EU Commission Proposal 2018/0113 – “The use of digital tools and processes in company law”

A large part of the EU company law is now codified in the single Directive UE 2017/1132, which contains the rules of six previous directives issued on company law.

This directive has harmonised the European company law but has not introduced any new legal rule in order to facilitate companies’ use of digital technologies, even if at the European level there is a common awareness that companies are increasingly using digital technologies to carry out their business and that entrepreneurs are constantly seeking for more and effective tools in order to interact digitally with public authorities.

Therefore, with the Proposal 2018/0113 the EU Commission is trying to provide an easy accessible  and improved use of digital technologies. The purposes is to facilitate the circulation of information, focusing on those already made public through local company registers by creating a unique European company register. This will allow the 24 million companies that operate in the EU area to easily operate towards a single European business market.

The current status from which this proposal moves its steps, is that not all EU member state made possible possible to interact with their national authority through on-line procedures. Indeed, nowadays not all member States allow, for instance, both face-to-face and online procedures for the incorporation of a company or for filing on-line the information with the company register.

The lack of common European rules for online incorporation and filing the information and the differences of the legal rules adopted by each member State creates unnecessary costs and burdens to the entrepreneurs who wish to create a new business or to expand their existing one. This in turn leads to missed business opportunities and to lose competitiveness.

In order to improve a fast freedom of establishment – granted by the Maastricht UE Treaty – the proposal disposes that some kind of limited liability companies have to be incorporated on-line by implementing an electronic identification system.

This will also apply to those entities, like branches, that despite not having a legal personality nowadays need to be incorporated largely following the same legal requirements provided for companies which are separate legal entities.

The proposal also disposes that there have to be more data that must be available on-line and free of charge for the benefit of every stakeholder who may be interested in the companies’ life: for instance, the by-laws , information upon  any branches established in other Member States or information upon the approved financial statement.

Today this requirements exist but are limited and lack precision, leading to a very diverse implementation at national level.

Another element of innovation is due the creation of a strong European interconnected company registers that will allow the member State in which the company is registered to inform company registers of other member State of any relevant corporate or business change faced by the company.

The above implies the creation of a European corporate information framework that would allow national authorities to easily rely on information received by foreign authorities giving them full legal value.

Obviously this proposal will require important changes within national legislations and its implementation will be not only a legal, but also a technological challenge for the member States.

This is still a proposal that is under examination by the European Parliament and that in the next months is likely to be implemented as a directive; then we will exactly know where the digitalization process of the European company law has arrived.