Corp. Accounting

lecture
Erpaatetcca-wt.mg 1
Choosing a
Company
sole
prop .
-
iucop .
company
to +
* A is
person respond .
* buildup by legal act

* *
Farnon + owner
*
by shareholders lmoee than
Ipos)
contribution
* Personally liable *
assets & liabilities
*
* independent + can hire *
activities
direct indirect
* starts with A *
•
profit to shareholders
person
6@8haelueleencamaholneaneetheC0.t
all the
profit fore human lie up miorp.AZ .
)
pros
.
fast decisions
limited limited Ceimito
obligations liability
→
,
to cook iution)
cheaper →
separate
if entity
¥
→
in abt →
you can see
the
co 's
separate assets , but not
No
legal edify Rrs
belongings
.
unlimited
liability →
1
or
belongings
wore
personal as collateral people
→
represented
limited in expertise 4 capital by stones
→
easier to split the
tax biz
status →
once
you
start →
access to
waking a
lot of money
-8 less taxes to
capital
be
it's better to
→
Profits paid (25%)
form a co →
are
split
→ lower taxes Mgmt Can lead to conflictive
personally
.
→
→
Slower
→
wore costs &
more than 25K/year ire take 180% ) legal obligations
→
.
→
Hdliabtsep legalentity .
→
Draft status
→
financial Plan
→
Block contributions of cash & report the contribution in kind
→
Notary →
UBO → ultimate benef .

any
TAX number
-
Pllc financial
-
plan
'
↳ elements :
admin
part
objet
financing sources +( mortgage )
Securities .
. . .
forecast
projected Before sleet + All after
1242g
hypotheses months
am
g. again, , ana ,,
> think if you really want to do this
→¥ / Bankruptcy Investigator →
if
founders predicted well
, we're
prudent →
→
founders if bank
enough contributions
limited liability :
-
Pt in
2g )
under
↳ can be
↳ limited in
. .
. statutes
→
Articles of association -
Stotts
Public ⑧
win 1 .
pers
,
issued
Grisioob
cap
=t61 doesn't
.
-
minium> £85T → mean
if contrib
* Per shoe : minimum of each shaeir kind
.
*
pa.ae#-
•
d- easy
Contribute to
be
I did
after 5g here f. be
of in
f- "
incorporation paid or
of the CQ
¥7
.
of all
My / share compare with the abs .

win
61,58€
=
Absolute Min .
us
.
44 of slues
( 61,800€ )
YÉyid for draft Habits

to ✓
financial ph
Depositing
*
cash in Bonita that is blocked
*
Exam
aoez]→ÉY÷I,
.
of aeedñ
front of
*
Unblocking the Bank ta .
② P-aywtofcsshcanhibc.fi#
EÉ¥F÷÷÷# *
shareholders received
¥e¥tw
÷÷÷÷÷÷÷-÷¥E→
↳
the
slue towards
holders .
:
=
Jamal unties for the

incorporation of a PIC
5502
7•kµk-
① @ 48g - -
-
② formation of a
co t deed of
Natogt
.
kinds
100
/
For
•
amount
@ so , of issued
capital
4890 shotten ⇐g
(
•
→
readable booked
f7¥k
@ so, off
•
2210
24^5 do K
-
@ rot
③&ankta.iswblod# i
¥70K }
55002
the
@ 5502 -
-
company
now
exists
,
toute can
transfer the
⑨ money
www.fomp.ofesoiardsetethdpolf ovgliouexpaeyt
=
:
editor
""°¥
200
capitalised
income
t Stewart
Plot term wok .
-
Prof 't will te

other the
am .
payable larger As a cost

t 1-
Asset (fictions
)
less profit
Not assets
] Purchase invoice
?
6581657
↳ financial
=
¥¥
• capitalising ¥
amps
✓ ↳
capitalised
Bz in -
.
Stalinist
capitalising
•
Payment eyaug ,
4892455€
•
Amortization of formation expenses
-
volt =
worriedly over umax 5 Years Annalisa

→
20% at¥↳
Ace NE
2¥ ( No
.
special Acc
630042g
2500€ fatal foam .
expenses
excluding
→k values
VAT_
Notary + Auditor
✗
0,2 =
500€
LE-ufaprivteltd.co#
→ similar
→
needs
(deed
Notary )
a
auth .
→
heads
contribution
( concept of capital is cot
beg
-
contribution
→
all shores here to be
paid op
→
No minium
in contribution
free
→
Draft stats
→
financial
Plan
→
Blocked Accent
→
f) arty )
⇐eatin
d- and
the
→
Unblocking Anant (
orang at
notary
↳
eats)
entry )
→
-
.
2 contrib .
12800
)
+
19800
cash
→
Bank
certif.
:
Blocked toe
deposit
.
money in the B K
*•@µ→
-
¥0k
① . -
-
②
Notary :
Un# contributions
4890
¥5k
•
@ 1µg
•Notoy capitalise
,[¥Ix
200
4110 debt towards
780
@ agg
so
4
paid shareholder 907,50
→
the co
doesn't
pay
ofBavkd-a.at#-:p----os
Unblocking
s↳
⑨ Amortization of form .
expenses
6Ñ÷µYt four
of cases .
capitalized
are
normally four
→
exp are
.
very
loss
brqfj
→
Chronological order → if notary is
paid
immediately →
entry
immediately
{Early -Payewents_ →
early payments are
"
what is paid
amore than what is
formation of
-
a
PK tgeeeg-reqei.ee "
T⇐G=gnaguats_Ñ
the
beholders
→
receive interest for

→
iutnstispaia turns
eaey payment
gory additional
capital is partoffle
an
called
up
→
Interest is
always due
atstanday
on debt
the .
Entries
Blocked
→
① Bank calif hktshaehedders
paid
"
-
p
the
legally
.
required
f- minimum & how "
wud / they overpaid
"
thefrctth.at#s-s--@fgg78ooo-
178000
if oe.s-F-s.ie agF ↳ 75-000
H9Ui✓e¥ legally
"
-
{
-
→ *• "
% to
find out how was So the minimum
min
÷÷÷÷÷÷ :÷÷÷÷ .÷*

is
+3000
.
25%
of the
total capital (
Kifer shoe) from two
early pywt
shareholders
legally required minimum
to
if the is not ←
pay 25%
of what
they over
A &B
But
co .
2 shaehodkns decide to
*:*.
ask their
money back
.
% 50% and
100% of their
( shot term lids .
.
② |N_try_- ( Exec .
of deed of dixorpt . → this proves
that
÷÷Y
the
money
is
legitimate and
Always same
entry the
tt@eoo Yet
existing
is now
company
.
amount
of issued
cap .
↳
Nawltat the
:::÷¥.÷⇐*
Co exists
shareholders connect /
liability has to be
a
±t§
Shareholders 1 gets booked
off .
any be created
required
to the
agley
wuiwiuue -
ragu④
Early 4890T¥as the tot amount that
☐ .
uncalled "•
Mt on the blocked Bank toe
capital
↳ Min
.
was 75k
Short-term debt
$0T the Co still has
.
a short term
WHY? : debt
its
hewers
of the shareholders
only in the deeds of ]
we
incop ( after
see who
the
notary
paid how
that
uncle
ghaf%°°€# term
1-
% ""
e) That's has
•
has to be
why in the
.
→
we
bare the 78K
I 3k
beginning early payments
bundled .
& tunneler the short term

debt
?⃝
⑧
lukodcfheBwkAC
total amount now
gets put to the Bank ta .
how much will come on an BIA ?

→
the minimum
rug . value :
750001-3600
55027M¥
t 3k
5500
.
Paying
→
up an
additional of the
↳ - 105000
of
tlncalledcapleecaevescelkdcap
out
300
^"@4^•b"&d
-
ooo
→ →CIbdGp-
* Shareholder who
shot
term
maid
eoo
Shoes in
already receivable
*
shueheddn free > doesn't
have
who to
paid 50% pay
anything -
one
hrs
>
an
500 Shores
Why has to
pay an
additional
shareholder A will not
10T .
and not
have 1 ""
85% →
since he
any early puts 50% ( 25min
anymore ! +
25
.
arm now
extra
)
But :B has Hoy adv ) ( 25%+354 everyone
else has to
pay
_-→
.
.
so he
We
pys
need to Book off_ the early Payments that are not valid
anymore
?⃝
① → the 251 .
he paid in advance need to be booked
off + to -1 .
weed to
be added
⑨ →
35% of his 75% that he too
↳ still
paid be
booked
wm.ch need
off I to
called up .
has 600€
in
early payments ( 40% )
-
☒
JwuualLutub
①
BNwe#ts for (1875 of④
Call
of
1050¥
+
525of⑧)
② Add.€
SI
z-④→
an
Bank
. .
.
105£00 -
already paid in the

past
=
le26o to total
of among
that
needs to
our
came
bank Account
through on
① All shareholders
}
for the 35%
extra pay
pywwts
Synthesis
.
487 D 2400
5500 I 102600
410
Called Cap 105000
@⑦"•µ
shine holders
paid -5500 102600
487
early puts /
are booked
off
↳ not uncalled
ceepit
?⃝
?⃝
② Interest the to shareholders
payments on
eulogy
-①&⑧ 12% )
→ each time there is
capital
an
additional for
call
,
the shareholders who
will get interest
paid
early payments
payments .
Withholding tax rate

of 30%
→
interest settlement is calculated on the total
amount
of early payment for the
of the
incorporation
period
to the
immanent the
money gets called .
have
→
we
to 4
-
pay interest for

months in lbs
-
case i
Gross inbred due

early
an
payments
2%
let the
told •
41,2
3000€
=
20€
↳
Withholding tax to be withheld =
30% out of
the 20€
20 ✗
0,3 = 6€
met interest
payable to the shareholders = 20€ -
6€
=
14€
Tcuewatutry
The cost
for the co is 20€ :
6500 -
20€ ( tax admin

gets part at the 20€
'
°i
¥
6€
"
14,00€
② 6¥ in
have to
early payments now be annulled
120000 →
40% at the 300000
Book alt
early payments
→
120000 -
600
→ =
119-400
4 → until the 30thNov
3/4
1,20€
→
¥2 0,02 boo with tax

abating
.
. → →
-0,9€
÷÷ifii:¥"°°@ ¥"¥¥;
=
It € to shareholder B.
2,80€
increases
487 119400
www.
remains in d
the
making
only payment
account
Yelled
capital-7
↳ called
capital! ! !
?⃝
?⃝
Lectures f
cauhib.ci/iaees-Cautrib
:
.
/Capital
decrease
↳
l
retained losses →
capital cannot
↳ dividend
decrease →
too assets ROE

be paid
many is not
→
good
cannot
payout dividends if retained losses a re on the BS .
Actual decrease
us formal decrease
-
#
Actual
decrease reallocation
Ñ
shareholders ellhneuts of
the
equity
an
equity cop
→
→
changes liability side
outflow autd ↳
the 6 moiuupaet
equity
an
.
→faunIuts :
. . . .
Capital decrease in PLC (

↳
a
wb limited G)
special
protection for creditors who slice need back
to get
from the
firm which is
money
get their decreasing capital →
they can
ask to
money back
right away or demand extra
↳ the lower
the
security .
equity capital, the

won't see
their higher the
probability that creditors
Actual
cap .
Decrease money again -
②
⑥epaywevt a
exemption of
paying up uncalled
capital
them
a- shares at shareholders (paying
buying
③ up back)
Extraordinary
-
general
meeting needed
for decrease tuicrease of capital .
50% at
→
capital representatives
quorum
→
751
agreement majority
.
Notary will draw

up deed of capital
Publication (
→
→
Gazette luoutry )
in decrease →
Entry)
2m
protection period two
→
Actual entry )
repayment ( Entry
→
Examine :
Cap decrease of look shareholder)

120k
.
to each
①lssuedcaplt :
But
you don't
repay
immediately →
duos
waiting
¥÷@É%É #
↳ short
term period
debt
? ↳ towards
.
not shareholders
150K arstribuobk
yet
(
.
decrease
"
non -
distr .
)
i ( After 2
"
months )
Making
distributable
"
② the
cap . decrease
4840
eE±••÷÷•¥
③ We
- repay shareholders
-i
2.Exemptiantofayuncalleda.pro
Decision /
entry)
no
Drawing
→
up deed of cap
decrease
by
watery ✗ Entry )
.
→
Iwas
waiting turning)
Publication
→
)
→
Protection
period
→
Definite exemption to
pay up
↳ Entry required
① go.int#-:q-*
101
b. -
shat
tern receivable date
annulata shotten
to shareholders →
48424160¥41
neto ②
80th
3.
-
Acquiring our own shares
→
axtoaod .
Gazette
→
Bet :
We dont
know how shareholders will want to sell
their shares
many
→
Protection
period
Purchase
→
of shares (
our
entry required)
Drawing
→
UP the deed of cop ceeaease

by notary definite decision
#µ
.
:
1-
how
determination
of
wrong effective theres
will be
acquired
Shares why
→
will be neg .
Real destroyed after that

Cap '
Decrease
only happens when
acquiring then
you destroy your shares
after
? I;;÷g;;€
)
-
" K
, but we toooo
paid
costs_:d2-↳
capitalized
②Ñ¥?| ÷÷÷
↳ added to
47500 Ate
COA .
⇐
if
?:[II.
assets
and
are
refinanced fixed
exceptions :
you
- this is 1 COA
integrate costs to
only ,
of if You took
him chase over out of them as
regular
fiancee
a
the
wavy that weight occur .
↳ A .
?⃝
?⃝
¥soo-"""☒µµg
*•
② tmall.am
Profit →
unavailable reserve :
look -
94.3k
5700
°"%¥÷÷Y¥⑦-
→
"
" " mama

the shores Llooox ) we
acquired
,
and
5700€
made
of
profits
by buying them back
.
) Fownddecreaseofcapitsltorpublicttdagn
×
→ No protection procedure 141

retained
losses
→
) If we
^^
kid
need to incorporate #x(eggs profits
into
the capital
apaeeeeorg69f7@t.he
→
found
biggest Wittke =
"
that
you book off
immediately
retained
issued
losses
"
capital towards the
→
Incorporation of retained losses
first here 1-
go through either account 69 or 79
2 iawnal =#
entries .
result
appropr
Haw#
.
Notary deed →
journal
→
no
waiting Amie
→
publication
haadte
Date date ofact of
-
-
notary
7
①
^°¥1 ok " "
{ ( then you
wait until
year end for
profit appropriation )
690¥ ¥0k
②
.j
" -
Privateltacawpoy
Cautribuliauderease
f. :
Exclusion /
withdrawal of aghaefoelda from 's assets :
the
company
↳ ↳ slue holder
he/she
↳
the
HAS
sell /
to
to
can
pays
his/her
his shoes
shoes Ches / her
decision )
leave the
* (audition •
wl→
.
for
not
possible
↳ during first-year .
withdraw with d
he
should
his shares
in
yanshaeasyfomoors
indicate
the tgÑ_
be financial Plan
back paid hanuman
mamey is
.
needed
for your
+ Netassetsta.tl .
to run
Éy+
well
the
first 2
years If during
shareholder
.
withdraws
Candi Hans →
those
for
"• +
be assumptions
expulsion
an
of valid
*
-ashaehabeÉ
Can
take
→
But
from the
anymore
Ngan
.
place within the first 2

if years
and
only if : the
functioning of the G.
*
Should
be recorded
is
disrupted
in the articles of association .
also
exclusion needs ↳ do
Not assets
lividity test
+
what is the parting Shae ?

