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Proposal of EU Directive on single-member private limited liability companies

Improving the business environment for all companies, and in particular for SMEs, is one of the main priorities of the EU’s ten-year growth strategy, Europe 20201 -making business easier and better. A number of actions relevant to SMEs were set out in the Communication on “An Integrated Industrial Policy for the Globalisation Era”2, one of Europe 2020’s seven key flagship initiatives. The review of the Small Business Act3 and the Single Market Acts I4 and II5 also included actions designed to improve access to finance and to further reduce the costs of doing business in Europe.

Companies find it costly and difficult to be active across borders and only a small number of SMEs invests abroad. The reasons for this include the diversity of national legislations, in particular differences in national company laws, and the lack of trust in foreign companies among customers and business partners. In order to overcome the lack of trust, companies often establish subsidiaries in other Member States. The advantage of this being that they are able to provide customers with the brand and reputation of the parent company, whilst also offering them the security of dealing with a company which has the legal status of a national rather than foreign company. Establishing a company abroad involves, among others, the costs of meeting legal and administrative requirements in other countries, which are frequently different to what companies are used to “in the home country”. Those costs (including the additional necessary legal advice and translation) are likely to be particularly high for groups of companies, since any parent company, and particularly an SME parent, is presently faced with different requirements for each country in which it wishes to establish a subsidiary.

European small and medium-sized enterprises (SMEs) – have an essential role to play in strengthening the EU economy. However, they still face a number of obstacles, which hamper their full development within the Internal Market, and therefore prevent them from making their full potential contribution to the EU economy. The European Commission aimed to address these costs in its 2008 proposal for a European Private Company Statue (SPE).6 This proposal was intended to offer SMEs an instrument facilitating their cross-border activities, which would be simple, flexible and uniform in all Member States. It was issued in a response to a number of calls from businesses for the creation of a truly European form of a private limited liability company. Despite strong support from the business community it has not been, however, possible to find a compromise allowing for the unanimous adoption of the Statute among Member States. The Commission decided that it would withdraw the SPE proposal (the REFIT exercise7) and instead announced to come up with the proposal of an alternative measure designed to address at least some of the problems addressed by the SPE.

This approach is consistent with the 2012 Action Plan on European company law and corporate governance8, which reaffirmed the Commission’s commitment to launch other initiatives, further to the SPE proposal, in order to enhance cross-border opportunities for SMEs.

The overall objective of this proposal, which provides an alternative approach to the SPE, is to make it easier for any potential company founder, and in particular for SMEs, to set-up companies abroad. This should encourage and foster more entrepreneurship and lead to more growth, innovation and jobs in the EU. The proposal would facilitate cross-border activities of companies, by asking Member States to provide in their legal systems for a national company law form that would follow the same rules in all Member States and would have an EU-wide abbreviation – SUP (Societas Unius Personae). It would be formed and operate in compliance with the harmonised rules in all Member States which should diminish set-up and operational costs. In particular, the costs could be reduced by the harmonised registration procedure, a possibility of on-line registration with a uniform template of articles of association and a low legal capital required for the set-up. The creditors would be protected by the obligation imposed on the SUP directors (and in some cases on the SUP single-member) to control distributions. To enable businesses to reap the full benefits of the internal market, Member States should not require that an SUP’s registered office and its central administration be necessarily located in the same Member State.

In parallel to this proposal, the Commission is also carrying out related work aimed at improving legal certainty for companies and more generally regarding the law applicable to them when operating in other Member States, in line with the 2009 European Council’s Stockholm Programme on an open and secure Europe serving and protecting citizens9. This proposal, once adopted, will repeal Directive 2009/102/EC and amend Regulation 1024/201210 in order to allow for the use of the Internal Market Information System (IMI).

Read The full Proposal HERE.

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