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Companies: protecting the interests of members and third parties

Companies: protecting the interests of members and third parties

Outline of the Community (European Union) legislation about Companies: protecting the interests of members and third parties

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Businesses in the internal market > Company law

Companies: protecting the interests of members and third parties

Document or Iniciative

Directive 2009/101/EC of the European Parliament and of the Council of 16 September 2009 on coordination of safeguards which, for the protection of the interests of members and third parties, are required by Member States of companies within the meaning of the second paragraph of Article 48 of the Treaty, with a view to making such safeguards equivalent (Text with EEA relevance) [See amending act(s)].

Summary

This Directive aims to frame the guarantees required of companies in order to protect the interests of members and third parties.

Types of companies concerned

This Directive applies to:

  • companies incorporated with limited liability.

Disclosure as regards companies

Companies must disclose certain documents and information relating in particular to:

  • the instrument of constitution and the statutes, and their amendments;
  • the appointment, termination of office and particulars of the persons who have the power to represent the company in legal proceedings and who take part in the administration, supervision or control of the company;
  • the amount of the capital subscribed;
  • any change of the registered office;
  • the winding-up of the company;
  • the liquidation of the company.

All of these disclosed items shall be recorded in a file opened in a central register, commercial register or companies register. The file may be available in electronic format or on paper.

Any change must be recorded in the central register and made public within 21 days after the complete transmission of information.

Companies must have a unique identifier for communication between registers. This unique identifier includes the elements which shall enable the following to be identified:

  • the Member State of the register;
  • the domestic register of origin;
  • the company number in that register.

Member States shall be responsible for the publication of the above information in the national gazette or other means. They shall take the necessary measures to avoid any discrepancy between the pieces of information provided and shall ensure that this information is kept up-to-date. This information must also be made available on the European e-Justice portal in all the official languages of the EU, and also in electronic format using the system of interconnection of central registers (available from 2014).

The system of interconnection of registers shall provide access free-of-charge to the following information:

  • the name and legal form of the company;
  • the registered office of the company and the Member State where it is registered;
  • the registration number of the company.

The Commission shall provide a search service on companies registered in the Member States. In addition it shall introduce a central European portal which aims to ensure the inter-operability of the registers.

The processing of personal data is subject to the provisions of the Directive on the protection of personal data.

Validity of obligations entered into by the company

If action has been carried out on behalf of a company being formed before it has acquired legal personality, the persons who acted shall be liable therefor and not the company itself.

Once a company has acquired legal personality, acts performed by the organs of the company shall be binding upon it in respect of third parties, including such acts that go beyond the limitations of the objects of the company, except where these acts exceed the powers conferred upon those organs.

Even if the formalities of disclosure concerning the persons who are authorised to represent the company have been completed, any irregularity in their appointment shall not be relied upon against third parties. The company may only rely on such disclosure if it provides proof that the third parties had knowledge of the irregularities.

Nullity of the company

The Member States shall provide for the nullity of companies by decision of a court of law. The nullity of a company may only be ordered in the following cases:

  • no instrument of constitution has been executed;
  • the objects of the company are of an unlawful nature or contrary to public policy;
  • there is no statement of the name of the company, subscriptions, the total amount of capital subscribed or the objects of the company;
  • failure to comply with the provisions of national law concerning the minimum amount of capital to be paid up;
  • the incapacity of all the founder members;
  • the number of founder members is less than two.

Once nullity has been official recognised, the company is liquidated. However, shareholders must pay up the capital agreed to be subscribed by them but which has not been paid up with respect to creditors.

This Directive repeals Directive 68/151/EC.

References

Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2009/101/EC

21.10.2009

OJ L 258, 1.10.2009

Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal

Directive 2012/17/EU

6.7.2012

7.7.2014

OJ L 156, 16.6.2012

Successive amendments and corrections to Directive 89/666/EC have been incorporated in the basic text. This consolidated version is for reference purpose only.

A simplified business environment

A simplified business environment

Outline of the Community (European Union) legislation about A simplified business environment

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Businesses in the internal market > Company law

A simplified business environment

Document or Iniciative

Communication from the Commission dated 10 July 2007 on a simplifed business environment for companies in the area of company law, accounting and auditing [COM (2007) 394 final – Official Journal C191 dated 15.8.2007].

