This section outlines the procedure for starting a business in Flanders.

The formalities of starting a business and several other practical issues are covered, including how to finance a company, choose real estate and secure data protection and privacy.

Establishing a Branch in Flanders

What formalities must be fulfilled in the foreign corporation's jurisdiction?

Corporate resolutions

To form a branch office, the foreign corporation's board of directors (or any other competent corporate body under the law governing the company) must formally adopt resolutions deciding to open the branch office and appointing in Belgium a legal representative for the purposes of managing the branch and representing the company in dealings with third parties and in legal proceedings in connection with the activities of the branch.

Notarized and Apostilled documents

• Corporate resolutions: these resolutions must be signed by the board of directors of the foreign company. Thereupon, the public notary of the home country has to legalize the signatures of each member of the board of directors;
• Deed of incorporation and bylaws: a certified copy of the deed of incorporation and the bylaws of the foreign company must be submitted with an affidavit (certificate) from the company secretary and notarized by a public notary;
• The public notary should legalize the following documents:
  • The corporate resolutions;
  • A copy of the foreign company's memorandum and articles of incorporation and any modifications which may have been made thereto;
  • A copy of the certificate of registration of the foreign company with the "Company House", if the home country's company legislation provides such a registration (i.e. an official document certifying the foreign corporation's existence).
• In addition, each document mentioned above needs to be submitted to the competent authorities to provide the certified copies with an apostil (i.e. an internationally recognized official seal as per the Hague Convention of 5 October 1961). However, the use of an apostil is only possible if the head office is located in a country that adhered to the said Convention. If the Hague Convention does not apply, the documents mentioned above shall be legalized by the local Belgian Consulate or by the Belgian Ministry of Foreign Affairs.
  

What formalities must be fulfilled in Flanders?

Translate documents into Dutch

A sworn translation of the aforementioned documents will be required as if the original documents are in a foreign language. A free translation is allowed for the annual accounts and the consolidated accounts.

File accounts with Belgian National Bank

The most recent annual accounts and consolidated accounts (if any) of the foreign company must be translated into Dutch and filed with the National Bank of Belgium, the country's central reserve bank. The certificate from the National Bank of Belgium, confirming that the annual accounts and the consolidated accounts (if any) have been duly filed, must be filed with the Registrar Office of the Commercial Court.

This requirement applies to privately held as well as publicly held companies.

File documents with local Registrar Office of the Commercial Court / Publish the corporate resolution in the Belgian Official Gazette

The aforementioned translated documents as well as the original documents, together with a summary, must be deposited at the Registrar Office of the Commercial Court (of the district where the branch is established) for publication in the annexes to the Belgian Official Gazette (Belgisch Staatsblad).

Obtain a corporate registration number

Enterprises doing business in Belgium have to be registered on the corporate database, the so-called Crossroads Bank for Enterprises (Kruispuntbank voor Ondernemingen) via a Corporate Office (the socalled Ondernemingsloket). This new procedure replaces the "old" registration procedure of a company at the commercial registry.

Once the branch is registered at the Crossroads Bank for Enterprises (CBE), it will receive a corporate registration number that has to be mentioned on the enterprise's correspondence, documents and invoices.

A branch cannot be registered at the CBE unless the legal representative gives proof of good management skills. Consequently, a certificate of basic knowledge of managerial skills needs to be obtained based on either a diploma or the experience of the legal representative. This formality might sometimes prove to be time consuming but can be avoided if the foreign corporation can prove that it (or its parent) does not qualify as a small or medium sized company (i.e. has more than 50 employees, a turnover above EUR 7,000,000 or a balance sheet exceeding EUR 5,000,000). In this respect, a declaration of honour ("affidavit") by the foreign corporation or its parent is sufficient.

