EUROPEAN COMPANY LAW
THE ORIGINS AND FUTURE OF EUROPEAN COMPANY LAW
TFEU PROVISIONS ON COMPANY LAW
Simplifying and Modernising European Company Law
LESSON OF 23 SEPTEMBER 2024
[Link] avv. Barbara VERONESE
EUROPEAN COMPANY LAW
Uniform Company Law
General
Before proposing amendments or replacements of existing acts, the
Commission has entrusted groups of company law experts to
recommend proposals for either simplifying or modernising
European company law.
A first group of company law experts, chaired by Professor Eddy
Wymeersch (University of Ghent), was created in 1999 as part of the
fourth phase of the Simpler Legislation for the Internal Market
initiative (“SLIM Group”).
The SLIM Group was entrusted with the task of simplifying the First
and Second Company Law Directives. The SLIM Working Group
issued a final document named Recommendations on the
simplification of the First and Second Company Law Directives in
September 1999.
EUROPEAN COMPANY LAW
Uniform Company Law
General
A second group of company law experts, chaired by Professor Jaap
Winter (Duisenberg School of Finance, Amsterdam), was later created
in 2001 as the High Level Group of Company Law Experts.
This group was entrusted with the broader task of making
recommendations for a modern regulatory European company law
framework designed to be sufficiently flexible and up to date to meet
companies’ needs, taking full account of the impact of modern
technology.
EUROPEAN COMPANY LAW
Uniform Company Law
General
A First Report of 10 January 2002 (Report of the High Level Group of
Company Law Experts on Issues Related to Takeover Bids) only dealt
with issues related to the Takeover Bids Directive.
A Final Report of the High Level Group of Company Law Experts on
a Modern Regulatory Framework for Company Law in Europe was
delivered on 4 November 2002.
EUROPEAN COMPANY LAW
Uniform Company Law
General
The Commission has thoroughly considered all the proposals and
recommendations made by the two groups and has consequently
drafted action plans for the Council:
• A first Action Plan, named Modernising Company Law and
Enhancing Corporate Governance in the European Union – A
Plan to Move Forward was presented on 21 May 2003;
• A second Action Plan named European Company Law and
Corporate Governance – A Modern Legal Framework for More
Engaged Shareholders and Sustainable Companies was submitted
on 12 December 2012.
EUROPEAN COMPANY LAW
Uniform Company Law
The Company Law SLIM Working Group
The target is not to harmonise, but to simplify.
The SLIM Group made four proposals concerning the First Directive
and six proposals concerning the Second Directive.
These are discussed in the action plan named ‘Modernising Company
Law and Enhancing Corporate Governance in the European Union –
A Plan to Move Forward’.
EUROPEAN COMPANY LAW
Uniform Company Law
The High Level Group of Company Law Experts
The target is to make recommendations on a modern regulatory
framework in the EU for company law.
The High Level Group has made:
• 6 recommendations concerning general themes,
• 16 recommendations concerning corporate governance,
• 14 recommendations concerning capital formation and maintenance,
• 4 recommendations concerning groups and pyramids,
• 9 recommendations concerning corporate restructuring and mobility,
• 3 recommendations concerning the European private company, and
• 6 recommendations concerning cooperatives and other forms of
enterprises.
EUROPEAN COMPANY LAW
Uniform Company Law
The High Level Group of Company Law Experts
The Final Report concludes with 2 final recommendations worth
mentioning.
I. Company Law Action Plan – Recommendation IX.1:
The Commission should prepare a Company Law Action Plan
that sets the EU agenda, with priorities, for regulatory
initiatives in the area of company law and agree such an action
plan with the Council and the European Parliament;
II. Permanent Advisory Structure – Recommendation IX.2:
The setting up of a permanent structure to provide the
Commission with independent advice on future regulatory
initiatives in the area of EU company law should be duly
considered.
EUROPEAN COMPANY LAW
Uniform Company Law
Modernising Company Law and Enhancing
Corporate Governance in the European Union
In Annex I to the Action Plan, the Commission proposed a list of
actions for the short (2003–2005), the medium (2006–2008) and the
long term (2009 onwards).
