The latest developments and the future of EU Company Law

Thea Utoft Jensen – DG MARKT

Riga, 20 September 2012

Disclaimer

The following slides will give an overview over the issues raised. They do not reflect an official Commission position.

On-going work

• (Foundations)

• Business registers

• Transparency Directive

• Corporate governance in financial institutions

(CRD IV)

The big picture

• Consultation on the EU corporate governance

framework

• Consultation on the future of EU Company Law

Consultation on the EU corporate governance framework - overview

• Public consultation took place from April to July 2011

• Contrary to the 2010 Green Paper on corporate governance

this consultation did not focus on financial institutions

• Objective: to explore ways forward to improve corporate

governance in companies at large

• Key issues raised:

• How to improve the functioning of boards

• How to enhance shareholders' involvement

• How to improve monitoring and enforcement of national

corporate governance codes

Consultation on the EU corporate governance framework - replies

• High number of responses: 409

• General observations – respondents:

• Welcomed the reflection on the improvement of corporate

governance framework

• Were divided on the need for further regulation at EU level

• Were against "one-size-fits-all" approach

• Favoured a principle-based and flexible approach

• Called for EU measures in some specific fields, e.g.

disclosure of remunerations

Consultation on the future of EU Company Law

Background

• Reflection on the future of EU company law

• Report of ad hoc expert group, April 2011

• Conference in May 2011

Timing

• Public consultation 20 February - 14 May 2012

• Publication of results: July 2012

Replies by sector

Replies by country of origin

Objectives of EU company law

• Improve business environment and company

mobility

• Facilitate creation of companies

• Setting framework for regulatory competition

providing flexibility and choice

• Employee protection

• Protection of creditors, shareholders, members

Scope of the EU Company Law

• Modernisation of existing texts

• New areas of EU company law

• Soft tools

• Structural issues: scope listed/unlisted

• Codification of Directives

European legal forms: advantages?

• European image/label

• Legal personality

• Cost savings in cross-border transactions

• Possibility not to be subject to compulsory national

requirements

• Possibility to carry out cross-border operations (transfer of

seat)

• Tax reasons

• Labour law reasons

European legal forms: shortcomings?

• Complexity linked to cross-references to national

legislation

• Uncertainty linked to different national legislations being

applied simultaneously

• Different degree of attractiveness across Member States

• Limitations that derive from unanimous decision-making

European legal forms: revision?

• Simplification of procedures

• Increased uniformity by reducing cross-references to

national legislation

• Reduction of minimum capital

• Deletion of cross-border element requirement

• Enabling registered office and headquarters in two MS

• Modification of employee participation

• Solution to the shelf companies issue

SPE follow-up?

• New legislative proposal helping SMEs through European

labelling of existing national CL instruments meeting

harmonised requirements

• 12th CLD could be reviewed to introduce simplified

company charter to facilitate the organisation of groups

• Scope of SE Statute could be modified to allow smaller

companies to benefit from it based on more flexible

requirements

• No further activity in this direction

• Continue on basis of SPE proposal

Transfer of registered office: need?

• New Directive

• Different legal tool

• Already sufficiently covered (SE, cross-border mergers)

• Not essential operation

Transfer of registered office: requirements?

• Transfer should not be possible if proceedings for winding up,

insolvency, etc., brought against company

• MS should be able to decide whether transfer of comp's HQ or

principal place of business linked to transfer of registered office

• Transfer should be accepted by all MS even when not

accompanied by the transfer of the comp's HQ or principal place

of business

• A transfer should be allowed only if accompanied by the transfer

of the comp's HQ or principal place of business

Transfer of registered office: consequences?

• No winding-up of the company in the home MS

• Company should not lose its legal personality

• Transfer should be tax neutral

• Transfer should not result in loss of pre-existing rights of

shareholders, members, creditors and employees of the

company

Cross-border mergers: improvements?

• Approval of cross-border merger by GM

• Duration of merger review by national authorities

• Methods for valuation of assets

• Date of the start of the protection period regarding creditors'

rights

• Duration of the protection period regarding creditors' rights

• Consequences of creditors' rights on the completion of a

cross-border merger

Cross-border divisions: EU instrument?

• Yes, based on cross-border mergers Directive

• Yes, based on shared liability of the involved companies for

claims existing at the time of the division (distribution of

assets)

• No need

Groups of companies: EU initiative needed?

• Yes, on recognition of group interest

• Yes, on improved communication of group structure

• Yes, in order to achieve …

• No need

Revision of capital maintenance Directive: poss objectives

• Abolish/change minimum capital requirement

• Replace balance sheet test with solvency test

• Impose cumulative use of balance sheet test and solvency

test

• Allow for alternative use of balance sheet test and solvency

test

• Use of IFRS for dividend distribution

• Clarify the regime of abstention vote

Revision of capital maintenance Directive: arguments against

• Current rules are flexible and leave significant margin of

manoeuvre to MS

• Current rules have stood test of time

• Compliance costs for companies are adequate

Next steps

• Results of both reflection exercises will be combined

• Commission will adopt Action Plan on company law and

corporate governance before the end of 2012

• Action Plan will detail roadmap for the next years

• Policy mix around three main themes:

• Transparency

• Shareholder engagement

• Growth