Social enterprises in the EU (IVOR nr. 111) 2018/2.6.1:2.6.1 The Belgian company with a social purpose (VSO)

Social enterprises in the EU (IVOR nr. 111) 2018/2.6.1

2.6.1 The Belgian company with a social purpose (VSO)

Documentgegevens:

mr. A. Argyrou, datum 01-02-2018

Datum: 01-02-2018
Auteur: mr. A. Argyrou
JCDI: JCDI:ADS591642:1
Vakgebied(en): Ondernemingsrecht / Rechtspersonenrecht

Article 661(6) of the Belgian Companies Code of 1999 imposes an obligation on the directors of a VSO to issue an annual report demonstrating that the expenditure on investments, the company’s operating costs and the remuneration paid to the members of the board of directors have been used in a way that furthers the VSO’s social purpose.1 The directors of a VSO are obliged to publish an annual social report that explains whether the company met the social objectives in practice.2 The objective of this report is to show that the VSO owners of shares, members and/or the directors have not managed the company’s reserves contrary to the social objectives of the company.3 Where such a report has not been prepared, or where it has been unlawfully produced, directors can be held liable pursuant to the legal provisions of the Belgian Companies Code of 1999 and the AoA of the VSO.4

In particular, Article 663 of the Belgian Companies Code of 1999 holds the directors of a VSO liable if they allocate the company’s reserves to activities that do not seek the fulfilment of the social purpose mentioned in the AoA.5 For example, this rule applies when a legal claim is filed by the VSO’s owners of shares and members, by interested third parties (stakeholders) and/or by the public prosecutor. Additionally, the VSO owners of shares and members have the right to claim restitution when directors have breached their statutory duty to allocate reserves in accordance with the social objectives.6 Restitution and damages can be also claimed against those who received the reserves improperly. The applicable decisive standard for the judiciary deciding on the case is whether those who received the reserves improperly knew or should have known the irregularity of the distribution.7

Finally, the VSO’s obligation to submit annual reports and subsequently social reports depends on the legal form that a VSO social enterprise takes. In Belgium, limited liability companies are obliged to submit annual accounts regardless of their size. However, small companies in Belgium without limited liability, such as the cooperative with unlimited liability or the partnership, are not obliged to report on their financial status.8

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Belgian Companies Code of 1999, art. 661(6). It is unclear from the wording of the Belgian provision, i.e. ‘inzake de werkingskosten en bezoldigingen’ whether the legislation refers to the remuneration of the members of the board of directors or to the employees’ salary. However, reference to the explanatory notes clarifies that this part of the provision was introduced to prevent the distribution of dividends to (board) members in the form of additional remuneration, expense allowances or operation expenses. See P. Ernst, ‘De vennootschap met sociaal oogmerk’, in H. Braeckmans and E. Wymeersch (eds), Het gewijzigde vennootschapsrecht (Maklu 1996) 37-70 at 63 refers to the explanatory notes contained in the Parliamentary documents of the Belgian Senate, 1086, No. 2 (1993-1994)(8 March 1995) 308 available at: <www.senate.be/lexdocs/S0543/S05430131.pdf> accessed 20 June 2017.

The social report constitutes part of the annual report that the enterprise is obliged to submit to the Central Balance Office of the National Bank of Belgium. Belgian Companies Code of 1999, art. 661(6). Coates and Van Opstal (n 67) 39; National Bank of Belgium: see the list of legal forms that are obliged to file a set of annual accounts and the Central Balance Sheet Office available at: <www.nbb.be/en/central-balance-sheet-office/filing-annual-accounts/who-has-file-accounts/belgian-enterprises> accessed 24 September 2017.

Coates and Van Opstal (n 67) 39.

Belgian Companies Code of 1999, art. 263 (BVBA), art. 408 (CVBA) and art. 528 (NV).

If this duty is breached, the VSO directors could be held jointly and severally liable for the improper distribution (as well as for the consequences of such improper distribution) of the company’s reserves. Cafaggi and Iamiceli (n 8) 44.

The law requires from the directors to provide the appropriate restitution and remuneration to the VSO owners of shares and members. Belgian Companies Code of 1999, art. 663.

ibid art. 663.

Even though, small organisations in Belgium may be exempted from providing annual reports, it does not constitute a reason to infringe the VSO obligation to issue a social report in Coates and Van Opstal (n 67) 39; see also the requirements on the National Bank of Belgium website (n 146).