28 February 2019 - 3 min Reading time
Yesterday, the long-awaited new Companies and Associations Code was approved in the Chamber. Febelfin is convinced that the new company law will make it much easier to set up businesses and attract financial resources through the capital market.
Facilitating Access to the Capital Market
The new company law will help businesses attract investors more easily and gain access to the capital market. Startups and growth companies, in particular, can benefit from this. For example, they will be able to more easily negotiate agreements on profit and loss sharing, as well as voting rights, which are often essential when attracting venture capital. The possibility of multiple voting rights for non-listed companies and double voting rights for listed companies is also a notable innovation.
Furthermore, financing through bond issuances will become much simpler. The rules for bond issuances will now better align with practices on international capital markets.
Reducing Administrative Burden
Unnecessary administration in lending will be eliminated. Listed companies will no longer need to have certain clauses in a credit agreement approved by the general meeting. Moreover, the distinction between civil companies and commercial companies will disappear, simplifying the provision of guarantees and thus, the granting of loans by banks. Finally, the rules regarding financial assistance have been relaxed.
"The new rules eliminate many unnecessary formalities and provide more flexibility for businesses, without losing sight of the interests of creditors and partners of companies. These are objectives we support from the financial sector. Belgium now has a competitive legal framework for businesses again."
One of the most discussed innovations is the possibility of establishing a private limited company without capital. Although there were concerns from some quarters, Febelfin expects that this will have little impact on lending: "Banks primarily look at the business plan, assets, and liabilities of a company at the time of the credit application when granting a loan. The initial capital has never played a significant role in the assessment of a credit dossier," explains Karel Van Eetvelt.
The new company law entails significant adjustments for banks. They must revise their credit lending procedures, incorporate the new corporate forms into their "know-your-customer" obligations, and provide training for their employees. The new code comes into effect very quickly, specifically on May 1, 2019. However, banks are doing everything possible to ensure a smooth and fast transition.