About Michael Boudry As a corporate lawyer, I advise entrepreneurs and companies on corporate strategy, corporate restructuring, M&A, transactions and corporate litigation. My approach is client-focused. I like to think outside the box and go the extra mile to deliver a practical result for my clients. LinkedIn: www.linkedin.com/in/ micha%C3%ABl-boudry-92763913/ the event of bankruptcy against the liquidator who brings a liability action for the benefit of the joint creditors. In addition, as of 2019, the Companies Code provides for concrete financial caps for directors’ liability, depending on the company’s turnover and balance sheet total. However, these caps do not apply to repeated minor errors, serious errors, fraudulent intent or acts with intent to cause damage. Can foreign companies do business in Belgium directly, i.e. without having to set up or register a legal entity? It is indeed possible for foreign companies to do business in Belgium without necessarily setting up a separate legal entity. This can be done through a representative office, an establishment unit or a branch. All of these vehicles require considerably less formalities. However, each has its own legal and operational implications. A representative office is by far the easiest way to operate in the Belgian market. A representative office is set up to represent the interests of a foreign company in Belgium, but cannot itself engage in commercial activities. Its activities are limited to market research, promotion, liaison between the foreign company and local parties and coordination of activities. To develop commercial activities, one can opt for an establishment unit. The establishment unit is similar to a representative office, except that the establishment unit is registered with its own company/VAT number. A representative office and an establishment unit do not have their own legal personality and are not subject to separate registration, publication or accounting obligations. Nor is a local legal representative appointed. This also means that all legal acts must be performed directly by and under the responsibility of the foreign head office. To go one step further with commercial activities in Belgium, one can open a branch. Unlike the representative office and the establishment, the branch has a local legal representative. This legal representative also carries out legal acts. However, the branch does not have its own legal personality and still operates under the responsibility of the foreign head office. A branch is subject to slightly more extensive registration, publication and accounting obligations (including the filing of the memorandum and articles of association and the (consolidated) annual accounts of the foreign head office). The branch is registered with its own company number/VAT number. All documents issued by branches contain a number of mandatory legal notices. grounds) for damages caused by mistakes made in the exercise of their mandate, to the extent that their actions are manifestly outside the margin within which normally prudent and diligent directors in the same circumstances could reasonably disagree (i.e. the margin test). Directors are also liable (jointly and severally) to the company for damages caused by breaches of the provisions of the Companies Act or the articles of association. There is also a specific liability regime for undue financial gain from conflict of interest arrangements. External liability (to third parties) In relation to third parties, we speak of non-contractual liability based on common law principles where directors have not acted as a reasonably prudent and diligent director in the same circumstances (i.e. the general standard of care). Specifically, directors’ external liability may be compromised in cases of late bankruptcy filings, neglect of managerial duties, acts to benefit themselves at the expense of the company, etc. Directors are also equally (jointly and severally) liable to third parties for damages caused by violations of the provisions of the Companies Code or the articles of association. There are also specific liabilities to third parties in the event of the company’s bankruptcy. This is the case for manifest gross misconduct that contributed to the bankruptcy, liability for social security debts, liability for unlawful trading, tax liability. Limitation of liability In certain circumstances, the discharge (by the general meeting or, where applicable, the supervisory board) covers the internal liability of directors. However, it does not cover external liability. Nor can it be invoked in WWW.LAWYER-MONTHLY.COM 23
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