EU makes it easier for companies to restructure within the single market
The EU is removing unjustified barriers to EU companies’ freedom of establishment in the single market. Following an agreement with the European Parliament earlier this year, the Council today adopted a directive that facilitates EU companies’ cross-border conversions, mergers and divisions.
These new rules enable EU companies to make the best out of the single market so that they remain competitive globally. At the same time, the directive provides for appropriate safeguards that discourage abuses and protect the legitimate interests of workers, minority shareholders and creditors.
Anna-Maja Henriksson, Finnish minister of justice
The new rules introduce comprehensive procedures for cross-border conversions and divisions and provide for additional rules on cross-border mergers of limited liability companies established in an EU member state. They also offer further simplifications that will apply to all three operations. These include the possibility of speeding up the procedure by waiving reports for members and employees in the event that shareholders agree, or if the company or any of its subsidiaries do not have any employees.
The directive sets out procedures to check the legality of cross-border operations against the relevant national legislation and introduces a mandatory anti-abuse control procedure. The procedure will allow national authorities to block a cross-border operation when it is carried out for abusive or fraudulent purposes, i.e. when it is designed to evade or circumvent national or EU law, or is intended for criminal purposes.
The agreed text provides for similar rules on employee participation rights in cross-border conversions, mergers and divisions. It also ensures that employees will be adequately informed and consulted about the expected impact of the operation. Minority and non-voting shareholders’ rights will enjoy greater protection. At the same time, creditors of the company concerned are granted clearer and more reliable safeguards.
Finally, the directive encourages the use of digital tools throughout the cross border operation. It will be possible to complete formalities such as the issuance of the pre-operation certificate, online. All relevant information will be exchanged through existing, digitally interconnected, business registers.
The directive will enter into force 20 days after its publication in the Official Journal of the EU. Member states will then have 36 months to adopt the measures necessary for its implementation.
This directive is one of two proposals tabled by the Commission in April 2018 for the modernisation of EU company law. The other one, a directive of the European Parliament and of the Council amending Directive (EU) 2017/1132 as regards the use of digital tools and processes in company law, was adopted in June 2019.
According to figures made available by the Commission, there are around 24 million companies in the EU, of which approximately 80% are limited liability companies. Around 98-99% of these limited liability companies are small and medium-sized enterprises. The latter will be the primary beneficiaries of the considerable savings generated through this directive.
- Procedure file 2018/0114(COD), Cross-border conversions, mergers and divisions: europarliament; EUR-Lex.
- NOB opinion, 12 July 2018 (pdf).
- NFDR information on the proposal, date unknown (Dutch).
This article was earlier published on the company law blog.
Addition 17 January 2020
Read also the posts on the company law blog.
FROM THE COMPANY LAW BLOG
Council: EU company law adapted to the digital era
5 February 2019
EU company law adapted to the digital era
The EU has decided to revise its company law rules so that they remain fit for purpose in the digital age. The aim is to achieve greater efficiency, transparency and legal certainty through the use of digital tools. The Romanian presidency of the Council today reached a provisional agreement with European Parliament’s representatives on a draft directive that will facilitate and promote the use of online solutions in a company’s contacts with public authorities throughout its lifecycle.
The new rules ensure that:
* companies are able to register limited liability companies, set up new branches and file documents for companies and their branches, to the business register fully online;
* national model templates and information on national requirements are made available online and in a language broadly understood by the majority of cross-border users;
* rules on fees for online formalities are transparent and applied in a non-discriminatory manner;
* fees charged for the online registration of companies do not exceed the overall costs incurred by the member state concerned;
* the ‘once-only’ principle, whereby a company would only need to submit the same information to public authorities once;
* documents submitted by companies are stored and exchanged by national registers in machine-readable and searchable formats;
* more information about companies is made available to all interested parties free of charge in the business registers.
