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Which types of insurance do I need, which are mandatory, etc.?
Depending on the activities or assets involved, certain types of insurance may be required:
- car insurance, if cars will be used/owned;
- occupational accidents insurance for employees;
- if certain areas can be accessed by the public, fire and explosion insurance;
- product liability insurance;
- certain specific types of insurance, eg, in the medical field it is required to cover the sponsor's liability for clinical trials;
- certain professions also require civil liability insurance.
Other policies, while not required, are highly recommended (eg, D&O liability insurance, force majeure insurance, etc).
Am I eligible for YIC status and, if so, how do I obtain it?
Each region (Flanders, Brussels and Wallonia) has its own YIC provisions. If the statutory requirements are met, companies can benefit from various employment and R&D subsidies.
In general, companies may be eligible for YIC subsidies if they:
- are considered "small" (fewer than 50 employees, turnover or balance sheet total of less than EUR 10 million);
- have existed for less than 6 years;
- have invested at least 15% of their operating costs in R&D for at least one year within the three-year period preceding the YIC application; and
- can demonstrate, through independent expert reports, that they are likely to develop, in the foreseeable future, goods, services or techniques which are technologically new or represent a substantial improvement compared to existing goods, services or techniques.
The application procedure for YIC subsidies will vary from one region to another and involve regional agencies or authorities (IWT in Flanders, Innoviris in Brussels, and the Gateway to Research and Technologies in Wallonia).
Are there any restrictions on contractual arrangements from a competition law perspective? Are non-compete clauses recommended and/or possible?
The types of clauses which are permissible under competition law will depend on whether the agreement is concluded with a competitor (eg, in view of joint R&D or production) or a non-competing undertaking (eg, for the distribution of goods and/or services).
Agreements between competitors are strictly scrutinised by the competition authorities. Hence, caution is required when negotiating contracts with competitors. A non-compete clause will only be allowed in a limited number of cases.
Agreements between non-competing undertakings are also subject to competition law and hence caution should be taken, in particular with regard to exclusivity and pricing. Non-compete clauses are permitted if they fulfil certain strict conditions.
How can I sufficiently finance my company, protect my rights and involve investors without losing too much control? What types of mechanisms can I use to secure my "place" in the company (eg, the dilution of shares)?
Different classes of shares are often created, with different rights and obligations, eg, the right to appoint a specific number of directors. It is also possible, for instance, to appoint a manager who can only be dismissed by a qualified majority, in order to secure your "place" in the company.
Indeed, it is advisable to include in the articles of association a list of material decisions which must be approved by a qualified majority or are subject to a veto right. In addition, certain classes of shares may be given the right to greater dividends than others. What matters is not the number of shares held but the rights attached to the shares.
By law, shareholders in a limited-liability company have a pre-emptive right to subscribe with priority to new shares in cash in order to avoid dilution of their shareholdings. However, this preferential subscription right can be cancelled (including for the benefit of specified persons) by the general meeting, provided the quorum required to amend the articles of association is met. To ensure that no capital increase by means of a contribution in kind can take place without the approval of a certain
shareholder, capital increases can be included on the list of material decisions.
In order to avoid dilution, warrants can be issued to certain shareholders and exercised under specified circumstances (eg, upon a capital increase). Another alternative would be to issue profit-sharing certificates. The rights attached to such certificates should be described in the articles of association (eg, voting rights, dividends, etc).
As a shareholder, director or manager, can I be held liable for the company's liabilities? If so, how can I limit my liability in this regard?
As a shareholder, you can be held liable for all liabilities of the company if it does not have a limited-liability structure (eg, VOF/SNC, Comm.V/SCS, CVOA/SCRI, etc). If a corporate form with limited liability is selected (eg, NV/SA, BVBA/SPRL, CVBA/SCRL), however, shareholders can only be held liable in very exceptional circumstances.
As a director or manager, you may also be held liable to the company and third parties for shortcomings in the performance of your official duties.
Such liability can be covered by adequate insurance, or a hold harmless arrangement can be put in place (eg, by a shareholder).
