The “Company Law Package” – providing mobility to companies within the EU

On April 25, 2018, the EU Commission published its “Company Law Package,” proposals for cross-border reorganization and the use of digital tools and procedures in company law. The package aims at promoting and simplifying the mobility of EU companies, as well as the digitization of the entire life cycle of companies.

The need for regulating cross-border reorganizations is high: The basic principle of freedom of establishment, in accordance with long-standing case law, gives all corporations in the EU the right to relocate their registered office to another Member State. To date, however, only cross-border mergers of corporations have been regulated by law. Due to different national regulations and administrative practices, other forms of cross-border reorganizations are practically impossible – or may only be implemented with considerable time and expense. The proposal now provides for an EU-wide harmonized procedure for different types of cross-border reorganizations. In addition, for the first time, it is intended to create a legal framework for the conversion of a company into the legal form of another Member State. It would also allow the transfer of all or part of a company’s assets to a company in another Member State.

The core of the proposal for digitization is to create the possibility of establishing corporations online in all EU Member States, including across borders. In Germany, for example, this is not possible to date. The involvement of civil law notaries in company formation would then no longer be mandatory. In Germany, online incorporation will probably initially only be possible for GmbHs (limited liability companies) and UGs (entrepreneurial companies with limited liability). The national legislator may exempt the establishment of “large” corporations from the online procedure. Digitization aims at registering the newly founded company in the commercial register within five days. Finally, the proposal also provides for standardizing data on companies that is available free of charge in the Member States.

The “Company Law Package” represents a long-awaited step in the right direction. Creating a binding legal framework for implementing cross-border reorganizations in the EU would be a key aid for practical purposes. The transposition of the proposal into existing law is likely to take some time, however. The Commission’s proposal on digitization is welcome as well. It remains to be seen how the role of civil law notaries in company establishment will develop in the future. What will also be crucial for gaining confidence in the new procedures is that the use of digital instruments and data is sustainably protected against misuse. As soon as this is ensured, corporate law will finally arrive in the digital age.

Your contacts are the experts from the Corporate/M&A Practice Group. Dr. Philipp Jansen is a member of Dr. Pär Johansson’s team and specializes in private equity transactions.