The Buysse Code: soft law, hard added value

What corporate governance really means in unlisted companies

The term “corporate governance” quickly conjures up images of large listed companies and formal governance structures. Yet good governance is at least as essential for SMEs, family businesses and growth companies. This is precisely where the Buysse Code provides a valuable frame of reference. Why does such a code remain relevant today? What are the main innovations? And above all: what concrete benefit does this code offer to companies and their directors? NOMA's attorneys share their insights.

Why (still) a Corporate Governance Code?

More than twenty years later, the name Enron still rings a bell. The scandal acted as a catalyst for national and international initiatives on good governance, both in the United States and in Europe.

In our own country too, recent cases - such as that of bus builder Van Hool - show how vulnerable companies become when transparency and structure are lacking. A closed management style without clear role agreements rarely proves sustainable in the long term.

Moreover, needs and expectations change rapidly. Today more than ever, companies need clear rules that not only give direction, but also create trust.

Buysse Code: non-binding, but impactful

Both the Lippens Code and the Buysse Code are soft law instruments. They are guidelines that are not legally binding or enforceable on companies. Nevertheless, they can have an impact in practice in various ways.

• For example, a listed company that decides to deviate from the Lippens Code must justify that deviation in its annual corporate governance statement, which is published with the annual report. The Buysse Code has no such obligation to state reasons.
  For example, the Lippens Code states that a non-executive director may not take on more than five directorships within listed companies. If a director nevertheless takes up a sixth mandate, each company involved must justify why this does not conflict with the effective performance of his duties.
• Shareholders can also invoke the Code. For example, if the reappointment of a director who already holds five mandates is proposed, shareholders can refuse the appointment based on the guidelines of the Code.
• Finally, a judge can also take into account the provisions of the Lippens or Buysse Code in his assessment. Non-compliance may, for example, be an indication that a director acted contrary to the company's interests.

Corporate governance is not a straitjacket, but a framework that leaves room for growth, individuality and long-term thinking.

What's new in the Buysse Code 2024?

The most recent revision of the Buysse Code brings innovation on several fronts. A selection of the main emphases:

• More accessible and user-friendly | The structure is clearer, the language simpler. This makes the Code more manageable in practice.
• More attention to board dynamics | The functioning of governing bodies is given more emphasis. The focus is not only on who sits at the table, but also on how people work together.
• Clearly defined roles and expectations | Shareholders, directors and management are each given a clearly defined mandate, with an eye to complementarity.
• Diversity and inclusion | Not as a checklist, but as added value. The Code recognizes the impact of diverse perspectives on decision-making and growth.
• Sustainability structurally embedded | Governance also becomes sustainable business. The Code encourages integrating ESG objectives into a long-term strategy.
• Digital transformation | The Buysse Code includes guidelines that help companies to make targeted use of the opportunities of digitalization and artificial intelligence.
• Family governance further refined | The Code includes additional recommendations to clearly distinguish family and business roles, with succession as a continuous process.

What's in it for you? Practical applications of the Corporate Governance Code

And the farmer, he plowed on ... Why would you invest time in this as an entrepreneur?

In the Flemish clay, where the formal operation of governing bodies is often limited to paper, agreements on good governance are often anything but self-evident. Yet these agreements are essential for sustainable and well-considered growth as a company.

In revising the Buysse Code, one of the central objectives was to make the guidelines more accessible and applicable to every entrepreneur, regardless of the scale or maturity of the company.

The Code offers guidance on numerous practical questions. Here are a few that entrepreneurs often struggle with in practice.

The Buysse Code is not a one size fits all, but a menu for those who consciously opt for workable agreements and future-oriented governance.

1 | "As an entrepreneur, I need a sounding board and am considering an advisory board. How do I go about that?"

A fair question. Unlike the board of directors, an advisory board is not a formal governing body and therefore not legally regulated in the Companies and Associations Code.

The Buysse Code provides guidance in this regard. It clarifies that an advisory board does not make decisions, but formulates recommendations. The role is advisory, but can be of great strategic value.

In addition, the Code gives concrete examples of possible interpretations: from sounding board to networker or sector advisor. It emphasizes the importance of a well-considered composition, with attention to complementarity in terms of expertise, experience and background.

The practical functioning is also discussed: frequency and structure of consultation moments, remuneration, evaluation and duration of the mandate. The Code thus helps to turn a non-binding advisory board into a workable and valuable instrument.

2 | "My daughter recently took the torch as CEO, my son is a non-executive director, and I am still a majority shareholder. Who decides what?"

A recognizable situation in many family businesses. The Buysse Code provides a clear framework to delineate authority and avoid areas of tension.

• Shareholders decide on the capital structure, appointment and dismissal of directors, approval of the financial statements and determination of dividends.
• The governing body has four core functions:
  • Exercising legal powers, such as preparing the financial statements
  • Directing the company, for example approving strategic projects
  • Overseeing, such as financial auditing
  • Advising, for example on acquisition matters
• Management, led by the CEO, is responsible for the operational functioning of the company. The CEO bears ultimate responsibility for implementing policy and achieving the results set out in the annual budget.

The Code also contains a separate chapter on family governance. The most recent version strongly emphasizes the distinction between family and business roles, and recommends the creation of a family charter.

3 | "To finance our growth plans, we attracted external investors. What can I expect from them?"

Shareholders primarily exercise their legal powers, as explained above.

The Buysse Code goes further, stating among other things that shareholders should:

• Formulate their long-term objectives, including ambitions, expected financial returns, expectations in terms of strategy and growth
• Clarify these long-term objectives vis-à-vis the governing body and management
• Understand the fundamentals and risks of the business, etc. 

These expectations are preferably coordinated with the governing body and management. A well-structured shareholder agreement provides guidance here. Such an agreement supplements the legal framework with agreements on shareholders' rights, future evolution of shareholdership, valuation, exit scenarios and powers within the board.

4 | "We recently hired an external director. Until then, board meetings only took place ‘on paper’. How do we organize these meetings properly?"

The Buysse Code contains concrete recommendations to make board meetings structured and goal-oriented. It recommends including at least the following items on the agenda each time:

• Approval of the report of the previous meeting,
• Follow-up of outstanding action items
• Status of the most important KPIs (key performance indicators)
• Discussion of any risks,
• Follow-up of the implementation of strategic decisions (such as acquisitions, major projects or investments).

Setting down clear agreements in a charter or shareholder agreement today will strengthen legal security and cooperation tomorrow.

Need a legal framework for a charter, shareholder agreement or internal regulations? NOMA thinks along with you. 

Setting down agreements between shareholders, directors and management often raises complex questions. Who decides what? How is succession arranged? What happens in the event of an exit?

This is why it is crucial to work with clear legal frameworks from the start. Are you considering drawing up a charter, shareholder agreement or internal regulations?

Our attorneys will guide you with strategic insight and in-depth legal expertise, so that you can make well-founded and future-oriented choices. Make an appointment at our offices in Brussels, Bruges or Kortrijk. See you soon!