Apply for a VAT identification number

From the moment the branch is registered at the CBE it can apply to activate a Belgian VAT-number. In principle, the Belgian VAT-number will be the same number as the enterprise's corporate number at the CBE. The VAT-authorities will activate this VAT-number as from the moment Form 604A is filed. This application form must be signed by the legal representative. His/her signature need not be legalized.

The value-added tax is like a general sales tax. It is neither an import duty nor other levy. Generally speaking, almost every business is required to charge VAT to its customers and therefore must obtain its own VAT number. Among the types of companies that are not currently required to obtain a VAT number are insurance companies.

While the VAT code is consistent throughout the European Union, the VAT percentage may differ from country to country. The VAT percentage depends on the type of product sold or service rendered. In Belgium, the standard VAT rate is 21%, although under certain circumstances rates of 0%, 6% or 12% apply. The VAT charged by the branch to its customers must be transferred to the State. However, the branch may deduct from the VAT received the amount of VAT paid to its suppliers. Consequently, having a VAT number allows the branch to reduce the cost of its supplies, as VAT paid is deductible.

Open for business

As stated above, any foreign company that intends to open a branch in Flanders must appoint a person who will be authorized to represent the company in dealings with third parties and in legal proceedings for the activities of the branch. This person is referred to as the "legal representative" of the company. The legal representative does not need to be a Belgian national or a Belgian resident.

In addition to all powers that have been granted to him/her by the company, the legal representative is required by law to carry out all disclosure formalities outlined above.

However, it should also be noted that such a legal representative has the same liability as a director of a Belgian company.

Additional information about establishing a branch in Flanders

What are the costs of establishing a branch in Flanders?

In addition to the fees for legal and tax advisers, the costs of setting up a branch include:

• Translation fees (English into Dutch) depending on the translation office. The total costs for the translation of all documents should not be underestimated;
• The expense of publishing the above-mentioned documents in the Belgian Official Gazette: 214,53 EUR (VAT included);
• Registration at the Crossroads Bank for Enterprises: 71 EUR (not subject to VAT).

How long does it take to establish a branch in Flanders?

The establishment of a branch usually requires one month, assuming the company has prepared all necessary documents/translations and procedures are handled smoothly by the authorities. The amount of time required to complete all formalities for the establishment of a branch depends mainly on translation work. Another timing element is the legalization and apostille requirements.

Registration at the Crossroads Bank for Enterprises can take place within days of the filing with the Registrar Office of the Commercial Court. From that moment on, the branch may commence its commercial activities. If the legal representative must prove his/her management capabilities and/or must have a work permit or a professional card, however, the time required to process these applications must also be taken into account.

Registration with the VAT authorities usually takes approximately three weeks from the filing of the application form.

The publication of the opening of the branch in the Annex to the Belgian Official Gazette can take some weeks but the branch may commence its commercial activities prior to the date of publication.

Can we freely determine the corporate name?

Since the branch is not a separate legal entity it must operate under the name of the company by which it is established.

Are there any government controls on starting a business?

No prior government authorization or business permit is needed to start a business, with the exception of some specific industries (e.g. banking, insurance, travel indemnity, pharmaceuticals and broadcasting).

In which language should the corporate documents be drawn up?

Branches are subject to Belgian regulations on the use of languages. All documents required by law must be drafted in one of Belgium's official languages (i.e. French, Dutch or German), depending on the region where the branch has its registered office.

If the branch is located in Flanders, these documents must be drafted in Dutch. If its registered office is located in the Brussels Capital region, these documents can be drafted in either Dutch or French or even in both languages.

Formalities to be complied with by the branch in the course of its activities.

In the course of its activities the branch office will be compelled to file and publish any and all resolutions from the foreign company that are of public interest (i.e. any modification related to the deed of incorporation or bylaws, name, registered office of the head office, the nomination of the directors of the head office, the liquidation or bankruptcy of the head office or the closure of the branch). Branches are obliged to keep accounting records in accordance with Belgian accounting rules but are not required to publish their own annual accounts. Only the accounts of the foreign company (of which the branch is a part) need to be filed and published. The parent company's accounts must be audited and certified according to its national regulations. If the aforementioned documents are in a foreign language, they will have to be translated into Dutch.

