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Friday, 29.03.2024, 08:20
New impetus into the EU-wide “business code”: French initiative
Harmonization of business law at European level is expected
to increase by 40 percent the volume of trade among the states and by about 14%
the EU average of income per capita. The work on the unified “business code” started
some decades ago to overcome the many problems of methodology, criteria limitations
and the scope of regulations, to name a few.
Recent efforts deserve a specific attention: in February
2019, French Prime Minister Edouard Philippe asked Valérie Gomez-Bassac to “initiate thoughts” and draft recommendations
regarding the idea of a European Business Code. Already in November, a former
vice-dean of the Toulon University of Law and presently MEP from France
delivered 25 proposals. The “thoughts” are fundamental in approaching the most
important for the EU’s corporate community existence; the document is published
by the Robert Schuman Foundation.*)
More in: Foundation Robert Schuman/European Issues, nr. 535
/12 November 2019, in: https://www.robert-schuman.eu/en/doc/questions-d-europe/qe-535-en.pdf
Suggested methods of harmonisation
The author’s approach to the legal harmonisation is through
three main aspects: a) legal certainty (including linguistically accessible
states’ “standards”); b) national corporate legal modifications, and c) new
“tools” in SMEs’ cross-border activities.
These steps are supported by 25 (!) proposals for legal academics and
practitioners.
One of the proposals, i.e. nr. 8 specifies the author’s idea
of creating a coordination center that will “distribute work between the three
committees responsible: firstly, for the compilation work; secondly, for possible
modification of the community acquis; and, thirdly for the drafting of the
legal status of this European enterprise”.
It seems that the author suggests the creation of two
“parallel legal entities”: a) the EU’s “coordinated” regime, and b) that of the
member states; the former “must be acknowledged by each EU state in parallel to
national standards”, the author postulates (p.4)
The author suggests the “inter-connection of the EUR-Lex and
N-Lex portals to improve accessibility and legibility of European standards in
all of the Union’s languages” (p.2).
It has to be noted that some steps towards interconnection
of the EU states’ business registers have been already done: e.g. from June
2017 business registers in all EU countries are interconnected. That means that
all interested can search for information on companies registered in any EU
country, Iceland, Liechtenstein and Norway. Besides, the registers can share information on foreign branches and
cross-border mergers of companies (in accordance with the Directive 2012/17/EU).
However, not all of the EU states are
currently connected, but more will join the system soon: the links to the
respective national registers on the "General information and terms and
conditions" are in the following web-link:
https://e-justice.europa.eu/content_find_a_company-489-en.do?clang=en
There is a new reference system: the Business Registers
Interconnection System (BRIS) as a joint effort by EU member states’
governments and the European Commission. For the legal basis see the Directive 2017/1132/EU and Regulation (EU) 2015/884.
References to:
https://e-justice.europa.eu/content_business_registers_at_european_level-105--maximize-en.do;
however the search in the register was available only until 15 November
2019.
Besides, the author suggested three “bodies of experts”: the
first would be responsible for compiling European texts, the second would work
on codification modification to complete the legislative lacuna, and the third
would work on the creation of contracts adapted to the legal form adopted. The
mobilization of experts in each EU state would help quell the fears caused by
previously failed projects, argued the author.
Background
Attention to the “unified” corporate legislation on the EU
institutions’ agenda since the inception of the Common/Single/Internal market
transformations. Main idea behind these moves has been the necessity to create
a common playing field for the corporate entities within the already
established four basic freedoms: people, goods, services and capital.
However, more fundamental changes occurred in the European
corporate legislation after adoption of the new EU basic law, i.e. the Lisbon
Treaty (in effect from 2010).
See more in:
Eteris E. Modern European Law
for Businessmen: Lisbon Treaty in Action. RSU Publish. – 2012. Riga, Latvia. -
202 pp.
During the
last decade several attempts have been made to get closer to the EU-wide
“unified” corporate procedures, however without much progress.
Corporate
regulations have been spread out among at least three Commission’s political
and socio-economic guidance: a) in business, economy and euro; b) in the EU
legislation; and c) in sectoral policies. The latter is important, as the Lisbon
Treaty created a division of competences among the EU institutions and the
member states into exclusive, shared and supporting “activities”; it means,
among other things, that the search for a “common approach” to corporate
regulations is bound to be “divided” among the EU and the states’ legal
concepts.
For
example, the most forward looking development perspective (and cross-sectoral
too) concerning sustainable development is concentrated in the EU regional and
urban sector.
More in: https://ec.europa.eu/info/eu-regional-and-urban-development_en
In “doing
business” in the EU, several issues are included to show the ways the EU
institutions “coordinate” all-Union’s approach to a “business code”.