Can
defined the chaos
of
→
be in
assoc
%b8horialcaul-ribuh.ae#--
.
shaper already
→
What has a
paid in the
past
the amount that
already got refunded
→
he
Maximum amount of
panting
done :
-wvre_#-aÉhÉf
cannot be
the shares
according to
the latest annual
accounts
.
If
then
nothing is
stipulated in the articles of associate
the ,
person is
paid book their
contribution .
lnstorical
&Tes .
Balance sheet test

1SaWengte
-2kg
If
you
pay out \•
something
shareholder
to
you
if there is
unavailable
, and the net equity capital :
assets be
me
distribution
may not made
can
became if net
below
assets
have
negative or
would
fallen
amount fall below
of
unavailable
capital
→ EÉa I. becauseotthÉtrbtiou
equity
Netassets-i-f-d-IH-s-wi-DG-llnamot.se
test formation d costs of
expenses
tluaveorlisedderolopvventosfs
-
↳C¥lifww÷
formation or
development)
s①emoiue8toascsthesameasequitgapita÷①
↳
levity capital put further
corrected
there to
,
flowery
carpets
Net assets because

may not became negative you
pay out thou I dividends

paling .
But suppose ttat true is

unavailable
capital in equity
a co
,
the the met assets
may not
face below the
unavailable
amount
of
equity capital .
What is
unavailable
cavity capital
#
nmaxaibhk
+ reserves /reserves
unavailable for debt 112
If the
Bee unavailable )
solvency
:{lhramedised
test contributions outside
.
is hweotwaeet capital (1/1)

=
fulfilled then we still

+ grants ¢31 =
need
,
to do part of revolution
surpluses less
the . .
.
..Liquiaitg⑦-→( ) no aistribuliau can

be
if (from
-
to
made
point of a
reasonable
't)/ will
view ) the
Iwan
Ne
still be
able to company after .
the distribution
need
way full pay it 's debts
they
due as
of over
calculating this period
a
So of
:
months at least 12
we use
ratios from the dabs
.
of the distribution
↳but ( needs to from assets
[A
ratio
.
be >
1)
pay all shot true debts
sin
&
Asset test ratio / needs to be 1) Current
-DeTti± take into account
>
⇐÷¥,q• no
no
inventory
% "
deferrals / accruals
"
"¥¥fdistribution
from
to
shareholders
liabilities side
campanile Assets & unavailable
-
eacity capital
their be
only oiffaae can
paid out as
a
parting share
we
only need to ant ask
and
those 25K pay
meet
,
Asr
the
Sebag
④ The
.
contribution at the
also
to be
parting shore is
considered
shot ten a
If the Net Assets test is

met :
liability .
fg ☒¥k
→ "
①
.
- -
↳ shot
town debt
.
If the
liquidity test is w¥ :
→
②
↳9@µ
techy '
Increase in contributions
Public →
miurease
)
in capital
issuing
②
new shares
Private →
increase in contributions
↳
extraordinary 8m
NVISA
801
quorum
.
↳ BVISARL
75% majority
In NV 18A →
authorized capital →
management can increase
capital up ¢-0 a certain amount
BVISARL (stipulated in statutes )

delegation of
→
power →
directors are
allowed
BV to issue now
scores
→
additional :
contributions
rap without
→
simple issuing new
shares
→
No majority
financial
plan needed for ice .
in contr .
if
-¥↳ increase
Actual us .
F- in contributions by incorporating
Mito
change in the
'
contributions
⑧% # Shere
shareholders premium
thetiwu tense
equity surpluses
.
weans reserves (130/1811133)

jncapaaqag
new
→
a
are
brought profit carried
forward 114
loan into the
becamepart of co
invest 45 )
by capitalising N
, ,
untaxed 2) &
:
the alert reserves lis .
equity capital & the grants

equity charges debt yanolso have
,
an impact amenity without noninfectious
( Nominal robe # of shares Issued Capitol )
-
→
Nominal value ✗
fractional
→
valve ( value that is wet mentioned in the
Parolee
↳ issued cap
Stotts)
tFs
→
Actual value
of shoves
•
stock mkt
price
•
Book value Equity
/intrinsic value =
-
# of stores
AÉrAmtac
abl•okedaccae①
①
Depositing the amount of stones into
by subscribers →
entry → the of the
required amount
capital increase
-
②
entry %
'
GI
2too→÷s-* -4¥
-0-0
.→ .
③
Notary ( Entry )
-
→ so
⑧ Bank Account ( Entry )

llubeodaig
→
the
EI.
:
② 55¥ BloIcedta•¥fK-
go Advances
Shotten debt ,
in case the capitalincrease doesn't happen .
(same
Notaryactotthecapincrease as when
)
② incorporating a
co
d⑤@µo-
.
the receivable
longterm cancelling
receivable the and debiting
→
dos ,
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.
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4 Calculation
*
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of the reduction
of the tax
*
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of the tax
provision
we need to determine the
taxpvouision
How?
Emm '
+
Expenditure rejected 167177 -
Accounts / 50% of
costs of business
gifts , 31%
of
-
Director 's fees ( →

restaurant costs
,
)
remuneration
. . .
to to the
↳ are taxed /not
allocated in directors
, counted
as
the
profit allocation based an
on the profit expense
of the )
company
-
Tax
deductions
Loss carried
forward
-
114 1- as .
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dials )
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?⃝
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Taxable Base •
Rate
→
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25%
→
for ÑÉ2o% ✗ for their
first look at profit )

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you
profit &±Ése
much
be ? → at
accounting will
gear ENI !
→ tax
assessment notice
comes
through in the 3rd quarter
in the
Fisc year
→
cawpaneis need
to estimate the profit during a certain
year ,
and
44 at it stand we paid quarter
→
every .
these 't
payments deer
have to be the same ,
can
change
When do have to
you the advance tax
pay payments ?
after
→
to of
days the end the quarter
80 Q1
→
for :
the latest is 10104
→
Q2 :
1017 the latest
→
Q3 :
lotto the latest
→
Q4 :
later than
no
20112 → we can't wait until ion
!!
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.FI#neepay1iyotyeeus
→
result
estimate
of taxes
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change depending
can
.
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on outlook
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pay enough
.
advance
subject to payments ,
the co will be
a
tax increase .
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rate
↳ to
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↳ the
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rate
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with
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tax
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payments during the course at a
fiancee
→
rewards if a co advance tax payments :
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.
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-
average z 0
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ñg tax
Advance
-
+ Tak
payments
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)
= tax
provision
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Examples :
SMB
result
o
110500
:
1-
Exp regatta ngk ( payments rejected expenses ! ! )
.
advance are also

-
1500
( Tax deduction)
( Directors fees )
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base loose
→
=
is sooo
on look
of the TB 20% 20-000
stepsBasic ]
-
oh
38K + g.soo
25%
=zg5①
Taxation
Steps Calculation of
:
tax increase
Tax increase is
→
calculated based basic
on taxation 12
Basic taxation
withholding tax
-
28500,00 É
=
→
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percentage
→
2,25%5--6,751
The tax increase
Itself ,
--1991i
6,75%
295-00,00
.
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of tox increase
-
fanfiction
take half of the ECB ref ( 1i5o%) point .
. rate
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not
did
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ygqzg(sqggg
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well
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first
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gonna
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?Y
.
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.
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1991,25-2220=-228,75
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sa
only 800
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?⃝
Academic year 2020-2021
Corporate Law & Accounting

Part: Accounting Law
Vicky Ghijselinck
vicky.ghijselinck@kuleuven.be
Office B05-11

Chapter 5:
The appropriation of results
Lecturer: V. Ghijselinck 1
The incorporation of a company

The decrease of contributions
The increase of contributions
Corporate Law
The business tax cycle
and
Accounting
Long-term debt financing – The
bond loan (self-study)
Outline
Introduction
The NV: profit appropriation without

liquidation reserve
The NV: profit appropriation with liquidation
reserve
The NV: profit distribution restrictions

The BV: profit appropriation
Introduction
Introduction
Process
Legal Provisions
• Belgian Code of Companies and Associations
‒ NV: legal reserve (article 7:211 BCCA)
‒ NV: profit distribution restriction (article 7:212 BCCA)
‒ BV: profit distribution restrictions (article 5:142 BCCA: balance
sheet test or net assets test and article 5:143 BCCA: liquidity
test)
• Income Tax Code
‒ Liquidation reserve (ITC 1992)
Statutory provisions
Proposal of the management body to the general
meeting
6
The NV: profit appropriation

without liquidation reserve

Introduction
The possibility of establishing a fiscal liquidation
reserve is reserved exclusively for small
companies (article 1:24 BCCA)
Large companies are excluded from this and

must therefore always follow the procedure
explained below

0
Legal reserve
1/20 of Article 7:211 BCCA H2o
‘Each year the general meeting shall set aside at least one-twentieth of the net
profits go into profits to constitute a reserve fund; such deduction shall no longer be required
-
as soon as such reserve fund has reached one-tenth of the capital.’

a reserve
fund ,
Net profit: the basis of calculation consists of the
until the
smallest of the following amounts:
amount in the
• either the profit of the financial year to be
fund is
1,0 of appropriated;
the
• or the profit balance to be appropriated (= result of
capital .
the financial year + result carried forward)

In practice: losses carried forward from the previous financial year
✗ are taken into account,
120 of either but not profits carried forward from the previous financial year 9
total
profit ,
or
profit I losses / profit carried
forward

Legal reserve
Examples
1 2 3 4 5
Capital 100 000,00 100 000,00 100 000,00 100 000,00 100 000,00
Legal reserve 3 000,00 9 700,00 3 000,00 3 000,00 9 700,00
Result carried forward 12 000,00 12 000,00 - 12 000,00 10 000,00 - 10 000,00
Result of the financial year 10 000,00 10 000,00 10 000,00 - 12 000,00 12 000,00
Allocation to the legal reserve 500,00 300,00 0,00 0,00 100,00
10

Schematic: profit appropriation of NV
Profit of the year available for appropriation (9905)
- Loss carried forward from the previous financial year (690)
= Balance
- Allocation to the legal reserve
= Balance
→ Follow the articles of association
= Balance
+ Profit carried forward from the previous financial year
= Balance
→ Decision of the general meeting on proposal by the
management body
11

Example
FACTS:
The balance sheet of NV GAMMA shows a ‘profit of the year available for
appropriation’ (9905) of 58 045,40 EUR.
In the balance sheet we also find the following data:
account 100: 250 000,00 EUR CB
account 101: 50 000,00 EUR DB
The articles of association of NV GAMMA contain the following information:
allocation to the legal reserve according to the minimum provisions of the
Belgian Code of Companies and Associations;
allocation of a first dividend amounting to 6 % of the paid-up capital;
the balance will be decided by the general meeting.
12

Example
FACTS:
The proposal of the management body to the general meeting for distribution
of the balance:
40 % dividends
40 % directors' fee
20 % to be carried forward
REQUIRED:
Calculate and record the distribution of profits.
The capital is divided into 2 500 shares. Take into account 30 % withholding tax.
Round off to arrive at a distributable dividend and set off the balance against
the results to be carried forward.
Also book the dividend payable (after the general meeting) and the payment of
2 200 coupons.
13

Example
1 Determination of the profit

available for appropriation
2 Allocation to the legal reserve
3 Follow articles of association
4 Decision general meeting

(including profit carried forward)
14

Example Step 1:
Determination of the profit
Profit available for appropriation
Profit of the year available for appropriation 58 045,40 EUR

- Loss carried forward (from the previous financial year) - 0,00 EUR
= Profit available for appropriation = 58 045,40 EUR
15

Example Step 2:
Allocation to the legal reserve
Legal reserve
Profit available for appropriation 58 045,40 EUR

Legal reserve: 5 % x 58 045,40 EUR 2 902,27 EUR
After allocation to the legal reserve, the legal reserve then becomes
8 000,00 EUR + 2 902,27 EUR = 10 902,27 EUR < 25 000,00 EUR (10 % of
250 000,00 EUR capital)
16

Example Step 3:
Follow articles of association
Articles of association: first dividend
100 CB 250 000,00 EUR

- 101 DB - 50 000,00 EUR
- 410 DB - 0,00 EUR
Actual paid-up capital 200 000,00 EUR
First dividend: 6 % x 200 000,00 EUR 12 000,00 EUR
17

Example Step 4:
Decision general meeting
Balance after first dividend: 43 143,13 EUR

58 045,40 EUR – 2 902,27 EUR – 12 000,00 EUR = 43 143,13 EUR
+ Profit carried forward from the previous financial year + 5 012,50 EUR
= Balance = 48 155,63 EUR
Second dividend: 40 % x 48 155,63 EUR = 19 262,25 EUR 19 262,25 EUR
Directors’ fee: 40 % x 48 155,63 EUR = 19 262,25 EUR 19 262,25 EUR
Profit to be carried forward: 20 % x 48 155,63 EUR = 9 631,13 EUR 9 631,13 EUR
18

Profit of the year available for appropriation (9905) 58 045,40 EUR
- Loss carried forward from the previous financial year (690) - 0,00 EUR
- Allocation to the legal reserve - 2 902,27 EUR
Articles of association: first dividend - 12 000,00 EUR
+ Profit carried forward from the previous financial year + 5 012,50 EUR
Decision of the general meeting on proposal by the management body
Second dividend: 40 % x 48 155,63 EUR = 19 262,25 EUR - 19 262,25 EUR
Directors’ fee: 40 % x 48 155,63 EUR = 19 262,25 EUR - 19 262,25 EUR
Profit to be carried forward: 20 % x 48 155,63 EUR = 9 631,13 EUR - 9 631,13 EUR
= Balance = 0,00 EUR
19

Example
Distributable dividend
Gross dividends: 12 000,00 EUR + 19 262,25 EUR 31 262,25 EUR
Gross dividend per share: 31 262,25 EUR / 2 500 shares 12,5049 EUR
This is rounded down to 12,50 EUR gross dividend per share
Total gross dividends: 2 500 shares x 12,50 EUR/share 31 250,00 EUR
Withholding tax: 30 % x 12,50 EUR 3,75 EUR
Net dividend per share: 70 % x 12,50 EUR 8,75 EUR
Difference: 31 262,25 EUR – 31 250,00 EUR = 12,25 EUR

12,25 EUR is added to the profit to be carried forward, which is then
9 631,13 EUR + 12,25 EUR = 9 643,38 EUR
20

Example
Journal entries profit appropriation
No. Acc. no. Description D C

31/12/20X0
… 140 Profit carried forward 5 012,50
790 @ Retained profits of the previous 5 012,50
accounting year
DIV/… – Profit appropriation
21

