141 final COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying th

194 Pages·2017·2.52 MB·English

EUROPEAN
COMMISSION
Brussels, 25.4.2018
SWD(2018) 141 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document
Proposal for a Directive of the European Parliament and of the Council amending
Directive (EU) 2017/1132 as regards the use of digital tools and processes in company
law

and

Proposal for a Directive of the European Parliament and of the Council amending
Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions

{COM(2018) 239 final} - {COM(2018) 241 final} - {SWD(2018) 142 final}

EN EN
Table of contents
GLOSSARY ........................................................................................................................ 3
1 INTRODUCTION ....................................................................................................... 5
1.1 Context .............................................................................................................. 5
1.2 Calls for an initiative ......................................................................................... 6
1.3 Scope of the impact assessment ........................................................................ 8
2 THE PROBLEM DEFINITION ................................................................................ 12
2.1 Use of digital tools and processes throughout a company's lifecycle ............. 13
2.2 Cross-border mergers ...................................................................................... 18
2.3 Cross-border divisions ..................................................................................... 22
2.4 Cross-border conversions ................................................................................ 26
2.5 Conflict of laws rules ....................................................................................... 32
2.6 How would the problem evolve – what is the baseline scenario? ................... 37
3 NEED FOR ACTION AT EU LEVEL ..................................................................... 39
3.1 Legal basis for the EU to act ........................................................................... 39
3.2 Added value of EU action ............................................................................... 39
4 OBJECTIVES: WHAT IS TO BE ACHIEVED? ..................................................... 40
4.1 Policy objectives .............................................................................................. 40
4.2 Consistency with other EU policies and the Charter of Fundamental
Rights ............................................................................................................... 41
5 POLICY OPTIONS AND ANALYSIS OF THEIR IMPACTS ............................... 42
5.1 Use of digital tools and processes throughout a company's lifecycle ............. 43
5.2 Cross-border operations (mergers, divisions and conversions) ....................... 53
5.3 Conflict of laws rules ....................................................................................... 75
6 PACKAGE OF PREFERRED POLICY OPTIONS AND OVERALL
IMPACTS .................................................................................................................. 83
6.1 Summary of preferred policy options .............................................................. 83
6.2 Analysis of the overall impacts of the package ............................................... 86
6.3 Subsidiarity and proportionality of options ..................................................... 95
6.4 Choice of legal instrument ............................................................................... 95
7 MONITORING AND EVALUATION ..................................................................... 95
7.1 Monitoring ....................................................................................................... 96
7.2 Evaluation ........................................................................................................ 97
ANNEX 1: PROCEDURAL INFORMATION ................................................................ 98
ANNEX 2: STAKEHOLDER CONSULTATION ......................................................... 106
ANNEX 3: WHO IS AFFECTED AND HOW? ............................................................. 122
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ANNEX 4: PROBLEM DEFINITION – ADDITIONAL EVIDENCE.......................... 124
ANNEX 5: EVALUATION OF THE FUNCTIONING OF RULES ON CROSS-
BORDER MERGERS ............................................................................................. 143
ANNEX 6: OVERVIEW OF ECJ CASE-LAW ON CROSS-BORDER
MOBILITY OF COMPANIES ............................................................................... 160
ANNEX 7: OVERVIEW OF MEMBER STATES' POSITIONS ON THE
QUESTIONS OF SEAT AND CONNECTING FACTORS .................................. 169
ANNEX 8: METHODOLOGY OF KEY ASSUMPTIONS FOR CROSS-
BORDER DIVISIONS AND CROSS-BORDER CONVERSIONS ...................... 172
ANNEX 9: CALCULATION METHOD FOR POTENTIAL SAVINGS FOR
COMPANIES BROUGHT ABOUT BY THE USE OF DIGITAL TOOLS
AND PROCESSES THROUGHOUT A COMPANY'S LIFECYCLE .................. 184
ANNEX 10: EMPLOYEE PARTICIPATION AT BOARD LEVEL ............................ 190
ANNEX 11: THE SME TEST – SUMMARY OF
RESULTS………………………………… ............................................................ 192
2
GLOSSARY
Acquiring company The company that receives the assets and liabilities from the
acquired company in a merger or division by acquisition.
Business register The database maintained by each Member State to keep record
of registration of companies in the given Member State and
subsequent changes in the information on companies.
Conflict of law In situations with cross-border elements, conflict of laws rules
determine which of possibly two or more national laws apply to
the internal functioning of a company.
Connecting factor The relevant link between a subject (in this context a company)
and a legal order which determines the applicable law in a
conflict of law situation.
Cross-border conversion An operation whereby a company formed and registered in
accordance with the law of a Member State converts into
another company formed and registered in accordance with the
law of the another Member State retaining its legal personality
and without being wound up or going into liquidation.
Cross-border division An operation whereby a company splits and transfers all or
some of its assets and liabilities to existing or new
company/companies in another Member State.
Cross-border merger An operation whereby two or more companies from two or
more Member States transfer their assets and liabilities to an
existing (acquiring) or a new company.
Cross-Border Merger Directive 2005/56/EC of the European Parliament and of the
Directive (CBMD) Council of 26 October 2005 on cross-border mergers of limited
liability companies. Now it is part of the Codification Directive
(see below).
Codification Directive Directive (EU) 2017/1132 of the European Parliament and of
the Council of 14 June 2017 relating to certain aspects of
company law (codification). This Directive codified in 2017
several Directives covering different aspects of company law.
Dividing company The company that is being split up in the framework of a
company division.
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Freedom of The freedom of establishment applicable to legal entities
establishment of pursuant to Articles 49 and 54 TFEU.
companies
Group reorganisation The restructuring of legal and/or operation structure within a
corporate group.
Inbound conversion The process of conversion from the perspective of the country
of destination, i.e. whereto the company will be registered as the
result of the process.
Limited liability A company with share capital and with legal personality
company possessing separate assets which alone serve to cover its debts.
It is defined in Annex II of Directive (EU) 2017/1132 relating to
certain aspects of company law (codification).
Member State(s) (MS) In the context of this Impact assessment, this covers Member
States of the EU and of the EEA (i.e. Iceland, Liechtenstein and
Norway in addition to the EU).
National Gazette A periodical publication authorised to publish public or legal
notices. In the context of this Impact Assessment it refers to the
national gazettes in the MS that publish company information.
Outbound conversion The process of conversion from the perspective of the country
of departure, i.e. where the company originally was registered.
Recipient company The company that receives certain assets and liabilities from the
dividing company in the framework of company division.
Registered office The office and the address under which the company is
registered in the business register.
Registration of The process through which the competent authorities or
companies organisations create and keep records of the creation of
companies, changes in companies' registered information
(filing) and the linked documentation. The business register is
the database where these data are recorder.
SE Societas Europea (European Company), a limited liability
company formed according to the Regulation (EC) No
2157/2001 on the Statute for a European company (SE).

