DUALITY OF FUNCTIONS IN THE INSURANCE SECTOR: GAME OVER?

In this article we have a look at the consequences of a recent communication of the National Bank of Belgium relating tot the duality of functions for corporate mandate holders. With duality of functions we mean the situation in which a person combines the status of employee and independent.

By Van Olmen & Wynant

1. The Court of Cassation has since long validated the duality of function theory, i.e. that the same person could hold a Director/member of the ExCom’s mandate, while working as an employee for the same company, provided that: Both functions are strictly distinct; The function exercised as employee is performed under a genuine, effective subordination relationship.
   
   
2. The (new) Belgian Code of company and associations (“BCCA”) incorporates the express prohibition to exercise such a mandate under an employment contract but does not prohibit the duality of functions as applied by the case law of the Court of Cassation.
   
   
3. However, on May 5, 2020, the National Bank of Belgium (“NBB”) has adopted a communication modifying the Overarching Circular on system of governance directed at the sector of insurance and reinsurance companies¹ , which now states that the duality of function is not compliant with sound governance principles. As a result, the NBB asks insurance and reinsurance companies to terminate any combination of self-employed status for a mandate of Director/ExCom Member and salaried status for a function of employee in the same company² .
   
   
4. So game over for the duality of functions in the insurance sector? Not so sure since such prohibition seems at odds with the new BCCA and the case-law of the Supreme Court. It also implies a major restriction on free enterprise without any clear legal basis for doing so, especially considering that the purpose of an administrative circular should be to clarify existing regulations.
   
   
5. Externalization of functions currently performed under an employment contract might be considered as a solution to keep holding two functions but this is not always possible. For instance, the compliance function should be performed internally except in special circumstances. Besides, change of social status should be accompanied by a change on the ground and so actual loss of controlling power over the employee if requalification into an employment contract is to be avoided.
   
   

Please do not hesitate to contact Gautier Busschaert (gautier.busschaert@vow.be) or Koen Hoornaert (koen.hoornaert@vow.be) if you have any question.

[1] NBB, Circular 2016_31 on the National Bank of Belgium’s prudential expectations concerning the governance system in the insurance and reinsurance sector, May 2020, available at https://www.nbb.be/doc/cp/eng/2020/20200505_nbb_2016_31_governance_clean.pdf.

[2] NBB, Communication of 5 May 2020, NBB_2020_017, p. 3, available at https://www.nbb.be/doc/cp/eng/2020/20200505_nbb_2020_017.pdf.