Example
31/12/20X0
… 6920 Increase in legal reserve 2 902,27
693 Profit to be carried forward 9 643,38
694 Remuneration of the contributions 31 250,00
695 Directors’ entitlements 19 262,25
130 @ Legal reserve 2 902,27
140 @ Profit carried forward 9 643,38
4710 @ Dividends for the current 31 250,00
accounting year (gross)
472 @ Directors’ fees for the current 19 262,25
accounting year
22

Example

31/12/20X0
… 4710 Dividends for the current accounting 31 250,00
year (gross)
4711 @ Dividends for the current 21 875,00
accounting year (net)
453 @ Deducted advance tax payments 9 375,00
DIV/… – Dividend payable
23

Example
31/12/20X0
… 4711 Dividends for the current accounting 19 250,00
year (net)
5500 @ Credit institution X – C/A 19 250,00
C/A extract no. … – Payout
2 200 coupons
24

with liquidation reserve
25

Introduction
From assessment year 2015, i.e. from the financial year closing on
31/12/2014, small companies (cf. article 1:24 BCCA) can allocate the
entire ‘profit of the financial year to be appropriated (code 9905)’,
even if there are losses carried forward from a previous financial
year, to a liquidation reserve, to be recorded in one or more
separate accounts of the liabilities
However, a separate assessment is due on this, in the amount of
10 % of the amount recorded as a liquidation reserve
This separate assessment must still be recorded in a separate sub-
account of account 6702 ‘Estimated taxes’ in the year-end
transactions on the balance sheet date and has an effect on the
‘profit of the year to be appropriated’
26

Introduction
Due to the anticipatory taxation of 10 %, the liquidation reserve may
be distributed tax-free (no withholding tax) to the shareholders
upon dissolution of the company
If the liquidation reserve is distributed as a dividend within five
years of its creation, 20 % withholding tax is still owed by the
shareholder for liquidation reserves created as of assessment
year 2018. After that period, a withholding tax of 5 % is still due; the
5-year period is calculated from the end of the financial year in
which the liquidation reserve was created
Other legal and any statutory obligations must also be taken into
account when allocating the result
See also: CBN advice 2015/6
27

Schematic: profit appropriation of NV
- Allocation to liquidation reserve
= Balance
- Allocation to the legal reserve
= Balance
= Balance
= Balance
management body
28

Example 1
FACTS:
The SME company NV DELTA has a (provisional) ‘profit of the financial year to
be appropriated’ (after recording the fiscal provision for corporate tax) of
1 430,00 EUR. There is also a profit carried forward from the previous financial
year of 300,00 EUR.
The company proposes the following profit appropriation:
allocation of 1 200,00 EUR to a liquidation reserve (available);
allocation of 5 % of the net profit to the legal reserve;
the balance is carried forward to the next financial year.
REQUIRED:
29

Example 1


30

Example 1 Step 1:
Profit available for appropriation available for appropriation
A separate assessment of 10 % is still due on the allocation to the

liquidation reserve: 10 % x 1 200,00 EUR = 120,00 EUR
This can be recorded as follows
31/12/20X0
… 6702 Estimated taxes 120,00
4500 @ Estimated taxes 120,00
This reduces the final ‘Profit of the financial year to be appropriated’

(code 9905) to 1 430,00 EUR – 120,00 EUR = 1 310,00 EUR
31

Example 1 Step 1:

- Allocation to liquidation reserve - 1 200,00 EUR
= Profit available for appropriation = 110,00 EUR
32

Example 1 Step 2:
Legal reserve
Profit available for appropriation 110,00 EUR

Legal reserve: 5 % x net profit 65,50 EUR
= 5 % x 1 310,00 EUR
33

Example 1 Step 3:
Articles of association
Nothing mentioned
34

Example 1 Step 4:
Balance after legal reserve: 44,50 EUR

110,00 EUR – 65,50 EUR = 44,50 EUR
+ Profit carried forward from the previous financial year + 300,00 EUR
Profit to be carried forward: balance 344,50 EUR
35

1 430,00 EUR – 120,00 EUR
- Allocation to the legal reserve - 65,50 EUR
Profit to be carried forward: balance - 344,50 EUR
36

Example 1

31/12/20X0
… 140 Profit carried forward 300,00
790 @ Retained profits of the previous 300,00
accounting year
37

Example 1
31/12/20X0
… 6920 Increase in legal reserve 65,50
6921 Increase in other reserves 1 200,00
693 Profit to be carried forward 344,50
130 @ Legal reserve 65,50
133x @ Liquidation reserves available for 1 200,00
distribution (31/12/20X0)
140 @ Profit carried forward 344,50
38

Example 2
FACTS:
The SME company NV EPSILON has a (provisional) ‘profit of the financial year
to be appropriated’ (after recording the fiscal provision for corporate tax) of
1 430,00 EUR. In the balance sheet, there is a loss carried forward from the
previous financial year of 500,00 EUR.
It is proposed to transfer the entire ‘Profit of the financial year to be
appropriated’ to the liquidation reserve, and to qualify part of it as ‘legal
reserve’.
A further special assessment of 10/110 or 9,0909... % is then due on the
establishment of the liquidation reserve.
9,0909...% x 1 430,00 EUR = 130,00 EUR. Which means that 1 430,00 EUR –
130,00 EUR = 1 300,00 EUR remains as ‘profit of the year to be appropriated’,
which can ultimately be allocated to the liquidation reserve.
REQUIRED:

Example 2


40

Example 2 Step 1:
Profit available for appropriation available for appropriation
In this case, this 1 300,00 EUR profit of the year to be appropriated will be
divided between the legal reserve and an available reserve, both classified
as a liquidation reserve
The portion transferred to the legal reserve is no longer eligible for later
distribution as a dividend
Legal reserve = 5 % x (1 300,00 EUR – 500,00 EUR loss carried forward) =
40,00 EUR
The remainder goes to an available liquidation reserve
Finally, the loss carried forward from the previous financial year is simply
carried forward again → This has an effect on the justification of
maintaining the valuation rules in continuity (article 3:6, § 1, 6° BCCA)
41

Example 2 Step 1:

= Profit available for appropriation = - 460,00 EUR
42

Example 2 Step 2:
Legal reserve
Calculation:
see supra
43

Example 2 Step 3:
Nothing mentioned
44

Example 2 Step 4:
Balance after legal reserve: - 460,00 EUR – 40,00 EUR = - 500,00 EUR
= Balance = - 500,00 EUR
Loss to be carried forward: balance - 500,00 EUR
45

1 430,00 EUR – 130,00 EUR
- Allocation to the legal reserve - 40,00 EUR
Loss to be carried forward: balance - 500,00 EUR
46

Example 2

31/12/20X0
DIV/… – Separate assessment of
liquidation reserve
47

Example 2

31/12/20X0
… 690 Retained losses of the previous 500,00
accounting year
141 @ Loss carried forward (-) 500,00
DIV/… – Result appropriation
48

Example 2
31/12/20X0
… 6920 Increase in legal reserve 40,00
6921 Increase in other reserves 1 260,00
130x @ Legal liquidation reserve 40,00
(31/12/20X0)
133x @ Liquidation reserves available for 1 260,00
distribution (31/12/20X0)
49

Example 2

31/12/20X0
… 141 Loss carried forward (-) 500,00
793 @ Losses to be carried forward 500,00
50
The NV:
profit distribution restrictions
51
The NV:
Article 7:212 BCCA
‘No distribution may be made if the net assets, as shown in the annual
accounts, have decreased or could decrease as a result of the distribution
below the amount of the paid-up or, if higher, of the called-up capital
increased with all reserves not distributable by law or the articles of
association.
For the purposes of this provision, the non-depreciated portion of the
revaluation surpluses shall be treated as a reserve that has been made
unavailable pursuant to the law.
‘Net assets’ shall mean the total amount of the assets as shown in the balance
sheet, less the provisions, the liabilities and, save in exceptional cases to be
mentioned and justified in the notes to the annual accounts, any pending
depreciation of the costs of incorporation and further development and of the
research and development costs.’
52
The NV:
Net assets are defined as
Total assets (= total liabilities)

- Provisions
- Debts
= Shareholders’ equity
- Formation expenses
- Research and developments costs
= Net assets
53
The NV:
These net assets may not fall below the paid-up
(or if higher the called-up) capital, plus all
unavailable amounts of equity capital
This therefore gives the sum of

Paid-up (or if higher called-up) capital
Share premium (unavailable)
Revaluation surpluses (unamortised part)
Legal reserve
Other reserves not available for distribution
Capital subsidies
54
The NV:
Example
FACTS:
An NV has the following (schematic) balance sheet, in which the undistributed
result of the financial year amounting to 15 000,00 EUR is included.
ASSETS LIABILITIES
Formation expenses 10 000 Equity 240 000
Fixed assets 240 000 Capital 150 000
R&D costs 40 000 Legal reserve 15 000
Tangible fixed assets 200 000 Capital subsidies 60 000
Result of the financial year 15 000
Current assets 50 000 Provisions 20 000
Amounts receivable 32 000 Amounts payable 40 000
Cash at bank and in hand 18 000 Trade debts 40 000
TOTAL 300 000 TOTAL 300 000
55
The NV:
Example
FACTS:
The company would like to distribute the profit of the financial year as follows:
5 000,00 EUR to the available reserves and 10 000,00 EUR dividend payment.
This then gives the following balance sheet:
ASSETS LIABILITIES
Formation expenses 10 000 Equity 230 000
Fixed assets 240 000 Capital 150 000
R&D costs 40 000 Legal reserve 15 000
Tangible fixed assets 200 000 Available reserves 5 000
Capital subsidies 60 000
Current assets 50 000 Provisions 20 000
Amounts receivable 32 000 Amounts payable 50 000
Cash at bank and in hand 18 000 Trade debts 40 000
Dividends payable 10 000
TOTAL 300 000 TOTAL 300 000
The NV:
Example
Is this profit distribution allowed?
Net assets = 300 000,00 EUR (total assets) – 20 000,00 EUR
(provisions) – 50 000,00 EUR (amounts payable) –
10 000,00 EUR (formation expenses) – 40 000,00 EUR (R&D
costs) = 180 000,00 EUR
Unavailable equity capital = 150 000,00 EUR (capital) +
15 000,00 EUR (legal reserve) + 60 000,00 EUR (capital
subsidies) = 225 000,00 EUR
Conclusion: the adjusted net assets would fall below
225 000,00 EUR, so the proposed dividend distribution is not
allowed
57
The NV:
Example
Article 7:214 BCCA
‘Any distribution in breach of articles 7:212 and 7:213 must be repaid by the
shareholders and all other persons who have received the same if the company
proves that such shareholders or all other persons for the benefit of whom the
distribution has been decided were aware or, having regard to the
circumstances, could not be unaware of the irregularity.’
Such violation, of course, also constitutes a violation of corporate law

and also triggers director liability
58
59

Introduction
Article 5:141 BCCA
‘The general meeting shall be authorised to allocate the profit and to
determine the distributions.’
No requirement to retain a portion of net profits

to establish a legal reserve
BVs that are ‘small’ (in accordance with

article 1:24 BCCA) can establish a fiscal
liquidation reserve
60

Schematic: profit appropriation of BV
- If possible: allocation to liquidation reserve
= Balance
= Balance
= Balance
management body
61

Profit distribution restrictions
In a BV, when deciding to distribute profits, a
double test must be met
• Balance sheet test or net assets test
• Liquidity test
62

Balance sheet test or net assets test
(article 5:142 BCCA)
What? Solvency test to determine whether distributions

can be made in private limited company
Test
• No distribution can be made if the net assets of the company
are negative or would become negative because of the
distribution
• If company has unavailable equity capital: no distribution can
be made if net assets have fallen or would fall below amount of
unavailable equity capital because of the distribution
63

The net assets may not be negative + they may not fall below the
unavailable equity
Net assets = Total assets – Provisions – Debts – Unamortised costs of
formation expenses (20) – Unamortised development costs (210)
The net assets are determined on the basis of the last approved
annual accounts or of a more recent statement of assets and
liabilities
The unavailable equity (in the BV) = Unavailable contributions
outside capital (111) + Unamortised part of revaluation surpluses
(12) + Reserves not available for distribution (131) + Investment
grants (15)
64

Liquidity test
What? Second test to be carried out for the limitation of
distributions which mentions that distributions can be
made only if it can reasonably be expected that, after the
distribution, the company will be able to continue to pay
its debts as they fall due over a period of at least twelve
months from the date of the distribution
Test
• Current ratio > 1, taking into account distribution
• Acid test ratio > 1, taking into account distribution
• Distribution = short term debt towards shareholders
65

Example
FACTS:
At the end of financial year 20X1, the BV ZETA has a (still undistributed) profit
for the financial year of 5 000,00 EUR. It is proposed to the general meeting to
reserve 10 % of this (available reserve) and to distribute the rest as dividend.
The balance sheet on 31/12/20X0 looks as follows:
ASSETS LIABILITIES
Formation expenses 500 Equity 15 000
Fixed assets 18 500 Contributions not available 10 000
Current assets 26 000 Reserves not available 1 000
Stocks and contracts in progress 12 000 Accumulated profits 4 000
Amounts receivable within one year 8 000 Result of the financial year 5 000
Cash at bank and in hand 6 000 Provisions 5 000
Amounts payable 20 000
Amounts payable after more than one year 8 000
Amounts payable within one year 12 000
TOTAL 45 000 TOTAL 45 000

Example
FACTS:
The balance sheet of the annual accounts that will be presented to the general
meeting will then look as follows:
ASSETS LIABILITIES
Formation expenses 500 Equity 15 500
Fixed assets 18 500 Contributions not available 10 000
Current assets 26 000 Reserves not available 1 000
Stocks and contracts in progress 12 000 Reserves available 500
Amounts receivable within one year 8 000 Accumulated profits 4 000
Cash at bank and in hand 6 000 Provisions 5 000
Amounts payable 24 500
Amounts payable after more than one year 8 000
Amounts payable within one year 16 500
TOTAL 45 000 TOTAL 45 000
67

Example
Net assets = 45 000,00 EUR (total assets) – 5 000,00 EUR
(provisions) – 24 500,00 EUR (amounts payable) – 500,00 EUR
(formation expenses) – 0,00 EUR (R&D costs) = 15 000,00 EUR
→ Conclusion: the net assets are not negative
Unavailable equity capital = 10 000,00 EUR (contributions not
available) + 1 000,00 EUR (reserves not available) =
11 000,00 EUR
→ Conclusion: the net assets do not fall below unavailable
equity capital
→ The balance sheet test or net assets test is OK!
68

Example
Liquidity test
Must be performed by the management body at the date of distribution (making the
dividend payable)
The evaluation should not be done on the basis of the balance sheet on 31/12/20X1
(included in the annual accounts), but in principle based on an interim statement at
the time of distribution (i.e. after the general meeting)
If calculations are made based on the present balance sheet from the annual
accounts:
• Current ratio = (12 000,00 EUR + 8 000,00 EUR + 6 000,00 EUR)/16 500,00 EUR
= 1,5758
• Acid test ratio or quick ratio test = (8 000,00 EUR +
6 000,00 EUR)/16 500,00 EUR = 0,8484
Conclusion: the liquidity in the broad sense is sufficient, but the liquidity in the
narrow sense is below 1 and indicates a possible liquidity risk
69

