Explanatory Memorandum to COM(2014)212 - Single-member private limited liability companies - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2014)212 - Single-member private limited liability companies. |
|---|---|
| source | COM(2014)212  |
| date | 09-04-2014 |
Improving the business environment for all companies, and in particular for SMEs, is one of the main priorities of the EU’s ten-year growth strategy, Europe 2020 -making business easier and better. A number of actions relevant to SMEs were set out in the Communication on “An Integrated Industrial Policy for the Globalisation Era”[2], one of Europe 2020’s seven key flagship initiatives. The review of the Small Business Act[3] and the Single Market Acts I i and II[5] also included actions designed to improve access to finance and to further reduce the costs of doing business in Europe.
Companies find it costly and difficult to be active across borders and only a small number of SMEs invests abroad. The reasons for this include the diversity of national legislations, in particular differences in national company laws, and the lack of trust in foreign companies among customers and business partners. In order to overcome the lack of trust, companies often establish subsidiaries in other Member States. The advantage of this being that they are able to provide customers with the brand and reputation of the parent company, whilst also offering them the security of dealing with a company which has the legal status of a national rather than foreign company. Establishing a company abroad involves, among others, the costs of meeting legal and administrative requirements in other countries, which are frequently different to what companies are used to “in the home country”. Those costs (including the additional necessary legal advice and translation) are likely to be particularly high for groups of companies, since any parent company, and particularly an SME parent, is presently faced with different requirements for each country in which it wishes to establish a subsidiary.
European small and medium-sized enterprises (SMEs) - have an essential role to play in strengthening the EU economy. However, they still face a number of obstacles, which hamper their full development within the Internal Market, and therefore prevent them from making their full potential contribution to the EU economy.
The European Commission aimed to address these costs in its 2008 proposal for a European Private Company Statue (SPE).[6] This proposal was intended to offer SMEs an instrument facilitating their cross-border activities, which would be simple, flexible and uniform in all Member States. It was issued in a response to a number of calls from businesses for the creation of a truly European form of a private limited liability company. Despite strong support from the business community it has not been, however, possible to find a compromise allowing for the unanimous adoption of the Statute among Member States. The Commission decided that it would withdraw the SPE proposal (the REFIT exercise[7]) and instead announced to come up with the proposal of an alternative measure designed to address at least some of the problems addressed by the SPE. This approach is consistent with the 2012 Action Plan on European company law and corporate governance[8], which reaffirmed the Commission’s commitment to launch other initiatives, further to the SPE proposal, in order to enhance cross-border opportunities for SMEs.
The overall objective of this proposal, which provides an alternative approach to the SPE, is to make it easier for any potential company founder, and in particular for SMEs, to set-up companies abroad. This should encourage and foster more entrepreneurship and lead to more growth, innovation and jobs in the EU.
The proposal would facilitate cross-border activities of companies, by asking Member States to provide in their legal systems for a national company law form that would follow the same rules in all Member States and would have an EU-wide abbreviation - SUP (Societas Unius Personae). It would be formed and operate in compliance with the harmonised rules in all Member States which should diminish set-up and operational costs. In particular, the costs could be reduced by the harmonised registration procedure, a possibility of on-line registration with a uniform template of articles of association and a low legal capital required for the set-up. The creditors would be protected by the obligation imposed on the SUP directors (and in some cases on the SUP single-member) to control distributions. To enable businesses to reap the full benefits of the internal market, Member States should not require that an SUP's registered office and its central administration be necessarily located in the same Member State.
In parallel to this proposal, the Commission is also carrying out related work aimed at improving legal certainty for companies and more generally regarding the law applicable to them when operating in other Member States, in line with the 2009 European Council’s Stockholm Programme on an open and secure Europe serving and protecting citizens[9].
This proposal, once adopted, will repeal Directive 2009/102/EC and amend Regulation 1024/2012[10] in order to allow for the use of the Internal Market Information System (IMI).
Contents
- CONSULTATIONS
- LEGAL ELEMENTS OF THE PROPOSAL
- WITH INTERESTED PARTIES AND IMPACT ASSESSMENT
- Legal basis, subsidiarity and proportionality
- Detailed Explanation of the Proposal
- Part 2: Specific rules for the Societas Unius Personae (SUP)
- Chapter 2: Formation of an SUP
- Chapter 3: Articles of association
- Chapter 4: Registration of an SUP
- Chapter 5: Single share
- Chapter 6: Share capital
- Chapter 7: Structure and operational procedures of an SUP
- Part 3: Final provisions
- 4. EXPLANATORY DOCUMENTS
The initiative builds on the research conducted in the preparation of previous EU initiatives such as the 2008 SPE proposal and on a number of relevant consultations and discussions which have taken place subsequently to this proposal.
