7 Things Every Association Leader Needs to Know about the Belgian Association Law Reform
Belgian association law is about to change significantly, and the impact of this reform cannot be overestimated. Given the extensive upcoming changes, the new Code will affect every single company and association based in Belgium in various ways. All associations will need to review their statutes and governance processes in light of the challenges arising and opportunities created by the new reform. Here are seven key facts you need to know to prepare.
1) What Law Is Affected?
Associations with a seat in Belgium are currently governed by the law of 27 June 1921 on associations (ASBL), international associations (AISBL), and non-profit organisations. This law was last amended by the Act of 2 May 2002. This legal framework will be completely replaced by a new Code of Companies and Associations.
2) Why the Reform?
While many European and international associations chose Belgium as their official home, the legal requirements in the region are rigid and complex. The main goals of the reform are to simplify the existing legal framework and to give those organisations affected greater flexibility for their internal operations. The philosophy driving the reform will ideally make Belgian company law more attractive for both Belgian and foreign investors.
3) What Has Happened to Date?
On 20 July 2017 the Belgian Federal Council of Ministers approved a draft bill introducing a complete new Code of Companies and Associations. On 4 June 2018 the draft Code on Companies and Associations was presented to the Belgian Parliament. The draft law has already been discussed in a Commission of the Chamber of Representatives, the last meeting having taken place on 16 July 2018. However, no date has been announced yet for the vote in the Parliament.
4) What Will Change?
Although the full text of the new Code has not yet been agreed upon, some changes can already be foreseen based on publicly-made available drafts:
- More Opportunities to Raise Funding: By virtue of the new rules, associations will be able to conduct any type of activities without limitation, including profit-making activities. All profits must be reinvested in the social objective of the association to distinguish associations from enterprises. In addition, any change in association activities has to be reflected in the association statutes. As long as an association has not adapted its statutory purpose, it can only carry out ancillary economic activities.
- Clearer rights for Association Members: The rights and obligations of members will have to be explicitly included in the statutes. Moreover, the members’ right to defend themselves in case of resignation or exclusion from the association is more clearly formulated: the law requires that they are heard.
- More Defined Mandate for Association Directors: In the new law, the General Assembly is responsible for clearly determining the terms of board members’ mandates (remuneration, contribution to insurance, non-cash benefits, conditions to end a mandate, etc.). It will not be possible to confer this exclusive competence to another body. Moreover, a legal person with a board member mandate within an association must designate a natural person as permanent representative from now on.
- Clearer Rules on Association Administration: When signing an act that commits an association, the capacity in which the representative is acting must be clearly stated before or after their signature under the new law. Moreover, board members can use the legal address of the head office of the association for everything related to their mandate, avoiding as a result to divulge their private address. Finally, the membership register can be kept in electronic form from now on.
- Clear Majority Rules Concerning the Decision-Making Processes: The new law foresees that decisions made by General Assemblies are adopted by a simple majority of the attending and represented members, to the exclusion of absentees, blank votes and abstentions. A two-thirds majority is applied to statutes amendments, in which case abstentions will also be recorded.
- One Court for All: The end of the divide between civil and commercial company law will lead to the development of a single court called the Company Court [tribunal de l’entreprise/ondernemingsrechtbank], which is currently the Commercial Court. This court will include specialised judges who are familiar with the association sector for litigations involving associations.
- Obligatory Registration in the Crossroads Bank for Enterprises (CBE): Associations will have to actively register via the recognised one-stop-shop for companies at the CBE as “company subject to registration”. This will only apply from a date that will be set by the King and after which the association will have 6 months to register. The registration is free for associations.
- Income Tax: From a tax point of view, little change is expected as associations can already be subject to corporate income tax under the current legal settings.
- No Changes Expected regarding Volunteers: ASBLs can still benefit from the help of volunteers for activities linked to its social objective. There may be some impact on volunteering arrangements, but more details will be required to evaluate this further.