At the same time, the directive sets out the necessary safeguards against fraud and abuse in online procedures, including control of the identity and legal capacity of persons setting up the company and the possibility of requiring physical presence before a competent authority. It maintains the involvement of notaries or lawyers in company law procedures as long as these procedures can be completed fully online. It also foresees an exchange of information between member states on disqualified directors in order to prevent fraudulent behaviour.
The directive does not harmonise substantive requirements for setting up companies or doing business across the EU.
The provisionally agreed text will now have to be approved by the relevant bodies of the two institutions. It will then be formally adopted after the usual legal/linguistic scrutiny.
According to figures provided by the Commission, there are around 24 million companies in the EU, out of which approximately 80% are limited liability companies. Around 98-99% of limited liability companies are small and medium-sized enterprises, which would be most directly impacted by these improvements.
The proposed directive complements the existing rules on EU company law as codified in directive (EU) 2017/1132. It is one of the two proposals tabled by the Commission in April 2018 for the modernisation of EU company law. It is also an important pillar for the recently adopted Single Digital Gateway regulation, which facilitates interactions between citizens, businesses and competent authorities by providing access to online solutions.
Addition 26 April 2019
Press release “Making EU company law rules fit for the digital era“, 18 April 2019:
Making EU company law rules fit for the digital era
Press Release | Plenary session JURI | 18-04-2019 – 13:15
New rules modernising company law by making it easier for companies to move within the Single Market and find solutions online were adopted by MEPs on Thursday.
The two proposals, previously agreed with EU ministers, put forward simpler and less burdensome rules for companies, which aim to help European businesses save time and money, while at the same time offer better protection to their employees and stakeholders. Both texts also introduce several safeguards that help detect and avoid fraud and abusive behaviour.
Easier and cheaper to set up a company
New rules on digital tools will allow companies to complete all operations digitally, from setting up a company and registering branches, throughout a company’s lifecycle.
User-friendly information will be provided on registration portals, free of charge, and in a language broadly understood by a majority of cross-border users. The “once-only” principle was also included in the agreed text, meaning that companies will only be required to submit information to public authorities once during their lifespan. While all steps to set up a business can be completed online, it is also possible to request face-to-face interaction on a case-by-case basis.
“We will give European entrepreneurs a modern, safe and transparent environment to operate in. It is high time entrepreneurs benefited from new technologies, especially in their cross-border activities. We must continue to cut red tape for SMEs and dismantle the obstacles that European businesses face in the common market”, said Tadeusz Zwiefka (EPP, PL), rapporteur.
The European Commission points out that online registration takes on average half the time and can be up to three times cheaper than traditional paper-based formats. The new rules on digital registration are estimated to generate savings of between €42 and €84 million per year.
The provisional agreement was endorsed by 522 MEPs, 54 against and 6 abstentions.
Cross-border mobility within the Single Market
When limited liability companies merge with other companies, divide into new ones or move to other EU countries, their employees, creditors and shareholders will be better protected, believe MEPs. The company carrying out the cross-border operation will have to inform and consult its employees on the legal and economic aspects and consequences of such a cross-border operation.
The new rules will allow companies to retain their legal personality throughout the transformation procedure, while at the same time effective safeguards will be put in place to prevent cross-border operations designed for abusive, fraudulent or criminal purposes.
Evelyn Regner (S&D, AT), rapporteur, said: “Today the European Parliament voted in favour of a fairer common market. When companies want to move to another member state they now have to follow clear rules. This is an important step forward for companies who use their right to relocate and for workers’ whose rights are now better protected. We ensured information, consultation and representation of workers whenever a company wants to move offices. Clear rules benefit companies and their employees alike.”
Currently there are some 24 million companies in the EU, out of which approximately 80% are limited liability companies. According to Commission’s estimates, the new rules on conversions, mergers and divisions could save companies between €12,000 and €19,000 per operation and a total of €176 – €280 million over 5 years.
The provisional agreement was approved with 511 votes in favour, 54 against and 16 abstentions.
