Bringing your Articles of Associations in compliance with the Code - The clock is ticking
Updated: Jan 7, 2022
Although the companies and associations Code (hereinafter: “Code”) has been in force for 2 years, it is clear that over the last 2 years many (international) non-profit associations (hereafter: “(I)NPA”) had something else in their mind that the compliance of their articles of association / bylaws / statutes (hereafter: “AoA”) with the Code. Nevertheless, time flies and (I)NPAs should not lose sight of their legal obligation to render their AoA compliant with the Code. Based on its daily practice, EY Law’s Non-Profit Law and Trade Association team, gives in this article a non-exhaustive hindsight of the main legal and practical points to be taken into account when bringing your AoA into compliance with the Code.
Whilst adopting the Code, the Belgian legislator has provided for a period of 4 years (until 31 December 2023) to allow (I)NPAs to render their AoA compliant with the Code. Whilst at first glance this seemed like a long time, it is worth to remind (I)NPAs that almost half of this period has already elapsed.
In addition to this 4 years’ period, the Belgian legislator has also required (I)NPAs to bring their AoA into compliance with the Code as soon as they are amended, no matter how minor the amendment to the AoA may be. This legal obligation seems to be more and more overlooked by (I)NPAs as we have observed that an increasing number of (I)NPAs wishing to make quick and minor amendments to their AoA (e.g. change the address of their registered seat, amend their membership criteria, increase the number of directors, etc.) find themselves in a position where they need to bring their entire AoA into compliance with the Code.
Key changes to be made
Whilst the timing imposed by the legislator seems to have been overlooked lately, the number of changes to be brought to the AoA should not be taken slightly either. Indeed, whilst some of the required changes are quite obvious others are not as evident.
These obvious and well-known changes include, amongst others:
The fact that commercial activities can now be exercised by (I)NPAs provided that they are mentioned in the AoA;
The references to the law that which have to be changed;
The address of the registered office which does not longer have to be mentioned in the AoA but only the region;
For NPAs, the new convening period for meetings of the General Assembly of at least 15 days;
The allocation of new powers to the General Assembly;
Amongst the required changes which are less obvious, let us mention, amongst others:
The new mandatory rules provided by the Code governing the competent body to adopt, amend and revoke internal rules as well as the content of the internal rules. In several (I)NPAs, the introduction of these new rules entail an important reallocation of provisions between the AoA and the internal rules;
The obligation to hold once a year an ordinary General Assembly within six months after the end of the financial year. Such rule is often unknown from INPAs;
For NPAs, the new rules regarding the co-optation of directors in case of vacancy;
The prohibition, after the dissolution of an (I)NPA to allocate the liquidation balance to a member;
Moreover, as a consequence of the COVID-19 pandemic, on December 20, 2020, the Belgian legislator has amended the Code in order to regulate:
Virtual General Assembly meetings;
Unanimous written resolutions of the members; and
Upfront votes via electronic means before a meeting of the General Assembly (provided that it is allowed in the AoA).
The introduction of these rules regarding the decision-making process at the General Assembly shall also be carefully considered by (I)NPAs whilst amending their AoA. As an example, the AoA of many INPAs provides that the members can take decisions via a written procedure with a simple or an absolute majority. However, since the amendment of the Code end of December 2020, such provisions of the AoA are not legally compliant and shall not be applied anymore.
Finally, in addition to these mandatory aspects of the Code, the Covid-19 pandemic made many (I)NPAs realising that their AoA are not always adapted to exceptional circumstances, new technologies and virtuality. Consequently, bringing the AoA into line is a very valuable opportunity to make other updates and upgrades to the AoA.
A (long) road ahead
The final variable to be considered when deciding to bring your AoA into line with the Code is the process. Indeed, it can be long, i.e. often several months.
The process of amending your AoA can be summarized in three main steps: (i) the drafting of the amendments, (ii) the organization of the (virtual) Extraordinary General Assembly, and (iii) the administrative and publication formalities. Whilst these steps seem rather obvious, there are some factors to be taken into account when planning the process of amending your AoA.
The first one is unfortunately too well known. In a context of post COVID-19 pandemic, the organisation of an (Extraordinary) General Assembly needs to be thoughtfully reflected on. Indeed, due to travel restrictions and rules applicable to large meetings, (I)NPAs must be vigilant and ask the right questions when organizing Extraordinary General Assemblies: where does the Extraordinary General Assembly take place? Will everyone be willing/allowed to attend in person? In case of a virtual or semi-virtual Extraordinary General Assembly what are the specific rules to be complied with regarding the convening formalities, the online participation and vote, etc.
Another factor to be taken into account is the time limit for convening an Extraordinary General Assembly often imposed by the AoA of the (I)NPA (for certain (I)NPAs the convening period is 6 months for instance). It is also necessary to remember that all relevant documents should be attached to the convening notice and therefore ready by then (i.e. the new version of the AoA).
Finally, for INPAs, it is important to remember that if a notarial deed is required, a Belgian notary shall be present at the Extraordinary General Assembly. However, a Belgian notary can only act on the Belgian territory. If you decide to hold your Extraordinary General meeting in another country, be sure to contact a notary who is competent in that jurisdiction and verify if he/she can perform the required formalities in order for the Extraordinary General Assembly to validly adopt the new AoA.
To summarize the above in a few words, many (I)NPAs are overlooking the deadlines to render their AoA compliant with the Code and underestimate the number of amendments and time required to carry out the whole process of amending their AoA. Moreover, many (I)NPAs are still not fully acquainted and/or comfortable with the process of running virtual or semi-virtual meetings of the General Assembly which can complicate this process.
Based on these observations, we strongly recommend (I)NPAs to start the process of amending their AoA and render them compliant with the Code as soon as possible. By planning this well in advance, (I)NPAs will avoid being in a situation where they have to do it in a hurry either because the deadline of December 31, 2023 is approaching or because they want to perform other changes to their AoA. Keep in mind that the process of amending the AoA requires time, careful consideration of the (I)NPA's new needs, and the human resources to make it happen.
Should you require our assistance with performing the amendment of the Articles of Association of your (I)NPA or wish for our assistance in regards to taking care of your publications please do not hesitate to contact us.