1132 as regards further expanding and upgrading the use of digital tools and processes in company law - Main contents

Please note

This page contains a limited version of this dossier in the EU Monitor.

dossier	COM(2023)177 - Amendment of Directives 2009/102/EC and (EU) 2017/1132 as regards further expanding and upgrading the use of digital tools ...
source	COM(2023)177
date	29-03-2023

CONTEXT OF THE PROPOSAL

• Reasons for and objectives of the proposal

Companies are at the heart of the single market. Thanks to their business activities and investments, including on a cross-border basis, they play a leading role in contributing to the EU’s economic prosperity, competitiveness and in carrying through the EU’s twin transition to a sustainable and digital economy. To this end, companies need a predictable legal framework that is conducive to growth and adapted to face the new economic and social challenges in an increasingly digital world. While companies are established under national law, EU company law lays down a legal framework that enhances legal certainty across the single market and predictability for them. This company law framework, which encompasses the roles and responsibilities of the business registers, needs to keep abreast with new developments and challenges. It is with this objective that the Commission is putting forward this proposal.

In line with the EU digitalisation objectives set out, in particular, in the Commission Communication 2030 Digital Compass: the European way for the Digital Decade¹, this proposal aims to address the developments in digitalisation and technology that have substantially changed how business registers operate, and how business registers, companies and public authorities interact with one another on company law-related issues. The COVID-19 pandemic clearly demonstrated the key role of digital tools in ensuring the continuity of companies’ interactions with business registers and authorities. This proposal also aims to introduce company law measures to address obstacles to cross-border expansion that small and medium-sized enterprises (SMEs) currently face in the single market, in line with the Commission Communications Updating the 2020 New Industrial Strategy² and SME Strategy for a sustainable and digital Europe³.

This proposal will contribute to the creation of a more integrated and digitalised single market and result in an administrative burden reduction for companies estimated at around EUR 437 million per year. It will also limit new burdens to the extent possible by building on national business registers and their interconnection through the Business Registers Interconnection System (BRIS)⁴, while taking into account different national systems and legal traditions.

In particular, the proposal endeavours to enhance transparency on companies in the single market through the use of digital tools such as BRIS, improve the reliability of company data and create trust between Member States’ registers and authorities, including by creating more connected public authorities. It also aims to abolish and reduce formalities in relation to the use of company information in cross-border situations and make the setting up of subsidiaries and branches in other Member States less time-consuming and more cost-effective, including by using the ‘once-only principle’ (whereby companies would not be asked to submit the same information to the business registers more than once). In this way, it strives to reduce the overall administrative burden for companies and other stakeholders in cross-border situations and make it easier for SMEs to expand across the EU.

To strengthen the smoother operation of the internal market, it is essential to ensure that access to and use of company data cross-border can be done easily and without administrative burden, thus underpinning economic activity and creating a safer and more favourable economic environment for companies, consumers and other stakeholders (investors, creditors, employees). Such conditions in turn are essential to ease the operations of companies, in particular SMEs, and help them find ways to explore and expand to other EU markets, and therefore contribute to economic growth.

Although in an increasingly digitalised world there are stronger calls for transparency from investors, creditors, consumers and companies themselves, access to company information from business registers in cross-border situations is still hindered by barriers. Company information needed by stakeholders is not yet sufficiently available in national business registers and/or cross-border through BRIS, and stakeholders encounter difficulties when looking for it. EU company law already provides for harmonised disclosure requirements about limited liability companies, but some important data (e.g. about companies’ central administration and the principal place of business or company groups) is still not available at EU level and only rarely, in Member States’ registers. There is also no information at EU level about other entities, such as partnerships, which play an important role in the economies of many Member States.

The calls for transparency also mean that company information should be reliable. Stakeholders, authorities and the public need to be able to trust that the information about companies is accurate, up to date and reliable so they can use it for business purposes, in administrative procedures or court proceedings. EU company law includes only partial minimum standards for ex-ante checks. While all Member States carry out to a certain extent ex-ante scrutiny of company documents and information, national procedures differ. This often leads to insufficient trust in the registered company information from other Member States.