As a part of the reflection process on the future of EU company law, in April 2011 the Reflection Group of company law experts published a report with a number of recommendations.[11] The report called for increased efforts to simplify the legal regime applicable to SMEs. It mentioned in particular the need to simplify the formalities before a company can be established (e.g. registration, access to electronic procedures). The report also proposed introducing a simplified template for single-member companies across the EU, which would allow both single shareholder start-ups and holding companies with wholly owned subsidiaries to reduce transaction costs and avoid unnecessary formalities.
On the basis of this report, the Commission launched a broad public consultation on the future of European company law in February 2012. The conclusion included the opinions of interested parties on possible measures to provide further support to European SMEs at EU level. Nearly 500 responses were received, from a wide range of stakeholders including public authorities, trade unions, business federations, investors, academics and individuals. A vast majority were in favour of Commission actions supporting SMEs, but views differed as to the means to achieve it. The Commission has also benefited from input from company law experts involved in the Reflection Group, e.g. as regards advice on the key aspects of the potential future Directive on single-member companies.
A more detailed on-line public consultation on single-member companies was launched in June 2013[12], examining whether the harmonisation of national rules on single-member companies could provide companies, and in particular SMEs, with simpler and more flexible rules and reduce their costs. A total of 242 responses were received from a broad range of stakeholders including companies, public authorities, trade unions, business federations, universities and individuals. Of those respondents who expressed an opinion 62% of respondents considered that the harmonisation of rules for single-member private limited liability companies could facilitate cross-border activities of SMEs; 64% considered that such an initiative should include rules relating to on-line registration with a standardised registration form throughout the EU.
On 13 September 2013, the Commission’s Internal Market and Services Directorate-General met a number of EU business representatives[13]. Most participants supported the initiative emphasising the positive impact it could have on companies in the EU. However, they stressed that this initiative should not be considered as a fully-fledged alternative to the SPE and that the efforts towards the SPE should continue.
Other stakeholders, such as notaries, were also generally supportive of the initiative, but raised a number of concerns relating specifically to the security of on-line registration of companies and to the need to guarantee the appropriate level of control over the procedure. In addition, some stakeholders were of the opinion that the reduction of the minimum capital requirement should be accompanied by appropriate measures e.g. a solvency test or restrictions on the distribution of dividends.
The Impact Assessment carried out by the Commission discards a number of options at the outset (most notably, the introduction of a new supranational legal form; harmonisation of company law related to establishment of subsidiaries with only SMEs as founders or both in the form of public and private limited liability companies) due to their infeasibility and/or a lack of support from stakeholders.
The options considered following the assessment envisaged the creation of forms of national company law for single-member private limited liability companies with harmonised conditions, in particular in respect of the registration process and the minimum capital requirement.
The chosen policy option, that would provide for the possibility of on-line registration, with the standard template for the articles of association, a minimum capital requirement of EUR 1, accompanied by a balance sheet test and a solvency statement, was chosen. Compared to the other policy options, it provides the best overall solution, as measured by its effectiveness in achieving the objectives (in particular a reduction in costs for companies), its efficiency and its level of coherence with EU policies.
The Impact Assessment Board adopted an overall positive opinion on the Impact Assessment on 20 November 2013. The comments received from the Board resulted in the modification of the sections regarding: the problem definition and problem tree, the size of the market and the policy options and their impacts. In addition, the description of the situation in Member States was converted into tables and the summary of the results of the 2013 on-line consultation was added. In particular, following the opinion of the Impact Assessment Board, the Impact Assessment includes now the options on a minimum capital requirement and creditors' protection as well as regarding on-line registration and the use of the uniform template for the articles of association. Moreover, the size of the market concerned is showed more prominently in the Impact Assessment: there are around 21 million SMEs in the EU out of which approximately 12 million are limited liability companies and around half of them (5,2 million) are single-member private limited liability companies.
The proposal is based on Article 50 of the Treaty on the Functioning of the European Union (TFEU) which is the legal basis for the EU competence to act in the area of company law. In particular, Article 50(2)(f) TFEU provides for progressive abolition of restrictions on freedom of establishment as regards the conditions for setting-up subsidiaries.
The draft proposal does not establish a new supra-national legal form for the single member company but rather contributes to the progressive abolition of restrictions on freedom of establishment as regards the conditions for setting up subsidiaries in the territories of Member States. In principle, the objective of the draft proposal could thus have been achieved through the independent adoption of identical laws by the Member States. Under these circumstances, Article 50 provides a sufficient legal basis for the proposal and recourse to Article 352 TFEU is not necessary.
