With a lot of attention right now on head office location, not least in the context of BREXIT and passporting under European Union rules, there may be a new factor to bear in mind. My thanks go to Bart Vanstaen of Law Square for directing my attention to a radical new proposal contained in the new draft Belgian Companies Code (BCC), capping the director liabilities of Belgian companies.
The proposal forms part of wider company reform aimed at making it more “simple, flexible and coherent,” to enable Belgium to become a “more competitive and attractive place of establishment for companies.”
Size of cap
Under the proposals, the liability for company directors will be restricted to amounts depending on the size and turnover of the company. For larger companies with a balance sheet exceeding 43 million euros or with a turnover exceeding €50m, the proposed cap is €12m. For smaller companies with a turnover below €350k and a balance sheet total below €175k, the amount would be capped at €125k. The proposed amounts would be subject to automatic indexation on the basis of the (Belgian) consumer index.
Interestingly, it seems that one of the reasons mentioned in the draft explanatory notes to the new draft BCC, is that a general liability cap will ensure that the directors’ liability risk can “continue to be insured at acceptable terms and conditions.” I wasn’t aware that director and officer (D&O) liability insurance rates in Belgium have spiked recently or indeed are anywhere near the crisis levels we are seeing — for instance, in Australia, based on claims against directors. It may just be that Belgium’s lawmakers are anticipating a hard market and/or uptick in claims.
Which liabilities are capped?
What is unusual about this proposed cap is that it will not simply apply to director liabilities owed to the company but also to liabilities to third parties. In both cases, the basis for liability does not matter (e.g. breach of statute or the general duty of care and good management).
It also appears that the cap is per director for each set of facts which caused the damage and not per claimant. In other words, if there’s more than one claimant they must share the same capped limit. Only in cases of willful misconduct or fraudulent intent will the liability cap not apply, or where there is joint liability for directors for unpaid VAT or unpaid wage withholding taxes.
According to Law Square, the text of the new draft law will be submitted to the Belgian Parliament before the summer of 2018. Once approved in Parliament, the text must then be ratified by the King and published in the Belgian Official Gazette.
Ten days after publication, the law will enter into force. So if all goes smoothly, it could happen this year. Watch this space!