The legislator has chosen to integrate the entirety of company and association law into a single new Code from now on, known as the Code of Companies and Associations (the “CCA”). It supersedes the ASBL/VZW Law of 1921 and the Law of 31 March 1898 on professional associations. This immediately provided a useful opportunity to synchronise association law with company law where possible.
Profitable activities and impact on fiscal law
The discussion of Book 1 previously mentioned that the distinction between companies and associations had been simplified considerably. Pursuing the distribution of profits is still the only distinguishing criterion, no longer the exercising, or not, of profitable activities. Therefore, associations will also be able to pursue profitable activities in the future, just as with companies. This profit, however, may not be distributed to its members either directly or indirectly. Caution remains advised, however, as from a fiscal viewpoint it continues to be a requirement that these profitable activities are solely of an incidental nature, such that the association remains liable for legal entities tax. Where this is not the case, the association will be subject to the (less favourable) corporation tax. We will be happy to explore with you what the impact of this will be on your association.
Harmonisation of certain ASBL/VZW-AISBL/IVZW requirements with those for companies
The collective provisions in Book 2 are also applicable to ASBL/VZWs and AISBL/IVZWs unless expressly provided otherwise in Books 9 and 10. Part of what this means is that from now on:
- an association’s memorandum of association must be laid with the Registrar within thirty days after formation;
- every association must register with the Crossroads Bank for Enterprises;
- the capacity in which members have signed the instruments in writing that form the association should always be included;
- it is possible to give an address for service of process at the association’s registered office for the exercise of a mandate;
- it is a requirement to appoint a permanent representative should a legal person (e.g. another ASBL/VZW) take up the mandate of a member of the board of directors or of day-to-day management;
- directors hold joint and several liability for contravention of the Articles of Association or of the CCA;
- directors may enjoy limited liability in accordance with the size of the ASBL/VZW (please note: this limitation applies solely to incidental minor errors; the majority therefore remain excluded from this restriction);
- there are only three months instead of six months to take over the obligations of the association being founded from the founder; and the association will be able to dissolve and liquidate itself in a single instrument in writing, where and insofar as the conditions for this have been met.
Producing an annual report
Book 3, which relates to annual reports and also applies to ASBL/VZWs and AISBL/IVZWs, also now obliges very large associations to draw up an annual report.
Recognition of an ASBL/VZW as a professional association
The former ASBL/VZW Law of 1921 and the Law of 31 March 1898 on professional associations itself have been converted into Books 9 and 10 of the CCA, which contains a number of specific provisions that apply to ASBL/VZWs and AISBL/IVZWs. Given that professional associations were abolished as separate entities by the CCA, this status was converted into a recognition of an ASBL/VZW as a professional association. Art. 9:24 of the CCA provides that the requirement here is that the ASBL/VZW was formed exclusively to study, protect and develop the professional interests of its members. In such a case, the Minister with responsibility for tradespeople may recognise the ASBL/VZW as a “professional association” or a “federation of professional associations”.
These books are also saturated with provisions that are clearly along the same lines as company law, however. For example, they now provide for the possibility of directors appointing a new director by co-option, with the aim of finding a (temporary) replacement for a director who has resigned or passed away. The notice period for convening an Annual General Meeting has also been extended from 8 days to 15 days, to bring this in line with that of an NV/SA. From now on, the association will also be bound by the actions of its board of directors, of the day-to-day directors and of the directors who are authorised to represent it, even if those actions are beyond its property, unless the association can prove that the third party was aware of this or, given the circumstances, could not have been unaware. The publication of the Articles of Association is not, however, sufficient evidence
The legislator also wishes to settle a number of points of contention in the administration of justice and legal doctrine. For example, it was previously unclear whether or not a director was permitted to participate in deliberation and voting in the event that they had a direct or indirect pecuniary interest that was in conflict with the interests of the association, for lack of any legal regulations around this. The CCA now provides clear regulations, which run parallel to the conflict of interest regulations that apply to NV/SAs. The director is therefore now required to inform the other directors of this before the board of directors makes a decision, and they may not participate in the board’s deliberation on this decision or action, nor vote in connection with it, under any circumstances.
The CCA also now provides for the express possibility of the board of directors coming to a decision by means of unanimous consent in writing, as well as the possibility of one director nominating another to represent them at a board meeting, on the condition that this option is included in the Articles of Association. There is an express provision on the requirement for the board of directors to take minutes of their meetings. The members’ right to ask questions at the Annual General Meeting is enshrined in law.
Number of founders – electronic register of members – members joining
Additionally, a number of provisions have been thoroughly revised, with a view to meeting the need for greater flexibility. For example, in the future it will be possible to set up an ASBL/VZW with only two founders instead of three. The requirement for the number of directors to always be lower than the number of people who are members of the association has been dropped. From now on, the board of directors will also be able to decide that the register of members will be maintained in electronic form, making changes easier to keep up with. The rights and obligations of joining members will be exclusively determined by the Articles of Association going forward and can no longer be included in internal rules and regulations.
Duty to hear a member upon exclusion – day-to-day management
Finally, the necessary attention was also paid to the codification of the established administration of justice. For example, the obligation to hear a member in cases of exclusion is explicitly included in the new legislation. The CCA further stipulates what should be understood by day-to-day management of the association from now on, these in particular being the actions and decisions with a scope no broader than the needs of the association’s daily life, as well as the actions and decisions that, either owing to their lesser importance, or owing to their urgent nature, do not justify the involvement of the board of directors.
Reorganisation – conversion
With a view to completing the integration into a single Code, Book 13 introduces a legal framework for mergers and splits in associations. Book 14 provides for the possibility of converting a company into an ASBL/VZW or an AISBL/IVZW, or the reverse, converting an ASBL/VZW into an SCES/CVSO (cooperative society with a social purpose) or an SC/CV recognised as having a social purpose.
Draft law with a view to ensuring accessibility
As you will have noticed, association law is being thoroughly reformed and the provisions applicable to associations and foundations are spread throughout the new CCA. This is why a law was proposed on 29 March 2019 with the aim of ensuring the accessibility of the law applying to associations and foundations. This law provides for a co-ordination of all applicable provisions to appear on the Federal Public Service for Justice website annually, albeit in an unofficial capacity.
Can’t see the wood for the trees any more? No worries! Our specialist lawyers with specific experience in the non-profit sector will be glad to help you on your way to confirming your association’s compliance with this new legislation. Make use of this opportunity to hold your association’s organisation and Articles of Association up to the light once more, and set out a framework for the future together.
A later contribution will examine Book 11: Foundations.