In its 2017 resolution on EU e-Government action plan, Parliament called on the Commission to consider further ways to promote digital solutions for formalities throughout a company’s lifecycle and underlined the importance of interconnecting business registers. Last April, the Commission proposed to revise and update Company Law rules and introduced a package of proposals on digital tools and processes in company law and on cross-border conversions, mergers and divisions.
- Procedure file – Use of digital tools and processes in company law
- Procedure file – Cross-border conversions, mergers and divisions
- EP factsheet – company law
- Company Law Package and the related factsheet
The European Parliament Think Tank on 10 April 2019 published a briefing on digital tools and processes in company law.
Votes today: Use of digital tools and processes in company law (@TadeuszZwiefka) and Cross-border conversions, mergers and divisions (@Evelyn_Regner), both part of the Company Law package proposed by @EU_Commission last April. Follow live at 12.00: https://t.co/Mis5YdVxQC https://t.co/h9TDyrQFCu
— JURI Committee Press (@EP_Legal) 18 april 2019
CNUE conference on the European Company Law Package
5 juli 2018
In an article of 1 October 2018 the Council of the Notariats of the European Union (CNUE) informs the readers on a conference that has taken place on 25 September 2018:
Conference on the Company Law Package – Brussels, 25 September 2018
1 October 2018
At the invitation of the Council of the Notariats of the European Union (CNUE), several representatives of the European Commission, Parliament and the Council of the European Union met on 25 September to take stock of the ongoing negotiations on the company law legislative package. The package contains two proposals for directives: one to facilitate the use of digital tools for company registration and online management of company information, and the other to establish harmonised procedures for cross-border divisions and transfers and a targeted review for mergers.
Mr Marius Kohler, President of the CNUE, welcomed the participants and recalled the favourable reception given by the European notariat to the approach adopted to prevent any disruption in company law by allowing Member States to build upon existing and well-established systems of preventive control, thus enabling a smooth and effective transfer of company law in today’s digital age.
Moderated by Corrado Malberti, Italian notary and Chair of the CNUE’s Company Law working group, the discussions brought together Renate Nikolay, Head of Cabinet of Commissioner Vĕra Jourová, MEP Jytte Guteland (S&D, Sweden), and Matthias Potyka, representative of the Austrian EU Council Presidency.
The speakers highlighted the fruitful discussions within the institutions to move the negotiations forward. However, Matthias Potyka expressed his concerns about the possibility of finalising a text under the Austrian Presidency of the Council, in view of the difficulties encountered on the proposal for a Directive on cross-border divisions and transfers. For the Commission, as Renate Nikolay pointed out, the objective remains to have the two proposals for directives adopted together.
On the subject of digitalisation, the Commission elaborated on the involvement of notaries throughout the lifecycle of companies. This possibility will remain open and not only during the creation by the online procedure. As shadow rapporteur for the S&D group, Jytte Guteland said that there were concerns about opening the scope to legal persons, not just individuals. The benefit of opening this procedure to legal persons – who are generally part of a larger company already established – is less, in her view, and could, on the contrary, pave the way for an increase in fraud.
- Article of 1 October 2018 by CNUE
- Announcement of the conference, Conference on Company Law – 25 September 2018, 14 September 2018
CCBE commented on the European Commission’s proposals on company law. See the latest newsletter:
The CCBE welcomes the two proposals, as they intend to facilitate cross-border operations and modernise company law rules. Nonetheless, the CCBE Company Law Committee analysed the proposals in depth and acknowledges legal pitfalls in the Commission’s proposals, which are extensively commented in the papers adopted by the CCBE
- CCBE comments on the Proposal for a Directive amending Directive 2017/1132 as regards cross border conversions mergers and divisions (29/06/2018)
- CCBE comments on the Proposal for a Directive amending Directive 2017/1132 as regards the use of digital tools and processes in company law (29/06/2018)
Gaat MKB profiteren van Europese richtlijn met betrekking tot grensoverschrijdende omzettingen, fusies en splitsingen?
