Making EU company law rules fit for the digital era
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.