European company law: European Commission consultation
The European Commission has published a consultation on the future of European company law.
On 20th February 2012, the European Commission launched a consultation on the future of European company law. It aims to find out whether the existing regulatory framework meets the needs of the current environment and where improvements could be made.
The consultation is open until 14th May 2012. A feedback statement will be published in mid-2012 and any follow-up initiatives will be announced in the second half of 2012.
EU Company Law Background
EU company law harmonises national law in areas including the constitution and maintenance of a public company's capital, takeover bids, branch disclosure, mergers and divisions, minimum rules for single-member private companies, shareholder rights and related areas such as financial reporting and accounting. It also provides for the establishment of European corporate entities including the European Company (SE), the European Economic Interest Grouping (EEIG) and the European Cooperative Society (SCE).
In April 2011, the Reflection Group on the future of EU company law (Reflection Group) presented a report to the Commission on the future of EU company law. A copy of the report can be found at http://ec.europa.eu/internal_market/company/docs/modern/reflectiongroup_report_en.pdf
The Reflection Group was established by the Commission and sought to address current problems in EU company law and to suggest initiatives where appropriate. The report was discussed at a public conference in May 2011.
European Commission Consultation
The consultation on the future of EU company law launched by the Commission on 20th February 2012 raises questions in relation to the following:
1. Objectives. The consultation asks what the objectives of EU company law should be.
2. Scope. The Commission asks whether the existing harmonised legal framework should be modernised further and/or whether new areas for harmonisation should be explored. It also asks whether EU company law should move towards drawing a distinction between listed and unlisted companies instead of the current approach of distinguishing between public and private companies.
3. Codification. To make it more user-friendly and to reduce potential inconsistencies, overlaps or gaps, the consultation asks whether all existing EU company law Directives, or alternatively those with a similar scope, should be merged into a single EU company law instrument.
4. EU legal entities. The consultation asks for views on the added value that EU legal entities bring to European business, the main shortcomings of the EU legislation that introduces these entities and whether existing EU legal entities should be reviewed. In addition, it asks whether optional models such as the European Model Company Act (on which academics are currently working) could be a suitable alternative to traditional harmonisation.
5. Societas Privata Europaea (SPE) statute. The consultation states that the proposal for a SPE statute has been in discussion for over three years but member states could not agree, in particular, on the separation of the registered office and headquarters and the employee participation regime. The Commission asks whether alternative means should be explored to support European SMEs engaged in cross-border activities.
6. Cross-border transfer of a company's registered office. It is noted that (other than in the rules contained in the statutes for the SE and for the SCE) EU rules do not provide for a general right to the cross-border transfer of a company's registered office, which would preserve the company's legal personality. It asks whether the EU should act to facilitate the cross-border transfer of a company's registered office and what should be the conditions and consequences of such a transfer.
7. Cross-border mergers. The consultation asks whether there is support for further harmonised rules in the Cross-Border Mergers Directive (2005/56/EC) and in which areas.
8. Cross-border divisions. The consultation asks whether there is support for regulating cross-border divisions at EU-level and what the aim of any harmonised rules should be.
9. Groups of companies. The Commission notes that past initiatives to produce a comprehensive European framework on the regulation of groups of companies were not successful. The Reflection Group recommended that a legal framework should not be exhaustive, but instead target specific areas where it is felt that action is needed. Views are sought on the need for EU intervention in this area.
10. Capital regime. The consultation asks whether the Second Company Law Directive (77/91/EEC) should be reviewed and, if so, what should be the aim of the review. It notes that a 2008 study on the feasibility of an alternative to the capital maintenance regime of the Second Company Law Directive found that the current minimum legal capital requirements and rules on capital maintenance do not constitute a major obstacle to dividend distribution. The study also found that the impact of the adoption on IFRS on dividend distribution was not significant.
Next steps for the European Commission Consultation
The consultation is open until 14th May 2012. You are able to participate in the consultation by visiting the European Commission website at http://ec.europa.eu/yourvoice/ipm/forms/dispatch?form=companylaw2012
The Commission intends to publish a feedback statement summarising the results of the consultation in mid-2012. It anticipates that potential follow-up initiatives will be announced in mid-2012 alongside any follow-up measures resulting from the consultation on corporate governance launched by the Commission in 2011.
A copy of the European Commission: Green paper on the EU corporate governance framework (COM (2011) 164) can be found at http://ec.europa.eu/internal_market/company/docs/modern/com2011-164_en.pdf
A copy of the European Commission: Corporate governance framework for European companies: what needs to be improved? press release (IP/11/404) can be found at http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/404&format=HTML&aged=0&language=EN&guiLanguage=en
A copy of the European Commission: Frequently Asked Questions: Consultation on the EU corporate governance framework (MEMO/11/218) can be found at http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/11/218&format=HTML&aged=0&language=EN&guiLanguage=en
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