The direct use of company information is also often hindered or not possible in cross-border situations due to frequent administrative barriers. These create burdens for companies and may even have a deterrent effect, in particular for SMEs. For instance, when setting up a subsidiary or a branch in another Member State, companies cannot yet rely on the once-only principle, and need to resubmit their own data, which exists in their national business registers, to the registers of other Member States. They often need to get these documents legalised (apostille). Companies also often face similar difficulties when they want to use their information from the national business register, for example when dealing with competent authorities or in court proceedings in another Member State. In addition, the company extracts, which are frequently used by companies and legal professionals to confirm information and identify companies for many different purposes, vary and cannot be used in cross-border situations without burdensome and costly formalities.

The overall objectives of this proposal are to enhance transparency and trust in the business environment, achieve more digitalised and connected cross-border public services for companies, and easier cross-border expansion for SMEs leading, in turn, to a more integrated and digitalised single market.

1. To achieve this, the proposal will:

- increase the amount of company data available in business registers and/or BRIS and improve its reliability;

- enable direct use of company data available in business registers when setting up cross-border branches and subsidiaries, and in other cross-border activities and situations.

This proposal is included in the 2023 Commission work programme as one of the key actions under the Commission’s headline ambition of ‘Europe fit for the digital age’⁵.

• Consistency with existing policy provisions in the policy area

This proposal aims to complement the existing rules on EU company law that are codified in Directive (EU) 2017/1132 (Codified Company Law Directive). It aims to increase the amount of publicly available company data in business registers and/or through BRIS, improve the reliability of company data in business registers and facilitate its use when setting up cross-border branches and subsidiaries and in other cross-border activities and situations. In this context, the proposal will build on and extend the existing provisions in the Codified Company Law Directive.

Directive (EU) 2019/1151 (Digitalisation Directive) focused on making company law procedures fully on-line and provided rules for the fully online formation of limited liability companies, registration of branches and fully online submission of documents in business registers ⁶. This proposal complements this Directive but focuses on other issues where digitalisation is needed in EU company law, in particular by addressing the availability and reliability of company information in business registers and BRIS, and its use in cross-border situations.

The proposal builds on and extends the use of BRIS without altering its functioning or infrastructure. BRIS is based on legal obligations set out by Directive 2012/17/EU and Commission Implementing Regulation (EU) 2021/1042. The proposal will make more company information available through BRIS and will introduce more exchanges between business registers (to apply the once-only principle) through BRIS. It will also link BRIS with the other EU-level systems of interconnection of registers.

• Consistency with other Union policies

The proposed measures will directly contribute to the digitalisation objectives set out in the Communication 2030 Digital Compass⁷, in particular to moving closer to achieving the target of 100% of key public services being available online for European citizens and businesses by 2030 and creating connected public administrations, including through the use of the once-only principle. The proposal will also be in line with the approach set out in the Communication Digitalisation of justice in the European Union⁸, which underlined the importance of digital tools for businesses to access information, interact with authorities and enjoy access to justice.

The proposed measures aim to facilitate cross-border expansion by SMEs in particular by abolishing or reducing formalities required to use company information in cross-border situations and when setting up subsidiaries and branches in other Member States. They also respond directly to the Communications Updating the 2020 New Industrial Strategy⁹ and SME Strategy for a sustainable and digital Europe¹⁰^. The SME strategy in particular mentioned that ‘the Commission will consult and assess the need for additional company law measures to facilitate cross-border expansion and scale-up by SMEs.’

Overall, the proposal will be relevant in responding to the call from the European Council, in its conclusions of 24-25 March 2022, for ‘completing the Single Market, in particular for digital and services’ and ‘closely monitoring and preventing bottlenecks as well as removing remaining unjustified barriers and administrative burdens and avoiding new ones.’¹¹

The proposal, in particular through its measures to enhance ex-ante controls of company data and increase transparency, will also contribute to the fight against abuse of company law structures and to the effective imposition of EU sanctions against such companies.