Who should be appointed as a legal representative?

The law does not require the legal representative to be Belgian, nor do any other nationality requirements apply. Neither does the legal representative need to be a Belgian resident. Proper consideration should be given to work permit regulations, however. Since the legal representative is supposed to carry out daily management of the branch and sign all official documents, it is strongly recommended however that he/she is based in Belgium.

Establishing a Subsidiary in Flanders

How does a foreign investor establish a subsidiary in Flanders?

Introduction

Belgian company law recognizes several forms of companies but in international business the public limited liability corporation ("naamloze vennootschap", abbreviated to "NV") and the private limited liability company ("besloten vennootschap met beperkte aansprakelijkheid", abbreviated to "BVBA") are the most convenient forms. Nevertheless, the legal steps required when establishing a company are similar for all types of companies. The incorporation procedure is similar for all such types and consists of the following 10 steps. Accounting firms can assist with the implementation of all steps.

1. Draft an incorporation deed

2. Draft a business plan

3. Deposit of the share capital in a blocked bank account

4. Draw up the appraisal reports (only in the event of a contribution in kind)

5. Notarize the incorporation deed

6. Register the incorporation deed

7. File for publication in Belgium's Official Gazette

8. Obtain a corporate registration number

9. Apply for a VAT identification number

10. Open for business!

Draft an incorporation deed

The incorporation deed will be drafted by a Belgian public notary based on the specifications of the shareholders. The incorporation deed must among other things state the details (name and address) of the shareholders who incorporate the company and specify the amount of the capital contribution made by each shareholder. At least two shareholders are required to establish a stock corporation. Often the foreign parent company will hold all but one of the shares and one of the company's senior executives will hold the one remaining share. In such cases, the foreign parent company typically makes a declaration in the deed of incorporation to the effect that it accepts the entire founders' liability. The executive will then not be subject to such liability. The incorporation deed also includes the company's articles of association ("statuten"), which determine the rules governing the company.

The directors will be appointed on incorporation of the company.

Draft a business plan

New legal entities must prepare a business plan covering the first two years of operation. A Belgian accountant can help to draft the business plan. The business plan must include a summary balance sheet that justifies the amount of capital made available by the shareholders in order to run the business. The business plan is not public but remains in the files of the notary who enacted the incorporation deed. If the business goes bankrupt within three years of the date of incorporation, the court at that time may decide 6 Starting a Business to look at the business plan to check whether or not the founders can be found liable for failure to fund the company with sufficient start-up capital. In certain cases the founders can be held liable for the debts of the bankrupt company. Branches are not required to draw up a business plan.

Deposit of the share capital in a blocked bank account

In the case of a contribution in cash, a bank account must be opened in the name of the company "to be incorporated" with a bank in Belgium and each shareholder must deposit the amount to be paid up on its shares in this account, prior to the execution of the incorporation deed. This account remains temporarily "blocked" until the incorporation of the company, or failing such incorporation, for a period of three months, after which the funds are reimbursed to the candidate-founders who request this. The bank will issue a certificate, which must be delivered to the notary on the date of execution of the incorporation deed, confirming that the paid-up amount of the capital is in the bank account. After the incorporation, the Belgian public notary will give his consent for unblocking the deposited funds (via a certificate sent to the Bank and confirming the incorporation) after the notarial deed is deposited at the Registrar Office of the Commercial Court. Belgian banks are familiar with the procedure.

Draw up the appraisal reports

The shareholders may also make a contribution in kind to the company consisting of assets other than cash, provided that such assets have an economic value (e.g. real estate, shares in another company, a claim for the payment of an amount of money etc). In such cases, an appraisal report must be issued by an auditor. This report must describe the assets and the valuation methods applied. In addition, the founding shareholders must prepare a report stating the reasons why the asset contribution is in the interest of the company and, as the case may be, the reasons why they do not agree with the findings of the auditor's report. Both reports must be delivered to the notary on the date of execution of the incorporation deed.