Example
Liquidity test
Based on the calculated ratios, the management body should definitely retake the
liquidity test based on the balance sheet at the date of distribution to further assess
this risk
It is ultimately the responsibility of the management body to decide whether to
proceed with distribution
This can put the management body in an awkward position when the general meeting
has decided to make a distribution (taking into account the balance sheet test), but
the management body decides (on the basis of the liquidity test) that no distribution
(or only a partial distribution) is possible on the foreseen date
In order to avoid this, it is best that the liquidity test is also prepared and submitted to
the general meeting
70
Exercises
71
Exercises
Exercise 1: NV INTENSA (p. 82)
Exercise 2: NV NOCIL (p. 84)
Exercise 3: NV RIO (p. 84-85)
72

Vicky Ghijselinck
Office B05-11

Chapter 4:

Corporate Law
and
Accounting
Outline
Introduction
Determination of the tax provision
• Taxable base
• Basic taxation
• Tax increase
• Reduction of tax increase
• Tax provision
• Examples
Accounting treatment
• Overview business tax cycle
• Advance payments
• Tax provision
• Assessment notice
4
Introduction
In the financial statements, the taxes on the
result must be included, so that the result of the
financial year after taxes is known, which must
then be allocated
In other words: the profit after taxes must be

distributed
Introduction
At the end of the financial year, the so-called ‘tax
provision’ must be determined and recorded,
taking into account the taxes already paid in the
course of the financial year
Tax provision = a possible debt or receivable

towards the tax authorities
Introduction
Process to determine the tax provision
1 Determination of the taxable base
2 Calculation of the basic taxation
3 Calculation of the tax increase
4 Calculation of the reduction of the tax increase
5 Calculation of the tax provision

Taxable base
Determination of the taxable base
Accounting result (revenues – expenses)
+ Expenditure rejected (e.g. income tax (67/77-
accounts), 50 % of the costs of business gifts, 31 %
of restaurant costs ...)
- Directors’ fees (still to be allocated in the profit
distribution)
- Tax deductions
- Loss carried forward (for tax purposes)
= Taxable base
8

Basic taxation
Calculation of the basic taxation
Basic taxation = Taxable base x Rate
General corporate income tax rate: 25 % as from

assessment year 2021
SME companies (in accordance with article 1:24

BCCA) that meet a series of tax conditions: a
reduced rate of 20 % on the first tranche of
100 000,00 EUR is applicable

Tax increase
Calculation of the tax increase
Companies in principle receive their tax assessment
notice in the third quarter after the end of the fiscal
year
However, during the fiscal year, they must pay in

advance one-fourth of their final tax due each time
no later than 10 days after the end of the quarter
(for the last quarter, 10 days before the end of the
quarter)
10

Tax increase
Advance payments
• Advance payment 1: no later than 10/04
• Each time ¼ of the tax due for the current financial year
In practice: not easy to estimate the result of the
financial year and, consequently, the final tax due
→ The principle of ¼ per quarter is often still
adjusted in the course of the financial year
11

Tax increase
Companies that do not make enough advance
payments incur a tax increase
The increase percentage is determined on the basis
of the ECB basic interest rate (= reference rate)
• Basic interest rate ≥ 3 %
• Increase percentage = 2,25 x Basic interest rate
• Increase percentage corresponds to the average of the
bonification interest rates
The increase percentage is always applied to
Basic taxation – Withholding tax
12

Reduction of tax increase
Calculation of the reduction of the tax increase
Advance payments lead to prevention of a tax increase
→ Bonification interest rate
The ECB reference rate (for example 3 %) is divided by 2 =
1,50 % and applied per quarter that a company paid earlier
than the assessment
• Bonification interest rate AP1: 6 quarters x 1,50 % = 9 %
• Bonification interest rate AP2: 5 quarters x 1,50 % = 7,50 % Total
• Bonification interest rate AP3: 4 quarters x 1,50 % = 6 % 27 %
• Bonification interest rate AP4: 3 quarters x 1,50 % = 4,50 %
27 % / 4 = 6,75 % or 2,25 x 3 % = 6,75 % → This gives an
average percentage increase of 6,75 % if a company had not
paid anything in advance
13

Calculation of the reduction of the tax increase
The reference interest rate is always determined per
assessment year: if the financial year runs parallel with the
calendar year, the assessment year is always the year
following the financial year
Example: for financial year 20X0 take into account the reference rate of
20X1
Either a tax increase is recorded or not (= no increase), but the
tax authorities do not grant any bonus (interest) if the advance
payments are too high and/or too early
Tax increase – Reduction of tax increase ≥ 0
The taxes that are paid too much in advance will be refunded
14

Tax provision
Calculation of the tax provision
Basic taxation
- Withholding tax
- Advance payments
+ Tax increase – Reduction of tax increase (> 0)
= Tax provision
15

Examples
Important remark
Use in the examples and exercises the rates that

apply as of assessment year 2021
16

Examples
Example 1
FACTS:
The balance sheet of the SME company BVBA ALPHA on 31/12/20X0 shows an
accounting profit of 110 500,00 EUR. The company benefits from a notional
interest deduction of 1 500,00 EUR.
The company made the following advance payments:
prior to 10/04/20X0: 2 000,00 EUR;
prior to 10/07/20X0: 5 000,00 EUR;
prior to 10/10/20X0: 10 000,00 EUR;
prior to 20/12/20X0: 12 000,00 EUR.
The reference interest rate for assessment year 20X1 is 3 %.
REQUIRED:
Calculate and record the fiscal provision.
17

Examples
Example 1
18

Examples
Example 1 Step 1:
Determination
of the taxable base
Taxable base
Accounting result 110 500,00 EUR

+ Expenditure rejected (67-accounts) + 29 000,00 EUR
- Tax deductions: notional interest deduction - 1 500,00 EUR
= Taxable base = 138 000,00 EUR
19

Examples
Example 1 Step 2:
Calculation
of the basic taxation
Basic taxation → SME company

0,00 EUR – 100 000,00 EUR 20 % 20 000,00 EUR
→ 20 % x 100 000,00 EUR
+ 100 000,00 EUR 25 % 9 500,00 EUR
→ 25 % x 38 000,00 EUR
= Basic taxation 29 500,00 EUR
20

Examples
Example 1 Step 3:
Calculation
of the tax increase
Tax increase
Basic taxation 29 500,00 EUR

- Withholding tax - 0,00 EUR
Base to calculate tax increase = 29 500,00 EUR
Increase percentage 2,25 x 3 % = 6,75 %

Tax increase 6,75 % x 29 500,00 EUR
= 1 991,25 EUR
21

Examples
Example 1 Step 4:
Calculation of the reduction
of the tax increase
AP1 6 quarters x 1,50 % =9% x 2 000,00 EUR = 180,00 EUR
AP2 5 quarters x 1,50 % = 7,50 % x 5 000,00 EUR = 375,00 EUR
27 % 1 695,00 EUR
27 % / 4 = 6,75 %
22

Examples
Example 1 Step 5:
Calculation
Tax provision of the tax provision

- Advance payments - 29 000,00 EUR
= 500,00 EUR
+ Tax increase – Reduction of tax increase + 1 991,25 EUR
(> 0) - 1 695,00 EUR
= + 296,25 EUR
= Tax provision 796,25 EUR
23

Examples
Example 2
FACTS:
Same as example 1, but the advance payments were made in reverse order.
In other words, the advance payments are made as follows:
prior to 10/04/20X0: 12 000,00 EUR;
prior to 10/07/20X0: 10 000,00 EUR;
prior to 10/10/20X0: 5 000,00 EUR;
prior to 20/12/20X0: 2 000,00 EUR.
REQUIRED:
24

Examples
Example 2
Idem example 1 2 Calculation of the basic taxation
25

Examples
Example 2 Step 4:
of the tax increase
AP1 6 quarters x 1,50 % =9% x 12 000,00 EUR = 1 080,00 EUR
27 % 2 220,00 EUR
27 % / 4 = 6,75 %
26

Examples
Example 2 Step 5:
Calculation

= 500,00 EUR
(> 0) Result must be ≥ 0, - 2 220,00 EUR
so no tax increase
= - 228,75 EUR → 0
= Tax provision 500,00 EUR
27

Examples
Example 3
FACTS:
The large company NV BETA has an accounting profit of 72 500,00 EUR, as
shown in its balance sheet on 31 December 20X0.
In this balance sheet we also find a debit balance of 28 000,00 EUR in the
6700-account (composed as follows: advance payment 1 = 12 000,00 EUR,
advance payment 2 = 10 000,00 EUR, advance payment 3 = 0,00 EUR, advance
payment 4 = 5 000,00 EUR, withholding tax = 1 000,00 EUR).
In the 61-account for business gifts there is a debit balance of 4 000,00 EUR.
NV BETA will grant a director's fee of 5 200,00 EUR in the context of the
subsequent profit appropriation. It has still carried forward (tax) losses of
1 300,00 EUR.
The reference interest rate for assessment year 20X1 is 4 %.
REQUIRED:
28

Examples
Example 3
29
}
Examples
Example 3 Step 1:
Determination
of the taxable base
Taxable base
Accounting result 72 500,00 EUR
+ Expenditure rejected + 30 000,00 EUR
67-accounts: 28 000,00 EUR
50 % business gifts: 2 000,00 EUR
- Directors’ fees - 5 200,00 EUR
- Loss carried forward - 1 300,00 EUR
apply
= Taxable base = 96 000,00 EUR →
30
tax rate

Examples
Example 3 Step 2:
Calculation
of the basic taxation
Basic taxation → large company
25 % x 96 000,00 EUR 24 000,00 EUR

= Basic taxation 24 000,00 EUR
31

Examples
Example 3 Step 3:
Calculation
of the tax increase
Tax increase
*
- Withholding tax - 1 000,00 EUR
Base to calculate tax increase = 23 000,00 EUR
% ref rate
-
-
Increase percentage 2,25 x 4 % = 9 %

Tax increase 9 % x 23 000,00 EUR
= 2 070,00 EUR
32

Examples
Example 3 Step 4:
of the tax increase
AP1 6 quarters x 2 % = 12 % x 12 000,00 EUR = 1 440,00 EUR
AP2 5 quarters x 2 % = 10 % x 10 000,00 EUR = 1 000,00 EUR
AP3 4 quarters x 2 % =8% x 0,00 EUR = 0,00 EUR
AP4 3 quarters x 2 % =6% x 5 000,00 EUR = 300,00 EUR
36 % 2 740,00 EUR
⇐
36 % / 4 = 9 %
33

Examples
Example 3 Step 5:
Calculation

- Withholding tax - 1 000,00 EUR
eoivaloce
JR
= - 4 000,00 EUR towards
(> 0) Result must be ≥ 0, - 2 740,00 EUR tax
authority
so no tax increase
= - 670,00 EUR → 0
= Tax provision
0 - 4 000,00 EUR
34
Overview business tax cycle
Financial year 20X0 Financial year 20X1

Income year Assessment year
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Quarter 3 Quarter 4
10/10 (1)
20/12 (1) …/09/20X1
10/04 (1) 10/07 (1)
(3)
31/12 (2)
(1) The advance payments

(2) The tax provision (claim or debt)
(3) The assessment notice (= the settlement)
35
Overview business tax cycle
Financial year 20X0 Financial year 20X1
Income year Assessment year
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Quarter 3 Quarter 4
10/10 (1)
20/12 (1) …/09/20X1
10/04 (1) 10/07 (1)
(3)
31/12 (2)
When the tax assessment notice is received, the settlement

must be compared with the estimated taxes (tax provision)
Since the tax assessment notice is always received in the
following financial year, any differences can no longer be
recorded in 670-accounts (= taxes on the result of the financial
year), but must be recorded in 671- or 771-accounts
36
Advance payments
Entries during the financial year: advance payments
For each advance payment made during the financial

year, the following journal entry is made

10/04 – 10/07 – 10/10 – 20/12/20X0
… 6700 Taxes due or paid XXX
5500 @ Credit institution X – C/A XXX
C/A extract no. …
37
Tax provision
Entries at the end of the financial year: tax provision
If the tax provision is a debt to the tax authorities
(see example 1)
31/12/20X0
If the tax provision is a claim against the tax authorities

(see example 3)
31/12/20X0
… 412 Taxes to reclaim 4 000,00
6701 @ Capitalised surplus of taxes paid 4 000,00
38
Assessment notice
Entries in the course of a subsequent financial year
(= assessment year): assessment notice
The amount of the tax assessment (= settlement by the
tax authorities) must then be compared with the own
estimate made at the end of the previous financial year
(= the tax provision)
Any differences must be booked against 671- or 771-

accounts
39
Assessment notice
Starting from example 1: tax provision (recorded on
31/12/20X0) = 796,25 EUR estimated tax liability
The final taxes due = the prepaid and/or estimated taxes

Example 1: assessment = 796,25 EUR
…/09/20X1
452 @ Taxes due 796,25
DIV/… – Assessment notice
40
Assessment notice
The final taxes due > the prepaid and/or estimated taxes
Example 1: assessment = 1 000,00 EUR
…/09/20X1
6710 Additional taxes due or paid 203,75
452 @ Taxes due 1 000,00
41
Assessment notice
The final taxes due < the prepaid and/or estimated taxes
Example 1: assessment = 750,00 EUR
…/09/20X1
452 @ Taxes due 750,00
7711 @ Regularisation of estimated taxes 46,25
42
Assessment notice
31/12/20X0) = 4 000,00 EUR taxes to be reclaimed
The final taxes to reclaim = the estimated taxes

Example 1: assessment = 4 000,00 EUR to reclaim
No entry required
43
Assessment notice
The final taxes to reclaim > the estimated taxes to
reclaim
…/09/20X1
… 412 Taxes to reclaim 180,00
7711 @ Regularisation of estimated taxes 180,00
44
Assessment notice
The final taxes to reclaim < the estimated taxes to
reclaim
…/09/20X1
… 6710 Additional taxes due or paid 400,00
412 @ Taxes to reclaim 400,00
45
Exercises
46
Exercises
To read
Situation no. 1: NV VACANCES (p. 35-36)
Situation no. 2: BV INTEGRO (p. 36-38)
Exercises
Exercise 3: BV TIMON (p. 81-82)
47

Vicky Ghijselinck
Office B05-11

Chapter 3:

Corporate Law
and
Accounting
Outline
Introduction
• Increase of contributions: business economic aspects
• Overview of the legal provisions
• Actual versus formal increase of the contributions
• Concepts of value of shares
Public limited company

• Actual capital increase
• Formal capital increase
Private limited company

• Actual increase of contributions
• Formal increase of contributions
Introduction
Introduction
Increase of contributions: business economic aspects
Balance sheet of Plc VOLCANO

