Draft company law directives published
On 25 April 2018, the European Commission published two draft directives aimed at simplifying and improving company law.
16 May 2018
EU company law directives
On 25 April 2018, the European Commission published two draft directives aimed at simplifying and improving company law. The first draft directive focuses on enabling fully online procedures for registering legal entities such as private and public limited companies. The second draft directive seeks to improve the possibilities for transferring registered offices and cross-border conversion of legal entities, and to introduce cross-border legal demergers. Both draft directives are briefly discussed below. The proposed measures are set to take effect within two years after publication of the final directives in the Official Journal of the EU.
The first directive obliges Member States to enable fully online procedures for registering legal entities and processing changes to such registrations. It will then no longer be allowed to require the natural persons behind such legal entities to appear in person. However, should such persons be disqualified as directors in another Member State, additional scrutiny can be carried out and the person involved may be refused. The above also means that no civil-law notary has to be visited to incorporate, for instance, a private or public limited company. Moreover, persons no longer have to personally appear at the office of the Trade Register. In addition, fully electronic filing of any and all records entities must provide by law, such as annual accounts, should be made possible. The above also applies for divisions of foreign entities.
Transfer of registered offices, mergers and demergers
The second draft directive provides for simplification of legal registration of entities in other Member States and termination of their registration in the Member State of departure (cross-border conversions). This effectively changes their legal form. The Member States currently use vastly different rules in this respect. The Court of Justice already mentioned this in a number of judgments and rejected several statutory provisions used in the Member States. The European Commission now proposes a regulation that enables such cross-border transfers of registered offices and establishes a clear procedure for such transfers. First of all, an assessment is to be performed in the country of departure, focussing particularly on protection of third party rights, such as shareholders, employees, and creditors. It should be examined whether their rights are sufficiently safeguarded. On top of that, a report by an independent expert is required for medium-sized and large companies. If the country of departure approves the departure, the country of destination should also carry out a scrutiny. This scrutiny is more limited and basically aimed at assessing whether the legal requirements of the country of destination have been met. If both countries approve, the entity is deregistered in the Member State of departure and simultaneously registered in the Member Station of destination.
Also, the rules relating to cross-border mergers are adapted since the present regulation contains several flaws. This particularly concerns protection of minority shareholders and creditors, improved provision of information to employees, and several more technical amendments.
And, last but not least, the new rules enable cross-border legal demergers. The rules for cross-border legal demergers will be closely aligned to the rules for legal mergers and, procedurally, to the abovementioned cross-border conversions. This draft directive should also become effective within 24 months after its publication in the Official Journal of the EU at the latest.