Company Laws in the EUOn 5 December 2018, the European Union (EU) agreed to improvements to the cross-border company tax law processes (company laws in the EU), which were proposed by the European Commission in April 2018. These changes aim is to improve company’s movement in a single market.

 

Company Laws in the EU – the goals of the changes are to:

  • Provide swifter processes for companies to merge, divide and move within the EU without incurring unnecessary delays or costs
  • Prevent tax abuse
  • Create a fairer single EU market

Current company laws in the EU attract criticism for imposing excessive administrative hurdles on companies with cross-border operations. Thus, the threat of complex processes and delays discourages companies from cross-border opportunities.  Member States national company rules differ, which creates confusion and uncertainty for companies. Further, current company laws are criticised for not adequately protecting the interests of employees, shareholders and creditors regarding cross-border movements.

The EU agreed that all Member States should provide online processes allowing companies to file, register and update information online. For example, enabling fully online company registration, which is estimated to reduce delays and save EU companies €42–€84 million. Currently, only 17 of the Member States have fully online company registration processes. The Commission also proposed online processes to safeguard from fraud, such as, obligatory identify control. The EU agree to implement the Digital Single Market Strategy involving changes, such as having greater availability of data sets free of charge from the EU interconnection of business registers (BRIS). Further, encouraging Member States to provide information set out in the Company Law Directive on their websites which will be made available by Single Digital Gateway. These changes will help implement the “once-only principle” whereby companies will be able to reuse certain information to avoid redundant processes.

In April 2018 the Commission also proposed new rules to protect the interests of employees, creditors and minority shareholders, however these proposals are still under consideration. For example, requiring companies to provide reports to their employees outlining the impact of the proposed cross-border ventures. Another example, requiring companies to provide exit rights in exchange for adequate cash compensation (valued by an independent expert) be made available to minority shareholders and non-voting shareholders. Further, the Commission proposed changes to create more reliable and predictable legal frameworks for creditor protection.

The current system of company laws in the EU is criticised for its inconsistency and lack of protection of company actors when making cross-border endeavours. The Commission’s proposed changes aim to address these concerns and create smoother cross-border processes enabling a fairer single market. Please contact our office for further information and advice regarding the Company Law Directive.

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