The proposal is complementary to and coherent with other ongoing initiatives relevant for digitalisation. For instance, there is a close link with the eIDAS Regulation¹² and the 2021 proposal to amend that Regulation as regards establishing a framework for a European Digital Identity¹³. The 2019 Digitalisation Directive already included the use of electronic identification and trust services through the eIDAS Regulation for electronic identification in company law procedures. The current proposal further relies on the use of trust services (e.g. to ensure that the proposed EU Company Certificate and the digital EU power of attorney are sufficiently certified to rely on them in cross-border situations) and will be aligned with the new digital means, e.g. the European Digital Identity Wallet introduced as part of the ongoing revision of the eIDAS framework.

The proposal is also complementary to other EU rules and initiatives that aim to increase transparency on companies. This includes the Anti-Money Laundering Directive ¹⁴, which focuses on information about beneficial ownership, or the Regulation on insolvency proceedings ¹⁵, which covers information about insolvent entities available in insolvency registers. In particular, the proposal aims to link BRIS with the beneficial ownership registers interconnection system (BORIS)¹⁶ and the insolvency registers interconnection (IRI) system ¹⁷, while not altering or circumventing the rules and limits to the access of the information available in those interconnections. This proposal is relevant for the recent taxation initiatives, e.g. the proposal to prevent the misuse of shell entities for tax purposes ¹⁸, as more transparency and more reliable company data will help tax authorities’ work as part of these other initiatives.

The proposal is also complementary to other EU initiatives that aim to facilitate cross-border information or procedures, such as the Single Digital Gateway Regulation (SDG Regulation)¹⁹ or the proposal for a European single access point ²⁰. While this proposal sets out company law procedure and specific rules related to company information available in business registers and/or through BRIS and enabling its direct use on a cross-border basis, the SDG Regulation provides for general rules for online provision of information, procedures and assistance services relevant for the functioning of the internal market. It explicitly excludes from its scope procedures related to the initial registration of a business activity with the business register and procedures concerning the constitution of or any subsequent filing by companies or firms within the meaning of Article 54(2) of the Treaty on the Functioning of the European Union (TFEU) since such procedures necessitate a comprehensive approach aimed at facilitating digital solutions throughout a company’s lifecycle.²¹ However, to ensure synergies with the SDG, Member States will make the information about online procedures set out in this proposal available on the websites accessible by means of the SDG ²². The European single access point, which focuses mainly on entity- and product-related financial market information for investors and aims to serve market needs, will target different intended users, accessing and using different information in a different way than BRIS that this proposal relies on.

This proposal focuses on the needs of direct users such as companies, other stakeholders and public authorities to access and use in the cross-border context reliable and up-to-date official company data based on legal obligations from business registers. Therefore, it does not cover the reuse of company information from business registers for commercial and non-commercial purposes, which is regulated by the Open Data Directive ²³. Similarly, the proposal does not cover the obligation of business registers as statistical business registers, which is regulated by the Regulation on European business statistics ²⁴.

Furthermore, the provisions to abolish legalisation or similar formalities such as apostille for certified company information obtained from business registers is complementary to the Public Document Regulation ²⁵. This covers public documents for citizens (for example, a birth certificate, a marriage notarial act, a judgment) and provides that their certified copies issued by the authorities of an EU Member State must be accepted as authentic by the authorities of another EU Member State without the need for an authenticity stamp (i.e. the apostille).

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

The proposal is based on Article 50(1) and (2) TFEU, which empowers the European Parliament and the Council to adopt provisions in order to attain freedom of establishment. This legal basis has already been used by the EU legislator to act in the area of company law. In particular, Article 50(2)(b) aims to ensure ‘close cooperation between the competent authorities in the Member States in order to ascertain the particular situation within the Union of the various activities concerned.’ Article 50(2)(c) allows for the abolition of administrative procedures and practices that form an obstacle to freedom of establishment. Article 50(2)(f) allows for ‘the progressive abolition of restrictions on freedom of establishment’, both as regards setting up branches or subsidiaries. Article 50(2)(g) allows for coordination measures concerning the protection of interests of companies’ members and other stakeholders. By improving cooperation between Member States’ authorities through the system of interconnection of registers, abolishing administrative barriers to the freedom of establishment, including when setting up cross-border subsidiaries and branches, and by providing new harmonised disclosure requirements, this proposal will contribute to attaining the freedom of establishment as enshrined in Article 50 TFEU.