ASSETS
III. Tangible fixed assets 300 000,00
B. Plant, machinery and equipment 200 000,00
C. Furniture and vehicles 100 000,00
VI. Stocks and contracts in progress 20 000,00
A.4. Goods purchased for resale 20 000,00
VII. Amounts receivable ≤ 1 year 15 000,00
A. Trade debtors 15 000,00
IX. Cash at bank and in hand 5 000,00
Total assets 340 000,00
Introduction
Balance sheet of Plc VOLCANO

LIABILITIES
I. Capital 100 000,00
A. Issued capital 100 000,00
VIII. Amounts payable > 1 year 200 000,00
A.4. Credit institutions 200 000,00
IX. Amounts payable ≤ 1 year 40 000,00
C. Trade debts 30 000,00
E. Taxes … 10 000,00
Total liabilities 340 000,00
Introduction
Capital of Plc VOLCANO is divided into
5 000 shares without nominal value
Required investment: 100 000,00 EUR
Question: How to finance?
Introduction
Answer: 3 possibilities
• Using existing cash and cash equivalents
• Contracting a loan
• Carrying out an increase of contributions
‒ Public limited company: capital increase
‒ Private limited company: increase of contributions
Which one to prefer?
Introduction
Overview of the legal provisions
Formalities and conditions as prescribed for the
incorporation of the company
In principle: a capital increase (NV) or increase in
contributions (BV) with the issue of new shares
requires an amendment to the articles of
association that must be decided on by the
extraordinary general meeting of shareholders
(article 7:153 (NV) and article 5:100 (BV) BCCA)
• At least half of the capital must be represented; if not:
resolved by a new meeting
• Three quarters of the votes must approve amendments
10
Introduction
Exceptions
• NV: authorized capital (article 7:198 BCCA)
• BV: delegation of power (article 5:134 BCCA)
• BV: additional contributions without issuing new
shares can be accepted by a simple majority; this
resolution is established in an authentic deed
No financial plan is required in the event of an

increase of contributions
11
Introduction
Public limited company Private limited company
Extraordinary general meeting
Extraordinary general meeting or management body within
Decision or managing body within the the limits of the delegation of
limits of the authorised capital power to the management
body
Authorised capital (Plc)
Issuance by delegation Statutory possible Statutory possible
(private limited company)
Act Authentic Authentic
Contribution in cash: 25 % per
100 % unless the articles of
share
Minimum payment per share association or the conditions
Contribution in kind: 25 % per
of issue stipulate otherwise
share + 100 % within 5 years
Paying-up
Share premium (Plc) 100 % unless the articles of
Acceptance of contribution 100 % by subscription association or the conditions
without issue of shares of issue stipulate otherwise
(private limited company)
12
Introduction
Actual versus formal increase of the contributions
Actual increase of contributions: increase of
contributions resulting in an actual increase in
shareholders’ equity Impact on equity
versus
Formal increase of contributions: increase of
contributions by incorporating into the contributions:
• share premium (11)
• revaluation surpluses (12), less deferred taxes on them
• reserves: legal reserve (130), unavailable reserves (131) and
available reserves (133)
• profit carried forward or retained profits (14)
• NOT: untaxed reserves (132) and investment grants (15)
No impact on equity
13
Introduction
Concepts of values of shares
Nominal value
• Value stated on shares
• Nominal value x Number of shares = Issued capital
Fractional value or par value

• Value of shares not mentioning a nominal value
• Issued capital/Number of shares
Actual value: several methods possible

• Stock market price
• Book value or intrinsic value = Equity/Number of
shares
• ...
14
Accounting aspects
of an actual capital increase
15

Actual capital increase
Procedure actual capital increase
Depositing amount of shares into blocked bank account
by subscribers of capital → entry required
Decision of extraordinary general meeting of
shareholders to increase capital → no entry required
Drawing up of the deed of capital increase by the notary
→ entry required
Unblocking of the bank account → entry required
Publication in the Annexes to the Belgian Official Gazette
→ no entry required
16

Example: capital increase in Plc VOLCANO
The extraordinary general meeting of shareholders of
Plc VOLCANO decides to increase capital with
100 000,00 EUR by issuing 5 000 new shares
Newly issued shares will have the same rights as the old
ones and should be paid in full
Both existing and new shareholders can subscribe to

these new shares
17

Example: capital increase in Plc VOLCANO
LIABILITIES
I. Capital 100 000,00
E. Taxes … 10 000,00
18

11/04/20X0: bank certificate no. 1 indicating that the subscribers to the capital
increase deposit the amount of their shares on a blocked bank account. The
bank issues a certificate for these deposits on 11 April 20X0.
Blocked bank account A + D 5502 Bank – Blocked account

Short term debt 4890 Advances received
L + C
towards shareholders on contributions

11/04/20X0
1 5502 Bank – Blocked account 100 000,00
4890 @ Advances received on contributions 100 000,00
Bank certificate no. 1 – Subscription to
capital increase
19

18/04/20X0: the act of the capital increase is drawn up by the notary on
18 April 20X0.
Issued capital L + C 100 Issued capital

Long-term receivable A +
D 101 Uncalled capital (-)
towards shareholders →L →-

18/04/20X0
2 101 Uncalled capital (-) 100 000,00
100 @ Issued capital 100 000,00
Notarial act dd. 18/04/20X0: capital
increase
20

18 April 20X0.

L - D
Long-term receivable A -
C 101 Uncalled capital (-)
towards shareholders →L →+

18/04/20X0
3 4890 Advances received on contributions 100 000,00
101 @ Uncalled capital (-) 100 000,00
increase
21

18/04/20X0: the notary charges a commission of 750,00 EUR (excluding 21 %
VAT) for expenses related to the capital increase (PI/23). The notary is paid
immediately by means of a cheque (bank cheque).
Commission notary A + D 200 Formation expenses

VAT A + D 4110 VAT to reclaim
4891 Other amounts payable
Total amount invoice L + C
– Notary

18/04/20X0
4 200 Formation expenses 750,00
4110 VAT to reclaim 157,50
4891 @ Other amounts payable – Notary 907,50
PI/23 – Purchase invoice notary
22

18/04/20X0: the notary charges a commission of 750,00 EUR (excluding 21 %
VAT) for expenses related to the capital increase (PI/23). The notary is paid
immediately by means of a cheque (bank cheque).

Debt towards notary L - D
– Notary
Bank cheque A - C 5501 CI – Cheques written out

18/04/20X0
5 4891 Other amounts payable – Notary 907,50
5501 @ Credit institutions – Cheques 907,50
written out
Bank cheque
23

20/04/20X0: the bank account is unblocked (C/A extract no. 31).
Bank account A + D 5500 CI – Current account

Blocked bank account A - C 5502 Bank – Blocked account

20/04/20X0
6 5500 Credit institutions – Current account 100 000,00
5502 @ Bank – Blocked account 100 000,00
C/A extract no. 31 – Unblocking bank
account
24

Balance sheet of Plc ROMEO
ASSETS
I. Formation expenses 5 000,00
B. Plant, machinery and equipment 200 000,00
25

Balance sheet of Plc ROMEO
LIABILITIES
I. Capital 100 000,00
A. Issued capital Difference 100 000,00
IV. Reserves with Plc VOLCANO: 100 000,00
Equity capital > Capital
A. Legal reserve 10 000,00
D. Reserves available for distribution 90 000,00
V. Retained profits 50 000,00
26

Example: capital increase in Plc ROMEO
Capital of Plc ROMEO is divided into 5 000 shares
Capital increase: 50 000,00 EUR (by issuing

2 500 new shares)
Questions
• Nominal value of one share?
• Actual (intrinsic) value of one share?
‒ Before capital increase
‒ After capital increase
27

Formulas
Nominal value of one share
Issued capital
Nominal value =
Number of shares
Intrinsic value of one share

Amount of equity
Intrinsic value =
Number of shares
28

Nominal value of one share
= Issued capital/Number of shares
= 100 000,00 EUR/5 000 shares = 20,00 EUR/share
Intrinsic value of one share
= Amount of equity/Number of shares
• Before capital increase:
250 000,00 EUR/5 000 shares = 50,00 EUR/share
• After capital increase:
29

Problem?
Existing shareholders will agree?
30

Solutions: 3 alternative options
Pre-emptive right or subscription right
Share premium
Adjusting nominal value of existing shares
31

Actual capital increase: pre-emptive right
Option 1: Pre-emptive right
What? Pre-emptive right for existing
shareholders to buy shares in advance in
proportion to their current holding
Formula proportion
Capital before capital increase
Amount of capital increase
OR
Number of existing shares
Number of new shares
32

Proportion
• 100 000,00 EUR/50 000,00 EUR
• 5 000 shares/2 500 shares
• 2/1
Meaning: an existing shareholder is granted a
right to buy a ‘new’ share if he already holds two
‘old’ shares
33

Conclusion: existing shareholders can
compensate their loss
• By claiming their subscription right and buying new
shares
• By selling their pre-emptive right(s) to third party
34

Question? Theoretical value of subscription
right?
Answer: theoretical value of subscription right
equals loss of existing shareholder on 1 share
Intrinsic value before capital increase
– Intrinsic value after capital increase
Plc ROMEO: 50,00 EUR – 40,00 EUR = 10,00 EUR
35

Check 1: existing shareholder with 2 shares buys
1 new share
• Loss on 2 existing shares: 2 x 10,00 EUR = 20,00 EUR
• Profit on 1 new share: 40,00 EUR – 20,00 EUR = 20,00 EUR
Check 2: existing shareholder with 2 shares sells

subscription right at 10,00 EUR per dividend coupon
• Loss on 2 existing shares: 2 x 10,00 EUR = 20,00 EUR
• Revenue from selling subscription right: 2 x 10,00 EUR =
20,00 EUR
36

Plc ROMEO decides to increase capital with 50 000,00 EUR by
issuing 2 500 new shares
Newly issued shares will have the same rights as the old ones
Both existing and new shareholders can subscribe to these
new shares
Plc ROMEO requires shareholders to pay up the legal
minimum
Existing shareholders are compensated for their loss on
existing shares by granting them a pre-emptive right or
subscription right
37

increase deposit the legally required minimum amount of their shares on a
blocked bank account. The bank issues a certificate for these deposits on
15 May 20X0.

L + C

15/05/20X0
capital increase
38

23 May 20X0.


23/05/20X0
increase
39

23 May 20X0.

L - D

23/05/20X0
increase
40



27/05/20X0
account
41

Actual capital increase: share premium
Option 2: Share premium
What?
• Issue price of a share is set above nominal or
par value of existing shares
• Difference between issue price and nominal
value is called share premium
Formula share premium
Intrinsic value – Nominal value
42

Important remark
Article 7:184 BCCA

‘If there is an issue premium on new shares, the amount of such
premium must be paid up in full on subscription.’
43

Nominal value of 1 share before capital increase
Intrinsic value of 1 share before capital increase
Share premium for 1 share
= 50,00 EUR – 20,00 EUR = 30,00 EUR/share
44

Check: comparing intrinsic value of 1 share
before and after capital increase
• Intrinsic value before capital increase:
• Intrinsic value after capital increase:
(250 000,00 EUR + 50 000,00 EUR +
75 000,00 EUR)/(5 000 shares + 2 500 shares)
= 50,00 EUR/share
45

new shares
minimum
Existing shareholders are compensated for their loss on
existing shares by asking the buyers of the newly-issued
shares to pay a share premium
46

15 May 20X0.

L + C

15/05/20X0
capital increase
47

23 May 20X0.


23/05/20X0
increase
48

23 May 20X0.

L - D
Share premium L + C 1110 Share premium

23/05/20X0
1110 @ Share premium 75 000,00
increase
49



27/05/20X0
account
50

Actual capital increase: adjust nominal value
Option 3: Adjusting nominal value of existing
shares
What? Increase nominal value of shares up to
intrinsic value and increase capital afterwards
51

Option 3: Adjusting nominal value of existing
shares
New nominal value of 1 share

= Intrinsic value of 1 share before capital increase
52

new shares
minimum
Existing shareholders are compensated for their loss by
adjusting the nominal value of existing shares
53

15 May 20X0.

L + C

15/05/20X0
capital increase
54

23 May 20X0.


23/05/20X0
increase
55

23 May 20X0.

L - D

23/05/20X0
increase
56



27/05/20X0
account
57

Accounting aspects actual capital increase: see
‘Formation of a company’
Guard existing shares against a decrease in

value!
• Intrinsic value versus nominal value
• Quotation versus par value
• 3 alternative options
‒ Pre-emptive (or subscription) right
‒ Share premium
‒ Adjusting nominal value
58
Accounting aspects
of a formal capital increase
59

Formal capital increase
Important remark
Note:
CBN Advice 121/3 (movements within shareholders' equity):
movements to the 14-account ‘Profit or loss carried forward’ must
always go through accounts of the result appropriation (69- and 79-
accounts)
60

Procedure formal capital increase
shareholders to increase capital → no entry required
Drawing up of the deed of capital increase by the notary

→ entry required

61

Equity of Plc PAREO
EQUITY
I. Capital 150 000,00
IV. Reserves 50 000,00
V. Retained profits 25 000,00
62

Example: capital increase in Plc PAREO
Plc PAREO decides to increase capital with 75 000,00 EUR
by incorporating:
• the legal reserve
• the reserves available for distribution
• the retained profits
63

01/06/20X0: notarial act regarding a formal capital increase by incorporating
the legal reserve, the reserves available for distribution and the retained
profits into capital.
Legal reserve L - D 130 Legal reserve
Reserves 133 Reserves
L - D
available for distribution available for distribution
Incorporation retained profits ‘C’ + D 691 Increase in contributions
Capital L + C 100 Issued capital

01/06/20X0
1 130 Legal reserve 10 000,00
133 Reserves available for distribution 40 000,00
691 Increase in contributions 25 000,00
increase
64

31/12/20X0: book-off of retained profits at year-end.
Retained profits L - D 140 Profit carried forward

790 Retained profits of
Incorporation retained profits ‘I’ + C
the previous accounting year

31/12/20X0
2 140 Profit carried forward 25 000,00
accounting year
increase
65

Shares without nominal value: no problem
Shares with nominal value

• Increase nominal value
• Convert shares with nominal value into shares
without nominal value
• Free distribution of shares: dividend coupon (bonus)
gives right to one or more shares (bonus shares)
66

Questions
How many bonus shares does an ‘old’
shareholder obtain if capital is divided into
shares with nominal value of 50,00 EUR?
What is theoretical value of a bonus of

Plc PAREO when stock market price is
60,00 EUR?
67

Answers
Incorporated reserves and retained
profits/Capital before capital increase
= 75 000,00 EUR/150 000,00 EUR = ½ = 0,50
A shareholder obtains 1 bonus share for 2 ‘old’

shares because incorporated elements and capital
before capital increase are to each other as 1 to 2
68

Answers
Theoretical value of a bonus
• Value of 1 ’old’ share before capital increase:
60,00 EUR/share
• Value of 1 share after capital increase: (3 000 shares
x 60,00 EUR)/4 500 shares = 40,00 EUR/share
→ Theoretical value of 1 bonus:
60,00 EUR – 40,00 EUR = 20,00 EUR
69

Check
Value of 1 new share: 40,00 EUR
To obtain 1 new share, one needs 2 bonuses = 2

x 20,00 EUR = 40,00 EUR
Value of 1 new share = Value of 2 bonuses
Correct!
70

By means of incorporating reserves,
retained earnings ... into capital
What about the nominal value of shares?

