The société simple: a high-level primer

The Reef
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About

The Reef’s group has decided to organize in a société simple (henceforth SS). The current ASBL will stay for cultural and social activities, but the real action of building the cohousing will be with the SS. We need a quick introduction to the SS for two reasons:

  1. Making sure we all clearly understand the rights and responsibilities of joining in ours.
  2. The statutes assume we are all familiar with Belgian company law, and so do not bother to state the relevant information that you can find in the law.

:exclamation:This primer is a required reading for all @reeflings in view of a special plenary to happen early in 2024, dedicated to the SS. It introduces, but does not replace, the reading of the statute. You still must read attentively the statute before you sign it.

What is a SS?

A SS is a simple legal vehicle to coordinate a project between two or more individuals. We need one for the construction of a cohousing, which means purchasing the site and constructing the building where we will live.

It has no legal personhood, but it does have a company number.

Financial responsibility

Being a partner in a SS allows you to earmark some of your assets for the (collective) purposes you and your partners have entrusted to the SS – in our case, building a cohousing. The concept of earmarked assets (patrimoine d’afféctation) works like this:

  • You own the SS, pro quota to the resources (normally money) entrusted to it. This means that if you contribute 10% of the assets, you own 10% of the SS.
  • You confer some of your assets to the SS.
  • At this point, your creditors can not seize the assets you have conferred. Example: Alice incurs a gambling debt that she cannot pay back. The gambling house can not claim payment from the SS that Alice is a partner in. This protects the continuity of the project from shocks originated in the personal situation of the partners.
  • However, the creditors of the SS can seize your personal assets. Example: SS Shady Cohousing has purchased a site for 10 EUR, but it only has 5 in its bank account. The site’s seller can ask a judge to take the remaining 5 out of the personal assets of Bob, one of the partners. This reassures third parties (in our case, the seller of the site and the construction company), but it implies that good governance and transparency are an absolute must.

Incorporating the SS

The current plan is to have the statute ready but not incorporate right away. When we, for the first time, vote to acquire a site, we will register the SS immediately after the vote. This can be done online, and does not require a notarial deed. The people who disagree with the decision on the site so much that they want to leave The Reef will leave effective immediately, so as to not have to go through the tedious process of leaving the SS later (see below). Those that wish to stay will sign the statutes on the spot.

Leaving the SS

You can only withdraw from an SS with the approval of the other partners. Legally speaking, you depend on the others. According to the rules we gave ourselves in The Reef, you can still withdraw if someone else takes over your unit from you and commits credibly to taking on your financial and operational responsibilities.

Dissolving the SS

When the building is complete, the SS will be dissolved. What will live on:

  1. A building association (copropriété forcée), composed of all owners of units in the building, that owns and manages the common spaces.
  2. The ASBL to organize activities unrelated to construction or building maintenance.
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Thanks Alberto… great info!
My favourite bit:

:joy:

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Needless to say, we are Proper Cohousing, and that will emphatically not happen to us.

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Hello guys,

I had some concerns about joining an organisational structure that uses such an ominous acronym, so I googled a bit around :blush: I am not a legal expert at all, so it is very possible that I made some interpretation mistake, but as far as I understand the financial risks involved are quite large. Apparently, every SS member holds unlimited personal responsibility. This means that:

  1. The creditors can seize everything from one member if they wish to do so.
    Example (if you are superstitious, please touch wood before reading on):
    SS Tragic Cohousing has a debt of 500’000 euro, when all members die during a flash flood. The creditors can confiscate all the money they are entitled to from the one surviving member (who was travelling at the time). The surviving member will then have to start a legal battle with the insurance companies (representing the deceased members of the SS) in order to make them pay back their share to him.

According to how I interpret the SS rules, this is possible because:

  1. The creditors of the SS can seize all your personal assets, not just the assets you invested into the SS.
    Example: The one surviving member of SS Tragic cohousing had just inherited the house of their parents. The creditors can confiscate that house to pay for the debts of the SS.

Again, I am not sure whether I am interpreting all this correctly and there might very well be a misunderstanding on my side. I have checked the statutes on Nextcloud, but they do not mention much about debts and how to handle them (or if they do, it is written in such a way that I don’t fully get it). I think it would be good if someone could double check this with the lawyer before the plenary meeting, so that everyone knows what they sign up for.

I found online that there is also the possibility of an “SComm”, which has the disadvantage that it has a legal personhood (so probably more complex) but the advantage that (i) it uses a less hostile acronym and (ii) each member can only be held financially responsible proportional to their contribution to the société. Maybe it would be good to clarify at the plenary what the reasons were to choose for an SS and what the pros and cons are of the alternatives?

Links where I found the information cited above:
https://justice.belgium.be/fr/themes_et_dossiers/societes_associations_et_fondations/societes/societe_mise_en_lumiere_la_societe

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Yes, that is what I meant. To repeat, creditors of the SS can claim assets of members. There are two sides to this:

  1. If you buy your own apartment outside of a cohousing, you also have unlimited personal financial responsibility. If you lose your job and cannot pay the mortgage, the bank can repossess everything you own (remember the subprime mortgage crisis?). According to the notary, sellers will not accept anything less than unlimited responsibility (unless you pay them in cash, but that has other problems).
  2. But, if you buy your own apartment outside of a cohousing, you only have to trust yourself. The tricky issue with a cohousing is that you have to trust each other, hence all of these trust-building investments in good governance and transparency.

