Belgian legislator introduces new tools to improve efficiency and effectiveness of prohibitions to act as a director

Under Belgian law, criminal and civil judges can impose a prohibition on both individuals and corporate entities to prevent them performing certain management functions in a company (“management prohibition”) upon conviction or in the context of insolvency. In practice, however, these management prohibitions often remain a dead letter, as persons who are prohibited from taking up a directorship are still appointed directors due to a lack of monitoring of compliance with these prohibitions.

With the stated goal to make management prohibitions more efficient and more effective, the Belgian legislator has submitted two draft bills introducing two new ways of enforcing compliance with management prohibitions. A central register will be introduced, through which management prohibitions will be publicised. In addition, bankruptcy trustees will now be able to request that the court impose a management prohibition in certain circumstances.

Introducing a central register for management prohibitions

Currently, management prohibitions are published in the Belgian State Gazette. However, since they are not centrally accessible but rather spread over various publications, it is often difficult to verify whether a management prohibition against a person is in place.

In the Act of 4 May 2023, the Belgian legislator has introduced a central register for management prohibitions, allowing all prohibitions to be kept in one place. The law transposes the European Directive 2019/1151 of 20 June 2019, which requires member states to respond efficiently to requests regarding management prohibitions from other member states and, to that effect, establish a central database in which all active management prohibitions are registered.

The legislator’s intention was therefore to create a database available to public authorities and third parties which will enable quick and easy verification of whether someone is prohibited from performing a management function. This covers all types of management functions, by natural or legal persons, including acting as a director, manager, auditor, daily manager, member of an executive committee, management board or supervisory board or liquidator of a legal entity, as well as acting as a permanent representative for the operations of a branch office or as a candidate for appointment to such office.

Registered data and accessibility

Any management prohibition imposed by a criminal or civil judge will automatically be published in this register, although access to some of the information in the register will be restricted.

• General information on management prohibitions imposed as a result of a bankruptcy will be generally accessible to third parties.
• General information on management prohibitions imposed as a result of a criminal conviction will only be accessible to third parties who have identified themselves (through Itsme or electronic ID).
• Information on the court which imposed the management decision, the grounds for that decision and the identity of the company for which the person subject to the management prohibition worked will always only be accessible to various public authorities (such as the justice department and the National Social Security Office, police departments, enterprise court registrars and notaries). 

In addition, third parties will only be able to search for management prohibitions on the basis of specific search criteria (such as name, place of birth, residence or company number). It will thus not be possible for a citizen to browse through a list of persons or legal entities who are subject to a management prohibition. 

Information on management prohibitions will be kept in the registry until the natural person dies or five years have passed from the day of the loss of legal personality (in the case of legal persons).

Enforcement

To ensure compliance with management prohibitions, the Act of 4 May 2023 imposes an obligation on notaries and registrars of the enterprise courts to consult the register when company deeds appointing a director (or any of the other management functions mentioned above) are approved or filed. If a management prohibition applies, they must refuse to approve or file the deed.

This check is not limited to management prohibitions imposed by Belgian courts. When filing the company deeds for the appointment of (i) a director (or any of the other management functions mentioned above) of a company or (ii) a permanent representative for the activities of a branch, the filing party will need to attach a declaration signed by the competent bodies of the company, stating that no similar management prohibition has been pronounced by a court of a member state of the European Economic Area. In the absence of this declaration, the relevant notary or court registrar must notify the Belgian Chamber of Indictments, which can then check if there is a similar prohibition, based on the European system of interconnection of registers.

Prohibition on the performance of management functions in a company: a new instrument for the bankruptcy trustee

On 25 April 2023, the plenary session of the Belgian Parliament adopted the bill for the implementation of the EU Restructuring Directive (see our blogpost on the implementation of the EU Restructuring Directive for more information). This new law brings many novelties, including allowing bankruptcy trustees to request that a bankruptcy court impose a management prohibition on a director or manager of an insolvent company.

One of the management prohibitions to be included in the central register is the prohibition referred to in Article XX. 229 of the Code of Economic Law, notably when the director committed errors that led to the insolvency.

Given their central role in the settlement of the insolvency, the bill contemplates that the bankruptcy trustee is best placed to judge whether the insolvency was caused by an executive’s gross error. This should also enable the court to impose these prohibitions more quickly.

Next steps

The law of 4 May 2023 introducing the new central register for management prohibition will enter into force on 1 August 2023.

The law of 7 June 2023 implementing the EU Restructuring Directive will enter into force on 1 September 2023.