• Adjusting the nominal value
• Conversion into shares without nominal
value
• Distributing free shares (‘bonus shares’)
71
Accounting aspects
of an actual increase
of contributions
72

Actual increase of contributions
Procedure actual increase of contributions
Depositing amount of increase of contributions into blocked
bank account by subscribers of increase of contributions
→ entry required
Decision of extraordinary general meeting of shareholders to
increase contributions → no entry required
Drawing up of the deed of increase of contributions by the
notary → entry required
73

Example: increase of contributions in private
limited company STARS
private limited company STARS decides to increase
contributions with 25 000,00 EUR by issuing
500 new shares; the contributions will be unavailable
Newly issued shares will have the same rights as the old
ones and should be paid in full
74

26/06/20X0: bank certificate no. 1 indicating that the subscribers to the
increase of contributions deposit the amount of their shares on a blocked bank
account. The bank issues a certificate for these deposits on 26 June 20X0.

L + C

26/06/20X0
Bank certificate no. 1 – Subscriptions
to increase of contributions
75

30/06/20X0: the act of the increase of contributions is drawn up by the notary
on 30 June 20X0; the contributions will be unavailable.

L - D
1119 Other unavailable
Unavailable contributions L + C
contributions outside capital

30/06/20X0
1119 @ Other unavailable contributions 25 000,00
outside capital
Notarial act dd. 30/06/20X0:
acceptance of contributions + Bank
certificate
76



03/07/20X0
account
77
Accounting aspects
of a formal increase
of contributions
78

Formal increase of contributions
Important remark
Note:
accounts)
79

Procedure formal increase of contributions
shareholders to increase contributions → no entry
required
Drawing up of the deed of increase of contributions by

the notary → entry required

80

Example: increase of contributions in private
limited company SUNSET
private limited company SUNSET decides to increase the
unavailable contributions with 30 000,00 EUR by
incorporating:
• 5 000,00 EUR revaluation surpluses on tangible fixed
assets
• 10 000,00 EUR of the reserves available for
distribution
• 15 000,00 EUR of the retained profits
81

23/08/20X0: notarial act regarding a formal increase of contributions by
incorporating the revaluation surpluses, the reserves available for distribution
and the retained profits into the unavailable contributions.
Revaluation surpluses on TFA L - D 121 Revaluation surpluses on TFA
Reserves 133 Reserves

L - D
available for distribution available for distribution
Incorporation retained profits ‘C’ + D 691 Increase in contributions
Contributions L + C
23/08/20X0
1 121 Revaluation surpluses on TFA 5 000,00
133 Reserves available for distribution 10 000,00
691 Increase in contributions 15 000,00
outside capital
Notarial act dd. 23/08/20X0: increase
of contributions

31/12/20X0: book-off of retained profits at year-end.
Retained profits L - D 140 Profit carried forward

790 Retained profits of
Incorporation retained profits ‘I’ + C

31/12/20X0
2 140 Profit carried forward 15 000,00
accounting year
Notarial act dd. 23/08/20X0: increase
of contributions
83
Exercises
84
Exercises
Exercise 1: NV THE MORNING (p. 254)
Exercise 2: NV ICONIC (p. 254-255)
Exercise 3: NV THE SEA (p. 256)
Exercise 5: Capital increase in NV ABC

(p. 256)
85

Vicky Ghijselinck
Office B05-11

Chapter 2:

Corporate Law
and
Accounting
Outline
Introduction
• Decrease of contributions: business economic
aspects
• Actual versus formal decrease of contributions
• Actual capital decrease
• Formal capital decrease
• Actual decrease of contributions
• Formal decrease of contributions
Concluding remark
4
Introduction
Introduction
Decrease of contributions: business economic aspects
Why decrease of contributions?

• Firm has large amount of retained losses on its
balance sheet
Firm not able to pay out dividends
Negative impact on solvency
• Capital exceeds financial needs
Negative impact on return on equity
• Reorganisation to allow capital increase in the future
Introduction
Decrease of contributions: business economic aspects
Why decrease of contributions?

• Firm has large amount of retained losses on its
balance sheet
Firm not able to pay out dividends
Negative impact on solvency
• Withdrawal or exclusion of a shareholder
Introduction
Actual versus formal decrease of contributions
Actual decrease of contributions: decrease of
contributions resulting in an actual decrease
in shareholders’ equity Impact on equity
versus
Formal decrease of contributions: decrease
of contributions by incorporating loss carried
forward or retained losses No impact on
equity
Introduction

Actual capital decrease
• Actual capital decrease by repayment to the firm’s
shareholders
• Actual capital decrease through exemption from the
obligation to pay up uncalled capital
• Actual capital decrease through the acquisition of
own shares
Formal capital decrease
• Formal capital decrease to meet losses incurred or
to establish a reserve to cover foreseeable losses
Introduction

Actual decrease of contributions
• Withdrawal or exclusion of a shareholder from the
company’s assets
Formal decrease of contributions
• Formal decrease of contributions to meet losses
incurred
Remark: with regard to the decrease of contributions in
a BV, it is important to check whether the contributions
are considered as available (1109) or unavailable (1119)
under the articles of association
10
Accounting aspects
of an actual capital decrease
11

Important remark
Article 7:209 BCCA
‘If a capital reduction is made by a repayment to the shareholders or
by a full or partial release of their obligation to pay up the balance of
their contribution, the creditors whose claims are created before the
publication shall have the right, within two months after publication of
the resolution for the capital reduction in the Annexes to the Belgian
Official Journal, notwithstanding any provision to the contrary, to
demand security for any claims not yet due and payable on the date of
such publication and for the claims for which an objection has been
instituted before the court or through arbitration prior to the general
meeting resolving on the capital reduction. The company may stay such
claim by payment of the discounted value thereof.
…
12

Important remark
Article 7:209 BCCA

…
No distribution or repayment may be made to the shareholders and
no release from payment of the balance of the contribution shall be
possible as long as the creditors who have pursued a claim for their
rights within the above-mentioned two month period have not been
paid, unless their claim to receive security has been dismissed by an
enforceable court decision.’
13

Actual capital decrease: 3 alternative ways
• Actual capital decrease by repayment to the
firm’s shareholders
• Actual capital decrease through exemption

from the obligation to pay up uncalled
capital
• Actual capital decrease through the

acquisition of own shares
14

Actual capital decrease: repayment to shareholders
Procedure actual capital decrease: repayment to
the firm’s shareholders
shareholders to decrease capital → no entry required
Drawing up of the deed of capital decrease by the notary
→ entry required
Period for protection of creditors → no entry required
Actual repayment → entry required
15

Example: capital decrease in Plc JUMP
ASSETS
A. Land and buildings 100 000,00
16

LIABILITIES
I. Capital 200 000,00
V. Retained profits (losses) 50 000,00
E. Taxes … 10 000,00
17

Capital of Plc JUMP is divided into 1 000 shares with
nominal value of 200,00 EUR
5 shareholders each hold 200 shares
Plc JUMP sells its land and buildings
Instead of reinvesting these funds, shareholders decide

to decrease firm’s capital to 100 000,00 EUR; each
shareholder will be repaid 20 000,00 EUR
18

15/05/20X0: notarial act regarding the decision of the capital decrease. The
notarial act is published in the Annexes to the Belgian Official Gazette
dd. 20/05/20X0.
Issued capital L - D 100 Issued capital

4840 Capital decrease
Debt towards shareholders L + C
– Non-distributable

15/05/20X0
1 100 Issued capital 100 000,00
4840 @ Capital decrease – Non-distributable 100 000,00
decrease of 100 000,00 EUR by
repaying 500 shares
19

20/07/20X0 (2 months after publication in the Annexes to the Belgian Official
Gazette): the making payable of the capital decrease.
Debt towards shareholders 4840 Capital decrease

L - D
→ Non-distributable – Non-distributable
L + C
→ Distributable – Distributable

20/07/20X0
2 4840 Capital decrease – Non-distributable 100 000,00
4841 @ Capital decrease – Distributable 100 000,00
Making payable of the capital decrease
20

30/07/20X0: C/A extract no. 27 indicating the actual repayment to the firm’s
shareholders.

L - D
→ Distributable – Distributable
Bank account A - C 5500 CI – Current account

30/07/20X0
3 4841 Capital decrease – Distributable 100 000,00
5500 @ Credit institutions – Current account 100 000,00
C/A extract no. 27 dd. 30/07/20X0
21

Actual capital decrease: exemption to pay up

capital

22

Procedure actual capital decrease: exemption to pay
up
shareholders to decrease capital by means of exemption
to pay up (part of) uncalled capital → no entry required
→ entry required
Definite exemption to pay up → entry required
23

Example: capital decrease in Plc SPRING
Issued capital: 300 000,00 EUR
• 3 000 shares with a nominal value of 100,00 EUR
Account ‘101 Uncalled capital’: 150 000,00 EUR
• 50 % of the issued capital is still uncalled
Legal reserve: 30 000,00 EUR
Other reserves: 175 000,00 EUR
Shareholders decide to decrease capital by means of
exemption of paying up uncalled capital
24

30/06/20X0: the act of capital decrease is drawn up on 30 June 20X0 in the
presence of notary … and published in the Annexes to the Belgian Official
Gazette dd. 05/07/20X0.

Debt towards shareholders L + C

30/06/20X0
1a 100 Issued capital 150 000,00
4840 @ Capital decrease – Non-distributable 150 000,00
exemption of paying up uncalled
capital
25

30/06/20X0: the act of capital decrease is drawn up on 30 June 20X0 in the
presence of notary … and published in the Annexes to the Belgian Official
Uncalled capital
A -
Long-term receivable C 101 Uncalled capital (-)
→L →+
towards shareholders
Short-term receivable 4160 Other amounts
A + D
towards shareholders receivable – Shareholders
30/06/20X0
1b 4160 Other amounts receivable – 150 000,00
Shareholders
exemption of paying up uncalled
capital
26

05/09/20X0 (2 months after publication in the Annexes to the Belgian Official
Gazette): definite exemption of paying up an amount of 150 000,00 EUR of
uncalled capital as a result of a capital decrease.

Debt towards shareholders L - D
Short-term receivable 4160 Other amounts
A - C
towards shareholders receivable – Shareholders

05/09/20X0
2 4840 Capital decrease – Non-distributable 150 000,00
4160 @ Other amounts receivable – 150 000,00
Shareholders
Exemption of paying up uncalled
capital as a result of a capital decrease
27

Actual capital decrease: acquisition own shares

capital

28

Procedure actual capital decrease: acquisition own
shares
shareholders to decrease capital through the purchase of
its own shares → no entry required
Purchase of own shares → entry required
Drawing up of the deed of capital decrease by the
notary: definite decision + determination of effective
capital reduction by board of directors → entry required
29

Example: capital decrease in Plc SUMMER
• 2 500 shares with a nominal value of 100,00 EUR
Extraordinary general meeting of shareholders

decides to reduce capital by destroying shares
purchased on the stock exchange
Condition: exchange rate + costs < nominal value

per share
30

01/06/20X0: C/A extract no. 36 indicating that 500 shares are purchased at
95,00 EUR per share, increased by 125,00 EUR costs. The additional costs are
capitalised.
Purchased own shares

A + D 50 Own shares
+ additional costs

01/06/20X0
1 50 Own shares 47 625,00
With every order, such a recording is made
for the amount of the purchase order
31

30/06/20X0: after the acquisition of 1 000 shares, the general meeting is
convened to decide on the capital reduction. At that time, the account '50 Own
shares' shows a debit balance of 94 300,00 EUR. The general meeting decides
to carry out the capital decrease and to transfer the profits made during the
transaction to an unavailable reserve.

Purchased own shares A - C 50 Own shares
1311 Reserves in respect
Unavailable reserve L + C
of the articles of association

30/06/20X0
50 @ Own shares 94 300,00
1311 @ Reserves in respect of the articles of 5 700,00
association
The purchased shares
are then destroyed
decrease by acquisition of own shares
Accounting aspects
of a formal capital decrease
33

Important remark
Article 7:210 BCCA
‘Article 7:209 (= special protection procedure for creditors) shall not
apply to capital reductions to compensate a loss sustained or to create
a reserve to provide for a foreseeable loss or to create a non-
distributable reserve in accordance with article 7:217, § 2. …’
Note:
accounts)
34

Formal capital decrease: 1 alternative way
• Formal capital decrease to meet losses

incurred or to establish a reserve to cover
foreseeable losses
35

Procedure formal capital decrease
shareholders to decrease capital → no entry required

→ entry required

36

Example: capital decrease in Plc DOWNY
ASSETS
37

LIABILITIES
I. Capital 100 000,00
V. Retained profits (losses) -30 000,00
IX. Amounts payable > 1 year 75 000,00
E. Taxes … 15 000,00
38

Capital of Plc DOWNY is divided into 500 shares
with nominal value of 200,00 EUR
5 shareholders each hold 100 shares
To be able to increase capital and to proceed

without retained losses, shareholders decide to
decrease firm’s capital to 70 000,00 EUR by
incorporating retained losses
39

01/09/20X0: the act of capital decrease is drawn up on 1 September 20X0 in
the presence of notary … and published in the Annexes to the Belgian Offical

791 Withdrawal
Incorporation retained losses ‘I’ + C
from contributions

01/09/20X0
791 @ Withdrawal from contributions 30 000,00
incorporating retained losses
40

31/12/20X0 (closing date of the accounting year): profit appropriation; book-
off of retained losses at year-end.
Retained losses L + C 141 Loss carried forward (-)

690 Retained losses of the
Incorporation retained losses ‘C’ + D
previous accounting year

31/12/20X0
2 690 Retained losses of the previous 30 000,00
accounting year
141 @ Loss carried forward (-) 30 000,00
Profit appropriation 20X0
41
Accounting aspects
of an actual decrease
of contributions
42

Actual decrease of contributions:
1 alternative way
• Withdrawal or exclusion of a shareholder
from the company’s assets
‒ Withdrawal: shareholder can sell his/her shares
to the company without procedure and without
shares being purchased by other shareholders
‒ Exclusion: shareholder is obliged to sell his/her
shares to the company
43

Mandatory conditions to be fulfilled if withdrawal of a
shareholder from the company’s assets is foreseen in
articles of associations
Withdrawal not possible during the first 2 financial years; articles of
association can stipulate longer waiting period
• Not allowed during first 2 financial years because of founder’s liability
In principle: withdrawal only possible during first 6 months of
financial year
In principle: withdrawal must happen with all shares of shareholder
Withdrawal takes place on the last day of the 6th month of the
financial year
Parting share is paid out no later than one month afterwards
Net assets test + liquidity test
44

