Consultation Launched Into European Company Law

by Ulrika Lomas, LawAndTax-News.com, Brussels

22 February 2012

The European Commission (EC) has launched an in-depth consultation on the future of European company law, to ascertain whether Europe’s needs are still met by the existing legal framework.

It was said that European Union (EU) company law has already played a central part in building the single market, but that, as Europe needs a company law framework “that is adapted to the needs of the society of today and to the evolution of the economic environment,” an on-line public consultation paper has been launched to collect comments from all stakeholders.

In particular, while the growth of cross-border trade and the development of e-commerce may present many opportunities for businesses and consumers, they also present challenges for the existing company law framework.

European company law provides a common set of rules that offers equivalent protection to shareholders, creditors and other stakeholders across the EU who are affected by companies' actions. Whilst member states’ different legal traditions and company structures must be respected, a harmonisation of the basic rules makes it easier for companies to offer services and products to all customers in the EU.

The existing European-level legislation on company law includes a large number of directives and regulations and different European legal forms, such as the European Company, the European Economic Interest Grouping and the European Cooperative Society.

The harmonisation of European company law covers the protection of interest of shareholders and others, the constitution and maintenance of public limited-liability companies' capital, takeover bids, branches disclosure, mergers and divisions, minimum rules for single-member private limited-liability companies, shareholders' rights and related areas such as financial reporting and accounting.

Internal Market and Services Commissioner Michel Barnier said: "Shaping EU policy on European company law is a challenge that we have to meet. Getting company law right makes it easier for businesses to develop across the EU to the benefit of their shareholders and customers. The landscape for company law is changing and we need to think about how best to adapt our regulatory framework. That is why I invite stakeholders to respond to the public consultation launched today."

Therefore, among the issues covered in the consultation are: what should be the main objectives of European company law; are the current rules fit for today's challenges; in which areas is there need for further evolution; and what is the relationship between company law and corporate governance?

Stakeholders are also asked whether the existing company law directives should be merged in a single instrument in order to make the regulatory framework more accessible and user-friendly; whether the company forms need to be reviewed; what can be done to facilitate cross-border mobility for companies; and whether the existing minimum legal capital requirements and rules on capital maintenance should be modified and updated.

The company law consultation is open until May 14, 2012. As, in 2011, the EC issued a similar public consultation in the field of corporate governance, and both policy fields are closely linked, any possible follow-up initiatives in these two fields will be announced jointly in the second half of this year.

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