Corporate law
Table of Contents
Corporate law....................................................................................................................1
Nature and objective of the course..............................................................................................2
Introduction.................................................................................................................................3
SOURCES OF CORPORATE LAW......................................................................................................................3
APPLICABLE LAW.............................................................................................................................................5
REASONS FOR STARTING A COMPANY...........................................................................................................5
TYPES OF COMPANIES..................................................................................................................6
Various types of companies............................................................................................................................6
Companies can be divided according to various criteria: not on exam, understand!...................................6
Characterization of a company.......................................................................................................................7
European companies......................................................................................................................................8
Main types......................................................................................................................................................9
INCORPORATION OF A COMPANY..............................................................................................10
Definition......................................................................................................................................................10
Plurality requirement....................................................................................................................................10
Valid consent................................................................................................................................................11
Nationality – residency requirements..........................................................................................................11
CONTRIBUTION.............................................................................................................................................11
Profit purpose...............................................................................................................................................13
PROCEDURE..................................................................................................................................................14
LIABILITY OF THE INCORPORATORS............................................................................................18
CAPITAL – EQUITY - FORMATION................................................................................................18
Capital/ equity – Equity Formation...............................................................................................................18
Capital subscription......................................................................................................................................19
Contribution in cash......................................................................................................................................19
Contribution in kind......................................................................................................................................19
Contribution in labor / industry....................................................................................................................21
Quasi contribution........................................................................................................................................21
SECURITIES....................................................................................................................................................22
TRANSACTIONS DURING EXISTENCE............................................................................................................25
MAINTENANCE OF THE COMPANY’S ASSETS...............................................................................................29
CORPORATE ORGANS.................................................................................................................37
GOVERNANCE...............................................................................................................................................37
Directors........................................................................................................................................................39
Director’s liability..........................................................................................................................................42
General Meeting.........................................................................................................................45
General Meeting...........................................................................................................................................45
CONTROL - AUDIT.......................................................................................................................47
Statutory auditor........................................................................................................................47
ANNUAL CORPORATE COMPLIANCE...........................................................................................48
RESTRUCTURING........................................................................................................................49
MERGER........................................................................................................................................................50
DE-MERGER...................................................................................................................................................51
Partial de-merger..........................................................................................................................................52
1
, <instead of company F, SH of company F will receive the shares that are being issued by company Y ->
company Y will be more poor (less assets, less liabilities), but at the end value of their shares remain the
same..............................................................................................................................................................52
Split of your real estate, but you want to keep that company, so you do not want to de- merge. This can
be for economic reasons. Sometimes they fear that they need to have other contracts, etc. They take out
the real estate and put it into a new company, such that both companies keep existing. Current
shareholders will become shareholders of both companies (F and Y)........................................................52
PROCEDURE..................................................................................................................................................52
CONTRIBUTION - BRANCH OF ACTIVITIES....................................................................................................53
Nature and objective of the course
Importance of corporate law
- Relevance for society
- Relevance for companies and associations
Objectives
- Understand how a company functions
- Understand how shareholders, investors, directors, employees, creditors, and other
stakeholders, such as consumers, the community and the environment, interact with
one another under the internal rules of a company
2
,Introduction
SOURCES OF CORPORATE LAW
Sources
- Code of companies and associations
o Belgian law of 23 March 2019
o Replaces the Belgian Code of companies of 7 May 1999
Still applicable for companies existing prior to 1 May 2019
Lots of items stayed the same
Law is applicable to all “newly created companies” but not for existing
companies (before March 23, 2019)
- In some countries integrated in Civil code (f.e. The Netherlands)
- European directives
o Developing ideas about how to make the business world competitive
o Problem in BE = tax law always changes so companies don’t find it attractive
to move to Belgium)
- Jurisprudence (case law) = interpretation of certain rules by judge
=> REMARK: companies should always try to avoid the court, because court
procedures are very lengthy and costly. Better to solve conflicts without the
interference of a court, for example, through mediation (mediation also exists in the
private atmosphere, e.g. for divorces). Through mediation, all parties together can
decide upon an agreement. Opposite to the court, where a third party, namely the
judge(s), decide upon an agreement for the parties. A judge is not necessarily always
fair, because the judge might not have the time to look through all the aspects of the
process, or to look at the conclusions made by the different parties.
