Het nieuwe Wetboek van Vennootschappen en Verenigingen – Boek 11 – De stichting

Het nieuwe Wetboek van Vennootschappen en Verenigingen – Boek 11 – De stichting

The legislator has taken advantage of the reform of company law to also update the rules on associations and foundations. As regard foundations, the Belgian legislator has clearly tried to base Belgian foundations more on the popular Dutch Trust Office (STAK). This contribution highlights the main changes.

What is a foundation?

A foundation is a legal entity without members, which pursues a disinterested goal. It is set up by its founders via an authenticated deed. Unlike a company or an association, a foundation has no shareholders or members.

The new Companies and Associations Code (CAC) recognises two types of foundations: (i) the private foundation (PS in Dutch) and (ii) the foundation of public utility (SON in Dutch).
The CAC brings together the rules concerning all legal entities into a single code. The rules on foundations have been included in Book 11, Part 3 of the CAC. As such, the CAC also replaces the Law of 27 June 1921 on non-profit associations, foundations and European political parties and foundations (“V&S” law in Dutch).

Private Foundations
In practice, a private foundation is often used as an instrument to bundle the voting rights of a certain group of shareholders, and separate them from the financial rights attached to shares. This is intended to prevent fragmentation of control and is interesting, for example, in companies with a lot of family shareholders or in start-ups/scale-ups with various small shareholders. The foundation then functions as a “trust office” and certification vehicle: the shareholders transfer their shares to the foundation, whose board then exercises the voting rights attached to the shares, and in exchange receive certificates representing the financial rights of the shares. In principle, the incorporation of a foundation trust office is tax-neutral.
These days, people often choose a “foundation trust office” under Dutch law when setting up a private foundation. This choice is mainly prompted by the extensive flexibility of this Dutch legal form, which allows the articles of association to be written in accordance with the foundation’s purpose. Belgian private foundations are less flexible on some points and therefore less popular.

Foundations of public utility
A foundation of public utility can only be set up in the light of exhaustively listed purposes, which are of a philanthropic, philosophical, religious, scientific, artistic, educational or cultural nature. It could be, for example, a fund to manage scholarships or to manage an art collection.

A foundation is a company
In the past, it was not always clear which activities a foundation was allowed to carry out. This has now been clarified: like companies and associations, foundations are an undertaking within the meaning of the Code of Economic Law. As such, foundations can carry out any activity to provide the necessary financial resources to achieve their disinterested purpose. On the other hand, foundations, like associations, are not allowed to have a profit distribution objective. It is therefore possible to perform an economic activity without any restrictions, provided that the profits are not subsequently distributed to the founders or directors.

Management
Until recently, a foundation had to appoint a collegial management board with at least three directors. In practice, that was not always straightforward for every foundation. If, for example, a private foundation is set up as a trust office for the central management of a share portfolio, it is often decided to entrust the management, and therefore the voting rights attached to the shares managed by the foundation, to only one person. This is possible under the new CAC: one director is now enough. In so doing, the legislator is trying to catch up with the popular Dutch foundation.
The new Article 11:8 of the CAC also provides for a mandatory regulation of conflicts of interest, which is inspired by company law. A director who is in conflict with the disinterested purpose of the foundation must abstain. Their statement and explanation regarding the conflict are included in the minutes of the meeting of the management board making a decision. If all directors, even if there is only one director, conflict with the disinterested purpose of the foundation, they take the decision themselves or carry out the transaction themselves. This is a logical consequence of the lack of a general meeting in the foundation, to which no referrals can consequently be made. The other directors describe in the minutes of the management board the nature and the financial consequences of the decision. If there is only one director, they shall set this out in a special report. These are then filed together with the annual accounts.
By analogy with the statutory provision for companies, the legislator has now also provided for a statutory provision concerning the limitation period for liability claims against directors or liquidators of the foundation. This period is 5 years.

Foundation dossier and formalities
Finally, some practical new features have been introduced to ensure the consistency and uniformity of the new Code:

  • Under the previous Code, commitments in the case of a foundation being incorporated had to be taken over within six months. The legislator has now set this period at three months for all legal entities.
  • The foundation dossier was taken over from the V&S law and will also contain the judicial decisions on the nullity of the foundation in the CAC, whereby the legislator has also provided for a filing period of 30 days.
  • The disclosure obligations for foundations were thirty days under the previous law, but given the available technological advances, this period has been reduced to 10 days in the new Code, for all legal entities.
  • The grounds for invalidity are now also listed in a limited way in the CAC.

Next contribution
The next contribution will cover Book 2: Common provisions for all legal persons.

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