- To find out more: Here is the full text of the draft law (in French and Dutch) for your review: http://www.dekamer.be/FLWB/PDF/54/3119/54K3119001.pdf
5) How Will the Change Impact My Association?
- Statutes: The change in law will require many associations to review and update their statutes. Changes in the roles and responsibilities of the board of directors may be required. Any references to outdated laws or bodies (such as courts) will need to be replaced.
- Structures, Bylaws and Processes: Associations may want to take this as an opportunity to review their governance structures and processes. Anti-trust regulations may need to be reviewed, volunteering contracts rewritten, and liability clauses and insurances updated.
- A Time to Explore New Legal Structures: ASBLs will be able to transform into AISBLs (international associations), and vice versa, and into corporative enterprises certified as social companies. The regulation on mergers and divisions will also apply to associations.
- New Opportunities for Raising Income: Diversifying income is both a key challenge and opportunity for 21st century associations. The change in law invites a review of the association’s funding model: is there an opportunity to raise additional income through events, commercial partnerships, or services to non-association clients?
- Liability for Directors: Board members are responsible towards the association for gross mismanagement mistakes they make while fulfilling their mission. As a group, board members are also liable towards the association and others for damage resulting from violations of the Code of Companies & Associations or the association’s statutes, even in the absence of a collegiate administration body. This liability will range from €125.000 to €12 million depending on the association’s annual turnover and balance sheet total. Limitations on the contractual and statutory liabilities beyond legal regulations are prohibited. Exemption and warranty clauses given by the association to its board members are also prohibited. Moreover, board members remain subject to the particular liability regarding unpaid social contributions, VAT and income tax.
Stricter rules don’t apply to small associations in the cases of serious misconduct leading to the bankruptcy of the association and wrongful trading by board members who continue to lead an association that is irretrievably lost.
6) What Do We Need to Do to Prepare?
- Identify weaknesses and opportunities: 2018 is a good time to review your statutes and bylaws and to update your governance to ensure it’s not just legally compliant, but also fit for the future.
- Set a time plan: Governance changes take time and need to be well prepared. Set your time plan to ensure that your association is fully compliant with the new legislation in good time.
- Invest in a Director’s Liability Insurance: Especially medium and large associations are strongly advised to take out a liability insurance for their directors to protect these key volunteers from financial risks.
7) What is the Timeline?
2018: Adoption of the draft law and first set of changes
This bill is expected to be adopted by the Federal Parliament over the course of 2018.
It is also important to note that some changes have already been implemented for associations. Since 1 May 2018, the insolvability law and the bankruptcy law can apply to associations. And as of 1 November 2018, litigations involving associations are judged before the Company Court.
2019: The new Code enters into force
The bill should enter into force in 2019. Associations founded in 2019 will have to comply with the new Code from the moment of their creation.
2020: Application of the new Code for existing associations
The mandatory provisions of the Code will apply to existing associations as of 1 January 2020 even if they haven’t adapted their statutes. After that date, associations that decide to change their statutes for whatever reason will have to make at the same time the necessary changes to comply with the new rules. If they fail to do so, directors will be liable and may be sanctioned.
2024: Ultimate deadline for adapting the statutes of associations
Existing companies and associations will have until 1 January 2024 to adapt their statutes to the new provisions, allowing them a long transition period. If associations miss this deadline, directors will be liable and may be sanctioned.
TBD: Registration in the CBE
The King will set a date after which associations will have 6 months to register in the CBE. Subscribe to out newsletter to be kept informed.
How Interel Association Management Can Help
As a professional association management practice, Interel’s European Association Management is well versed in designing effective and legally compliant association governance structures. We support European and international associations of all sizes to future-proof their statutes, bylaws and governance structures. Whether you need help with a strategic governance review, or support in optimising texts, structures and processes, Interel Association Management is a great partner to support you along the way. Feel free to contact us with any questions, ideas or comments, we’d love to help.
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