New rules facilitating cross-border corporate mobility within EU

Two amendments to Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 on certain aspects of company law aim to harmonise and modernise EU company law and improve the application of the freedom of establishment. The amendments deal with the use of digital tools and procedures in company law and the rules for cross-border conversions, mergers, and demergers.

Use of digital tools and procedures in company law

The first amendment shall reduce administrative and financial burdens and promote the use of electronic communication and online tools and procedures in the establishment and management of companies. It will have to be implemented in national legislations by 1 August 2021.

The amendment introduces the option for all EU member states to establish a company or a branch and file documents and particulars in a register exclusively online, using digital tools via the electronic identification system without the need to physically visit any registry offices. It will also be possible to submit documents to registers online, even subsequently during a company’s existence. The directive also limits the fees that may be charged for accessing particulars and documents in the registers, by the amount of the administrative costs for such services.

Another positive aspect is the strengthening of cooperation among the registers of individual member states via their interconnection.  This means, for example, that a company should have the option to use the documents and particulars it submitted earlier to a register in a domestic state when later registering a branch in another member state. Simultaneously, changes in a domestic register should be electronically exchanged with the register in which the branch is recorded, without the need to again having to submit these documents and particulars.

Rules for cross-border conversions, mergers and demergers

The second proposal currently awaits publication in the EU Official Journal; after the publication, the two-year period for its implementation into national legislations will commence. The amendment takes into account the case law of the Court of Justice of the EU on cross-border mobility. It also responds to the current situation in which more than half of the member states have not yet determined concrete rules facilitating cross-border conversions, substantially obstructing or even preventing their implementation.

The harmonisation of the legal framework should help enhance mobility among member states via cross-border conversions, i.e. without the need to dissolve of a company in one member state, only to establish it again in another one. The amendment introduces harmonised fundamental cross-border conversion rules, focusing on the protection of the rights of creditors, employees, and shareholders/members, and including a special regulation of cross-border mergers and demergers. The amendment also gives the appropriate authorities the right not to permit the registration of a cross-border conversion involving an artificial arrangement designed to obtain unlawful tax benefits, or excessively restrict the rights of employees, creditors and minority shareholders or members.

The above regulations will be transposed into national legislations in the following years. Hopefully, we can look forward to enjoying more effective communication with registers, the simpler management of companies and their foreign branches, and the easier cross-border mobility of companies within the EU via cross-border conversions.

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