More in: https://ec.europa.eu/info/business-economy-euro/doing-business-eu_en
However,
more pertinent is the Commission’s guiding sector on “company law and corporate
governance”, where the present EU rules are directed towards: enabling businesses to set up and carry out
operations in the EU states; providing protection for shareholders and other
parties connected to companies’ interests (e.g. employees and creditors);
making business more efficient, competitive and sustainable; and encouraging
business-cooperation among the EU countries. Besides, EU company reporting,
auditing and transparency rules complement this legal framework.
On the existing EU company law
First of all, the EU company law rules cover some
organizational issues, such as the company’s formation, capital/disclosure requirements as well as internal companies’
operations (e.g. mergers, acquisitions and divisions). Abolition
of restrictions on freedom of establishment has been a primary task for the
first Council directive in March 1968.
Since 2017, the
large part of the EU company law has been codified in the Directive 2017/1132 (of about 60 pages!) relating to certain
aspects of “limited liability companies”; it entered into force in June 2017.
Source: https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A32017L1132
The European
digital agenda provided ground for corresponding company legislation: e.g. the 2018 proposals covering rules
on digital tools and
on cross-border mobility of companies, which revised and complemented Directive 2017/1132.
Thus, the
Directive 2019/1151 covers provisions on the use of digital tools and processes
in company law; the EU states have to transpose the Directive by August 2021
(with longer deadline for some specific provisions). The new rules on
cross-border conversions and divisions as well as amended rules on cross-border
mergers will enable companies to use digital tools in company law procedures
and to restructure and move cross-border, while providing strong safeguards
against fraud and to protect stakeholders.
The Directive
in: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019L115; On issues to ease company law in: https://ec.europa.eu/info/sites/info/files/company_law_factsheet_2019.pdf
Besides, the Directive 2012/17/EU and Commission Implementing Regulation (EU)
2015/884 set out rules on
the system of interconnection of business registers (BRIS), which are operational since June
2017. It allows EU-wide electronic access to company information and documents
stored in the EU 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.
The Directive 2009/102/EC provides a framework for setting up single-member companies.
Besides, two
Regulations provide rules on EU legal entities: a) Regulation
2157/2001 sets out a
statute for a European Company (Societas
Europea or ‘SE’), and b) Regulation
2137/85 sets out a
statute for a European Economic
Interest Grouping (EEIG).
Secondly, the EU company legislation address corporate governance issues,
focusing on relationships between a company’s
management, board, shareholders and other stakeholders; thus, therefore, regulating the ways the
company is managed and controlled.
Shareholders
rights in the 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.
Takeover bids in
the Directive 2004/25/EC are regulating minimum standards for takeover
bids (or changes of control) involving securities of EU companies.
Thirdly, the EU law addressed corporate governance
issues, which were identified as an important issue in the context of
implementation of the Commission Action Plan on financing a
sustainable growth,
and in particular its SDG-10.
Present 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),
as amended by Capital
Requirements Directive V (Directive
2019/878/EU or CRD V) in
particular in Chapter 2, Sections II and V, and in Regulation No
575/2013 or CRR, as
amended by Regulation No
2019/876 or CRR II in
particular in Part VIII.
This legislation
is under review through: a) the amendments
to the CRD IV/CRR, which aim to make the rules on
remuneration more proportionate for smaller banks, and b) through 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 has been 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.
Besides, there
are in the EU several expert groups on corporate legislation: e.g. the Informal
Company Law Expert Group, which consists 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), and - Report on recognition of the interest of
the group(1 MB).
Another informal
expert group on “technical aspects of corporate governance” assists the
Commission with its work on technical aspects of corporate governance,
including the use of modern information and communication technologies in
corporate governance.
The online
“Platform on Corporate Governance” represents a digital space for information
sharing and the exchange of best practices on a number of different corporate
governance topics, ranging from investor stewardship to sustainability. The
platform encourages a dialogue between companies, investors, private and public
stakeholders and aides the Commission in evaluating whether former measures
achieve their purpose in practice.
Finally, there
are some legal reserah and studies on practical corporate regulations: e.g.
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.
Besides, there
are studies on the impact of digitalisation whch present 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.
https://ec.europa.eu/info/publications/digitalisation-company-law_en
Finally, the “Baltic
study on Minority Shareholders Protection” assists the European Commission in
assessing the EU policy on minority shareholder protection. The study includes
comprehensive analysis and assessment of every EU 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 the EU states’
basic, soft laws and case-law. National legal experts as well as national
stakeholders in the 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 in the EU
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.
References to: https://ec.europa.eu/info/business-economy-euro/doing-business-eu/company-law-and-corporate-governance_en#documents
It shall be
mentioned in the conclusion that social and fiscal convergence among the
EU member states is desirable in order for the “business code” to be practical.
However, it can only occur over the long term. Economic and social realities
are too different between the states for there to be a sudden development in
this area without damage occurring to those involved. Some international
efforts might be useful as well, e.g. International institute for the
unification of private law.
More in: https://www.unidroit.org/