13.04.2023

MORE TRANSPARENCY AND LESS RED TAPE FOR COMPANIES TO IMPROVE THE BUSINESS ENVIRONMENT IN THE EU

The European Commission has adopted a proposal for a directive that will make it easier for companies to expand their use of digital tools and processes in EU company law. The aim of the proposal is to facilitate the cross-border activities of companies and to improve the transparency and trust of businesses by providing public access at EU level to more information about companies. It will also lead to a reduction in red tape for businesses operating cross-border, saving around €437 million in administrative burden annually, thanks to an EU company certificate or the application of the one-time principle. The proposal will contribute to the further digitalisation of the single market and help companies, in particular small and medium-sized enterprises, to do business in the EU.

Reduction of bureaucracy and administrative burden

To reduce red tape and administrative burdens for cross-border businesses, the proposed rules include:

application of the one-time principle, so that companies do not have to re-submit information when establishing a branch or a company in another Member State. Relevant information can be exchanged through the Business Registers Interconnection System (BRIS); an EU company certificate containing a core set of company information that will be available free of charge in all EU languages; a multilingual EU standard form of digital power of attorney, with which a person will be authorized to represent the company in another Member State; eliminating formalities such as the need for an apostille or certified translations of company documents.

Improving transparency and trust in cross-border business activities

The proposal updates the existing EU company rules (Directive (EU) 2017/1132) to further adapt them to digital developments and new challenges, and to boost growth and competitiveness in the single market.

To ensure greater transparency and trust in companies, the proposed rules aim to:

ensuring that, through BRIS, important information about companies (e.g. on partnerships and groups of companies) is publicly available, especially at EU level; facilitating the search for EU company information by enabling searches through BRIS and simultaneously through two other EU systems linking national beneficial ownership and insolvency registers; ensuring that company data in business registers is accurate, reliable and up-to-date, for example by ensuring that company information is checked before it is entered in business registers in all Member States.

Next steps

The proposal will now be discussed by the European Parliament and the Council. Once the directive is adopted, member states are proposed to have two years to transpose it into national laws.

Context

Companies are at the heart of the single market. Thanks to their economic activities and investments, including in a cross-border context, they play a leading role in contributing to the EU's economic prosperity and competitiveness and in realizing the Union's twin transition to a sustainable and digital economy. To this end, companies need a predictable legal framework that favors growth and is adapted to deal with new economic and social challenges in an increasingly digitized world. The proposed measures will apply to around 16 million limited liability companies and 2 million partnerships in the EU.

The proposal envisages the second step of the digitization of EU company law. The 2019 Digitization Directive (EU) 2019/1151 ensures that company law procedures can be carried out online, and in particular that companies can be incorporated online. The proposal complements this directive and aims to increase the availability of information on companies, in particular at EU level, and to remove administrative obstacles when companies and authorities use this information in cross-border situations. Overall, the proposal encourages digital-by-default solutions when accessing or using company information in interactions between companies and business registers or authorities. The proposal will also rely on the use of certificate services and ensure that solutions such as the EU company certificate are compatible with the upcoming European digital identity wallet.

It will contribute to the digitalisation objectives set out in the communications Digital Compass 2030: The European Path to the Digital Decade and Digitizing Justice in the EU - Toolkit of Opportunities, and will facilitate the cross-border growth of SMEs in line with the Update the new industrial strategy for 2020 and Strategy for the place of SMEs in a sustainable and digital Europe.

As announced in the Commission's 2023 work programme, the proposal is one of the main actions under the policy priority Europe fit for the digital age.

For more information

Q&A: Commission proposal for a directive to extend the use of digital tools and processes in EU company law

Website - Company Law and Corporate Governance

Proposal for a directive to further expand and update the use of digital tools and processes in the field of company law

Annex - Proposal for a directive to further expand and update the use of digital tools and processes in the field of company law