- Legal doctrine (texts, books, articles… written by experts)
Sources - EU Corporate law
- Most important directives
o Second directive of 13 December 1976 on the protection of capital
o Third directive of 9 October of 1978 on the merger of public liability
companies
o Fourth directive of 25 July 1978 on the annual accounts of companies
o Sixth directive of 17 December 1983 on the de-merger of public limited
liability companies
- EU – Directives
o Various initiatives by the European Commission to simplify and harmonize
corporate law
Eg; company might be in Belgium, but moves to France and should not
change -> flexibility makes it attractive for companies to invest in Europe
Provide an efficient and modern legal framework
Give (group of) companies a competitive advantage against other
world players
3
, o Communication from the Commission to the Council and the European
Parliament, Modernizing Company Law and Enhancing Corporate Governance
in the EU – A plan to move forward
Sets out the objectives of the Commission to harmonize and
modernize corporate law within the EU
- Consultation of groups of specialists
o SLIM – Simpler legislation for the Internal Market
Made proposal for new legislation to provide a more efficient and
modern legal framework adapted to the new global business
environment
o High Level Group chaired by Mr. Jaap Winter
Consultation procedure
Advice summarized in a report: “A modern regulatory framework for
company law in
Europe” of 4 November 2002
o Advice used as basis for new Directives on company law
Sources – US law: IMPORTANT (exam) – difference between US law and EU law?
- US law vs EU law
o EU law = civil law
Legal system inspired by Roman law – law is mainly codified
Belgian Civil Code, basic of these rules (of corporate law), go
back to time of Napoleon
You have rules that you have to follow
o USA / UK = common law
Case law
Law is developed through court case
=>example; in common law, decisions are made by a jury, consisting
of normal civilians (no juridical background). These civilians often
grant high indemnity fees (eg; when pedestrian gets hit by a falling
object when passing by a building under construction), bcs they think
“company has enough money anyway”. They are not as objective as a
judge (from civil law)
o US law
Corporate law – competence of local states
Companies choose in what state to incorporate their company
regardless of the location of their headquarters
Delaware
well developed corporate law and court cases (best taxes)
most companies in US are Delaware companies
o more predictable – more certainty for companies
=>in Belgium, if you have a company outside of
Belgium, it will not be considered as being a Belgian
company. <-> US; where a Delaware -incorporate
company does not have to have its seat in Delaware
4
Table of Contents
Corporate law....................................................................................................................1
Nature and objective of the course..............................................................................................2
Introduction.................................................................................................................................3
SOURCES OF CORPORATE LAW......................................................................................................................3
APPLICABLE LAW.............................................................................................................................................5
REASONS FOR STARTING A COMPANY...........................................................................................................5
TYPES OF COMPANIES..................................................................................................................6
Various types of companies............................................................................................................................6
Companies can be divided according to various criteria: not on exam, understand!...................................6
Characterization of a company.......................................................................................................................7
European companies......................................................................................................................................8
Main types......................................................................................................................................................9
INCORPORATION OF A COMPANY..............................................................................................10
Definition......................................................................................................................................................10
Plurality requirement....................................................................................................................................10
Valid consent................................................................................................................................................11
Nationality – residency requirements..........................................................................................................11
CONTRIBUTION.............................................................................................................................................11
Profit purpose...............................................................................................................................................13
PROCEDURE..................................................................................................................................................14
LIABILITY OF THE INCORPORATORS............................................................................................18
CAPITAL – EQUITY - FORMATION................................................................................................18
Capital/ equity – Equity Formation...............................................................................................................18
Capital subscription......................................................................................................................................19
Contribution in cash......................................................................................................................................19
Contribution in kind......................................................................................................................................19
Contribution in labor / industry....................................................................................................................21
Quasi contribution........................................................................................................................................21
SECURITIES....................................................................................................................................................22
TRANSACTIONS DURING EXISTENCE............................................................................................................25
MAINTENANCE OF THE COMPANY’S ASSETS...............................................................................................29
CORPORATE ORGANS.................................................................................................................37
