Duty to disclose for sole-shareholder (so-called one-man) companies

In an earlier news story on our website, we explained that ever since the Belgian Code of Companies and Associations (BCCA) came into force, private and public limited liability companies can be incorporated by just one shareholder, and these companies can continue to run their businesses if they remain a one-person company throughout its lifecycle. It has always been possible to have only one shareholder incorporate a private limited liability company (a “BV” or besloten vennootschap in Dutch) (albeit with a higher paid-up capital required), but this was not so for a public limited liability company (the “NV” of naamelooze venootschap in Dutch). If an NV became a one-person company later on, that one shareholder would be held solely liable for all of the company’s obligations that arose after it became a one-person company (if this one-person status lasted longer than one year), and a third party would only be able to know about it as soon this information was disclosed in a public notice, hence the legal obligation to do so.

That news story, which was about the duty to disclose if there is only one shareholder, ended as follows:

“If Belgian lawmakers are reading this: we would like to hear your reasoning for why these obsolete formalities have survived the so-called modernization and flexibilization of Belgian company law.”

The lawmakers seem to have read this and provided clarification in their response to the questions about this duty to disclose, which were raised before parliament as follows:

“1.How much time does a company have to fulfil its duty to declare and disclose under Articles 2:8, §4 and 2:14, 4 of the BCCA?

2.Why do companies still have to fulfill the old requirements to declare and disclose when they evolve from having multiple shareholders to only one shareholder?

3. What purpose does this duty to declare and disclose serve, since the sole liability of the only shareholder doesn’t exist anymore?

4. A company’s governing body is liable for the harm suffered by third parties if the company fails to fulfil the duty to declare and disclose. What harm or loss can third parties suffer as a result of the breach of this duty, since the only shareholder’s sole liability for debts of the company doesn’t exist anymore?”

The Minister for Justice answered these questions on 4 January 2024, which can be summarized as follows:

  • For question 1, he confirmed that companies have a 30-day period to have their corporate instruments and changes to them published, as mentioned in Article 2:8 BCCA, and this also applies to announcing in a public notice that all shares have been acquired by one person. The 30-day period starts to run from the time the deed confirming the transaction has been authenticated.
  • The second and third question, which concerns the reason for keeping the rule and the need for the rule, were dealt with simultaneously, since the only shareholder’s sole liability has been abolished. But the answer refers to only the fact that the reason for declaring and disclosing has a broader purpose and does not merely serve the only shareholder’s sole liability context. This broader purpose was not clarified, however. Whatever reasons these could be, besides the removal of sole liability, has not been explained further. Reference was made to the objective of having notices published in the Annexes to the Belgian State Gazette, which is to disclose information about the company to third parties, but no clarification has been given about why this information must be disclosed.

Moreover, the UBO register gives clarity about the shareholding (and more), although it cannot be accessed by anyone (anymore), and the Belgian State Gazette has a wider public reach. But then it seems more logical to publish information about the complete shareholding and not only in the event of a sole-shareholding.

  • Regarding the last question, what kind of harm or loss would third parties suffer that could lead to director liability, it was only repeated that this concerns harm or loss suffered by third parties. However, since the only shareholder’s sole liability has been abolished, this also means a third party’s right to recourse against that sole shareholder has been abolished as well. Harm or loss suffered by third parties rather seems to be a theoretical scenario and risk.

Notices that are published in the Annexes to the Belgian State Gazette, especially depositing them with the court’s clerk, are not always evident (the last government circular from the Minister for Justice dated October 2023 did not help to clarify this, unfortunately). So this is a formality that creates unnecessary administrative burden for the board.

If the lawmakers are reading this again: we seek your removal of this rule; a simple deletion of Art. 2:8 §4 BCCA will do just fine.

This article is written by

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