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INTRODUCTION
1.1 Context
Companies play a crucial role in promoting economic growth, creating jobs and
attracting investment in the European Union. They help deliver greater economic as well
as social value for society at large. To achieve this, companies need to operate in an
environment which is conducive to growth and adapted to face the new economic and
social challenges of an increasingly globalised and digital world.
There are around 24 million companies in the EU1, out of which approximately 80% are
limited liability companies. Around 98-99% of limited liability companies are SMEs2.
Every year around 2,5 million new companies are created and a slightly smaller number
of companies cease to exist3. High growth enterprises4 play an important role in
contributing to the economic growth and the creation of jobs. In 2014, around 145 000
companies, or almost a tenth (9.2 %) of all enterprises with at least ten employees in the
EU-28’s business economy were recognized as high-growth enterprises, providing work
for over 12 million employees5.
The possibility to operate beyond national borders is a part of the natural life-cycle of the
company. This includes the option to carry out a cross-border merger, division or
conversion, offers them an important chance to survive and grow e.g. by having new
business opportunities in other EU countries, by reorganizing, cutting organisational cost
or adapting to changing market conditions. For example, a survey carried out in 20166
found out that 22% of the business executives had immediate plans for expansion in the
internal market.
However, cross-border company operations can have significant impacts for relevant
stakeholders as well as society at large. Therefore, it is essential that the protection of
those involved in and affected by the company affairs, namely employees, creditors and
minority shareholders, keep pace with the growing trans-nationalization of companies
and that Member State authorities are able to act against abuse.
The current situation concerning cross-border corporate mobility provides a very
fragmented picture across the EU. The existing EU legal framework provides rules only
for cross-border mergers of companies, while cross-border divisions and conversions are
subject to national rules, if such rules exist at all. In addition, it is not always certain
which law applies to the internal functioning of companies with operations in more than
one MS. Since there are no harmonised rules at EU level, the case law of the Court of
Justice has developed the principles, based on freedom of establishment, especially