According to the principle of subsidiarity the EU should act only where it can provide better results than intervention at Member States’ level.
The solutions adopted so far by individual Member States with regard to the reduction of set-up costs have not been so far coordinated at EU level. Such coordination among Member States, which would aim at introducing in national legal systems identical requirements for a particular national company law form, although theoretically possible, also appears unlikely in the near future. Instead, it is likely that individual actions by Member States will continue to result in divergent outcomes, as illustrated in detail by the Impact Assessment.
In particular, individual actions by Member States, most often, focus on their specific national context and usually would not seek to facilitate the cross-border establishments. For instance, a requirement of a physical presence before the notary or any other authority of the Member State of registration, although not directly discriminatory, has a different impact on residents and non-residents. The costs for foreign founders are likely to be more significant than for domestic founders. Also, on-line registration accessible in practice only to nationals or residents, which appears acceptable in the national context, generates additional costs for foreign companies, which are not incurred by domestic ones.
It appears, therefore, that without any action at EU level only non-harmonised national solutions would be available and SMEs would continue to face barriers making their expansion abroad more difficult and the resulting costs would in particular affect foreign founders. The simplification resulting from harmonised rules is theoretically possible to be achieved by Member States acting individually, but it is highly unlikely. In this context, the targeted EU intervention appears to comply with the principle of subsidiarity.
As regards the principle of proportionality, the EU action should be appropriate to achieve the objectives of the policy pursued and should be limited to what is necessary to achieve them. It is appropriate to harmonise the conditions of setting-up and operation of single-member limited liability companies to achieve a higher cross-border participation of SMEs in the Internal Market. This action should facilitate and encourage the set-up of companies, and in particular lead to the increase of the number of subsidiaries within the EU. It does not go beyond what is necessary to achieve this objective, since it does not attempt to fully harmonise all aspects related to the operation of single-member limited liability companies, but is limited to those aspects which are the most important in the cross-border context.The new Directive, which repeals the existing Directive on single-member companies, also ensures that the content and form of the proposed EU action does not go beyond what is necessary and proportionate in order to achieve the regulatory objective.
Part 1: General rules for single-member private limited liability Companies
The general rules for single-member private limited liability companies apply to all companies listed in Annex I, including the companies referred to in the second part of this Directive (Articles 1-5). The Twelfth Council Company Law Directive 89/667/EEC, which was codified by Directive 2009/102/EC, has introduced a legal instrument allowing for the limitation of liability of a company with a single-member throughout the EU. Furthermore, the provisions of the first part of this Directive require disclosure of information about a single-member company in a register accessible to the public and regulate both decisions taken by the single member and contracts between the single member and the company. If a Member State also grants public limited liability companies the possibility of having a single shareholder, the rules of the first part of the Directive apply to those companies as well.
Chapter 1: General provisions
The provisions of the second part of this Directive apply to single-member private limited liability companies established in the form of an SUP (Article 6).
Where a matter is not covered by this Directive, relevant national law should apply.
The Directive restricts the possible ways of founding an SUP to either establishing a company ex nihilo (founding an entirely new company) or converting a company which already exists under another company law form. Certain provisions for each of these two methods are made in the Directive (Articles 8 and 9) and the process of forming an SUP is also governed by national rules for private limited liability companies.
An SUP can be formed ex nihilo by any natural or legal person, even if the latter is a single-member limited liability company. Member States should not prevent SUPs from being single-members in other companies.
Only private limited liability companies listed in Annex I are allowed to form an SUP by conversion. A company which converts to an SUP preserves its legal personality. The Directive refers to national law with regard to conversion procedures.
According to this Directive, an SUP must have its registered office and either its central administration or its principal place of business in the EU (Article 10).
The Directive provides for the standard template for the articles of association, the use of which is obligatory in the case of on-line registration. It further sets out the minimum content of the template, as will be included in the implementing act to be adopted by the Commission (Article 11).
The articles of association can be changed after registration, but the changes must comply with the provisions of the Directive and national law (Article 12).
Provisions relating to the registration procedure form the main part of this Directive being a critical issue in facilitating the establishment of subsidiaries in EU countries other than the home country of the company. The Directive requires Member States to offer a registration procedure that can be fully completed electronically at a distance without requiring the need of a physical presence of the founder before the authorities of Member State of registration. It must therefore also be possible for all communication between the body responsible for registration and the founder to be carried out electronically. The registration of the SUP must be completed within three working days in order to allow companies to be formed quickly (Article14).
Moreover, the Directive contains an exhaustive list of documents and details which Member States may require for the registration of an SUP. After registration, the SUP may change the documents and details in accordance with the procedure specified by national law (Article 13).
