EU company law upgraded - Reply to the European Commission consultation
The Commission work programme for 2017 announced an initiative on company law to facilitate the use of digital technologies throughout a company’s lifecycle and cross-border mergers and divisions. The Commission is now consulting stakeholders to seek their views on the scope and content of such an initiative. Given the importance of this issue for European businesses and for the internal market in general, BusinessEurope takes this opportunity to express its views on the way forward on mobility and digitalisation of company law as well as on conflict of laws.
1. On digitalisation of company law and corporate governance
- BusinessEurope supports creating favourable conditions in Europe for further digitalisation in company law and corporate governance for all types of companies.
- Actions need to be diverse in nature and scope. There needs to be a balance between legislative and non-legislative action taking into account national tradition and legal features.
- Rules should primarily focus on the widespread of tools for companies to interact with Member States (e.g. registration, filing, publication, recognition and acceptability of electronic copies).
- Safeguards to ensure trustworthiness of these operations will need to be established.
- Because digitalisation is both a complex and costly process, companies (in particular small and medium-sized ones) should be given the room and time to adapt, which is why a voluntary and step-by-step approach is preferable, especially in the area of corporate governance. Companies must have the choice between using or not using digital tools.
- Digitalisation means a growing use of platforms, databases and cloud services. Stepping up on cybersecurity and privacy of data (e.g. coordination and education) will be necessary for the good functioning of the system and to inspire confidence amongst users of digital tools (both public and private).
2. On mobility of companies: mergers, divisions and conversions
The cross-border merger directive (CBMD) alongside the jurisprudence of the European Court of the European Union (e.g. cases C-210/06 and C-378/10) were important steps to clarify the conditions and parameters in which companies can exercise their right of establishment within the internal market. However, further needs to be done to ensure companies can fully benefit from this fundamental freedom in Article 54 of the Treaty of the functioning of the EU:
- Some improvements will be necessary in the CBMD, namely, safeguards for creditors, the need to further extend simplified cross-border merger procedures and on minority shareholder protection periods.
- Europe needs a specific framework on cross-border divisions. The lack of rules at European level on these operations can be considered a barrier for businesses wishing to undergo this type of operations.
- Europe also clearly lacks a specific EU procedure for cross-border conversions. In practice, it may occur that upon a conversion, a company forcefully loses its legal personality or gets dissolved in the process which disproportionately affects the interests of the owners (shareholders), creditors and employees. A clear and safe legal framework consolidating the European Court jurisprudence would be an enabler to exercise the fundamental EU right of establishment.
3. On conflict of law rules for companies
- Although we acknowledge that the European legal landscape and jurisprudence would deserve more attention when it comes to conflict of rules framework we do not think an EU legislative initiative is a priority.
- We would be skeptical that a satisfactory solution could be found at European level on different dimensions of this issue, in particular, on the question of real seat versus incorporation seat.
Further detail on these messages can be found in the annex which addresses the relevant questions in the European Commission public consultation on EU company law upgraded