The European Commission has launched an in-depth consultation on the future of European company law. Europe needs a company law framework that is adapted to the needs of the society of today and to the evolution of the economic environment. EU company law has played a central part in building the single market. It is now time to see whether today's needs are still met by the existing legal framework. An on-line public consultation is to collect comments from all stakeholders; the deadline for contributions is 14 May 2012.
European company law provides a common set of rules that offers equivalent protection to shareholders, creditors and other stakeholders across the EU affected by companies' actions. Company law is crucial to ensure legal certainty and protect shareholders' rights. While member states’ different legal traditions and company structures must be respected, harmonisation of the basic rules makes it easier for companies to offer services and products to all customers in the Union.
The growth of cross-border trade and the development of e-commerce present many opportunities for businesses and consumers but they also present challenges for the existing company law framework. Hence, the analysis on how to adapt the existing framework to the new landscape of the 21st century is necessary. Moreover, present business challenges in Europe require looking at company law not only from a purely legal perspective but in the wider context of corporate governance, corporate social responsibility and businesses' key role for innovation and growth.
"Shaping EU policy on European Company law is a challenge that we have to meet. Getting company law right makes it easier for businesses to develop across the EU to the benefit of their shareholders and customers. The landscape for company law is changing and we need to think about how best to adapt our regulatory framework”.
Internal Market and Services Commissioner, MichelBarnier
Input is requested both on the general orientation of European company law and on more specific initiatives that could be envisaged in the future. The following issues are covered in the consultation:
- Objectives and scope of European company law: current regulations for present EU and global challenges, areas of further evolution, relationships between company law and corporate governance;
- Codification of European company law: should the existing company law Directives be merged in a single instrument in order to make the regulatory framework more accessible and user-friendly?
- The future of company legal forms at European level: advantages and shortcomings of European company forms; do existing company forms need to be reviewed and should alternative instruments be explored?
- Cross-border mobility for companies: what can be done to facilitate the cross-border transfer of a company's seat? What if a company splits into different entities cross border? Should the rules on cross border mergers be reviewed?
- Groups of companies: i.e.a set of companies under a single management or source of control – Is there need for EU policy action in this field?
- Capital regime for European companies: should the existing minimum legal capital requirements and rules on capital maintenance be modified and updated?
The discussions’ materials (after 14 May 2012) will be analysed and a feedback statement summarising the results will be published; follow-up actions would be taken afterwards.
Background. Existing European legislation on company law includes a large number of directives and regulations. The harmonisation of European company law covers the protection of interest of shareholders and others, the constitution and maintenance of public limited-liability companies' capital, takeover bids, branches disclosure, mergers and divisions, minimum rules for single-member private limited-liability companies, shareholders' rights and related areas such as financial reporting and accounting. It also includes different European legal forms such as the European Company (SE), the European Economic Interest Grouping (EEIG) and the European Cooperative Society (SCE).
In 2011,the Commission issued a similar public consultation in the field of corporate governance. Both policy fields are closely linked as some corporate governance rules are enshrined in company law, and company law deals to a large extent with corporate governance issues. Thus, for the sake of coherence, any possible follow-up initiatives in these two fields would be announced jointly in the second half of 2012.
The Commission also published a review of the present state-of-art in the present European company law:
- Company law initiative. European company law provides a common set of rules that offer equivalent protection to shareholders, creditors and other stakeholders across the European Union. It also makes it easier for companies to offer services and products to all customers in the Union.
European industry today is seeing an increasing amount of cross-border trade and e-commerce. This growth in cross-border activities means that we need to adjust the European legal framework to match the times. That is why the Commission has initiated an in-depth reflection on the future of European company law.
- Public consultations on business regulations. It has been very difficult to reach agreement at European level on proposals in the field of company law, with the notable exception of the interconnection of business registers. The latest complicated and unfinished negotiations are those on the Private Company Statute. The Commission therefore wants to check the pulse of stakeholder opinion on the purpose of EU company law, and on its future.
