories of securities within the BV/SRL become possible and a preferential subscription rights scheme is in fact the only logical consequence.
The CCA further stipulates that this preferential subscription right cannot be restricted or cancelled by the articles of association. However, the general meeting may do so in the interest of the company, in accordance with a procedure provided for by law.
Contribution in kind (labour)
Under the old law, a contribution in labour (i.e. the commitment to perform work or services) to the BV/SRL could not be remunerated with shares with a capital-representative value. This rule is abolished in the CCA. The contribution in labour to the BV/SRL therefore becomes possible and constitutes a contribution in kind.
For contributions in kind, the existing regime of control by the statutory auditor or auditor was maintained but was stylistically reformulated in the light of the abolishment of the concept of ‘capital representative value’.
The procedure concerning the quasi-contribution was not taken over by the CCA: the legislator considers that the rules on conflicts of interest will provide the necessary guarantee in this respect.
New: ‘authorised capital’
As it was already possible in the NV under the old law (so-called ‘authorised capital’), the general meeting will also be able to delegate in the BV/SRL the power to the director(s) to issue new shares, convertible bonds or subscription rights for a period of five years. This principle is referred to in the BV/SRL as a ‘delegation of power to the administrative body’, which must be included in the BV’s/SRL’s articles of association.
Generally speaking, we can say that the CCA makes additional contributions to the BV/SRL just a little easier in so far as no new shares are issued, and just a little more difficult when they are (e.g. the issue report). In addition, many possibilities, which under current law are reserved for the NV, are now also possible in the BV/SRL (e.g. the delegation of power to the administrative body). The increased flexibility that characterises the BV/SRL in the CCA is yet another indication of the legislator’s aim to make this form of company the standard.
Deminor will be happy to advise you on the modelling of your BV/SRL. Do not hesitate to contact us for more information.