Summary

High administrative costs resulting from EU legislation restrict the competitiveness of European companies. Furthermore, legislation relating to company law, accounting and auditing has not developed in line with the business environment. The Commission proposes to re-examine EU directives in this area and their relevance. These proposals are subject to discussion with Member States, European Parliament and stakeholders with the aim of arriving at a consensus and submitting legislative proposals.

Company law

Member States need to be able to provide rapid and flexible responses appropriate to the constantly developing business environment. In this situation, a harmonised European framework promotes a climate of confidence that is required for the smooth running of the single market, but it also represents a restraint on innovation and imposes additional administrative burdens on companies.

An initial option consists in considering the relevance of directives and their complete or partial repeal where they do not regulate cross-border issues. This affects the following:

  • Domestic mergers and divisions (Third and Sixth Directives);
  • Rules on the capital of public limited companies (Second Directive);
  • Rules on single-member private limited liability companies (Twelfth Directive).

A second option consists of considering simplifying legislation if repeal is too far-reaching. This is aimed at giving Member States a wider margin for manoeuvre in mergers and divisions, regarding:

  • The choice between extending directors’ responsibility and the provision of specific financial data to reduce the burdens resulting from information (reports) to be compiled;
  • General meeting approval of the company acquiring another company and cases where this is necessary. In return, the protection of creditors needs to be ensured; Directive 2006/68/EC amending legislation relating to the formation of public limited liability companies and the maintenance and alteration of their capital may be used as a reference basis.

Specific simplification measures are also proposed in order to reduce unnecessary burdens and costs resulting from other legislative obligations for companies and their branches. These measures apply to:

  • Publicity. The duty to publish certain information in the national gazettes in compliance with the First Company Law Directive may be abolished. In fact, this information has already been published in national registers, since 2007 in electronic format, and is accessible to all Member States. For this reason, a simple registration service would be sufficient. Furthermore, publicity obligations for branches in the establishment’s Member State could also be simplified as regards the certified translation of certain documents and the Member State of the branch could have the certified translation prepared in another Member State. In both cases, the European Business Register (EBR) is an appropriate interface to access information taking full advantage of electronic registers;
  • The European Company Statute, particularly the requirements regarding the registered office which should be reviewed in the light of case law at the European Court of Justice. The report scheduled for 2009 on the European Company Statute will provide an opportunity to re-examine legislation.

Accounting and auditing for SMEs

The directives which ensure the quality of financial information and auditing in the EU impose a high administrative burden on companies, especially on small and medium-sized companies (SMEs).

The Commission proposes to introduce the idea of a micro entity, already considered by certain Member States, and to exclude it from the scope of the Fourth Directive on annual accounts. The micro entity could satisfy the following criteria: fewer than 10 employees, balance sheet total less than €500,000 and turnover less than €1,000,000.

As regards SMEs, various additional measures are proposed, namely:

  • To exempt small companies from the obligation to publish their accounts;
  • To extend the exemptions reserved for small entities when managers of the medium-sized entity are also owners of the small entity or when these companies have unlimited liability;
  • To realign periods of transition (from two years to five years when the threshold is exceeded and from two years to one year in the event of any movement in the opposite direction) and to review the procedure for adapting thresholds.

Additional measures may also be considered for SMEs, such as regular updating of thresholds, amendment of requirements in the area of consolidation (especially for small and medium-sized subsidiaries), revision of the need for accounting for deferred taxes and to remove certain disclosure requirements (on start-up costs and on breakdown of turnover).

Background

Reducing administrative burdens for companies boosts the European economy. Initiated by the Commission in 2006, the updated simplification programme, completed with an action programme, following on from the European Council of 8 and 9 March 2007 (FR ) (pdf). Company law, accounting and auditing had been identified there as three priority action areas.

Associated Acts

December 2007 summary on reactions to the Communication from the Commission on a simplified business environment in the area of company law, accounting and auditing (COM (2007) 394) (pdf ).
Following the Communication from the Commission dated 10 July 2007, the Council invited the Commission to examine responses generated by the Communication on a simplified business environment and, if necessary, to submit new proposals. As a result of the summary of these reactions, there is a clear preference for the solution involving simplifying existing legislation (second option proposed by the Commission in its Communication).