Mandatory conditions to be fulfilled if expulsion of a
shareholder from the company’s assets is foreseen in
articles of associations
Exclusion can take place during the first 2 financial years
Exclusion and resulting amendment of the articles of
association are established before the end of each financial
year by means of an authentic instrument
Only the general meeting is authorized to pronounce an
exclusion
Excluded shareholders will be paid out a parting share
Net assets test + liquidity test
45

Parting share
Can be defined in the articles of association
In the absence of a definition in the articles of

association: definition of legislator
• Parting share = amount of contribution actually paid
and not yet refunded (= historical contribution)
• Maximum amount parting share = net assets value
of the shares according to the latest annual accounts
46

What? Solvency test to determine whether distributions

can be made in private limited company
Test
• No distribution can be made if the net assets of the company
are negative or would become negative because of the
distribution
• If company has unavailable equity capital: no distribution can
be made if net assets have fallen or would fall below amount of
unavailable equity capital because of the distribution
47

The net assets may not be negative + they may not fall below the
unavailable equity
Net assets = Total assets – Provisions – Debts – Unamortised costs of
formation expenses (20) – Unamortised development costs (210)
The net assets are determined on the basis of the last approved
annual accounts or of a more recent statement of assets and
liabilities
The unavailable equity (in the BV) = Unavailable contributions
outside capital (111) + Unamortised part of revaluation surpluses
(12) + Reserves not available for distribution (131) + Investment
grants (15)
48

Liquidity test
What? Second test to be carried out for the limitation of
distributions which mentions that distributions can be
made only if it can reasonably be expected that, after the
distribution, the company will be able to continue to pay
its debts as they fall due over a period of at least twelve
months from the date of the distribution
Test
• Current ratio > 1, taking into account distribution
• Acid test ratio > 1, taking into account distribution
• Distribution = short term debt towards shareholders
49

Example: withdrawal in private limited
company SUNNYDAY
ASSETS
50

company SUNNYDAY
LIABILITIES
I. Contributions 75 000,00
A. Available 50 000,00
B. Not available 25 000,00
A. Reserves not available 30 000,00
C. Available reserves 40 000,00
V. Retained profits (losses) 60 000,00
E. Taxes … 20 000,00
Total liabilities 250 000,00 51

company SUNNYDAY
One of the three shareholders of private limited
company SUNNYDAY wants to withdraw and must be
paid out; shares are evenly divided among shareholders
Questions
• What is the parting share that must be paid out to the
shareholder?
• Does the distribution of the parting share meets the net assets
test?
• If the distribution meets the net assets test → Does the
distribution of the parting share meets the liquidity test?
52

Example: private limited company SUNNYDAY
Question: what is the parting share that must be paid
out to the shareholder?
Answer
• Parting share = amount of contributions actually paid and not
yet refunded (= historical contribution)
• 1/3 x 75 000,00 EUR = 25 000,00 EUR
Parting share = 25 000,00 EUR
53

Question: does the distribution of the parting share
meets the net assets test?
Answer
• Distribution may not result in negative net assets, so
distribution is maximum amount of net assets
• Net assets = 250 000,00 EUR – 45 000,00 EUR =
205 000,00 EUR
• But: in case of unavailable equity, net assets may not fall below
amount of unavailable equity
• Net assets corrected for unavailable equity components:
205 000,00 EUR – 25 000,00 EUR – 30 000,00 EUR =
150 000,00 EUR
Maximum amount to be paid out = 150 000,00 EUR
Distribution meets net assets test!
54

Question: does the distribution of the parting share
meets the liquidity test?
Answer
• Current ratio = (25 000,00 EUR + 35 000,00 EUR +
40 000,00 EUR)/(45 000,00 EUR + 25 000,00 EUR) = 1,43
• Acid test ratio = (35 000,00 EUR +
40 000,00 EUR)/(45 000,00 EUR + 25 000,00 EUR) = 1,07
Current ratio and acid test ratio > 1
Distribution meets liquidity test!
55

30/06/20X1: withdrawal of shareholder X at the expense of the company’s
assets (charged to the available contributions outside capital).
1109 Other available

Contributions L - D
Short term debt
L + C 489… Other amounts payable
towards shareholder

30/06/20X1
1 1109 Other available contributions outside 25 000,00
capital
489… @ Other amounts payable 25 000,00
Withdrawal of shareholder X at the
expense of the company’s assets
Entry if balance sheet test = OK! 56

15/07/20X1: C/A extract no. 37 indicating the effective repayment.
Short term debt

L - D 489… Other amounts payable
towards shareholder

15/07/20X1
2 489… Other amounts payable 25 000,00
Entry if liquidity test = OK!
57
Accounting aspects
of a formal decrease
of contributions
58

Important remark
Note:
accounts)
59

Formal decrease of contributions:
1 alternative way
• Formal decrease of contributions to meet

losses incurred
60

Procedure formal decrease of contributions
shareholders to decrease unavailable contributions
• An amendment of the articles of association is not even
required when losses are charged to the available
contributions
Drawing up of the deed of decrease of contributions by

the notary → entry required
61

Example: decrease of contributions in private
limited company STRATA
private limited company STRATA decides to cover its
losses carried forward, which amount to 25 000,00 EUR,
by withdrawing:
• 15 000,00 EUR from the unavailable contributions
• 10 000,00 EUR from the unavailable reserves
62

11/09/20X0: formal decrease of unavailable contributions and unavailable
reserves to compensate retained losses.
Unavailable contributions L - D
1319 Other reserves
Unavailable reserves L - D
not available for distribution
Compensation retained losses 791 Withdrawal
‘I’ + C
(contributions) from contributions
Compensation retained losses
‘I’ + C 792 Withdrawal from reserves
(reserves)

11/09/20X0
1 1119 Other unavailable contributions outside 15 000,00
capital
1319 Other res. not available for distribution 10 000,00
791 @ Withdrawal from contributions 15 000,00
792 @ Withdrawal from reserves 10 000,00
Decrease in the contributions for losses
carried forward

31/12/20X0: book-off of retained losses at year-end.
Retained losses L + C 141 Loss carried forward (-)

690 Retained losses of
Incorporation retained losses ‘C’ + D

31/12/20X0
2 690 Retained losses of the previous 25 000,00
accounting year
141 @ Loss carried forward (-) 25 000,00
Decrease of contributions
64
Concluding remark
In all aforementioned examples, shares
mention a nominal value
If shares mention a nominal value and the

contributions are decreased with number of
outstanding shares unaltered
• Adjustment of nominal value of shares
OR
• Conversion of shares into no par value shares
(shares without nominal value)
65
Exercises
66
Exercises
Exercise 4: NV BELU (p. 256)
• Initial situation
• Dematerialised shares (= 100 % paid up
shares)
• Capital decrease, partly due to exemption
from the obligation to pay up and partly due
to repayment to the shareholder
Exercise 10: BV SUCCESS (p. 259-260)
67

Vicky Ghijselinck
Office B05-11

Chapter 1:

Corporate Law
and
Accounting
Outline
Introduction: choosing a company
General procedure: incorporation of a
company
Accounting aspects of the formation of a
public limited liability company
private limited liability company
Special topic: early payments
4
Special topic
Early payments
Special topic
Early payments
Example: formation of Plc KEEP IT SIMPLE
• Represented by 20 000 shares
• Nominal value: 15,00 EUR/share
Contributions: fully in cash
Shareholders are required to pay up immediately the
legally required minimum
Shareholder A immediately paid up 50 % on 500 shares
Shareholder B immediately paid up 100 % on 100 shares
What is paid more than legally required:
early payments
Special topic
Early payments
Example: formation of Plc KEEP IT SIMPLE
The articles of association provide for an interest rate of
2 % for early payments
The interest on the early payments is settled and paid to

the shareholders each time an additional part of the
capital is called up
The interest is always due on the outstanding debt
Special topic
Early payments
01/04/20X0: bank certificate no. 1 indicating that the shareholders of Plc KEEP
IT SIMPLE paid up the legally required minimum. Nevertheless, shareholder A
immediately paid up 50 % on 500 shares and shareholder B 100 % on
100 shares.
Special topic
Early payments
01/04/20X0:
Date + fact
formation
Legally required 25 % x 300 000,00 EUR
minimum = 75 000,00 EUR
Overview of early payments
Shareholder A: + 25 % x 500 shares

50 % x 15,00 EUR/share
on 500 shares = 1 875,00 EUR
Shareholder B: + 75 % x 100 shares

100 % x 15,00 EUR/share
on 100 shares = 1 125,00 EUR
Total early payments:

3 000,00 EUR
Remark
Total bank account:
78 000,00 EUR
Special topic
Early payments
01/04/20X0: bank certificate no. 1 indicating that the shareholders of Plc KEEP
IT SIMPLE paid up the legally required minimum. Nevertheless, shareholder A
immediately paid up 50 % on 500 shares and shareholder B 100 % on
100 shares.

L + C

01/04/20X0
Bank certificate no. 1
10
Special topic
Early payments
01/04/20X0: formation of the company; the execution of the deed of
incorporation. Issued capital amounts to 300 000,00 EUR.


01/04/20X0
Deed of incorporation dd. 01/04/20X0:
formation of public limited liability
company KEEP IT SIMPLE
11
Special topic
Early payments
incorporation. Issued capital amounts to 300 000,00 EUR.
L - D
Additional contribution
L + C 487 Early payments
shareholders

01/04/20X0
487 @ Early payments 3 000,00
company KEEP IT SIMPLE
12
Special topic
Early payments
03/04/20X0: the bank account is unblocked. (C/A extract no. 1)


03/04/20X0
account
13
Special topic
Early payments
01/07/20X0: On July 1, 20X0 Plc KEEP IT SIMPLE requires its shareholders to
pay up their shares for an additional 35 %. The maturity date of the new call is
31/07/20X0.
Uncalled capital
A -
→L →+
Called capital
Short-term receivable A + D 410 Called capital

01/07/20X0
5 410 Called capital 105 000,00
Requirement to pay up an additional
35 %
14
Special topic
Early payments
01/04/20X0: 01/07/20X0:
Date + fact
formation additional call 35 %
Legally required 25 % x 300 000,00 EUR 35 % x 300 000,00 EUR
minimum = 75 000,00 EUR = 105 000,00 EUR
Book off:
Shareholder A: + 25 % x 500 shares
25 % x 500 shares
50 % x 15,00 EUR/share
x 15,00 EUR/share
on 500 shares = 1 875,00 EUR
= 1 875,00 EUR
Book off:
Shareholder B: + 75 % x 100 shares
35 % x 100 shares
100 % x 15,00 EUR/share
x 15,00 EUR/share
on 100 shares = 1 125,00 EUR
= 525,00 EUR
Total early payments: EP to be booked off:
3 000,00 EUR 2 400,00 EUR
Remark
Total bank account: Total bank account:
78 000,00 EUR 102 600,00 EUR
15
Special topic
Early payments
31/07/20X0: C/A extract no. 5 indicating that all shareholders meet the
requirement to pay up their shares for an additional 35 %.

L - D 487 Early payments
shareholders
Called capital
Short-term receivable A - C 410 Called capital

31/07/20X0
487 Early payments 2 400,00
410 @ Called capital 105 000,00
C/A extract no. 5
16
Special topic
Early payments
01/08/20X0: C/A extract no. 6 indicating the interest settlement on the early
payments. Take into account a withholding tax rate of 30 %.
In concrete terms:
the interest settlement is calculated
on the balance of the account 487 `Early payments’
over the period starting from the incorporation
of the company to the maturity date of the new call
17
Special topic
Early payments
6500 Interests, commissions

Interest on early payments C + D
and debt charges
453 Deducted advance
Withholding tax L + C
tax payments

01/08/20X0
7 6500 Interests, commissions and debt 20,00
charges
453 @ Deducted advance tax payments 6,00
5500 @ Credit institutions – Current account 14,00
C/A extract no. 6
18
Special topic
Early payments
01/11/20X0: On November 1, 20X0 Plc KEEP IT SIMPLE requires its
shareholders to pay up their shares in full. The maturity date of the new call is
30/11/20X0.
Uncalled capital
A -
→L →+
Called capital
Short-term receivable A + D 410 Called capital

01/11/20X0
8 410 Called capital 120 000,00
Requirement to pay up all shares in full
(an additional 40 %)
19
Special topic
Early payments
01/04/20X0: 01/07/20X0: 01/11/20X0:
Date + fact
formation additional call 35 % pay up in full
Legally required 25 % x 300 000,00 EUR 35 % x 300 000,00 EUR 40 % x 300 000,00 EUR
minimum = 75 000,00 EUR = 105 000,00 EUR = 120 000,00 EUR
Book off:
Shareholder A: + 25 % x 500 shares x
25 % x 500 shares x
50 % 15,00 EUR/share
15,00 EUR/share
on 500 shares = 1 875,00 EUR
= 1 875,00 EUR
Book off: Book off:
Shareholder B: + 75 % x 100 shares x
35 % x 100 shares x 40 % x 100 shares
100 % 15,00 EUR/share
15,00 EUR/share x 15,00 EUR/share
on 100 shares = 1 125,00 EUR
= 525,00 EUR = 600,00 EUR
Total early payments: EP to be booked off: EP to be booked off:
3 000,00 EUR 2 400,00 EUR 600,00 EUR
Remark
Total bank account: Total bank account: Total bank account:
78 000,00 EUR 102 600,00 EUR 119 400,00 EUR
20
Special topic
Early payments
30/11/20X0: C/A extract no. 30 indicating that all shareholders meet the
requirement to pay up their shares in full.