Although not all proposed actions have been undertaken, significant
goals have been achieved, namely:
(i) The recasting of the First, Second, Third, Eighth and Twelfth
Directives;
(ii) The delivery of the Tenth Company Law Directive on Cross-
border Mergers and the Shareholder Rights Directive on Listed
Companies;
(iii) Recommendations on directors’ independence and remuneration
policies, and on civil liability of auditors.
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
«The latest comprehensive review in this policy area stemmed from the
2003 Action Plan on Modernising Company Law and Enhancing
Corporate Governance in the European Union and the subsequent
consultation on future priorities for this Action Plan carried out in
2005 and 2006. A large number of initiatives announced in the 2003
Action Plan have been adopted. In particular rules on corporate
governance statements have been introduced in the Accounting
Directive, a Directive on the exercise of shareholders’ rights and the
Tenth Company Law Directive on Cross-border mergers have been
adopted. Moreover, the Commission adopted two Recommendations
regarding the role of independent non-executive directors and
remuneration. Besides, the Second Company Law Directive on
formation of public limited-liability companies and the maintenance
and alteration of their capital and the Third and Sixth Company Law
Directive on mergers and divisions have been simplified».
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
Nevertheless, new developments have since taken place that, in the
Commission’s view, require further action.
Corporate governance defines relationships between a company’s
management, its board, its shareholders and its other
stakeholders. It determines the way companies are managed and
controlled.
An effective corporate governance framework is of crucial
importance because well-run companies are likely to be more
competitive and more sustainable in the long term. Good corporate
governance is first and foremost the responsibility of the company
concerned, and rules at European and national level are in place to
ensure that certain standards are respected.
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
The EU corporate governance framework is a combination of
legislation and soft law, namely national corporate governance codes
applied on a ‘comply or explain’ basis which gives companies and
their shareholders an important degree of flexibility. Shareholders
have a crucial role to play in promoting better governance of
companies. By doing this they act in both the interest of the company
and their own interest.
However, the past few years have highlighted shortcomings in this
area. The financial crisis has revealed that significant weaknesses in
corporate governance of financial institutions played a role in the
crisis.
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
In order to respond rapidly to the problem of excessive risk-taking in
credit institutions and ultimately the accumulation of excessive risk in
the financial system, the Commission launched in 2010 a Green Paper
on corporate governance in financial institutions and, in 2011, it
proposed stricter rules on corporate governance in financial
institutions in the framework of the CRD IV package.
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
Weakness in corporate governance in listed companies:
In particular, there is a perceived lack of shareholder interest in holding
management accountable for their decisions and actions, compounded by
the fact that many shareholders appear to hold their shares for only a short
period of time.
There is also evidence of shortcomings in the application of the corporate
governance codes when reporting on a ‘comply or explain’ basis. Against
this backdrop the Commission adopted its Green Paper on the EU
corporate governance framework (hereafter ‘the 2011 Green Paper’),
which launched a discussion on how to improve the effectiveness of the
current rules.
The European Parliament also expressed its view on the questions raised
by the 2011 Green Paper in a Resolution adopted on 29 March 2012
highlighting the importance of corporate governance to society at large.
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
Notwithstanding the importance of the European Company law, it has
become more difficult to reach agreement at EU level on the adoption
of company law initiatives.
DIFFICULTIES:
For example, illustrated by the lack of progress on some simplification
initiatives and on the proposed statute of the European Private
Company (SPE).
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
The Commission services have therefore launched a process of
reflection on the future of European company law:
• Beginning with the publication of a report prepared by an ad hoc
reflection group and a public conference held in Brussels on 16
and 17 May 2011. In order to gather views across a broad
spectrum of stakeholders, an on-line consultation was launched on
20 February 2012 (hereafter ‘the 2012 public consultation’);
• The European Parliament also expressed its view on the way
forward for European company law in a Resolution adopted on 14
June 2012. A majority of respondents to the 2012 public
consultation were in favour of new measures to modernise the
existing company law framework.
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
This Action Plan outlines the initiatives that the Commission intends
to take in order to modernise the company law and corporate
governance framework. It identifies three main lines of action:
1) Enhancing transparency;
2) Engaging shareholders;
3) Supporting companies’ growth and their competitiveness.
Consider that: this Action Plan said that «EU corporate governance
rules only apply to companies listed on a stock exchange. On the other
hand EU company law applies in principle to all EU public limited-
liability companies».
