The withdrawal share after resignation or exclusion
The withdrawal share after resignation or exclusion
June 2022 – The Companies and Associations Code (CSA) provides that limited liability companies (BV/SRL) may provide in their articles of association for the possibility of resignation and exclusion. The Commission des normes comptables (CBN/CNC) has now commented on the accounting treatment of the resignation or exclusion of a shareholder from the company's assets.
Resignation and exclusion in the BV/SRL
The system of resignation and exclusion from the company's assets is an optional system in the BV/SRL, which means that a resignation or exclusion from the company's assets is only allowed if the articles of association explicitly provide for this possibility.
However, the CSA provides for a series of modalities to be respected in case a resignation or exclusion regime is provided for in the articles of association.
Voluntary resignation
Voluntary resignation of a founding shareholder is only possible from the third financial year after incorporation, regardless of the terms specified in the articles of association.
The other rules concerning voluntary resignation are as follows
shareholders can only resign during the first six months of the financial year;
a shareholder resigns for all his shares, which will be cancelled;
the resignation takes effect on the last day of the sixth month of the financial year and the value of the withdrawal share must be paid within one month;
the amount of the withdrawal share for each share is equivalent to the amount actually paid up and not yet reimbursed for that share, without, however, being greater than the amount of the net asset value of that share as shown in the last approved annual accounts.
It is possible to derogate from these four rules in the articles of association.
The distribution of the amount of the withdrawal share is considered as a distribution subject to the distribution tests: the net asset test of article 5:142 CSA and the liquidity test of article 5:143 CSA. It is not possible to deviate from this rule in the statutes.
The administrative body shall report to the ordinary general meeting on the requests for resignation made during the previous financial year.
Resignation by operation of law or by loss of the capacity required by the articles of association
The articles of association of an BV/SRL may also provide for a regime whereby a shareholder is deemed to resign ipso jure against the assets of the BV/SRL:
in the event of the death, bankruptcy, insolvency, liquidation or prohibition of the shareholder; or
if the shareholder no longer meets the statutory requirements to become a shareholder.
The resignation is deemed to take place at the time of the occurrence of the event and the same legal provisions apply as for a voluntary resignation, with the exception of the time limits. Attention: if the articles of association do not provide for this, it is not possible.
Exclusion
The exclusion of a shareholder from the assets of the limited liability company is initiated by the administrative body. Exclusion is only possible if the articles of association of the BV/SRL explicitly provide for the possibility of exclusion from the company's assets for just cause or for any other reason specified in the articles of association.
In order to be able to exclude a shareholder, the administrative body must send him a reasoned proposal for exclusion. The shareholder concerned shall be invited to make his comments known in writing to the general meeting within one month of the communication of the proposal for exclusion. The shareholder may ask to be heard.
Only the general meeting is competent to pronounce the exclusion and the exclusion must be justified. The administrative body shall notify the shareholder concerned of the decision of the General Meeting to exclude the shareholder, stating the reasons, within fifteen days and shall enter the exclusion in the share register, indicating the date of exclusion and the amounts paid to the shareholder concerned.
Exclusions and the resulting changes to the articles of association - as exclusions lead to a change in the number of shares - shall be established before the end of each financial year by a notarial deed received at the request of the administrative body.
The shares of the excluded shareholder are cancelled.
Accounting treatment of the withdrawal share
Unless otherwise provided for in the articles of association, the excluded shareholder shall be entitled to the payment of a withdrawal share, the amount of which shall be, for each share, equivalent to the amount actually paid up and not yet reimbursed for that share, but shall not be higher than the amount of the net asset value of that share as shown in the last approved annual accounts.
The distribution tests are also applicable in this case.
The administrative body shall determine to which equity items the amounts necessary for the payment of the withdrawal share shall be allocated. In doing so, the administrative body must take into account, among other things, the equity elements that are legally or statutorily unavailable.
Insofar as the repayment of the withdrawal share is charged to the non-capital contribution, the following entry is made at the time of resignation or exclusion:
11 Non-capital contribution XXX
to 48 Miscellaneous liabilities XXX
As the repayment of the withdrawal share is charged to reserves, the entry is made at the time of allocation of the result. At the time of the resignation or exclusion decision and, if applicable, the withdrawal from reserves, the following entries are made:
697 Other beneficiaries XXX
to 48 Miscellaneous liabilities XXX
133 Available reserves XXX
to 792 Withdrawal from reserves XXX
The actual payment of the withdrawal share must be suspended if the distribution tests prevent a full distribution. The suspension lasts until the distribution tests allow the actual payment. The Commission is of the opinion that the BV/SRL must mention this impossibility to pay the withdrawal share in the notes to its annual accounts.