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New Commission’s proposal is aimed at cutting red-tape in corporate activity, improving its efficiency and facilitating trust in corporate entities working in the European single market. Besides, the proposal is about achieving more digitalised and connected cross-border national public services for all companies, in particular for SMEs.
The proposal will significantly reduce bureaucratic barriers when companies use corporate information from national registers in cross-border situations, including in all possible administrative and/or court procedures. New legal instruments will apply to around 16 million limited liability companies and 2 million partnerships in the EU. Companies planning to engage in cross-border business activities, or to create cross-border subsidiaries or branches, will benefit from recurrent annual savings (administrative burden reduction) of around €437 million per year thanks to administrative simplification, including the application of “once-only principle”, abolishing the apostils and introducing an EU Company Certificate.
Expected advantages
The proposal contains important new approaches to corporate activities; for example:
= When companies set up subsidiaries or branches in another EU state, the proposal will ensure the application of the “once-only principle”. This means that companies will not need to re-submit the information already available in the EU-wide business registers interconnection systems, BRIS; national business registers will just exchange information.
BRIS will cover all vital information for investors, creditors, consumers and tax authorities on the following issues: -corporate partnerships, groups of companies, companies’ shareholders, the registered place of central administration (as well as a principal place of business) and the EU branches of non-European companies.
= Companies will be able to use a multilingual EU “company certificate” to provide essential information about their company, e.g., when taking part in public tenders, in the context of tax or authorisation procedures or when applying for funding in another EU state.
= Companies may use a multilingual model for a digital EU-wide power of attorney to authorise a person to represent the company in another EU state.
= Companies do not need to obtain apostles on certified documents or information from business registers, and on certain notaries’ documents, when such documents are presented in another EU state. The proposal respects different legal traditions and systems in the EU states, including the possible involvement of notaries in company law procedures, and does not aim to modify them.
= The proposal reduces the need for certified translations of company documents or information provided by business registers.
Reference to: https://ec.europa.eu/commission/presscorner/detail/en/QANDA_23_1931/ 29.03.2023.
“Digitalized” business
Using digital tools and processes in corporate activities make it more easily, rapidly and less time- and cost-effective by setting up a company or by opening a branch in another EU state. It also helps to provide comprehensive and accessible information on companies, which is one of the prerequisites for the effective functioning, modernisation and administrative streamlining of a competitive internal market and for ensuring the competitiveness and trustworthiness of companies.
Adopted in 2019, the EU “digitalisation directive” (officially, Directive 2019/1151 regarding the use of digital tools and processes in company law) ensured that company law procedures can be carried out online, and in particular that companies can be set up online. This proposal is complementary and provides for the second step of digitalisation of EU company law. It focuses on increasing the availability of company information, in particular at EU level, and on removing administrative barriers when companies and public authorities use such information in cross-border situations, through the use of digital tools and processes.
It does not introduce new systems but builds on existing ones, for example on national BRIS that are operational since 2017 and connecting all EU member states’ registers. It is also in line with the EU rules on electronic identification and trust services (the eIDAS Regulation and its ongoing revision to establish a framework for a European Digital Identity).
More on Directive in: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32019L1151
Simplifying SMEs
Over 25 million small and medium enterprises in the EU-27 are the backbone of the European economy: they employ around 100 million people and account for more than half of Europe’s GDP; besides, they play a key role in adding value in every sector of national economy.
SMEs bring innovative solutions to resolve numerous modern challenges like climate change, resource efficiency and social cohesion, and help spread all kind of innovation among EU states and regions.
They are therefore also central to the EU’s twin transitions to a sustainable and digital economy. Generally, the SMEs are essential to Europe’s competitiveness and prosperity, economic and technological sovereignty and resilience to external shocks. On top of the whole, they are a core part of the achievement of the EU’s industrial strategy.
Presently, the SMEs account for 98-99% of limited liability companies in the EU, and around 40% of SMEs are engaged in cross-border activities and operations or cross-border investments. SMEs in particular will benefit from the reduction in administrative burden and increased legal certainty, and also from easier access to company information, as they have less financial and administrative resources than large companies.
The present proposal on reducing administrative burdens is going to make it easier for SMEs and start-ups to expand and scale-up cross-border in line with the 2020 SME Strategy for a sustainable and digital Europe and the EU Startup Nations Standard. The latter (the Startup Nations Standard) is a set of practices designed to foster the EU-27 entrepreneurship and accelerate the growth of startups into innovative SMEs with all the conditions to scale even bigger.
More on sustainable and digital Europe in Commission’s communication: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2020%3A103%3AFIN; recommendations on Startup Nations Standard in: https://startupnationsstandard.eu/
Business “governance” in the member states
New proposal provide some additional work for the states’ business regulators and two important things shall be kept in mind:
= First, the proposal will improve reliability of company information in national business registers to ensure that such information can be trusted in cross-border situations. In particular, the proposal requires the states’ governance to ensure that: a) adequate administrative and/or judicial control (as well as a legality check) takes place when new companies are created and in case of any changes introduced; b) provide a “uniform check” of company information (e.g. checking legality of the company’s name, its object, etc.) before such information is entered in business registers.
= Second, the proposal will ensure a constant update of corporate information in national business registers by: a) asking companies to provide for timely updates of their information in business registers and once a year to confirm corporate information; b) asking business registers to make new information received from companies publicly available as soon as possible; and c) ensuring that sanctions are applied where companies do not file information or file it late to business registers.
More on the legislative proposal in: https://commission.europa.eu/document/95b702df-2add-452f-922d-b61812c50dde_en