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
The responses to the 2012 public consultation revealed considerable
interest in EU rules on cross-border transfers of corporate seats.
In fact: apart from the rules contained in the Statutes for the European
Company (SE), for the European Cooperative Society (SCE) and for
the European Economic Interest Grouping (EEIG), there are no EU
rules enabling companies to transfer their registered office across
borders in a way that preserves the company’s legal personality.
Currently, only a few Member States allow for a seat transfer without
winding up and subsequent re-incorporation. Companies can also use
the cross-border mergers Directive or the SE as a tool for changing
their home Member State.
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
The 2012 public consultation shows strong support for improvement
of the cross-border mergers framework.
Directive 2005/56/EC on cross-border mergers of limited-liability
companies was a big step forward for cross-border mobility of
companies in the EU. The framework thus created should now be
adjusted to meet the changing needs of the Single Market.
A number of issues have been identified as a potential source of
uncertainty and complexity, in particular a lack of harmonisation as
regards methods for valuation of assets, the duration of the protection
period for creditors’ rights, and the consequences for creditors’ rights
on completion of the merger.
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
The results of the 2012 public consultation demonstrated that there is
in fact considerable demand for a clear legal framework for cross-
border divisions.
Divisions at national level have been harmonised by over the years by
Directive 82/891/EEC. However, this has not yet been reflected in the
EU legislation on cross-border transactions, under which only cross-
border mergers have been explicitly enabled.
Currently, companies wishing to undertake a cross-border division
have to perform several operations, such as creation of a subsidiary
and a subsequent transfer of assets or a domestic division followed by
a transfer of the corporate seat.
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
In view of the lack of progress in the negotiations of the proposal of
the European Private Company (SPE) Statute, the 2012 public
consultation demonstrated hesitation among stakeholders about
continuing the negotiations on this proposal.
In any case, the Commission will continue to explore means to
improve the administrative and regulatory framework in which SMEs
operate in order to facilitate SMEs’ cross-border activities, providing
them with simple, flexible and well-known rules across the EU and
reducing the costs they currently face.
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
For SE and SCE:
The Commission takes note of the fact that, following extended
consultation, the complexity of the Regulation is considered to be one
factor explaining the weak use of the SCE instrument (only 25 SCEs
incorporated until July 2012), the other being the lack of awareness of
the existence of this instrument and lack of understanding of its
benefits for SMEs.
However, the Commission does not plan to revise them in the short
term. Instead, the Commission will focus on improving the awareness
of companies and their legal advisers about the SE and the SCE
Statutes (including the aspects related to employee involvement) in
order to encourage them to opt for these legal forms more often.
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
The 2012 public consultation has shown that the public is in favour of
well-targeted EU initiatives on groups of companies.
Two items have been previously identified on the basis of the
reflection group report:
1) Simplified communication of a group’s structure to investors; and
2) An EU-wide move towards recognition of the concept of ‘group
interest’ would be welcomed by stakeholders.
On the other hand the idea of a comprehensive legal EU framework
covering groups of companies was met with caution.
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
As already discussed, European company law provisions are spread
across many different legal acts.
This makes it difficult for users to have a clear overview of applicable
law:
• 2012 Public consultation: more than 75% of respondents asked for
either the creation of a single EU company law instrument
absorbing the existing Directives or several mergers of groups of
Directives with a similar scope.
The European Parliament also supports this approach.
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
The Commission has identified in this Action Plan a number of
concrete lines of action in the area of company law and corporate
governance to ensure further improvements in these areas.
1) In particular initiatives increasing the level of transparency
between companies and their shareholders;
2) Initiatives aimed at encouraging and facilitating long-term
shareholder engagement;
3) Initiatives in the field of company law supporting European
businesses and their growth and competitiveness;
EUROPEAN COMPANY LAW
Uniform Company Law
European Company Law and Corporate
Governance
4) The initiatives in the area of corporate governance do not aim to
alter the current approach, but rather ensure, by encouraging proper
interaction between companies, their shareholders and other
stakeholders, that this approach becomes more efficient.
5) As regards company law, the initiatives proposed focus on
providing companies with more legal certainty, in particular as regards
cross-border operations.
The Commission will continue to explore with stakeholders possible
further actions to ensure that the EU framework for company law and
corporate governance contributes to the objective of smart,
sustainable and inclusive growth …