EU Commission Proposes Changes to Company Law
The European Commission has outlined proposals aimed at facilitating cross-border business mobility and digitizing company law. The initiatives seek to simplify company formations and reorganizations across EU member states.
Brussels – The European Commission has unveiled proposed directives intended to update European company law, focusing on enhanced cross-border business mobility and the digitalization of legal processes. These proposals aim to streamline the establishment and restructuring of companies within the EU.
The directive concerning the digitalization of company law suggests enabling online formation of limited liability companies without requiring physical presence for registration or notary services. The goal is to allow companies to be established and registered within five working days after submission of all required documents and payments. The Commission also proposes the use of standardized templates for company statutes to expedite the process. Improved information exchange between member states is also part of the plan, enhancing oversight of individuals barred from directorial positions.
The proposal on company mobility extends existing regulations, currently applied to cross-border mergers, to also cover cross-border conversions of company seat and demergers. Independent experts would review these transactions, followed by an assessment by national authorities in both the departing and receiving states. Minority shareholders would gain the right to exit with compensation, and employee consultation rights would be strengthened.
The final form of these proposals as directives and their subsequent implementation into national law remain uncertain, as the legislative process is in its early stages. Previous attempts at harmonizing European company law have progressed slowly. Notably, the concept of online company formation without mandatory notary involvement has faced criticism in Germany, where the governing coalition has advocated for robust preventative controls and reliable identity verification for online registrations.
Trade unions have also voiced concerns regarding potential weakening of employee co-determination rights, citing the absence of minimum co-determination standards in the proposals. Future negotiations are expected to be complex and likely require significant compromise among member states to reach a final agreement.