1 The study 'Assessment and quantification of drivers, problems and impacts related to cross-border
transfers of registered offices and cross-border divisions of companies' EY 2017 (hereinafter referred to as
EY study on cross-border operations of companies) refers to 24,4 million in 2016. It makes an estimation
based on Eurostat data of 2014.
2 EY study on cross-border operations of companies
3 According to Eurostat data, there were 2,586,418 new companies in EU28 in 2014, while 2,307,036
companies ceased to exist. In 2013, the number of new companies in EU28 was 2,487,921, with 2,329,272
companies ceasing to exist.
4 This refers to an enterprise with average annualised growth in number of employees greater than 10 % per
year over a three-year period and having at least 10 employees in the beginning of the growth.
5 Source: Eurostat.
6 EY Attractiveness Survey, 2016, 1,469 executives participated in the survey. MS covered by the study
were Germany, France, the Netherlands, the UK, Belgium or Portugal.
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related to cross-border conversions7, but also to the recognition of companies
incorporated in another MS8. In its judgements, the court has always stated that it is for
the legislator to establish a detailed procedure/rules.
Furthermore, in today's world, the use of digital tools and processes, in particular in order
to initiate economic activity by setting up a company or continuing it in another MS
easily, rapidly and cost-effectively is one of the prerequisites for a competitive market
and for competitive companies. However the current EU law provides only for very
limited use of such tools and in particular there are no provisions on the online
registration of companies. While the Commission proposal on the establishment of a
Single Digital Gateway9 covers the general registration of business activity via online
means, the constitution of limited liability companies is carved out from the proposal
because it necessitates a comprehensive approach to be addressed in the company law
acquis. The Commission committed to propose specific rules for this area without delay.
Overall, today's Single Market does not offer companies and their stakeholders optimal
conditions in terms of clear, predictable and balanced legal framework. This is especially
important for SMEs which are the backbone of EU economy. For them any improvement
in the possible use of digital tools and any possiblity of performing cross-border
operations less costly and burdensome is very important.
While the role of companies is to create wealth, it should not only concern the well-being
of the company itself, but also of the stakeholders associated with it. In case of cross-
border mobility of companies, in particular the interests of employees10, creditors and
minority shareholders play an important role. However, today the legal uncertainty and
lack or complexity of rules for cross-border mobility of companies also means that there
is no clear framework to ensure effective protection of these stakeholders. This may even
lead to a situation whereby the freedom of establishment could be abused by some
companies. In the situation of a lack of legal certainty the protection offered to
stakeholders is therefore often ineffective.
Therefore, it is important to unleash the potential of the Single Market by breaking down
barriers to cross-border trade, facilitating access to markets, increasing confidence and
stimulating competition while offering effective protection to stakeholders.
1.2 Calls for an initiative
The Investment Plan for Europe11 stressed that determined efforts are needed to make the
most of the Single Market and make it an effective launch pad for companies. The 2015
Single Market Strategy12 mentioned uncertainties over company law as one of the
obstacles that SMEs complain about in the Single Market and announced that the
Commission would consider "further ways of achieving simpler and less burdensome
rules for companies — while continuing to act against letterbox companies — including
making digital solutions available throughout a company’s lifecycle, in particular in