Thank you for this! It’s important that people know what they sign up for, and walk away if they are not comfortable with it.

This was done. Your understanding is correct.

As for SComm: my understanding of it is slightly different from yours, but the point is made moot by what I wrote before: unlimited financial responsibility is a requirement from real estate sellers, unless you make a limited liability vehicle and immediately capitalize it with more money than it would cost to build the cohousing. The latter is impossible: banks will give us, individually mortgages, but they will never lend 10 million EUR to the newborn Improvised Cohousing SA, created by people with no real estate development experience.

So what we will do is have a SS that does not overstretch, and takes on no debt that is not covered by reserves or the famous locked accounts connected to our mortgages.

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@alberto , as i cannot be present on the plenary, i’ll ask my questions here (just to have a full view on what it means):

  • Say I am a SS member (the abbreviation makes me think of sth else than société simple… :anguished:) and i die. SS Tragic cohousing creates a debt the day after I die. Can my inheritance serve as a way to pay this debt, or as soon as I am die, I stop being a SS member so my inheritance cannot be used?
  • Say I am a SS member and i die, does my inheritor become an SS member and his/her assets can thus be used to pay possible debts? I guess not
  • Say I am a SS member , i have a loan with a bank for another house. Does my bank need to be informed about this. Say I lose my job and cannot pay my loan any more for my other house. My bank will want to get back the money they borrowed me and I didn’t pay back yet. The creditors will want to sell my other house to pay the debt of the SS Tragic Housing => will my bank still have priority over the creditors to get the money back?
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Excellent questions! I will look into them, and, where necessary, turn them to the lawyer.

The easy one is:

No, personal debts are not inheritable. What would happen exactly depends on the phase of the construction we are in at the time of death. In general, the cohousing would look for someone willing to take over the rols of the deceased member. This someone would have to pay off the deceased person, and that payment would become part of the inheritance.

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Hello Alberto
Thanks for your quick reply and for clarifying this point. I understand that unlimited personal financial responsibility is necessary for sellers. I also fully agree that it is important to trust each other. But what I still find difficult is that:

  1. Every single member can potentially be held financially responsible for the entire project. So, if the project is 5 to 7 million euro, we are talking about a lot more risk than the equivalent of one apartment.
  2. In the end of the day, it is the law that counts. And the law allows creditors of the SS to sweep all internal SS trust-building agreements aside and just cherry-pick the one member whose assets they think are easiest to claim.
  3. Even if I fully trust 100% all members of the Reef, that does not necessarily imply that I will also trust the insurance companies or the banks or the lawyers that might represent any of us (or our successors) in the future.
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Yes. Hence the importance of governance. The idea is never to incur a debt unless you (collectively) have committed the necessary resources for them

Indeed. As we keep saying, cohousing is not for everyone. And yes, I would say it is a bit more risky then buying property individually. It also has the additional risks that you always incur when buying property. Example: you buy a new apartment as it is being built, the real estate developer goes bankrupt before delivering, now you need to sue and hope you recover your money. This particular risk we do not have, but we could have others connected with the construction company, for example.

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Let me be more precise. Personal debt is inheritable, but Belgian law allows inheritors to refuse the inheritance. It normally works like this: if the inheritance consists of assets and liabilities, and the assets are worth more than the liabilities, then the inheritor accepts it, pays off the deceased debts and keeps the difference. If the liabilities are worth more than the assets, the inheritor declines. So an inheritance can be zero or positive, but not negative. Source: Family Law in Belgium.

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Hi Alberto,
Thanks for your explanation. Unfortunately I won’t be able to attend this plenary so I would like to add my questions here.
Is it possible to get some more information about the other possibilities that we rejected and the reasons why we chose for the société simple and not another mechanism, or can I find this information somewhere on Nextcloud?
I am also wondering how the other cohousings that we know like l’Echappée and Brutopia arranged this? Did they also work with a société simple or did they do it differently? What are the advantages and risks?

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These used the “Mark method”. They used the ASBL to purchase the site, then started SSs to run the construction.

Our notary advised against the Mark method. He pointed out that ASBLs are not allowed to create an economic advantage for their members. Mark got away with it, but if things had gone sour a member of the other cohousings’ ASBLs could have sued to claim that the property right acquired by the ASBL was invalid. So, he recommended to use a SS for the whole thing.

This information should indeed be in the minutes of the various meetings we had with the notary.

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As far as I understand the issue, a société simple (maatschap) is the only way to build a cohousing. Brutopia and co used a slightly different version (société civile), but that’s only because the law was changed (société civile is the predecessor of the société simple).

According to the Cohousing Projects webinar that I attended (see Cohousing Projects "Masterclass on money and documents", third bullet point) it is mandatory to use a société simple if you build real estate that is not covered by the “Loi Breyne” (which is the case for us).

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Thank you for this clear primer Alberto!
To alleviate reservations around the current acronym, we could perhaps refer to SocSim or SoSim in writing?

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Yes, I think we really should! How about SoSi? Simple enough no?

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Or VS, from Venootschaap.

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I vote for Venootschaap (Sheep Society :partying_face:). Sosi (Reef sausage?) would be my second choice.

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Probably a bit pointless to have a debate over this, but I stand with SoSi or SoSim! It will be impossible for most people to remember what the initial flemish word is, and thus its abbreviation!
Happy for anything else that is simple and easy to remember!

My proposal is to go with SoSim, heart if you agree, post if you want to challenge it! And if the battle is fierce, then let’s resort to a poll! :slight_smile:

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