They, together with the incorporation deed, must be filed at the Registrar Office of the Commercial Court by the notary.

Notarize the incorporation deed

The incorporation deed must be recorded in a notarial deed to be executed by the founders and a Belgian public notary. The founding shareholders must be present or represented when the corporate deed is enacted before the public notary. To be represented, a power of attorney must be provided and attached to the incorporation deed. The signature on such a power of attorney need not be legalized.

Register the incorporation deed

A corporation obtains a legal personality separate from that of its shareholders as of the date of filing of the incorporation deed at the Registrar Office of the Commercial Court in the judicial district where the company has its registered office. This filing is handled by the Belgian notary who executed the incorporation deed. The notary is required by law to file the incorporation deed within 15 days. In principle, a company may not enter into any transaction (e.g. lease of premises, purchase of assets etc) until it has a legal identity. However, it is possible for one or several persons to carry out a transaction on behalf of a company "in incorporation" prior to the moment when it acquires a legal identity.

File for publication in Belgium's Official Gazette

The company's incorporation deed must be filed for publication with the Belgian Official Gazette.

Obtain a corporate registration number

A company may not commence business activities prior to its registration at the Crossroads Bank for Enterprises (CBE). It must be registered at the CBE in the judicial district where it has its registered office.

Apart from the fulfillment of other conditions, a company cannot be registered at the CBE unless people having management powers (typically the managing director) give proof of good management skills. Consequently, a certificate of basic knowledge of managerial skills needs to be obtained, based on either a diploma or the experience of the manager. This formality might sometimes prove to be time consuming but can be avoided if the company can prove that it (or its parent) does not qualify as a small or medium sized company (i.e. has more than 50 employees, a turnover above EUR 7,000,000 or a balance sheet exceeding EUR 5,000,000). In this respect, a declaration of honour ("affidavit") by the foreign corporation or its parent is sufficient.

Apply for a VAT identification number

As a general rule, a subsidiary must also be registered with the local VAT Administration.

Open for business!

A public limited liability company ("NV") is managed by a board of directors composed of at least three persons. However, the minimum number of directors can be reduced to two if the company has only two shareholders. Daily management powers may be granted by the board of directors either to a director (who is usually referred to as the managing director - "gedelegeerd bestuurder"), or to any other person (generally an employee of the company) who is usually referred to as the general manager ("algemeen directeur"). The person to whom daily management is delegated represents the company for such daily
management.

A private limited liability company ("BVBA") is managed by one or more managers.

Additional information about establishing a subsidiary in Flanders

What are the costs of establishing a subsidiary in Flanders?

Different from a branch, the establishment of a subsidiary in Flanders does not include either translation costs or administrative legalization formalities and costs. However, a fee of approximately EUR 1500 must be paid to the public notary who will enact the incorporation deed. Other incorporation expenses include costs in relation to the publication of an abstract of the notarial deed in the Belgian Official Gazette (214,53 EUR - VAT included), stamp duties and registration at the Crossroads Bank for Enterprises (71 EUR - not subject to VAT). With effect from 1 January 2006 no capital duty is due.

How long does it take to establish a subsidiary in Flanders?

A public limited liability corporation or a private limited liability company can be established within a short period of time. There are no government approvals or waiting periods. If the foreign investor has approved the articles of association, opened a bank account and prepared its business plan, the incorporation is a matter of days. However, attention should be given to work permit regulations and the certificate of proof of good management skills, which might be delaying factors.

Can we freely determine the corporate name?

The choice of a corporate name is in principle free. However, the name must be sufficiently distinct from that of any other company so as to avoid confusion. It is recommended that a prior name check be carried out. This formality could be done by a Belgian public notary.