7 ECJ cases VALE, Cartesio, currently Polbud
8 ECJ cases Centros, Überseering, Inspire Art
9 Proposal for a Regulation of the European Parliament and of the Council on establishing a single digital
gateway to provide information, procedures, assistance and problem solving services and amending
Regulation (EU) No 1024/2012 - COM(2017)256
10 In line with the European Pillar of Social Rights.
11 COM(2014) 903 final.
12 COM(2015) 550 final.
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relation to their registration and to the filing of company documents and information"
and would also "examine the need to update the existing rules on cross-border mergers
and the possibility to complement them with rules as regards cross-border divisions".
The 2016 Communication on the Start-up and Scale-up Initiative13 stressed the need to
remove barriers for start-ups to develop in the Single Market and reiterated the call for
measures in the area of company law. Furthermore, both the 2015 Digital Single Market
Strategy14 and the 2016 e-Government Action Plan15 stressed the role of public
administrations in helping businesses to easily start business, operate online and expand
across borders. The e-Government Action Plan specifically recognised the importance of
improving the use of digital tools when complying with company law related
requirements. In addition, the Single Digital Gateway included a political commitment to
come forward with online registration of limited liability companies in the context of the
digitalisation of company law.
In addition, the Stockholm programme of 2009 called for an initiative on uniform
conflict of laws rules in the area of company law16.
Against this background, the Commission 2017 Work Programme17 included a company
law initiative to facilitate the use of digital technologies throughout a company's lifecycle
(equally confirmed in the Digital Single Market Mid-term Review18) and cross-border
mergers and divisions.
The need to complement and improve the legal framework as regards the use of digital
tools and on cross-border company mobility was also recognised by the European
Parliament. In its 2017 resolution on the e-Government Action Plan, it called on the
Commission to consider further ways to promote digital solutions for formalities
throughout a company's lifecycle and underlined the importance of work on the
interconnection of business registers19. Furthermore, in its recent resolution of 13 June
201720, the European Parliament called for a comprehensive EU framework in order to
simplify the procedures and requirements applicable to transfers, divisions and mergers,
and to remove obstacles arising from conflicts of laws, with a view to facilitating
companies' mobility in line with their business needs, while preventing abuses and
fictitious transfers for the purposes of social or fiscal dumping and duly respecting
employees’ representation rights. In its 200921 and 201222 resolutions the European
Parliament also specifically asked the Commission to come forward with a proposal on
cross-border conversions.

13 COM(2016) 733 final.
14 COM(2015) 192 final.
15 COM(2016) 179 final.
16 Official Journal C 115 of 4.5.2010.
17 COM(2016) 710 final; Annex 1.
18 COM (2017) 228.
19 European Parliament resolution of 16 May 2017 on the EU eGovernment Action Plan 2016-2020;
(2016/2273(INI)).
20 European Parliament resolution of 13 June 2017 on cross-border mergers and divisions
(2016/2065(INI)).
21 European Parliament resolution of 10 March 2009 with recommendations to the Commission on the
cross-border transfer of the registered office of a company (2008/2196(INI)).
22 European Parliament resolution of 2 February 2012 with recommendations to the Commission on a 14th
company law directive on the cross-border transfer of company seats (2011/2046(INI)).
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The Council also encouraged the Commission in its 2015 Conclusions on the Single
Market Policy23 to address the online registration of companies through the use of the
Digital Single Market Package. Furthermore, most recently in the Tallinn declaration on
eGovernment the Member States make a strong call to step up efforts for provision of
efficient, user-centric electronic procedures in the EU24.
The Commission has actively engaged with stakeholders and conducted comprehensive
consultations throughout the impact assessment process, in view of collecting the
evidence needed to come to a political decision on the scope of this company law
package. Stakeholder views are indicated throughout the impact assessment where
relevant and summarised in Annex 2.
1.3 Scope of the impact assessment
The purpose of this impact assessment is to assess whether and to what extent the
existing company law legal framework both at EU and national level a) hampers the
exercise of the freedom of establishment by companies and the possibility to use digital
tools throughout companies' lifecycle as well as b) provides the effective protection for
stakeholders, such as creditors, minority shareholders, employees but also other third
parties which are affected by companies' activities. In addition, the impact of the existing
national conflict of laws rules is assessed in this respect. The areas covered are:
- Use of digital tools and processes throughout a company's lifecycle: Companies use a
number of digital tools and processes in order to comply with requirements stemming
from company law, such as registering a company as legal entity, filing documents to the
business register or applying for publication in the national gazette. This also
encompasses digital access to company related information by third parties. The use of
digital tools in interactions between companies and their shareholders is not part of this
impact assessment.
- Cross-border mergers: A cross-border merger takes place when two or more companies
from different MS join into one surviving entity by transferring to it all their assets and
liabilities.
- Cross-border divisions: A division involves a transfer of all or some assets and
liabilities from a dividing company to existing or new company/companies in another
MS.25
- Cross-border conversions: A conversion means an operation whereby a company
formed and registered in accordance with the law of a Member State converts into a
company formed and registered in accordance with the law of another Member State
while retaining its legal personality and without being wound up or going into

