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.
4) What Will Change?
Although the full text of 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 economic activities without limitation. In such cases, they will be considered as enterprises. All profits must be reinvested in the social objective of the association.
Update the Role of Association Directors: The responsibilities of the directors of companies and of associations will be aligned. As there are already very few differences, little is expected to change. The new law also introduces a general cap on the liability for directors. Some reports indicate that directors of small non-profits may become fully exempt from any liability.
Associations and Bankruptcy: In line with the combined law for associations and companies, bankruptcy law will start applying to associations. Consequences are likely minor and, to date, it appears that there are no specific obligations related to this right and no significant additional responsibilities for associations.
One Court for All: The end of the divide between civil and commercial company law will lead to the development of a single court. Some fear that a combined court may not be as familiar with the specificities of associations as a dedicated civil court, but this remains to be seen in practice.
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.
Other Changes: There may be some impact on volunteering arrangements, but more details will be required to evaluate this further. There has not yet been an analysis of the impact of change in relation to compliance obligations, but as these are already very strict from EU side, little change is expected for European associations.
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.
Objectives: 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?
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 for the coming 18 months to ensure that your association is fully compliant with the new legislation by the end of 2019.
7) What is the Timeline?
This bill is expected to be adopted by the Federal Parliament over the course of 2018 and to be applicable as of 1 January 2019. According to the draft law, existing companies and associations will have at least one calendar year as from publication of the Code on Companies and Associations in the Belgian State Gazette to adapt to the new provisions.
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.