Belgian Supreme Court Confirms Directors’ Interim Powers Following Expiry of Mandate

On 27 June 2014, the Belgian Supreme Court (Hof van Cassatie/Cour de Cassation) handed down a judgment concerning the powers of a director during the period between the expiry of his or her mandate and the next shareholders’ meeting. The question submitted to the Supreme Court was whether the appellant was validly represented within the framework of legal proceedings initiated by its former director whose mandate had expired.

The Brussels Court of Appeal (Hof van Beroep/Cour d’Appel) decided that the director, whose mandate expired in 1995 and had not been renewed, did not have the power to start an opposition procedure (verzet/opposition) in 2008 and lodge a subsequent appeal (beroep/appel) in 2010. In the case at hand, neither of these acts had been ratified by the appellant, as the shareholders’ had not met since the closing of the bankruptcy in 1991. Although the Court of Appeal confirmed that a director whose mandate has expired still has interim powers, the Court of Appeal added that such powers are temporary and cannot go further than “the period reasonably needed for the shareholders to meet”. Considering that this reasonable time had elapsed, the Court of Appeal held that, according to Article 848 of the Belgian Judicial Code (Gerechtelijk Wetboek/Code Judiciaire), the two procedural acts are to be regarded null and void and hence inadmissible.

The decision was challenged by the appellant because there is no legal provision that the directors’ interim powers to represent the company cannot survive the time reasonably needed for the shareholders to meet. The Supreme Court sided with the appellant and decided that it cannot be established from the existing legal provisions that the interim directors’ powers cannot go further than the time reasonably required to hold a shareholders’ meeting. It consequently held that the Court of Appeal did not sufficiently justify its decision that the director’s acts of 2008 and 2010 are to be regarded null and void and hence inadmissible.

Although the underlying facts relate to the old Bankruptcy Law (which was replaced by the Law of 8 August 1997 providing for the dissolution of the company following the closing of the bankruptcy proceedings), the judgment of the Supreme Court would seem to remain relevant as it confirms that when the mandate of the directors has expired, the directors still have the powers (and even the obligation) to take all actions that are required in the interest of the company. Although lower courts and legal scholars are of the opinion that the interim powers should be limited in time (e.g. by referring to the time reasonably required for the shareholders to meet), the Supreme Court seems to take the position that the interim powers are not limited in time and remain in force as long as no shareholders’ decision has been taken on the renewal or replacement of the directors.