23 Council Conclusions on Single Market Policy, 6197/15, 2-3 March 2015.
24 The Tallinn Declaration on eGovernment was signed at the ministerial meeting during Estonian
Presidency of the Council of the EU on 6 October 2017.
25 Divisions can be carried out in different ways, e.g. a dividing company can be wound up and transfer its
assets and liabilities to more than one existing or newly formed company whose shares are allocated to the
shareholders of the dividing company (so-called ‘split up’). Alternatively, the dividing company can
continue to exist and it can transfer some of its assets to other (new or existing) companies (so-called ‘spin-
off’) or companies to which assets are transferred can become its subsidiaries (so-called ‘hive-down’). The
shares can be allocated to shareholders of the dividing company in proportion or disproportionately to their
existing shareholdings, J. Schmidt, cross-border mergers and divisions, transfers of seat: Is there a need to
legislate? Study for the EP JURI Committee, 2016 (hereinafter referred to as J. Schmidt, EP Study), p. 27.
8
liquidation. Unlike cross-border mergers and divisions, which involve more entities
across MS, a cross-border conversion concerns just one company.
- Conflict of laws rules: In situations with cross-border elements, conflict of laws rules
determine which of possibly two or more national laws apply to the internal functioning
of a company.
This impact assessment addresses those five areas which are interrelated and contribute
directly to a company's ability to expand their business and reap the full benefits offered
by the Single Market. Digitalisation serves as the starting point as the pragmatic use of
the opportunities offered by digital tools would help entrepreneurs to create their
business and communicate to the relevant competent authorities with greater ease and
less cost. Moreover, the effective use of digital safeguards would ensure the integrity of
the information that is provided to business registers in a cross-border setting and provide
greater transparency and security to society at large. Should entrepreneurs then wish to
expand their business cross-border, the enhancement of the Cross-border Merger rules
and the introduction of procedural rules for cross-border divisions and cross-border
conversions would not only offer them greater ability to grow their business and explore
new markets but would also offer robust protection to employees, minority shareholders
and creditors. Digitalisation strongly interacts with these procedures as effective digital
communication between the business registers through the EU system (called BRIS26)
would enable them to establish a clear point in time to which a company merges, divides
and converts cross-border and changes its legal form. This would in turn provide greater
legal certainty for business registers, entrepreneurs and stakeholders. Finally, certainty on
the applicable law is relevant if a company finds itself in a situation with cross-border
elements.
The present impact assessment addresses all the above-mentioned areas as the impact
assessment aims at informing the political decision whether action needs to be taken in
all of these areas or only in selected ones. Where possible, the interactions between
different areas and between any preferred options are spelled out. In addition, the
assessment refers to the relevant stakeholder feedback which has been obtained in
various consultations confirming the assessment of relevance (see for details on
stakeholder consultation Annex 2).
Decisions to set up a company, expand, restructure or move the company cross-border
depend on many factors such as business opportunities, productivity gains and business
environment as well as the legal, tax and regulatory regime of a given MS.27 However,
companies cannot even envisage exercising the freedom of establishment in practice, if
the underlying legal framework does not allow them to carry out such operations or make
them very costly or complicated. Against this background, this impact assessment will
only analyse the prerequisite condition for mobility, namely the enabling rules and
procedures in the area of company law. It will not address the EU and national legal
frameworks in other related policy areas such as labour law, insolvency, taxation or other

26 The system of interconnection of business registers was created with Directive 2012/17/EU of the
European Parliament and of the Council of 13 June 2012 amending Council Directive 89/666/EEC and
Directives 2005/56/EC and 2009/101/EC of the European Parliament and of the Council as regards the
interconnection of central, commercial and companies registers, OJ L 156, 16.6.2012, p. 1–9. This
directive is now part of the codified Directive (EU) 2017/1132 relating to certain aspects of company law.
27 EY Attractiveness Survey – Europe 2017
9