New restrictive rules applicable to company incorporation financial plans in Belgium
10 December 2018
An article written by Dimitri Lhoste (BDO Audit) about the regulatory changes related to the incorporation financial plan under the new Companies Code has been published in November 29th edition of daily newspaper L’Echo.
In May 2019, the new Companies Code will come into effect in Belgium.
With respect to new company incorporation, the new Code notably aims at removing minimum equity requirement, but such a major change does not happen without new measures regarding creditors’ protection. These measures include liquidity and solvability requirements, in-depth analysis of the links between right of insolvency and the Companies Code, as well as new restrictive rules on financial planning at incorporation.
The new rules can be split into three categories: (i) financing and guarantees, (ii) opening and forecast balance sheets and (iii) description of the assumptions.
- Financing and guarantees: an appropriate financing structure, with enough equity and guarantees, is an essential prerequisite to gain access to financing (see previous article “Key insights about SME financing parameters” published in Trends Family Business). The detailed description of the company’s financing structure and sources will therefore need to appear in the financial plan.
- Opening and forecast balance sheets: the balance sheet is the first thing a financial partner will investigate when analyzing an investment project. As such, the computation of the balance sheet and cash-flow statement, though more technical than the single forecast income statement, can be seen as the logical consequence of the Financing and Guarantees rules.
- Description of the assumptions: probably even more than financing hypotheses, operating and investment assumptions should carefully be thought and described in order neither to be too aggressive, nor too conservative.
In a nutshell, the removal of the minimum equity required to incorporate a new company in the new Companies Code comes with a logical stronger care for creditors. The new Code will require more strategic analysis, and more technical skills in order to prepare the incorporation financial plan and to prove the feasibility of the retained hypotheses.
Such requirements might be an encouragement to call upon financing professionals. Fortunately, the help of such professionals can be subsidized by public authorities (till 100% in the Walloon Region !), which we believe makes the regulatory change an opportunity, rather than a thread.
Read the full article here.
For more information about financial planning, please contact Dimitri Lhoste (BDO Audit) or Jan Vandommele (BDO Corporate Finance).