Volume 20, Issue 1

1The new Belgian Code of Companies and Associations, enacted in 2019, abolished the use of capital in the limited liability company. This important reform led to various changes in the rules applicable to this type of company, although several aspects of the previous regime generally associated with the concept of capital still remain in place. This article briefly describes the changes made in 2019 (2.) but also recalls the rules that have not been substantially modified (3.). It then brings together some observations on the economic players’ behaviour after almost four years of practice under the new rules (4.).2

27In 2019, Belgium joined the European trend and allowed listed companies to adopt loyalty voting rights, i.e. double voting rights for shareholders who have held their shares for more than two years. The stated goals were to combat short-termism by rewarding long-term shareholders and to encourage IPOs by allowing founders to retain control over the corporation with a smaller participation. Our paper analyzes these rationales from a conceptual perspective, describes the Belgian legal framework for loyalty voting rights, and presents novel empirical evidence on the use of loyalty voting rights in Belgium. We argue that the Belgian legal framework is designed to favour controlling shareholders and other insiders. In addition, our empirical data supports the view that loyalty voting rights mainly function as a control-enhancing mechanism, as loyalty voting rights are almost exclusively used by insiders. This is not necessarily a problem, in our view, as controlling shareholders may be able to help combat the short-termism problem where it would exist. However, loyalty voting rights also increase the incentives for insiders to extract private benefits of control by creating a wedge between cash flow rights and voting rights. We find that this wedge in our Belgian sample has been on average 11 percentage points. In addition, our evidence finds that the votes of insiders were often sufficient to adopt loyalty voting rights, and that non-insiders on average vote against loyalty voting rights. This highlights the risk of making it too easy to introduce loyalty voting rights in the midstream. The arguments for allowing loyalty voting rights are the strongest when they are introduced at the IPO stage, but so far, none of the Belgian corporations with loyalty voting rights have introduced them at the IPO. We conclude that loyalty voting rights are nothing more than a control enhancing mechanism. This raises the questions: why not allow other types of control enhancing mechanisms, such as dual class share structures? And why not treat the midstream introduction of loyalty voting rights with a similar level of protection as the midstream introduction of dual class share structures? We fail to see the policy reasons for this wide divergence.28

58The 16 th annual ECFR Symposium was opened by Koen Geens and Christoph Teichmann . The former addressed the evolution of company law in the EU and Belgium, focusing on the new Belgian Code on Companies and Associations which entered into force in 2019. The latter explained that the presentations in the morning would focus on topics of Belgian law that are also of interest to the European academic community, while the afternoon topics would be of an EU nature. The first morning session consisted of two presentations. The first one, given by Henri Culot , focused on the Belgian private limited company without capital. The second presentation was by Jeroen Delvoie and addressed loyalty shares.

85 Around the globe legislators have created labels and dedicated company forms for social enterprises. On the basis of an analysis of US, UK, German, French, Dutch and Belgian law, this article exposes which elements are important (and which are not) in the creation of these labels and forms. First, the distinction between labels and dedicated forms is of relative practical importance. Even dedicated company forms are – like labels – to a large extent governed by general corporate law. This offers advantages in terms of network effects and easy adoption. Creating a completely new corporate form is therefore justified only if there are compelling reasons for a comprehensive overhaul of existing company law. Second, the introduction of labels and dedicated company forms is influenced by the level of stringency with which jurisdictions distinguish between companies and nonprofit forms. For instance, the American benefit corporations and the French ‘raison d’être’ were introduced to explicitly authorize what conventional companies can do elsewhere. Nevertheless, a high degree of flexibility in conventional company law is insufficient to facilitate social entrepreneurship. Mandatory law for social enterprise labels or forms is necessary to credibly signal commitment to a social purpose. Yet, creating labels or dedicated forms for lightly regulated ‘mission purposes’ may generate noise that interferes with this signal. 86

