Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.
The dense population and pattern of urban development means that for 91% of Belgian consumers, retail shops and department stores are accessible within a 10-mile radius of their homes. Compared to the United States, or other European markets, the Belgian consumer has a relatively low ratio of square meters of retail space per capita. As a result, several major commercial centers or malls are being developed. These will offer U.S. retail brands and franchises with new, modern locations for their outlets.
The cultural, linguistic, and economic differences of Belgium’s three regions have a strong influence on how business is conducted. A good importer/distributor must be able to operate in all three areas. Belgian distributors tend to be small and specialized.
Using an Agent or Distributor
Companies wishing to use distribution, franchising, and agency arrangements need to ensure that the agreements they put into place are in accordance with EU law and Member State national laws. Council Directive 86/653/EEC establishes certain minimum standards of protection for self-employed commercial agents who sell or purchase goods on behalf of their principals. The Directive establishes the rights and obligations of the principal and its agents, the agent’s remuneration, and the conclusion and termination of an agency contract. It also establishes the notice to be given and indemnity or compensation to be paid to the agent. U.S. companies should be aware that according to the Directive, parties may not derogate from certain requirements. Accordingly, the inclusion of a clause specifying an alternate body of law to be applied in the event of a dispute will likely be ruled invalid by European courts.
The European Commission’s Directorate General for Competition enforces legislation concerned with the effects on competition in the internal market of “vertical agreements.” SMEs in the United States are often exempt from these regulations because their agreements likely would qualify as “agreements of minor importance,” meaning they are considered incapable of impacting competition at the EU level but useful for cooperation between SMEs. Companies with fewer than 250 employees and an annual turnover of less than 50 million euro are considered SMEs. According to Commission Notice 2014/C 291/01, agreements that affect less than ten percent of a particular market are generally exempted.
European Union authorities also look to combat payment delays. Directive 2011/7/EU covers all commercial transactions within the European Union, whether in the public or private sector, primarily dealing with the consequences of late payment (transactions with consumers, however, do not fall within the scope of this Directive). This directive entitles a seller who does not receive payment for goods and/or services within thirty days of the payment deadline to collect interest (at a rate of eight percent above the European Central Bank rate) as well as forty euro as compensation for recovery of costs. For business-to-business transactions, a sixty-day period may be negotiated subject to conditions. The seller may also retain the title to goods until payment is completed and may claim full compensation for all recovery costs.
Companies’ agents and distributors can take advantage of the European Ombudsman when victim of inefficient management by an EU institution or body. Complaints can be made to the European Ombudsman only by businesses and other bodies with registered offices in the European Union. The Ombudsman can act upon these complaints by investigating cases in which EU institutions fail to act in accordance with the law, fail to respect the principles of good administration, or violate fundamental rights. In addition, SOLVIT, a network of national centers within the European Union, offers online assistance to citizens and businesses who encounter problems with transactions within the borders of the single market.
Establishing an Office
U.S. companies wishing to start business activities in Belgium can choose to set up either a subsidiary or a branch. A subsidiary is incorporated under foreign law and the branch under Belgian law. The choice between a subsidiary and a branch often depends on the taxation structure in the foreign country from which the investment is made. Incorporation generally takes six weeks. No prior government authorization is required and there is no restriction on the transfer of capital into Belgium, with the exception of industries such as banking, insurance, pharmaceuticals, and broadcasting. When planning to open an office or set up a company in Belgium, U.S. companies should contact the foreign investment offices of the Belgian region where they will be located (Flanders, Wallonia; http://www.investinwallonia.be/?lang=en), and Brussels). These offices will be able to provide support and advice on matters of tax, employment, location and accounting. The Belgian Federal Government website also provides general information and steps to take to open an office in the country.
A subsidiary is a separate legal entity; thus, liability is limited to its own assets. However, a branch does not constitute a separate entity and has unlimited liability. The parent company is liable for all obligations and debts of the branch.
Setting up a Subsidiary
Subsidiaries are usually set up either as a public limited liability company (SA/NV) or a private limited liability company (SPRL/BVBA). The private limited liability company is generally suited for smaller companies. Steps for setting up public and private companies are relatively similar.
Deposit initial capital (€62,000 for SA/NV; €19,000 for SPRL/BVBA) with a Belgian bank. A certificate indicating the amount of capital held in a blocked account will be issued by the bank.
File signed financial plan with a notary. A financial plan shows how the initial capital covers the company’s operations for the next two years.
In the presence of a notary, sign the deed of incorporation and the by-laws.
The notary will file the deed of incorporation with the local commercial court and submit the corporate charter for publication in the Belgian Official Gazette. (Cost is approximately €1,000-1,500 for notary, €207 for publication in the Belgian Official Gazette.) Upon registration, an official corporate registration number is issued.