GOVERNANCE...............................................................................................................................................37
Directors........................................................................................................................................................39
Director’s liability..........................................................................................................................................42
General Meeting.........................................................................................................................45
General Meeting...........................................................................................................................................45
CONTROL - AUDIT.......................................................................................................................47
Statutory auditor........................................................................................................................47
ANNUAL CORPORATE COMPLIANCE...........................................................................................48
RESTRUCTURING........................................................................................................................49
MERGER........................................................................................................................................................50
DE-MERGER...................................................................................................................................................51
Partial de-merger..........................................................................................................................................52
1
, <instead of company F, SH of company F will receive the shares that are being issued by company Y ->
company Y will be more poor (less assets, less liabilities), but at the end value of their shares remain the
same..............................................................................................................................................................52
Split of your real estate, but you want to keep that company, so you do not want to de- merge. This can
be for economic reasons. Sometimes they fear that they need to have other contracts, etc. They take out
the real estate and put it into a new company, such that both companies keep existing. Current
shareholders will become shareholders of both companies (F and Y)........................................................52
PROCEDURE..................................................................................................................................................52
CONTRIBUTION - BRANCH OF ACTIVITIES....................................................................................................53
Nature and objective of the course
Importance of corporate law
- Relevance for society
- Relevance for companies and associations
Objectives
- Understand how a company functions
- Understand how shareholders, investors, directors, employees, creditors, and other
stakeholders, such as consumers, the community and the environment, interact with
one another under the internal rules of a company
2
,Introduction
SOURCES OF CORPORATE LAW
Sources
- Code of companies and associations
o Belgian law of 23 March 2019
o Replaces the Belgian Code of companies of 7 May 1999
Still applicable for companies existing prior to 1 May 2019
Lots of items stayed the same
Law is applicable to all “newly created companies” but not for existing
companies (before March 23, 2019)
- In some countries integrated in Civil code (f.e. The Netherlands)
- European directives
o Developing ideas about how to make the business world competitive
o Problem in BE = tax law always changes so companies don’t find it attractive
to move to Belgium)
- Jurisprudence (case law) = interpretation of certain rules by judge
=> REMARK: companies should always try to avoid the court, because court
procedures are very lengthy and costly. Better to solve conflicts without the
interference of a court, for example, through mediation (mediation also exists in the
private atmosphere, e.g. for divorces). Through mediation, all parties together can
decide upon an agreement. Opposite to the court, where a third party, namely the
judge(s), decide upon an agreement for the parties. A judge is not necessarily always
fair, because the judge might not have the time to look through all the aspects of the
process, or to look at the conclusions made by the different parties.
- Legal doctrine (texts, books, articles… written by experts)
Sources - EU Corporate law
- Most important directives
o Second directive of 13 December 1976 on the protection of capital
o Third directive of 9 October of 1978 on the merger of public liability
companies
o Fourth directive of 25 July 1978 on the annual accounts of companies
o Sixth directive of 17 December 1983 on the de-merger of public limited
liability companies
- EU – Directives
o Various initiatives by the European Commission to simplify and harmonize
corporate law
Eg; company might be in Belgium, but moves to France and should not
change -> flexibility makes it attractive for companies to invest in Europe
Provide an efficient and modern legal framework
Give (group of) companies a competitive advantage against other
world players
3
, o Communication from the Commission to the Council and the European
Parliament, Modernizing Company Law and Enhancing Corporate Governance
in the EU – A plan to move forward
Sets out the objectives of the Commission to harmonize and
modernize corporate law within the EU
- Consultation of groups of specialists
o SLIM – Simpler legislation for the Internal Market
Made proposal for new legislation to provide a more efficient and
modern legal framework adapted to the new global business
environment
o High Level Group chaired by Mr. Jaap Winter
Consultation procedure
Advice summarized in a report: “A modern regulatory framework for
company law in
Europe” of 4 November 2002
o Advice used as basis for new Directives on company law
Sources – US law: IMPORTANT (exam) – difference between US law and EU law?
- US law vs EU law
o EU law = civil law
Legal system inspired by Roman law – law is mainly codified
Belgian Civil Code, basic of these rules (of corporate law), go
back to time of Napoleon
You have rules that you have to follow
o USA / UK = common law
Case law
Law is developed through court case
=>example; in common law, decisions are made by a jury, consisting
of normal civilians (no juridical background). These civilians often
grant high indemnity fees (eg; when pedestrian gets hit by a falling
object when passing by a building under construction), bcs they think
“company has enough money anyway”. They are not as objective as a
judge (from civil law)
o US law
Corporate law – competence of local states
Companies choose in what state to incorporate their company
regardless of the location of their headquarters
Delaware
well developed corporate law and court cases (best taxes)
most companies in US are Delaware companies
o more predictable – more certainty for companies
=>in Belgium, if you have a company outside of
Belgium, it will not be considered as being a Belgian
company. <-> US; where a Delaware -incorporate
company does not have to have its seat in Delaware
4