Are there any government controls on starting a business?

As a general rule, no filing with, or approval from, any governmental authority in Belgium is required prior to the incorporation of a company.

However, if the company intends to engage in certain regulated activities (e.g. banking or insurance activities, pharmaceuticals, restaurants etc) prior approval from some governmental authorities will be required before the company may be authorized to carry out such activities.

In which language should the corporate documents be drawn up?

The language of the incorporation documents depends on the location of the subsidiary's registered office: Dutch in Flanders and either Dutch or French in the Brussels Capital Region. If the company has one or more places of business in different Belgian linguistic regions, the regulations on the use of languages in each of these regions must be complied with.

Filing annual accounts with the Belgian National Bank

A Belgian company has to comply with Belgian accountancy law and keep a full set of accounting records. Furthermore, every business operating must file a summary of its financial accounts on an annual basis. There are detailed rules and regulations regarding the type of financial information that must appear in these reports.

For more detailed information, it is advisable to consult an accountant or attorney.

Real Estate Issues

What should be considered when choosing real estate for a new business?

A new company developing activities can rent (lease), buy or build premises. Most small and medium sized businesses start by renting space according to their particular needs. One of the advantages of purchasing a building is that the acquisition price will be considered to be part of the "calculation base of the total investment" for purposes of obtaining investment incentives. On the other hand, buying premises will also have certain tax implications, such as the levy of a registration duty of 10% in Flanders and 12.5% in the rest of Belgium of the purchase price, which is, however, deductible for corporate income tax purposes.

Who can assist in finding appropriate premises?

Flanders Investment & Trade, in co-operation with local development authorities and/or real estate advisers, will prepare an overview of potential locations in the different areas of Flanders, according to the specifications of the potential investor. Real estate brokers can also be consulted.

Additionally, local development authorities provide the opportunity for start-up businesses to locate in "business centers" offering secretarial and communication services at competitive prices. Business centers are actively promoted and encouraged as a means of reducing costs for start-up companies. A significant consideration in choosing a location might be the availability of EU incentives in certain development zones in the country.

How are tenants protected under a commercial lease?

The Belgian Law of 30 April 1951 on commercial leases gives special and mandatory protection to tenants whose commercial premises are directly accessible to their customers for retail purposes.

More importantly, the law provides for an easy and favorable renewal of the lease up to three times for subsequent nine-year periods. Furthermore, tenants are allowed to assign their lease as part of the total sale of the business. While the purpose of the law is to protect retail commerce, it can also be made applicable, by mutual agreement of the parties, to other types of leases.

What is the duration of a commercial lease?

One of the typical features of a so-called commercial lease is that the lease is contracted for a nine-year period but can, under certain conditions, be terminated by either party after any three-year period, albeit it under specific conditions for the lessor. A similar lease agreement is also often contracted in respect of premises that are not directly accessible by customers.

What kind of leases are there for offices, warehouses etc?

Under the strict definition of the Law of 30 April 1951 above, when the premises are not rented for purely commercial purposes (i.e. when the premises are rented for the purposes of installing HQs, offices, warehouses, distribution centers etc), landlords and tenants enjoy the greatest freedom to settle their mutual relationships and, in particular, to fix the duration of the lease and the termination options thereof.

What is a lease with an option to buy?

A company can negotiate with the landlord an option to purchase the building at some point during the term of the lease. Belgium does not impose restrictions on non-Belgian businesses or persons purchasing buildings or land.

Must a lease be in writing?

Leases must be registered for tax purposes only and therefore must be in writing, stipulating the duties and obligations of the respective parties. Under Belgian Law, registering a lease also gives more protection to the tenant when the premises are sold by the landlord to a new owner during the execution of the lease.

Must tenants provide a security deposit?

Generally, a landlord will require a deposit which usually equals three to six months rent. This can be provided by a deposit in cash with a bank or by a bank guarantee. In the latter case, the bank will charge the tenant a small fee.