As an SUP has only one shareholder, it is only allowed to issue one share that cannot be split (Article 15).
The Directive prescribes that the share capital shall be at least EUR 1, or at least one unit of the national currency in Member State in which this is not the euro. Member States should not impose any maximum limits on the value of the single-share or the paid-up capital and should not require an SUP to build legal reserves. However, the Directive allows SUPs to build voluntary reserves (Article 16).
The Directive also contains rules regarding distributions (e.g. dividends) to the single-member of the SUP. A distribution may take place if the SUP satisfies a balance-sheet test, demonstrating that after the distribution the remaining assets of the SUP will be sufficient to fully cover its liabilities. In addition, a solvency statement must be provided to the single-member by the management body before any distribution is made. The inclusion of the two requirements in the Directive ensures a high level of protection of creditors, which should help the label ‘SUP’ to develop a good reputation (Article 18).
The Directive covers the decision-making powers of the single member, the workings of the management body and the representation of the SUP in relation to third parties (Article 21).
In order to facilitate cross-border activities of SMEs and other companies, the Directive grants the single-member to right to take decisions without the need to organise a general meeting and lists subjects that must be decided by the single member. The single-member should be able to take other decisions than mentioned by this Directive, including the delegation of its powers to the management body, if it is permitted by national law.
Only natural persons can become directors of SUPs, unless the law of the Member State of registration allows legal persons to do so. The Directive includes certain provisions on the appointment and removal of directors. The directors are responsible for managing the SUP, and also represent the SUP in its dealings with third parties. It is envisaged that the SUP may be an attractive model for groups of companies and the Directive therefore allows the single-member to give instructions to the management body. However, these instructions must comply with national laws protecting the interest or of other parties (Article 22).
The SUP can be converted into another national legal form. In case the requirements of this Directive are no longer fulfilled, the SUP is required to either transform into another company law form or to dissolve. If it fails to do so, national authorities must have the power to dissolve the company (Article 25).
The Directive requires the Member States to lay down appropriate penalties for breaches of the Directive, of national law or of the articles of association (Article 28). It also empowers the Commission to adopt delegated and implementing acts.
In order to keep the list of company law forms in Member States up-to-date, the Commission will propose an amendment to Annex I, when necessary, through a delegated act, which will not require reopening of the Directive and going through the legislative procedure (Article 1 . Also, it is proposed to delegate the power to adopt two implementing acts to the Commission – with regard to the templates for registration and articles of association (Articles 11 (3) and 13 (2)). The templates contained in the implementing acts would be easier to adapt to changing business environment than the ones adopted in the ordinary legislative procedure. In drafting the templates, the Commission will be assisted by the Company Law Committee.
The Directive repeals Directive 2009/102/EC which is replaced by this Directive and amends Regulation 1024/2012[14] in order to allow for the use of the Internal Market Information System (IMI) (Articles 29 and 30).
Member States must transpose the provisions of this Directive no later than two years from the date of its adoption. In the meantime, the Commission will adopt the necessary implementing acts. Member States are invited to start the process of implementation immediately after the entry into force of the Directive.
According to the Joint Political Declaration of 27 October 2011, the European Commission should only request explanatory documents if it can "justify on a case by case basis […] the need for, and the proportionality of, providing such documents, taking into account, in particular and respectively, the complexity of the directive and of its transposition, as well as the possible administrative burden".
The Commission considers that in this particular case it is justified to ask Member States to provide it with explanatory documents in view of the existing implementation challenges that arise, inter alia, due to the considerable degree of variations in the ways in which company law is regulated in Member States (e.g. in civil codes, company law codes and companies acts).
Implementation measures will have a number of effects at a national level, and will influence, for example national company law, the registration procedure, communications between the body responsible for registration and the founder, websites of the competent authorities and on-line e-identification procedure. In particular, the provisions of the second part of the Directive will most likely be transposed into several national acts. This could particularly be the case in Member States with more than one central business register.
In this context, the notification of transposition measures will be essential to clarify the relationship between the provisions of this Directive and national transposition measures, and therefore to assess the conformity of national legislation with the Directive.
The simple notification of individual transposition measures would not be self-explanatory and would not therefore allow the Commission to ensure that all the EU legal provisions were faithfully and fully implemented. The explanatory documents are necessary to gain a full understanding of the way in which Member States are transposing the provisions of the Directive into national law. Member States are encouraged to present the explanatory documents in the form of easily readable tables showing how the individual national measures adopted correspond to the provisions of the Directive.
Given the above, the following recital is included in the proposed Directive: 'In accordance with the Joint Political Declaration of Member States and the Commission on explanatory documents of 28 September 2011, Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified'.