L - D 487 Early payments
shareholders
Called capital
Short-term receivable A - C 410 Called capital

30/11/20X0
487 Early payments 600,00
410 @ Called capital 120 000,00
C/A extract no. 30
21
Special topic
Early payments
In concrete terms:
the interest settlement is calculated
on the balance of the account 487 `Early payments’
over the period starting from the previous interest
settlement to the maturity date of the new call
22
Special topic
Early payments
6500 Interests, commissions

Interest on early payments C + D
and debt charges
453 Deducted advance
Withholding tax L + C
tax payments

01/12/20X0
10 6500 Interests, commissions and debt 4,00
charges
453 @ Deducted advance tax payments 1,20
5500 @ Credit institutions – Current account 2,80
C/A extract no. 31
23
Exercises
24
Exercises
Exercise 2: Incorporation of NV ISOLO
(p. 185-186)
Exercise 3: Incorporation of BV ROCCO

(p. 186-187)
Exercise 4: NV FISCUS (p. 187-188)
25

Vicky Ghijselinck
Office B05-11

Chapter 1:

Corporate Law
and
Accounting
Outline
Introduction: choosing a company
General procedure: incorporation of a
company
public limited liability company
private limited liability company
Special topic: early payments
4
Introduction
Choosing a company
Introduction
Choosing a company
Sole proprietorship versus incorporated company
Sole proprietorship
• A sole proprietorship is a form of business where one person is
responsible for a business
• That person is both the founder and the owner of the company and is
personally liable for actions and finances
• Although the owner is independent, he can hire staff
Incorporated company
• A company is incorporated by a legal act of one or more persons,
called shareholders, who make a contribution
• It shall have assets and liabilities and as object the exercise of one or
more well-defined activities
• One of its purposes is to provide a direct or indirect financial benefit
to its shareholders
Introduction
Choosing a company
Sole proprietorship
Advantages Disadvantages
All profits for owner-entrepreneur Unlimited liability
Indisputable authority of one person: Low continuity and difficult succession
not accountable to anyone
Flexibility: quick decisions Limited activity and expertise
Limited legal obligations and low Limited capital (available capital)
administrative formalities
Limited costs Tax status
Introduction
Choosing a company
Incorporated company
Advantages Disadvantages
Possibility of limiting liability (to the Profits (usually) have to be divided
contribution)
Greater continuity and smooth Unity of management can be a
succession possible problem
Greater expertise Slower and more difficult decision-
making process (shared management)
Greater capital formation possible More legal obligations and formalities
Better access to credit
Double-entry bookkeeping with more More costs
management information
Tax status
Introduction
Choosing a company
Private limited Public limited Cooperative General Limited
company company company partnership partnership
Minimum number
1 1 3 2 2
of partners
unlimited for the
managing
Liability limited limited limited jointly and severally partners, limited
for the silent
partners
Articles of
authentic authentic authentic authentic or private authentic or private
association
Minimum capital none 61 500,00 EUR none none none
Minimum deposit none 61 500,00 EUR none none none

cash contribution:
100 % unless 25 % 100 % unless
Minimum
otherwise specified contribution in otherwise specified
payment per none none
in the articles of kind: 25 %, but in the articles of
share
association 100 % within 5 association
years
Introduction
Choosing a company
Financial plan
at the time of required required required none none
incorporation
Founder’s liability yes yes yes no no
by name or
Shares by name by name by name by name
dematerialised
Unless the articles
Unless the articles of association
of association provide otherwise,
provide otherwise, there is free
the transfer is transfer among
The shares cannot The shares cannot
limited (subject to shareholders.
be transferred, be transferred,
Transferability assent rules). These Unlimited For transfer to third
unless otherwise unless otherwise
rules do not apply parties, the shares
agreed. agreed.
to transfers to must comply with
partners, the spouse the categories and
or relatives in direct conditions set out
line. in the articles of
association.
10
Introduction
Choosing a company
Managed by a
management body
composed of at
least three One or more
One or more directors, who are directors, who may
directors, who may natural or legal or may not
or may not form a persons (two if constitute a college
college, and who there are less than and who may or
are natural persons three may not be natural One or more One or more
Management
or legal entities. shareholders). persons or legal managers. managers.
Directors may be However, the entities. Directors
appointed by virtue articles of may be appointed
of the articles of association may by virtue of the
association. provide that only articles of
one director is, association.
possibly, appointed
under the articles
of association.
11
General procedure
12
General procedure
Drawing up a draft of the company agreement (articles of
association)
Preparation of a financial plan (articles 7:3 (NV) and 5:4 (BV) BCCA)
In case of a contribution in kind: reporting by the founders and by an
auditor (articles 7:7 (NV) and 5:7 (BV) BCCA)
In case of a contribution in cash: payment into a blocked bank
account of the company under formation (articles 7:12 (NV) and 5:9
(BV) BCCA)
Notarial deed of incorporation (articles 7:13 (NV) and 5:11 (BV)
BCCA)
Registration in the Crossroads Bank of Enterprises
Registration in the UBO register
Application for a VAT number
Publication of the extract of the deed of incorporation (articles 2:8,
§ 2 and 2:13 BCCA)
13
General procedure
Financial plan
What? The financial plan must contain at least the following
elements (article 7:3, § 2 and article 5:4, § 2 BCCA):
• Administrative part (identification data)
• An accurate description of the intended activity
• An overview of all sources of financing at incorporation, if any, with an
indication of the securities provided in that context
• An opening balance sheet + projected balance sheets after 12 and 24 months
• A projected profit and loss account after 12 and 24 months
• Projected income and expenditure for a period of at least 2 years after
incorporation
• A description of the assumptions used in estimating the expected turnover and
profitability
• (if applicable) the name of the external expert who assisted in drawing up the
financial plan
14
General procedure
Financial plan
Purpose: demonstrate that the initial contributions are
sufficient for the intended activity for the first two years
Founder's liability: articles 7:17 (NV) and 5:15 (BV) BCCA

The founders are jointly and severally liable towards interested parties for the
obligations of the company, in a proportion to be determined by the court, in the
event of bankruptcy within three years after the acquisition of legal personality, if
the initial capital at the time of incorporation is clearly insufficient for the normal
exercise of the intended activity over at least two years. In this case, the notary
public shall, at the request of the examining magistrate or the public prosecutor,
submit to the court the prescribed financial plan
15
General procedure
Financial plan
Limitation of founder's liability: articles 7:13 (NV) and 5:11
(BV) BCCA
The persons appearing on the execution of the deed of incorporation shall be
deemed to be the founders of the company. However if the deed designates one
or more shareholders who jointly hold at least one-third of the capital as
founders, the other persons appearing who only subscribe for shares to be paid
up in cash without being entitled, directly or indirectly, to any special benefit shall
be deemed to be ordinary subscribers
Example financial plan public limited company:
see handbook p. 125-132
Example financial plan private limited company:

16
General procedure
Example articles of association

public limited company:
Example articles of association

private limited company:
17
Accounting aspects
The incorporation
of a public limited liability company
18
Accounting aspects
Formation public limited liability company
Important remarks regarding the formation of a
public limited (liability) company (Plc)
A public limited company can be incorporated by way of a
legal act of one or more persons, called shareholders, who
make a contribution
• At least one partner (no maximum)
Issued capital should amount to at least 61 500,00 EUR
Amount of capital that must be paid up at the time of
incorporation
• Absolute amount: at least 61 500,00 EUR of issued capital has to be
paid up
• Per share: each share has to be paid up for at least 1/4
• Shares representing a contribution in kind must be paid up in full
within five years after the incorporation of the company
19
Accounting aspects
Minimum amount to be paid up at the time of
incorporation
Absolute minimum amount and minimum payment per share
subscribed in cash or in kind must be applied in combination,
whereby the higher of the two calculated amounts always
applies
Remark: for contributions in kind it is checked whether it is

practically possible to hand over the contribution in fractions
to the company → Often the contribution will have to be
made in full (de facto, for practical reasons) even though this
is not required by the Belgian Code of Companies and
Associations
20
Accounting aspects
Minimum amount to be paid up at the time of incorporation:
examples
FACTS:
Formation of a public limited liability company with a share capital of
61 500,00 EUR, subscribed in cash
REQUIRED:
What is the amount of capital to be paid up at the time of incorporation?
21
Accounting aspects
examples
FACTS:
REQUIRED:
22
Accounting aspects
examples
FACTS:
REQUIRED:
23
Accounting aspects
examples
FACTS:
100 000,00 EUR: shareholder A contributes 50 000,00 EUR of land and
shareholder B subscribes 50 000,00 EUR in cash
REQUIRED:
24
Accounting aspects
Procedure to incorporate a public limited company
Drawing up a draft version of the articles of association
Drawing up a financial plan → no entry required
Depositing into a blocked bank account → entry required
Execution of the deed of incorporation before the notary
→ entry required to indicate the capital formation
• In case of a contribution in kind: the conclusions of the
auditor’s report are included in the deed of incorporation; the
contribution is made on the date of incorporation

25
Accounting aspects
Example: formation of Plc SUNNY
Issued capital: 200 000,00 EUR, represented by
8 000 shares
Contributions
• In cash: 70 000,00 EUR
• In kind
‒ Building: 120 000,00 EUR
‒ Car: 10 000,00 EUR
26
Accounting aspects
01/03/20X0: bank certificate no. 1 showing a payment of 70 000,00 EUR on a
blocked bank account related to the owners paying up their shares in the
company.

4890 Advances received
Contribution shareholders L + C
on contributions

01/03/20X0
27
Accounting aspects
incorporation. The articles of association are mentioning 2 contributions in
kind, being (1) a building for an amount of 120 000,00 EUR and (2) a car for an
amount of 10 000,00 EUR. Issued capital amounts to 200 000,00 EUR.


05/03/20X0
company SUNNY
28
Accounting aspects
kind, being (1) a building for an amount of 120 000,00 EUR and (2) a car for an
amount of 10 000,00 EUR. Issued capital amounts to 200 000,00 EUR.

L - D

05/03/20X0
company SUNNY
29
Accounting aspects
kind, being (1) a building for an amount of 120 000,00 EUR and (2) a car for
an amount of 10 000,00 EUR. Issued capital amounts to 200 000,00 EUR.
2210 Buildings
Building A + D
– Cost of acquisition
2410 Vehicles
Car A + D
– Cost of acquisition

05/03/20X0
4 2210 Buildings – Cost of acquisition 120 000,00
2410 Vehicles – Cost of acquisition 10 000,00
contribution in kind
Accounting aspects


07/03/20X0
account
31
Accounting aspects
08/03/20X0: purchase invoice (PI/1) from the auditor (related to the
contribution in kind), for 1 000,00 EUR, excluding 21 % VAT. Formation
expenses are capitalized.
Fee auditor A + D 200 Formation expenses

– Auditor

08/03/20X0
6 200 Formation expenses 1 000,00
4891 @ Other amounts payable – Auditor 1 210,00
PI/1 – Purchase invoice auditor
32
Accounting aspects
08/03/20X0: purchase invoice (PI/2) from the notary (related to the
formation of the company), for 1 500,00, excluding 21 % VAT. The fee for the
notary is paid by means of a cheque. Formation expenses are capitalized.
Fee notary A + D 200 Formation expenses

– Notary

08/03/20X0
7 200 Formation expenses 1 500,00
4892 @ Other amounts payable – Notary 1 815,00
33
Accounting aspects
08/03/20X0: purchase invoice (PI/2) from the notary (related to the formation
of the company), for 1 500,00, excluding 21 % VAT. The fee for the notary is
paid by means of a cheque. Formation expenses are capitalized.

Debt towards notary L - D
– Notary
Bank cheque A - C 5501 CI – Cheques written out

08/03/20X0
8 4892 Other amounts payable – Notary 1 815,00
5501 @ Credit institutions – Cheques 1 815,00
written out
Bank cheque
34
Accounting aspects
31/12/20X0: amortisation of formation expenses.
Formation expenses A - C 200 Formation expenses

6300 Amortisation
Amortisation C + D
of formation expenses

31/12/20X0
9 6300 Amortisation of formation expenses 500,00
200 @ Formation expenses 500,00
DIV/…
35
Accounting aspects
The incorporation
of a private limited liability company
36
Accounting aspects
Formation private limited liability company
Important remarks regarding the formation of a
private limited (liability) company
A private limited company can be incorporated by way of a legal act
of one or more persons, called shareholders, who make a
contribution
• At least one partner (no maximum)
Concept ‘capital’ is replaced by the concept ‘contributions’

Contributions do not have a minimum amount
Contributions can be available or unavailable in accordance with the
deed of incorporation
All shares have to be paid up in full from the time of incorporation,
unless stipulated otherwise in the deed of incorporation
37
Accounting aspects
Procedure to incorporate a private limited company
Drawing up a draft version of the articles of association
Drawing up a financial plan → no entry required
Depositing into a blocked bank account → entry required
Execution of the deed of incorporation before the notary
→ entry required
38
1. 5502 @ 25k
4890
2. 101 @ 100
25K Academic year 2020-2021
3. 4890 @ 101 .
4. 5500 @ 5502
Accounting aspects
Example: formation of private limited liability
company PRETTY
Contributions: 25 000,00 EUR, represented by
1 000 shares, paid in full from the time of
incorporation
Contributions
• Partner BOLLY: 12 500,00 EUR
• Partner JOLLY: 12 500,00 EUR
39
Accounting aspects
01/09/20X0: bank certificate no. 1 indicating shareholders are paying up their
shares for a total amount of 25 000,00 EUR.
Both partners – BOLLY and JOLLY – have deposit 12 500,00 EUR with the bank.

4890 Advances received
Contribution shareholders L + C
on contributions

01/09/20X0
Partner BOLLY: 12 500,00 EUR
Partner JOLLY: 12 500,00 EUR
40
Accounting aspects
incorporation. The shareholders’ contributions amount to 25 000,00 EUR,
which has to be paid up in full. The articles of association stipulate that the
contributions are unavailable.
L - D
Contributions 1119 Other unavailable
L + C
→ Unavailable contributions outside capital

05/09/20X0
outside capital
formation of private limited liability
company PRETTY
41
Accounting aspects
07/09/20X0: purchase invoice (PI/1) from the notary (related to the formation
of the company): 750,00 EUR (excluding 21 % VAT), paid in cash by Mr. BOLLY.
The company decides to capitalize this expense.
Fee notary A + D 200 Formation expenses

– Partner BOLLY

07/09/20X0
3 200 Formation expenses 750,00
4891 @ Other amounts payable – Partner 907,50
BOLLY
42
Accounting aspects


08/09/20X0
account
43
Accounting aspects
31/12/20X0: amortisation of formation expenses.
Formation expenses A - C 200 Formation expenses

6300 Amortisation
Amortisation C + D
of formation expenses

31/12/20X0
5 6300 Amortisation of formation expenses 150,00
200 @ Formation expenses 150,00
DIV/…
44
Seeoidtryi

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Copyright:

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Corp. Accounting

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lecture

* buildup by legal act

UBO → ultimate benef .

> think if you really want to do this

My / share compare with the abs .

YÉyid for draft Habits

Jamal unties for the

Prof 't will te

payable larger As a cost

worriedly over umax 5 Years Annalisa

receive interest for

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& tunneler the short term

how much will come on an BIA ?

already paid in the

Withholding tax rate

money gets called .

pay interest for

Gross inbred due

20€ ( tax admin

4 → until the 30thNov

¥2 0,02 boo with tax

too assets ROE

Capital decrease in PLC (

equity capital, the

Decrease money again -

Notary will draw

Cap decrease of look shareholder)

UP the deed of cop ceeaease

Real destroyed after that

" " mama

→ No protection procedure 141

place within the first 2

what is the parting Shae ?

Balance sheet test

Net assets because

pay out thou I dividends

But suppose ttat true is

is hweotwaeet capital (1/1)

fulfilled then we still

..Liquiaitg⑦-→( ) no aistribuliau can

If the Net Assets test is

BVISARL (stipulated in statutes )

weans reserves (130/1811133)

equity capital & the grants

⑧ Bank Account ( Entry )

towards the short term

intrinsic value before -

① Preemptive right on subscription right to

YE for existing shareholder an can buy one crew share

two shoes he owns .

cover existing shareholder

5502µg ?ZFgµ ③"%@# ¥k

the itriusic robe

l¥?¥¥ -•§gg# ←s→o€

69179 accounts ( profit

133 Rescues avail fo distr

691 Increase in contr .

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if you incorporate capital