Linking business registers across Europe will stimulate cross-border trade and save up to 70 million euro a year. The Commission adopted in February 2011 a proposal to interconnect business registers within the EU. Company registers provide company information that is essential for consumers and business partners alike, such as information on a company's legal form, its seat, capital and legal representatives. The proposal will help to facilitate cross-border electronic access to business information, by ensuring business registers are updated, and business information is more easily and readily accessible. These changes are crucial for companies when setting up branches, conducting cross-border trade or providing cross-border services in the EU. Business registers are currently organised at national, regional or local level, and lack the capacity to share information in an efficient and transparent manner. The proposal will be considered by the member states and the European Parliament.
Internal Market and Services Commissioner Michel Barnier said: "More and more companies are offering their services to consumers across the EU. As a result of the growth of e-commerce, goods and services are crossing borders at an unprecedented rate. Consumers, particularly in the online market, need to be able to access reliable and up-to-date information in order to verify the legitimacy of these businesses. The proposal aims to improve this legal certainty both for consumers and for businesses."
- Company information is valuable forconsumers, existing or potential business partners, as well as for publicadministrations. Cross-border access to business information allows a businessto find out about another business elsewhere in the EU. It is also needed inthe cases of cross-border mergers and/or seat transfer procedures.
Such cross-border access to business information requires that national business registers cooperate in various ways. Although some cooperation already exists, accessing company information from another member state is often difficult.
It takes time, and translations are often unavailable. Businesses are faced with diverse national registration systems which is costly. Business information in the register of a company’s foreign branches is often not up to date. Furthermore, it is limited to certain types of information and it does not cover all EU states.
The proposal will require all member states to link up their business registers electronically. This will help business registers provide reliable and up-to-date information on the status of the company and its foreign branches in Europe. This will also improve efficient cooperation between business registers in cross-border transactions and mergers by ensuring better electronic links between them. Still another aspect concerns improving cross-border access to official business information for interested parties such as consumers, existing or potential business partners, the public and the tax and justice administration throughout the EU.
Cross-border access to business information is also useful for consumers. The Commission's 2009 report on e-commerce showed that, in 2008, 33% of individuals in the EU ordered online, but cross-border shopping reached only 7%. Consumers underlined that one of the reasons for not buying in another country was the difficulty of establishing whether a seller (usually a company) was trustworthy or not, mainly due to insufficient information and language problems.
Commission’s initiative should increase confidence and transparency in the European single market, ensuring a safer business environment for onsumers.
All 27 Member States hold business registers. They are organised at national (e.g. Sweden, Ireland and Denmark), regional (e.g. Austria) or local level e.g. Germany). Throughout Europe, business registers offer a range of services, which may vary from one country to another. The core services provided by all registers, however, are to examine and store company information, such as information on a company's legal form, its seat and its legal representatives, and to make this information available to the public.
Facilitating access to official information on companies for third parties was one of the objectives of the First Company law Directive (68/151/EEC) in 1968. Its 2003 amendment ensured that all Member States had electronic business registers in place by 2007. Furthermore, other requirements in EU law, such as the cross-border mergers Directive (2005/56/EC) and the Directive on branch disclosure (89/666/EEC) have made the day-to-day co-operation of business registers a necessity. Nevertheless, the co-operation between business registers remains voluntary. As such, it fails to either guarantee certainty in cross-border legal procedures or to increase transparency in the Single Market.
This proposal for a Directive on the interconnection of central, commercial and companies registers amends the above-mentioned Directives 89/666/EEC and 2005/56/EC as well as Directive 2009/101/EC on the coordination of safeguards for the protection of the interests of members and third parties.
- The consultations on European company law is a part of a larger reflection process that the Commission initiated in autumn 2010 by setting up an ad-hoc expert group to look at the future of European company law. The group produced a report containing a number of recommendations for action. The report was followed by a public conference on “European Company Law: the way forward” (Brussels, 16-17 May 2011).
Eugene Eteris Baltic-course.com