European Competitive Telecommunications Association

In the context of the conversion of ECTA from an English law body corporate to a Belgian law international not for profit association (INPA), you asked us to prepare a high level overview of the rights and obligations of a director of an INPA and of its members. We have set out this overview in the note below. The below overview is confined to general principles and cannot replace legal advice on specific situations.

A. DIRECTORS’ RIGHTS

Directors’ rights are determined by the INPA’s articles of association. In particular, the rights of the board of directors are among other things the following:

  • To attend all the Board of Director’s meetings personally, by phone or by proxies;
  • To prepare and convene ordinary and extraordinary general meetings;
  • To determine the tasks of the Secretary and/or Treasurer of the INPA;
  • To take the initiative to set up committees and expert groups authorized to prepare position on specific points to be suggested to the General Meeting;
  • To commit the INPA towards third parties;
  • To bring legal actions both as claimant and as defendant;
  • To amend the INPA’s internal rules;
  • To monitor the Regulatory Forum;
  • To appoint members of the Advisory Board; and
  • To establish the INPA’s accounts of income and expenditure as well as the balance sheet.

 B. DIRECTORS’ DUTIES

Directors must comply with the law, the INPA’s articles of the association and internal rules:

  • Directors’ terms are executed free of charge and directors may not personally benefit from their function;
  • Respect of deliberation rules (e.g. quorum, majority);
  • Respect of the representation rules of the INPA (e.g. collegiality rules; daily management powers’ limitation).

Directors must act in the corporate benefit of the INPA in all circumstances.

More generally, the board of director is responsible for ensuring that the INPA is managed in a prudent and diligent manner.

C. DIRECTORS’ LIABILITIES

The INPA is a separate legal entity with limited liability. Decisions of the board of director are in principle directly accountable to the INPA, rather than to the board members personally. There are, however, principles of directors’ liability under Belgian law which need to be taken into account:

  • Directors’ liability towards the INPA

Directors may be held liable by the INPA for violation of the law or the articles of association, but also for acts which no other reasonable director placed in the same circumstances would have taken. The latter test is aimed at ensuring that directors retain a certain margin within which they can manage the INPA without risking personal liability.

Examples taken from case law include: a director being held liable for incurring obligations knowing that the association could not satisfy these obligations, a director neglecting to pursue an insolvent debtor, a director achieving acts that fall outside of the corporate object of an association, a director not contesting unjustified invoices, a director making expenses out of the scope of the budget defined by the general meeting, a director omitting to enter into a fire insurance regarding facilities leased by an association.  

  • Directors’ liability towards third parties

Directors can also be held liable by third parties. Third parties would need to provide evidence of a director’s fault (i.e. the director having acted in a manner which no other reasonable director placed in the same circumstances would have acted in), their damage and a causal link between the director’s fault and their damage.

We understand that ECTA will take out Directors’ and Officers’ Insurance for the benefit of its board members, thus mitigating the risk of damages being incurred by the directors in case their directors’ liability were to be engaged.

D. Members’ liability

An INPA benefits from the principle of limited liability under Belgian law, meaning that members can in principle not be held liable for liabilities and commitments of the INPA. Members’ liability for debts of the INPA can only occur in exceptional cases, mainly if the statutory provisions have not been complied with, such as:

  • If a member acts on behalf of an INPA in incorporation, i.e. before the INPA has been formed and gained legal personality, and the INPA fails to (i) be incorporated within two years and (ii) assume the liabilities undertaken by its members prior to its incorporation, the relevant members are personally liable; this risk can easily be mitigated by avoiding any commitments being undertaken prior to the incorporation of the INPA;
  • If a member cooperates to documents or contracts of the INPA which do not mention the legal form and address of the INPA, the members can be held personally liable for the liabilities and commitments undertaken in the relevant document; this liability can be avoided by ensuring that all documents of the INPA include the INPA’s legal form and address, e.g. by consistently using the INPA’s letterhead with these legally required statements;
  • If an INPA would have a commercial object (i.e. making profit) or commercial activity as its main activity, it can be held to be a commercial undertaking rather than an INPA, potentially engaging members’ liability; this can be avoided by ensuring that the INPA does not have a commercial object or commercial activity as its main activity;
  • If an INPA is not incorporated and managed in accordance with all statutory provisions, it could be held to be a defective INPA which does not benefit from the limited liability; this can be avoided by ensuring that the incorporation and management of the INPA complies with all statutory Belgian law provisions and by monitoring compliance with these provisions throughout the lifetime of the INPA; as to the incorporation, the involvement of the notary will equally help to mitigate this risk, since the notary will perform his own verification of compliance with statutory provisions;
  • Members could be held liable under the general principles of tort; this could for example be the case if members incorporate an INPA which manifestly has insufficient assets to fund its liabilities; it should be noted though that the general principle of founders' liability does not apply to INPAs; cases where tort liability is withheld are therefore very exceptional; this liability can be avoided by ensuring that members act reasonably and prudently with regard to decision and actions taken with regard to the INPA.

Since the general principles of founders’ liability applicable to commercial companies in Belgium do not apply to INPAs, we consider that the founding members of new Belgian INPA do not take substantial additional risk compared to the members who will adhere at a later stage, provided that the founding members act reasonably and prudently and that the above requirements are complied with.

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