22 mei 2018
Op de KNB site is bekend gemaakt dat de Gecombineerde Commissie Vennootschapsrecht (GCV) advies heeft uitgebracht over de Europese voorstellen op het gebied van omzetting, fusie en splitsing van vennootschappen, waarover een Nederlandse consultatie wordt gehouden.
GCV adviseert over EU-richtlijn grensoverschrijdende herstructurering
De Gecombineerde Commissie Vennootschapsrecht (GCV) is blij met het richtlijnvoorstel van de Europese Commissie met betrekking tot grensoverschrijdende omzetting, fusie en splitsing van vennootschappen. De praktijk heeft namelijk behoefte aan een wettelijke regeling op dit gebied.
De GCV heeft namens de KNB en de NOvA advies (pdf, 487 kB) uitgebracht over het richtlijnvoorstel. De interpretatie van de vrijheid van vestiging door het Hof van Justitie heeft vanaf 2012 geleid tot een groeiend aantal grensoverschrijdende omzettingen. Voor deze omzettingen bestaat in Nederland (nog) geen regelend kader. Gelet op de mogelijk verstrekkende gevolgen voor (minderheids)aandeelhouders, schuldeisers en werknemers vindt de GCV het wenselijk dat er een regeling komt. Dit geldt ook voor grensoverschrijdende splitsingen waarbij Nederlandse vennootschappen zijn betrokken en die, voor zover de commissie bekend is, in de huidige praktijk slechts sporadisch voorkomen.
De voor grensoverschrijdende omzetting en splitsing voorgestelde procedure komt de GCV relatief zwaar voor. Hoofdpunt van kritiek is de voorgestelde toets door de ‘bevoegde instantie’ of de omzetting een kunstmatige constructie beoogt. In de eerste plaats dient een fiscale toets plaats te vinden. Verder moet worden vastgesteld dat er geen sprake is van een kunstmatige constructie om de wettelijke of contractuele rechten van werknemers, schuldeisers of minderheidsaandeelhouders aan te tasten. Deze beide toetsen staan in de ogen van de commissie op gespannen voet met de vrijheid van vestiging.
Als er een vorm van toets wordt ingevoerd, dan rijst de vraag welke instantie in Nederland geschikt is om die toets uit te voeren. De notaris lijkt volgens de GCV daarvoor het meest geschikt vanwege zijn bestaande taak als bewaker en coördinator van zowel inhoudelijke als processuele kanten van juridische fusies en splitsingen. De toets kan, zoals door het kabinet gesuggereerd, in plaats van door de notaris ook door de rechter worden verricht.
De voorgestelde toets maakt geen onderdeel uit van de wijzigingen die worden voorgesteld voor de bestaande regeling voor grensoverschrijdende fusie. De GCV begrijpt dit onderscheid niet en pleit voor zoveel mogelijk gelijkvormigheid van herstructureringsprocedures. Daarbij zouden de voorgestelde procedures voor grensoverschrijdende omzetting en splitsing meer in lijn moeten worden gebracht met die voor grensoverschrijdende fusie.
Inmiddels zijn er elf openbare consultatiereacties bekend gemaakt.
Op 18 mei jl. is in Nederland een internetconsultatie van start gegaan over het Europese richtlijnvoorstel. Dat voorstel over grensoverschrijdende omzetting, fusie en splitsing vult richtlijn 2017/1132 (EU) aan met procedurele regels voor grensoverschrijdende omzetting en splitsing en wijzigt de procedurele regels voor grensoverschrijdende fusie.
De consultatie loopt tot en met 30 juni.
Profijt voor het MKB?
In de aankondiging voor de consultatie staat een opmerkelijke tekst onder het kopje “Verwachte effecten van de regeling”
Met name het MKB zal profiteren van het gemakkelijker en goedkoper worden van grensoverschrijdende omzetting, fusie of splitsing.
Ik ben zo vrij daar helemaal niets van te geloven.