Of course, directors and officers can limit their liability by always acting in the best interest of the company and justifying every decision taken. It is important to examine various options and set out the pros and cons of each in the minutes of the meeting of the competent corporate organ.
What are the legal and tax consequences and reporting obligations of a given corporate form and how do I comply with these requirements?
The legal, tax and reporting obligations are practically the same for all types of companies with limited shareholder liability. On the other hand, corporate forms without limited shareholder liability or without legal personality are subject to more limited legal and reporting obligations since creditors have a right of recourse against both the legal entity itself and the natural persons behind it.
From a tax perspective, companies with legal personality are subject to tax in Belgium on their worldwide income and will need to file a corporate tax return annually. On the other hand, companies without legal personality, such as non-stock corporations (maatschap/société de droit commun),are transparent for tax purposes, meaning their profits are taxed solely in the hands of the shareholders or partners and, therefore, only the latter need declare the profits on their personal income tax return. If you choose to operate via a branch or sales office, you will only be taxed in Belgium on Belgian source income. The question of whether a tax return must be filed will in this case depend on the facts, ie the type of income sourced in Belgium. If no tax return need be filed, the tax due in Belgium will be withheld at source.
In addition, various forms may need to be filed for tax purposes, eg, withholding tax returns for dividends or interest, pay slips for wages or commissions, and other specific forms to claim certain tax benefits such as the notional interest deduction (aftrek voor risicokapitaal/déduction fiscale pour le capital à risque) or the patent deduction (aftrek voor octrooi-inkomsten/déduction pour revenus de brevets). Moreover, depending on the nature of your business, you may also be required to register with the VAT authorities and file VAT returns on a monthly or quarterly basis.
If you operate a business in Belgium, you are generally required to keep books of account. The nature of your accounting obligations will depend on the type and size of your business.
Most legal and tax obligations must be fulfilled periodically and can thus be anticipated. It is advisable to compile a chart or table of all deadlines to ensure that none are missed.
How can my choice of corporate form influence the future development of my company, especially if I would like to open a branch/subsidiary in the US?
From a US perspective, a BVBA/SPRL is often preferred as this type of corporate form allows you to simply "check the box", whereas an NV/SA is a corporation per se. A change of corporate form entails, in principle, a (fictitious) liquidation for tax purposes; however, if certain conditions are met, tax neutrality can often be achieved.
Under Belgian law, no particular corporate form is preferred for the purpose of opening a branch/subsidiary in the US. NautaDutilh has privileged relationships with several US law firms which can assist you in setting up a US branch or subsidiary.
What type of corporate form (company) should I opt for to best develop the envisaged activities (eg, an NV/SA with shares or a less flexible BVBA/SPRL)?
In general, corporate forms with limited shareholder liability are preferred (eg, a BVBA/SPRL or an NV/SA). The choice of corporate form will mainly depend on the possibility to freely transfer shares and the desired governance structure. In addition, an NV/SA (Public limited company - naamloze vennootschap/société anonyme) can issue warrants, convertible bonds and profit-sharing certificates and have different classes of shares, which is not possible with a BVBA/SPRL (Private
limited-liability company - besloten vennootschap met beperkte aansprakelijkheid/société privée à responsabilité limitée). Since these types of instruments are often used by YICs, an NV/SA would appear to be the most appropriate choice.
How can I ensure that my corporate structure is aligned from the outset with the company's future development?
Companies that intend to grow often opt for an NV/SA, given the flexibility of this corporate form and the need to raise capital. The articles of association can allow the board of directors to establish a management committee, appoint a managing director, etc.
In addition, it is important that a clear distinction be made, internally, between the company's various "branches" of activity (or activities which could develop into separate departments, branches or subsidiaries in the future). In the event of a subsequent sale, divestment or funding round, financing can be allocated to the various projects and each "branch of activity" can grow at its own pace.
For tax purposes, depending on future development as well as the exit strategy, it may be advisable to allocate different assets (eg, IP, real property, financing, etc) to different entities in order to optimally benefit from Belgian tax incentives and facilitate, for example, a future takeover.