Wake-Up Call for Dormant Companies

As a rule, all Belgian companies are required to file annual financial statements. However, practice shows that this obligation is sometimes forgotten, especially by foreign parent companies who are unaware of the filing requirement for their Belgian subsidiaries. Failure to file can have serious consequences, including the striking of the company from the Crossroads Bank for Enterprises or its involuntary winding-up. Recent news alerts warn about a large clean-up operation undertaken by the Brussels courts in order to start winding up inactive companies in the Brussels-Capital Region. While the operation is directed at shell companies used for criminal activities, bona-fide inactive companies might be affected too.

Shell companies and inactive companies

On 12 September 2018, the Belgian newspaper De Tijd1 reported that more than 113,000 companies in Belgium did not file their annual financial statements with the National Bank of Belgium (NBB) in 2017, a higher number than in 2016. This staggering figure includes not only shell and fictitious companies but also dormant companies and subsidiaries of international holding companies whose management may not be aware of the filing requirement.

The use of brass plate companies for criminal purposes

For obvious reasons, shell (or brass plate) companies are ideal vehicles for criminal activities, ranging from VAT fraud to drug trafficking and social security schemes. In addition, purchasing a brass plate company or an inactive company is an easy way to circumvent the incorporation formalities, which require the provision of personal information by the founders and their appearance before a notary as well as capital contributions. Unsurprisingly, the impact of phantom companies on the economy can be disastrous.

Good faith

In many cases, however, failure to file annual financial statements does not stem from criminal intent, but from oblivion. Sometimes a company is simply inactive, sometimes management forgets about the filing deadline, etc. In our practice, we notice that many of our clients need to be reminded about their filing obligation. In addition, larger companies, for example with a foreign parent and a Belgian subsidiary are often unaware that the Belgian subsidiary is required to file its own or consolidated annual financial statements. Some countries, including the Netherlands, provide for a filing exemption for subsidiaries (the so-called 403 declaration) if the parent company files consolidated financial statements and accepts responsibility for the debts of its subsidiaries. This exemption does not apply to Belgian subsidiaries, which are still required to file their annual financial statements in Belgium.

Rude awakening

Belgian law provides for the imposition of a number of sanctions on companies that do not file their financial statements. First of all, the NBB imposes fines for late filing, which increase over time. Second, after three years, the company will be struck from the Crossroads Bank for Enterprises. Third, failure to file financial statements can lead to the involuntary winding-up and liquidation of the company. The Brussels courts recently started a major clean-up operation to remove dormant and shell companies from the Brussels-Capital Region, with an emphasis on greater transparency concerning natural persons and legal entities actually residing in Brussels.

Next steps

While the proactive stance adopted by Brussels authorities against non-compliant companies is good news for the fight against money laundering and other crime, it cannot be excluded that companies acting in good faith will be tarred with the same brush as shell companies. In order to avoid the risk of being wound up, dormant companies are therefore encouraged to make sure that their financial statements are approved by their shareholders within 6 months from the close of the financial year and filed with the NBB within 30 days from shareholder approval. Even if the deadline for filing has elapsed, it is recommended to still file the financial statements, although a late fee will apply.

1 De Tijd, 12 September 2018, p. 3

Karel De Smet

Tinneke Everaert

Voir aussi : NautaDutilh ( Mrs. Elke Janssens )

Click here to see the ad(s)
Tous les articles Droit des sociétés

Derniers articles Droit des sociétés

Holding board meetings by video conference or teleconference

The Code of Companies and Associations (CCA) does not mention the possibility to hold board meetings by video conference o...

Read more

First Significant Amendments to the Code of Companies and Associations (CCA)

The Act of 28 April 2020 (the "Act") amends the CCA in order to align it to the requirements of the Shareholder ...

Read more

Covid-19 – New temporary protective measures for enterprises in difficulty

The Federal Government has adopted new protective measures for enterprises affected by the COVID-19 crisis in the Royal De...

Covid-19 – New temporary protective measures for enterprises in difficulty Read more

Royal Decree number 15: Covid-19 crisis and suspension of execution

On the 24 April 2020, the Royal Decree number 15, regarding the temporary suspension in favour of undertakings of executiv...

Read more

Derniers articles de Mrs. Elke Janssens

Compliance consists of both prevention and remediation

Compliance has become a key concern not only in the financial sector but in business circles in general.

Read more

New Protection for Whistleblowers under Financial Law

Until recently, persons blowing the whistle on breaches of financial legislation were not protected under Belgian law. Con...

Read more

Proposal for a New Regulation Repealing the Prospectus Directive

On 30 November 2015, the European Commission published a proposal to replace the existing Prospectus Directive (Directive ...

Read more

Private Equity Investors and Business Angels face 'Consumer-like Protection' for SMEs

Small and medium-sized enterprises (SMEs) have gained 'consumer-like protection' pursuant to the Act of 21 December 2013 o...

Read more

LexGO Network