Reforms to the director liability regime under the new Belgian Code on Company and Associations
The new Code on Companies and Associations ("BCCA") will enter into force on 1 May 2019.
What are the impacts on D&O’s liabilities?
Key changes are:
- Common liability regime for all types of companies and associations (based on the existing regime for public limited liability companies (SA/NV), with some modifications)
- Same liability regime for both “de jure directors “ and “de facto directors”
- Joint liability, by default, for all management acts if collegially organised or if relating to a violation of the BCCA or the Articles of Association (AoA)
(until now: individual liability for personally committed acts, in solidum liability for damage resulting from concurring acts committed by different directors and joint and several liability if the damage was triggered by a joint act. Violation of the AoA or the Belgian Companies Code implied joint and several liability)
- Capped liability
- Director’s liability is now capped vis-à-vis the company and third parties: caps range from 125.000 EUR (for very small companies) to 12.000.000 for large companies (cap is based on balance sheet total and annual turnover)
- Cap is an aggregate cap applying to all directors together, with respect to a wrongful act or set of wrongful acts leading to liability, regardless of the number of creditors/claimants or actions.
- Cap applies to any type of liability, including proven negligence and criminal sanctions, but will not apply in case of repeated minor faults, gross negligence, fraudulent intent or intent to cause harm. No cap towards social security institutions. No cap in case the fault leads to bankruptcy.
- No exemption/holding harmless: exemption/hold harmless/indemnification agreements are now explicitly prohibited by the BCCA (exception for cases where third parties such as a parent company or shareholders of the company may hold directors of the company harmless)
Cap will not apply for
- Directors of companies headquartered abroad (do you have foreign subsidiaries?)
- Foreign criminal proceedings
- Actions in liability introduced within the context of insolvency proceedings initiated abroad