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Questions and Answers: The Commission Proposes to Expand Digital Tools in EU Company Law

The questions and answers of the European Commission (“the Commission”) on the proposal to expand digital tools in EU company law were published on the official website of the Commission on 29 March 2023. These Q&A’s stipulated as below;

 

  • What are the objectives of the Commission's proposal?

This proposal aims to cut red tape and improve transparency and trust in the business environment in a single market.

 

  • How will it help companies?

The proposal will significantly reduce administrative barriers when companies use company information from business registers in cross-border situations, including in administrative or court procedures:

  • When companies set up subsidiaries or branches in another Member State, the proposal will ensure the application of the “once-only principle”. 
  • Companies may use a multilingual model for a digital EU power of attorney to authorize a person to represent the company in another Member State.
  • Companies do not need to obtain an apostille on certified documents or information from business registers, and on certain notarial documents, when such documents are presented in another Member State.
  • The proposal reduces the need for certified translations of company documents or information provided by business registers.

 

  • How much will the proposal reduce the administrative burden on companies?

By making more company data publicly available in business registers and at the EU level through BRIS, and by improving the reliability of such information, the proposal will reduce the overall administrative burden on companies and in turn facilitate access to finance and the creation of businesses.

Companies planning to engage in cross-border business activities, or to create cross-border subsidiaries or branches, will benefit from recurrent annual savings of around €437 million per year thanks to administrative simplification, including the application of the “once-only principle”, abolishing the apostille, and introducing an EU Company Certificate.

 

  • ”)?SMEsHow will it help small and medium enterprises (“

SMEs in particular will benefit from the reduction in administrative burden and increased legal certainty, and also from easier access to company information, as they have fewer financial and administrative resources than large companies.

This proposal helps to make it easier for SMEs and start-ups to expand and scale up cross-border in line with the 2020 SME Strategy for a sustainable and digital Europe and the EU Start-up Nations Standard.

 

  • How will it improve transparency in the business environment?

The proposal will make more information about companies publicly available in particular at the EU level through the Business Registers Interconnection System (BRIS). It covers important information for investors, creditors, consumers, and authorities about:

  • partnerships,
  • groups of companies,
  • single shareholders of single-member companies,
  • the place of central administration and the principal place of business of companies,
  • EU branches of non-EU companies.

It will also make searches for information about companies in the EU easier by allowing a search through BRIS and, at the same time, through two other EU systems interconnecting national beneficial ownership registers and insolvency registers, while respecting the existing rules for access to each system.

 

  • How will it improve trust in the business environment?

 

First, the proposal will improve the reliability of company information in business registers across the EU and thus ensure that such information can be trusted in cross-border situations. In particular, the proposal requires Member States to ensure that:

  • administrative or judicial control, as well as a legality check, of the instruments of the constitution takes place when new companies are created and in case of any changes to those documents;
  • uniform checks of company information (e.g., checking the legality of the company's name, and object) are carried out before the information is entered into business registers.

Second, the proposal will ensure that company information in business registers is up-to-date by:

  • asking companies to make timely updates of their information in business registers, and to confirm once a year that the information is up-to-date;
  • asking business registers to make new information received from companies publicly available as soon as possible;
  • ensuring that sanctions are applied where companies do not file information or file it late to business registers.

 

  • How does this proposal relate to the existing company law framework?

 

The 2019 Digitalisation Directive ensured that company law procedures can be carried out online, and in particular that companies can be set up online. This proposal is complementary and provides for the second step of the digitalisation of EU company law. It focuses on increasing the availability of company information, in particular at the EU level, and on removing administrative barriers when companies and public authorities use such information in cross-border situations, through the use of digital tools and processes.

It does not introduce new systems but builds on existing ones, for example, BRIS which is operational since 2017 and connects all Member State registers. It is also in line with EU rules on electronic identification and trust services.

 

You can reach further information here.

Kind regards,

Zumbul Attorneys at Law

info@zumbul.av.tr