109This article discusses some aspects of the completely new Companies Act (“BCCA”) adopted in Belgium in 2019. Even though the reform touched upon all aspects of company law and all company types, its main goal was to roll back Belgian goldplating of EU company law Directives and to turn the hitherto very rigid Belgian private company into a very flexible, contractual vehicle with little mandatory law applicable to it, except for rules on creditor protection. As part of this reform, the concept of legal capital (not just minimum capital requirements) was abolished for the private company. In order to allow a Belgian company to better compete in the light vehicle competition, Belgium moved from the real seat doctrine to the incorporation theory. For public companies, the main reform was probably the introduction of loyalty shares, which (so far) did not succeed in attracting more listings to the Brussels stock market, but did allow existing controlling shareholders to cement their control with a smaller stake than before. The reform was very successful in increasing legal certainty about many issues about which no authoritative case law exists. But in a way, the reform fought the last war (the light vehicle competition) while arguably not enough attention was paid to enabling venture capital and private equity contracting and the capital structures that go with these investments.110

162During the second morning session three topics were highlighted. Like in the first session they all concerned Belgian law but were also of interest to the European academic community. Marieke Wyckaert discussed classes of shares, Sofie Cools addressed corporate law for social entrepreneurship and finally Hans De Wulf made an overall assessment of the Belgian company law reform.

166In November 2022 the Council and the European Parliament adopted Directive (EU) 2022/2381 on improving the gender balance among directors of listed companies and related measures. Thus, by 30 June 2026, European Member States must ensure that large, listed companies reach the Directive’s gender balance objectives. Gender balance is achieved when members of the underrepresented sex hold at least 40% of non-executive director positions or members of the underrepresented sex hold at least 33% of all director positions, including both executive and non-executive directors. To achieve gender balance Member States must set up a procedure for selecting candidates for appointment or election to director positions. Although the article finds that quotas are the best model to bring about a real improve to gender balance on company boards, it questions whether the model, the Commission has chosen will achieve the objective of the Directive. However, the article also finds that it is likely to have a positive effect in the Member States that has been lagging behind. Moreover, the article criticizes that the Directive does not openly address the company law implications of the established procedure, and finds that the application of principles of equal treatment in top-management positions place the Directive in an unclear position between employment matters and company law.167

199The first part of the afternoon session of the 16 th annual ECFR Symposium in Leuven focused on current topics of European Company and Financial Law. The discussion following the presentations by Rüdiger Veil and Marc Wiesner as well as Hanne Søndergaard Birkmose dealt mainly with questions of ad hoc publicity and insider trading with regard to the EU Listing Act as well as details on the design of a gender quota in boards.

203This article emphasizes that the wave of regulation focusing on sustainability, like the CSDDD, is fundamentally different in scope and character from traditional rulemaking. Given the wide-ranging objectives of the CSDDD and its open norms, companies and supervisory authorities will need to cooperate and have open and fair discussions to develop alternative instruments and best practices taking account of what can be reasonably required from companies in addressing complex issues in an even more complex world also in terms of feasibility and resources. This is fully in line with the CSDDD which explicitly recognizes that companies will have to balance diverging interests, and – as set out in Articles 6-8 CSDDD – will inevitably need to make choices and prioritize actions. Where traditionally regulatory supervisors focus on strict compliance, the CSDDD marks a fundamental change to process rules and goals to be achieved and therefore calls for a fundamentally different approach and oversight strategy by supervisory authorities. It is also demonstrated that extending liability rules for companies is not an effective policy instrument. This article compares developments in the UK, France, Germany, Norway and the Netherlands, and by identifying the lessons learned, concludes that a strategy as set out above seems best fit to realise the ambitious goals set by the CSDDD. Therewith a paradigm shift is in the making. Governments and regulatory supervisors would misinterpret the signs of the times if, in promoting the purposes of the CSDDD, they were to cling to traditional ideas of how supervisors should operate.204

240The last part of the afternoon session of the 16 th annual ECFR Symposium in Leuven focused on a Panel on Supply Chain Due Diligence with Pierre-Henri Conac, Eva-Maria Kieninger and Harm-Jan de Kluiver. The discussion initially took place among the panel members themselves. Subsequently, further comments and questions were contributed by the audience.