Is there any protection for residential leases?

Residential leases are governed by a set of specific and mandatory rules designed to protect the tenants. These rules are especially stringent if the rented accommodation is the principal residence of the tenant and his family. The protection includes:

• A cap on rent increases, limited to a yearly indexation based on consumer prices;
• Advance notice of termination and
• The possibility of having short-term leases for up to three years (a few months, one year etc).

Data Protection/Privacy Requirements

Are there any restrictions on the processing of personal data?

The European Union directive on data protection sets a number of requirements with which companies processing personal data in any EU country must comply.

Belgian law has implemented this directive. When a company established in Belgium undertakes activities that involve (directly or indirectly) the processing of personal information about, for instance, its employees or customers as individuals, it must abide by the Belgian data protection regulations. The processing of data includes any business operations performed upon personal data such as the collection, recording, storage, use, dissemination or destruction of data. The data protection rules apply to the manual processing of personal data (provided the personal data is, or will be, included in a filing system) and to the processing of personal data by automatic means (e.g. by computer), regardless of whether this is done routinely or only once for a specific purpose.

The processing of personal data is permitted if certain conditions are met - for example, when the individuals concerned have given their consent or when processing is necessary for a company to perform a contractual obligation towards the data subject.

The manner of processing is also subject to specific legal requirements. In particular, data can be collected only for legitimate, specific and explicit purposes. If there is further processing for other reasons, the data subjects must, in principle, give their consent to the new processing. There should also be a relevance between the data collected and the purpose of the processing. In addition, the processed data must be accurate and, where necessary, be kept up to date. It should also be retained only as long as it is necessary,
in view of the purpose of the processing and, sometimes, according to the type of data processed.

Companies engaged in data-processing operations may have to make available to individuals the means to access the data they process on their behalf. They must also give data subjects, at any time, the opportunity of rectifying their data or asking for rectification. Individuals are entitled to object to a specific processing if certain conditions are met: for instance, when processing is related to direct marketing.

Which authority is responsible for administering data protection rules in Belgium?

A company planning to process personal data by automatic means must submit detailed information to the supervisory authority (the Commission for the Protection of Privacy), prior to any processing. Some processing activities, nevertheless, do not have to be notified in cases prescribed by legislation (e.g. data processing relating to the administration of staff or salaries in a company etc).

Consequently, a company wishing to process customer information for direct marketing purposes falls within the scope of current law and needs to inform the customer and notify the Commission for the Protection of Privacy. The notification shall contain specific information relating to data processing.

The notification can be made either on paper form or by the Internet. The Commission for the Protection of Privacy has issued standard paper forms that can be used for notification. These forms can be obtained from the Commission by post or they can be downloaded from the Commission's website (http://www.privacy.fgov.be).

Are there any restrictions on the transfer of data to non-EU countries?

Companies are permitted to transfer personal data to third (non-EEA) countries only if the third country in question ensures an adequate level of protection.

The adequacy level shall be assessed in view of all the circumstances surrounding the processing operation, such as the type of data processed, the purpose and duration of a given transfer etc.

The European Commission may issue decisions that confirm whether a given country ensures an adequate level of protection. If a European Commission decision is issued, personal data can be transferred from the EU member states to the country in question without the company being obliged to give additional guarantees. Countries covered so far by the European Commission's decisions are: Switzerland, Canada, Guernsey, the Isle of Man and Argentina. As far as data transfers to the US are concerned, US-based companies must adhere to the Safe Harbor Privacy Principles issued by the US Department of Commerce
(and annexed to the "safe harbor" decision of the European Commission).

If no European Commission decision is issued with respect to a given country, companies planning to process personal data outside the European Union must ensure that their data processing operation falls within one of the exceptions to the ban (such as the use of contractual guarantees).

The European Commission has issued model contractual clauses that can be inserted in private agreements involving transfers of personal data to third countries.