Register at the “one-stop shop for companies” (guichet d’entreprise / ondernemingsloket) to activate the corporate registration number and register with the Value Added Tax (VAT) administration. (Cost is €71 for registration fee and €61 for VAT registration.)
Register with social security administration for salaried workers (ONSS/RSZ).
Within three months of incorporation, companies must register with the social insurance fund for self-employed persons and begin annual contributions to this fund.
Setting up a Branch
To open a branch office in Belgium, the following documents must be brought to a notary to be legalized and translated:
- Articles of incorporation and bylaws of the foreign incorporation with subsequent amendments.
- Minutes from the Board Meeting when it was decided by the parent company to open a branch office in Belgium.
- Minutes from the Board Meeting to appoint a legal representative along with a description of powers delegated to him.
- Consolidated annual accounts of the parent company.
- The translation of these documents must be done by an official translator in Belgium into French or Dutch, depending on the location in Belgium.
- The documents must be submitted to the local Court of Commerce and the annual accounts must be filed at the National Bank of Belgium.
- Register at the “one-stop shop for companies” (guichet d’entreprise / ondernemingsloket) to activate the corporate registration number and register with VAT administration.
- Publish the documents in the Belgian Official Gazette. (The costs will be the fee for the translation, registration fee, and publishing fee)
- Register with social security administration for salaried workers (ONSS/RSZ).
Within three months of incorporation, branches must register with social insurance fund for self-employed persons and begin annual contributions to this fund.
A list of notaries in Belgium is available at https://www.notaire.be/.
In an effort to modernize and streamline the procedure of setting up a company or an office in Belgium, the Belgian Government established the ”Crossroads Bank for Enterprises” (Banque Carrefour des Entreprises). It is a repository that assigns business entities a unique identification number that replaces the social security number, its register of commerce number, its VAT number, and the number granted by the national register of legal entities. Data are entered one time only and all government entities share this database. The database tracks relevant identification details, such as name, address, VAT number, and business type. For third parties (including the administration), this number serves as the main identification number of the branch. It must appear on all documents originating from the subsidiary or branch.
According to the Belgian Franchise Federation, Belgium’s franchising system represents 6% of the Belgian retail, about 100 franchisors, 3,500 franchisees, 30,000 jobs and a market of € 2.4 billion. This places Belgium, along with Denmark and Finland, among the European countries with the lowest number of franchise units per capita. The largest part of the franchise concepts is in D-I-Y, food distribution and confection. Over the past 10 years the franchising of services has grown slowly. The largest increase is found in in-house, electrical household equipment and fast-food.
In 2005, Belgium adopted a law on pre-contractual information in the framework of commercial
agreements. Franchise agreements fall under this law. In the case of a franchisor–franchisee relationship proposal, the franchisor is obliged to provide a pre-contractual information document (PID) and a draft of the proposed agreement one month before concluding the agreement. This document must contain all the necessary information, as described in the law, to allow the franchisee to accurately evaluate the consequences of the contract. Disrespect for the required “cooling-off” period, of the required content and even of the accuracy of the information provided, result in the nullity of the agreement.
In the long-standing market economies governed by Civil Codes, there is very limited franchise specific legislation. Franchising, which is not usually distinguished from commerce in general in national economic statistics, is governed in each EU country by the many laws that usually govern mainstream commercial and distribution contracts. These include the general principles of contractual and civil law, specific commercial regulations, IPR protection laws, fiscal and social laws, etc. as well as national or European jurisprudence. https://eff-franchise.com/.
Since its foundation in 1972, the European Franchise Federation has promoted its European Code of Ethics for Franchising. The EFF’s Code of Ethics for franchising has been recognized as an industry reference both by the European Commission, the European Court of Justice, and in franchise jurisprudence in countries like France and Germany. Its purpose is to promote a self-regulatory set of ethical standards by which the actors of the industry themselves define how to protect its practice from behavior which could otherwise be detrimental to its image and ultimately to its business development.
The European Union has yet to adopt legislation harmonizing the direct selling of consumer products. However, there is a wide range of EU legislation that impacts the direct marketing sector. Compliance requirements are elevated for marketing and sales to private consumers. Companies need to focus on the clarity and completeness of the information that they provide to consumers prior to purchase and on their approaches to collecting and using customer data. The following gives a brief overview of the most important provisions flowing from EU-wide rules on distance-selling and e-commerce. In addition, it is important for exporters relying on a direct-selling business model to ensure that they comply with Member State requirements.
In addition to the Commercial Service, there are numerous banks, professional organizations, service companies, and financial organizations prepared to advise and assist parties considering joint ventures and licensing within Belgium. Belgium has a very sophisticated business community with many potential qualified joint venture and licensing partners.
To assist companies to conduct due diligence prior to entering into a financial or other agreement, the Commercial Service recommends that the U.S. firm contact a company that offers commercial information reports. CS Belgium also offers a service known as the International Company Profile report. For more information contact us at: email@example.com.