Under the Companies and Associations Code (CSA) adopted in 2019, private limited liability companies (SPRL) are transformed into limited liability companies (SRL), for which the notion of capital has been abolished. In order to protect creditors, the legislator has decided to impose a double test of liquidity and solvency on LLCs, which will have to be carried out prior to any dividend distribution.

The solvency test (article 5:142 of the SHA) states that no distribution may be made if the company's net assets are negative or would become negative as a result of such a distribution.

The liquidity test (article 5:143 of the SHA) implies that the distribution can only be made if it does not prevent the company from paying its current debts, i.e. debts that will become due within 12 months and can reasonably be expected to be paid.

In the event of a distribution in violation of these provisions, the company is entitled to demand the repayment of the distributions. Furthermore, if members of the administrative body have made a distribution in violation of the liquidity test, the SHA provides that these members will be jointly and severally liable for the damage caused to the company and to third parties.

We would also like to remind you that the arrival of the summer months is usually accompanied by the filing of the annual accounts. The annual accounts must be submitted to the general meeting for approval within six months of the end of the financial year. Companies then have thirty days to file their annual accounts with the Central Balance Sheet Office of the National Bank of Belgium. The members of the administrative body are liable for late filing of the annual accounts and the law provides for a presumption of liability in the event of damage suffered by third parties as a result of such late filing. Late filing may also be subject to a fine, the amount of which will vary according to the delay.

For more information, please contact: David Szafran (david.szafran@cew-law.be), lawyer, CEW & Partners.