Grensoverschrijdende juridische omzetting, fusie en splitsing zijn juridisch technische handelingen, die gespecialiseerde juridische begeleiding vereisen die de meeste MKB-adviseurs niet kunnen geven, zodat betrokkenen bij dure specialisten terecht komen. Bovendien vergen dergelijke activiteiten een gespecialiseerde fiscale begeleiding door adviseurs met kennis van het (snel veranderende) internationale belastingrecht.
- Aankondiging van de consultatie
- Richtlijnvoorstel grensoverschrijdende omzetting, fusie en splitsing 25 april 2018, Nederlandstalige versie (pdf)
- Richtlijnvoorstel in verschillende talen (html pagina)
- Procedureoverzicht Europees Parlement
- Artikel naar aanleiding van Europese persberichten met verwijzing naar (Engelstalige) bronnen
Commission proposes new rules to help companies move across borders and find online solutions
1 May 2018
The European Commission proposes new legislation in company law. Possibly taking measures against tax avoidance and other abuses are the main reasons for the proposal.
In it’s daily news of 25 April the Commission says:
Company Law: Commission proposes new rules to help companies move across borders and find online solutions
Today, the European Commission is proposing new company law rules to make it easier for companies to merge, divide or move within the Single Market. The new rules will also ensure that employees’ rights are well protected and tax abuse is prevented. The rules will stimulate the growth potential of European companies by digitalising the process of setting-up and running a business. First Vice-President Frans Timmermans said: “In our thriving EU Single Market, companies have the freedom to move and grow. But this needs to happen in a fair way. Today’s proposal puts in place clear procedures for companies, with strong safeguards to protect employees’ rights and, for the first time, to prevent artificial arrangements aiming at tax avoidance and other abuses”. Commissioner for Justice, Consumers & Gender Equality policy, Vera Jourová said: “Too often, European companies are prevented from looking for business opportunities abroad. I want to change this and modernise the company law rules. First, I want more online solutions for European businesses so that they cut costs and save time. Second, I want to offer the honest entrepreneurs the choice of where to do business and how to grow or reorganise their businesses.” This Company Law proposal was first announced in the Commission’s 2017 Work Programme and part of the Commission’s Digital Single Market Strategy. More information can be found in this press release and memo. (…)
Today we are presenting new company law rules.
— Frans Timmermans (@TimmermansEU) 25 april 2018
In the press release of 25 April 2018 creating companies online is introduced as an important element of the proposal:
Creating companies online
There are currently only 17 Member States that provide a fully online procedure for registering companies. Under the new rules, in all Member States, companies will be able to register, set up new branches or file documents to the business register online. Going digital makes the process of setting up a business more efficient and cost effective:
* online registration takes on average half of the time and can be up to 3 times cheaper than traditional paper-based formats;
* savings for online registration and filing under the new rules are estimated to be €42 – €84 million per year for EU companies;
* the “once-only principle”, included in today’s proposal, replaces the need to submit the same information several times to different authorities in a company life-cycle;
* more information about companies will be available to all interested parties free of charge in the business registers.
To prevent fraud and abuse, national authorities will be able to rely on each other’s information about disqualified directors. If they suspect fraud, authorities can still request the physical presence of company owners. They will also be able to require the involvement of bodies, such as notaries, in the process.
The European Commission announced that the proposal for a Directive on single-member private limited liability companies will be withdrawn.
- Daily news of the Commission of 25 April 2018
- Press release and memo on the company law proposals, 25 April 2018
- Q&A, 25 April 2018
- Company Law Package, 25 April 2018
- The Commission’s 2017 Work Programme
- The Commission’s Digital Single Market Strategy
- AccountancyVanmorgen: Europese Commissie: bedrijf alleen verkassen of opsplitsen met toestemming, 26 April 2018 (Dutch)
- EU Seeks To Prevent BEPS With New Company Law Rules, 27 April 2018
- EU clamps down on letter box firms’ tax avoidance, social dumping, Euractiv 25 April 2018
- Commission Proposal on Company Law: Promotional Programme for Tax and Social Dumping in Europe, Giegold, MEP for the Greens, 25 April 2018