Book 4 of the Belgian Companies and Associations Code (the ‘CAC’) contains rules for partnerships (NL: ‘personenvennootschappen’) in which the partners have unlimited liability for the company’s obligations.
Since Book 4 contains the rules for companies with and for those without legal personality, for companies with legal personality, i.e. vof and CommV, Book 2 also applies.
We will discuss the most important provisions from Book 4 below.
The maatschap as a basic concept
Under the new Code the basic model for partnerships will be the maatschap. Maatschappen can be either ‘undisclosed’ or ‘temporary’. If the maatschap acquires legal personality, it becomes a vennootschap onder firma (‘vof’) in which all the partners are jointly and severally liable, or a commanditaire vennootschap (‘CommV’) in which a limited number of partners have liability.
Please note: the concepts ‘tijdelijke handelsvennootschap’ (temporary trade company, ‘THV’) and ‘stille handelsvennootschap’ (undisclosed trade company) are no longer used as from 1 November 2018.
The absence of legal personality means that the maatschap is not categorised as a separate legal entity and therefore cannot act as such in legal proceedings; that the goods in the maatschap form part of the capital of the partners, not of the partnership; that the partners are liable for debts of the maatschap with their personal capital, etc.
Furthermore, parties do not get to establish any other company form than the one statutorily provided. Companies that do not meet the legal parameters are considered maatschappen.
Formation of the Partnership
The CAC doesn’t change the rule that the maatschap may be formed through private agreement.
The partners may determine their share in the profits and losses of the maatschap, as well as in the capital of the partnership in case of termination of the maatschap.
The maatschap-agreement may not distribute all of the profit to just one of the partners, nor may it deny one or more partners any of the profit (so-called leonine nullity, as such a clause would be inconsistent with the essence of the partnership agreement).
What is interesting, though, is that the old BCC provision that ‘monies or goods may not be exempt from any contribution to the loss’ is deleted from the new CAC. This means that a clause exonerating a partner from losses, is now valid.
Board of the maatschap
The maatschap shall be managed by one or more managing directors, who may or not be partners, in a capacity as mandatary. Unless the partnership agreement or certificate of appointment provides otherwise, they may fulfil their task separately.
Special protection may be provided by entrusting the management of the partnership to the managing director in a separate clause. In that case the mandate may be withdrawn either on legal grounds which are for the court to decide, or by unanimous vote of the partners, or in accordance with any majority rules provided in the agreement.
If no management arrangements have been included in the agreement, the partners are deemed to have authorised each other to manage and bind the maatschap. Thus, any act carried out by either of the partners is binding on the other partners, unless either of them raises an objection before the act has been performed.
Decisions of the partners
The CAC also provides that in a meeting, the partners may unanimously take all the decisions concerning the partnership or that change the partnership agreement, unless the agreement provides that resolutions are passed by a majority of votes.
The clause that allows the partners to change the agreement by a majority of votes does not allow to change the fundamental object of the partnership. In this context, the Explanatory Memorandum to the Code contains the following example: a partnership formed to provide transportation services, for instance, may not be transformed unilaterally into a partnership providing IT services.
The CAC does not change the existing rules as regards the assets of the partnership and the rights of creditors. Consequently, the principle remains unchanged that creditors of the partnership have recourse to the partnership’s assets and simultaneously to the assets of the partners. However, personal creditors of the partners have recourse only to the related partner’s share and the profits paid to that partner. The existing exception for undisclosed partnerships is maintained also, particularly in that creditors have recourse only to the partner or manager who dealt with them in his or her own name.
However, the CAC does relax the conditions for being considered a creditor of the maatschap. From now on, partners will not just be liable to creditors who have entered into agreements with the partnership, but, in a broader sense, to creditors ‘whose claim arises from the partnership’s activities’.
Limitation of liability
The CAC provides a much discussed limitation of liability for directors of companies (please refer to one of our earlier editions for details). The limitation applies only to directors of companies with legal personality, hence not to the management of a maatschap, but indeed to that of a vof or CommV.
Dissolution and liquidation of the maatschap
The CAC largely maintains the reasons leading to the dissolution of a maatschap: expiration of the term; destruction of the good or performance of the activity; the death, legal incompetence, liquidation, bankruptcy or insolvency of either partner; the resolution passed by the partners, either unanimously or with a majority of votes as specified in the agreement; the fulfilment of a resolutive condition of the agreement.
However, the practice of continuation and survivalship clauses is worked out in more detail in the new CAC. The law now provides that partnership agreements may determine that the death of either partner does not automatically imply the dissolution of the partnership, but that instead it may be continued either by the successors or beneficiaries, or by the surviving partners. This is referred to as a continuation clause and a survival clause, respectively.
The CAC also introduces the option of partial judicial termination of the partnership agreement and confirms the validity of clauses concerning the retirement and exclusion of partners without resulting in the dissolution of the maatschap.
Every interested party may demand the appointment of one or more liquidators before the president of the Business Court of the partnership’s registered office in fast-track proceedings.
Special rules for vof and CommV
Contrary to the maatschap, the vof and the CommV are partnerships with legal personality.
For these partnerships, the CAC provides a number of special rules, including:
- In a vof and CommV the managers constitute the management body.
- The partners in a vof and CommV cannot be convicted in person for obligations of the partnership as long as the partnership itself has not been convicted.
- Partners in a CommV may not perform acts of management. Advice and counsel, checks, as well as proxies granted to managing directors for actions outside their competence, are not acts of management.
- Partners in a CommV are liable only for the monies and goods they promised to contribute to the partnership, unless they are alleged to have performed acts of management or to have taken up the habit of taking care of the partnership’s affairs, or if their name appears in the name of the partnership.
A maatschap is a company
Besides the numerous new provisions contained in the CAC it is important to know that since the Act on reforming business law entered into force on 1 May 2018, a maatschap is considered a company. This means that, just like any other Belgian company, the maatschap is now subject to the following rules:
- Mandatory registration in the Crossroads Bank for Enterprises (CBE).
- Requirement to keep records with due observance of the common rules on double-entry bookkeeping (that said, certain maatschappen with a limited turnover may stick to single-entry bookkeeping).
- Maatschappen can go bankrupt.
- The Ultimate Beneficial Owner of the maatschap must be recorded in the UBO register.
- Disputes relating to the maatschap now have to be brought before the Business Court for settlement.
In the next edition we will discuss Book 5: the private limited company