EU rules in this area
The purpose of EU rules in this area is to
enable businesses to be set up and to carry out operations anywhere in the EU
provide protection for shareholders and other parties with a particular interest in companies, such as employees and creditors
make business more efficient, competitive and sustainable in the long term
encourage businesses based in different EU countries to cooperate with each other.
EU company reporting, auditing and transparency rules complement this legal framework.
What the EU is doing
I. EU company law rules cover issues such as the formation, capital and disclosure requirements, and operations (mergers, divisions) of companies:
1. A large part of EU company law is now codified in a single Directive - Directive 2017/1132 relating to certain aspects of company law.
The Company Law Package of 25 April 2018 proposed to revise and upgrade this Directive by introducing rules on digital tools and processes in company law and on cross-border conversions, mergers and divisions. This Package is currently under negotiations by the European Parliament and the Council.
2017 public consultation: EU Company law upgraded: Rules on digital solutions and efficient cross-border operations
2. Directive 2012/17/EU and Commission Implementing Regulation (EU) 2015/884 set out rules on the system of interconnection of business registers (‘BRIS’). BRIS is operational since 8 June 2017. It allows EU-wide electronic access to company information and documents stored in Member States’ business registers via the European e-Justice Portal. BRIS also enables business registers to exchange between themselves notifications on cross-border operations and on branches.
3. Directive 2009/102/EC provides a framework for setting up single-member companies.
4. Two Regulations provide rules on EU legal entities: Regulation 2157/2001 sets out a statute for a European Company (Societas Europea or ‘SE’) and Regulation 2137/85 sets out a statute for a European Economic Interest Grouping (EEIG).
II. EU company law rules also address corporate governance issues, focusing on relationships between a company’s management, board, shareholders and other stakeholders, and therefore, on the ways the company is managed and controlled.
Shareholders rights Directive 2007/36/EC sets out certain rights for shareholders in listed companies
This Directive was amended by Directive (EU) 2017/828, which aims to encourage more long-term engagement of shareholders.
Furthermore, the 2018 Commission Implementing Regulation (EU) 2018/1212 lays down minimum requirements as regards shareholder identification, the transmission of information and the facilitation of the exercise of shareholders rights and next on guidelines on the presentation of the remuneration report.
Takeover bids Directive 2004/25/EC sets out minimum standards for takeover bids (or changes of control) involving securities of EU companies.
III. The corporate governance issues were also identified as an important area to focus on in the context of implementation of the Commission Action Plan on financing a sustainable growth, and in particular its Action 10.
IV. EU company law rules also include provisions on corporate governance and transparency for banks and investment firms to curb risks to the financial stability.
The corporate governance and remuneration provisions for financial institutions are included in the Capital Requirements Directive IV (Directive 2013/36/EU or CRD IV), in particular in Chapter 2, Sections II and V, and in Regulation No 575/2013 or CRR, in particular in Part VIII.
This legislation is under review through:
The amendments to the CRD IV/CRR, which aim to make the rules on remuneration more proportionate for smaller banks and more harmonised across the EU, while ensuring that they still reduce incentives for focusing on short-term profitability and taking excessive risk.
A new, tailor-made corporate governance and remuneration regime for investment firms (investment firms Directive and Regulation) put forward by the Commission in December 2017, as the current CRD IV regime was designed mainly for banks and has been found not to take appropriate account of the different business models, remuneration structures and risks posed by investment firms.
Those proposals are currently being negotiated in the Council and the Parliament.
Expert groups and stakeholder platforms
Informal Company Law Expert Group
This group – consisting of company law professors - has been advising the Commission in the preparation of company law initiatives and issued the following reports.
- Report on information on groups (845 kB)
- Report on digitalisation(2 MB)
- Report on recognition of the interest of the group(1 MB)
Informal expert group on technical aspects of corporate governance
This expert group assist the Commission with its work on technical aspects of corporate governance, including the use of modern information and communication technologies in corporate governance.
Ernst and Young Study on the Cross-border Operations
This study provides an overview of the divergence of approaches across Member States in relation to cross-border conversions and divisions, the problems such fragmentation creates for companies and stakeholders, and the related statistical data.
Optimity Study on the Impact of Digitalisation
This study presents a comparative analysis of paper and online processes used in the context of company registration, company dissolution, filing and disclosure of company information and cross-border merger procedure, and the impacts that the use of digital tools has on legal certainty, socio-economic issues and illegal/fraudulent activities.
Everis Study on Digitalisation
This study presents a factual overview of the use of digital tools in company law procedures across the EU, including information about benefits, constraints and challenges associated with such digitalisation.
Ernst and Young study on identification and assessment of legal and practical impediments for the use of digital tools for interaction between companies and their shareholders
The study analyses the current legal framework and practices in the European Union as regards the use of digital solutions in the interaction between companies and shareholders. It assesses legal and practical impediments to the use of digital solutions and any possible solutions.
The use of digital solutions is in most cases either required or allowed by national laws. Most companies and shareholders use digital solutions, in particular for communicating resolutions adopted in general meetings and meeting notices. The most commonly used solutions are e-mails and corporate websites. Even if they can require significant investment, digital solutions overall allow for faster, cheaper, more convenient, more effective and safer interactions. In-depth research on ten Member States demonstrated that the development of digital solutions more adapted to the users’ needs significantly facilitates their adoption even if the legal framework is not particularly favourable. Impediments to the use of digital solutions were identified: bias in favour of traditional solutions; ineffectiveness of the legal framework; additional burden for using digital solutions; blocking points along the chain of intermediaries; risks related to the chosen technology; and lack of harmonisation of legislation across Member States. Recommendations were also formulated to overcome these impediments.
TGS Baltic study on Minority Shareholders Protection
The purpose of the study is to assist the European Commission in assessing the EU policy on minority shareholder protection. The study includes comprehensive analysis and assessment of every Member State’s legal framework and it focuses on all principal categories of minority shareholder rights, namely economic, control, information, litigation, and equal treatment rights. The study strives to enable policymakers to obtain a clearer picture of Member States’ hard laws, soft as well as case-law. National legal experts as well as national stakeholders in 28 Member States were involved in the preparation of the study to identify both practical and theoretical problems.
The study shows that despite similarities in legal framework for shareholders rights across the Member States, there still exist numerous differences in both regulation and enforcement. In some areas the EU law has a moderate contribution towards the proper functioning of the internal market as well as a limited impact on legal certainty and foreseeability.