Capital decrease and protection of creditor’s rights/Decision Constitutional Court

The Companies Code provides for a mechanism of creditor protection in case of a “real” capital decrease (i.e. capital decrease by means of a reimbursement to the shareholders) for public limited liability companies (“NV” or “SA”).

The decision to decrease the share capital is taken by the extraordinary shareholders’ meeting before a notary public. The notary public will deposit the deed of the capital decrease with the Clerk’s Office for publication in the Annexes to the Belgian Official Gazette.

As from the date of publication, a two month waiting period starts. During this term, creditors with a claim on the company which has not yet fallen due before the date of publication, can request additional security. The rationale of this publication requirement is to protect the creditors of the company who are faced with reduced recourse assets as a result of the decrease of the share capital.

In the event a creditor claims additional security, the company may reject this claim by repaying to the creditor the outstanding debts. If parties can not agree on the additional securities to be provided, the dispute is submitted to the competent court where the President chairs as in summary proceedings.

The judgment of the President will relate to the dispute regarding the security and the President will determine the securities to be provided by the company and the time limit within which these securities must be provided. The President can also judge that no additional securities are needed, given the guarantees that the creditor already possesses or refer to the general repayment capacities of the company.

For long as the creditors have not been fully satisfied (or their claim for security has not been rejected by means of a judgment), no repayment to the shareholders can be made.

Reference is made to the decision of 9 June 2016 in which the Constitutional Court ruled that there is a gap in the Companies Code regarding the capital decrease in private limited liability companies (“BVBA” or “SPRL”). Indeed, creditors of private limited liability companies with claims on the company can not demand such additional securities.

The Court ruled that, although the distinction in the treatment of creditors of public limited liability companies and of private limited liability companies is based on an objective criterion, there is however no reasonable justification for this distinction. Therefore, the lack of rules in this regard for private limited liability companies is discriminatory and not in line with articles 10 and 11 of the Constitution. Although the scope of this judgment is limited to private limited liability companies, similar problems also arise for cooperative companies with limited liability. Hopefully this judgment paves the way for a harmonization of creditor’s protection in the proposed reform of the Companies Code.