Article 50 TFEU is combined with Article 114(1) TFEU, which allows for the adoption of measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market. This proposal also aims to address the fragmentation of national regulatory approaches to the cross-border use and acceptance of company information in business registers as well as of notarial or administrative acts in the context of procedures under the Codified Company Law Directive. By introducing uniform checks of company information before it is entered into business registers in order to improve its reliability, by abolishing administrative barriers to the use of such information in cross-border situations including administrative or court procedures and by introducing a harmonised EU Company Certificate, this proposal will contribute to the functioning of the internal market as enshrined in Article 114 TFEU.

• Subsidiarity (for non-exclusive competence)

The overall objective of this legislative proposal is to ensure the smooth functioning of the EU single market by facilitating the cross-border access to and use of company information in cross-border situations. There is a strong value added by acting at EU level because the problems that this proposal tackles are not limited to the territory of one Member State but are of a cross-border nature, in particular due to discrepancies in national legislations. Member States are unable to bring about sufficient improvement to those problems on their own.

To increase the scope of available company data at EU level through BRIS, coordinated action is required to ensure that all Member States have the data in their business registers and that the data is accessible in a comparable and multilingual format centrally at EU level through the system of interconnection of registers. This system already exists and is operational at EU level. Similarly, coordinated action is required to ensure that there are common checks of company data before it is entered into national business registers to improve its reliability and facilitate its use in cross-border situations. Furthermore, to enable the cross-border use of company data, including the application of the once-only principle, barriers in cross-border situations need to be removed. Similarly, the value added from linking the EU-level systems of interconnection of registers can also be only achieved through EU action.

Member States acting individually would continue to apply their own rules in this respect, with little prospect that such rules would address the cross-border situations in a compatible manner. It therefore appears that without any action at EU level, different measures taken at national level would likely result in divergent national solutions. SMEs would also continue to face barriers, making effective exercise of the freedom of establishment more difficult and the resulting costs would affect companies in particular. In this context, the targeted EU intervention in the form of this proposal complies with the principle of subsidiarity.

• Proportionality

The measures introduced by this proposal are proportionate to its objectives of increasing the amount and reliability of company data available in business registers and/or through BRIS, and enabling its direct use in cross-border situations. The proposed provisions are well targeted as they focus on the needs of direct users (e.g. companies, other stakeholders and public authorities) to use reliable and up-to-date official company data from business registers in the cross-border context (see Section 1.3 of the impact assessment). The proposal focuses on cross-border aspects and introduces solutions that Member States could not achieve on their own. The harmonisation elements are limited to what is necessary and proportionate to achieve the required objectives while respecting national legal traditions, including those with notarial involvement in company law procedures and, where possible, providing flexibility to Member States to achieve the requirements in line with their national laws and systems. In addition, the proposal does not introduce any new systems, but builds on the use of the existing and operational system of interconnection of registers as well as on the eIDAS Regulation¹ and the 2021 proposal to amend that Regulation as regards establishing a framework for a European Digital Identity².

The package of preferred measures can best address the objectives because it will make most information available cross-border and link BRIS with two other EU systems of interconnection of registers. This will greatly increase transparency on EU companies in the single market. It will also bring significant benefits in terms of increased legal certainty as it will provide for ex-ante checks and also introduce the additional common procedural requirements to keep company information up to date. In addition, it will have the strongest positive impact on enabling the direct use of company data in cross-border situations as it will not only apply the once-only principle to setting up cross-border subsidiaries and branches, but also introduce the EU Company Certificate and abolish formalities such as the apostille (see Section 7.2 of the impact assessment).

The package does not go beyond what is necessary to achieve the chosen measures. The multi-criteria analysis carried out for all policy options, which took into account their effectiveness, efficiency, coherence and proportionality, showed that all options had a net positive benefit and that the preferred measures ranked the highest in the analysis (see Section 6.5 of the impact assessment and Annex 4 on methodology).

In line with the principle of proportionality, the planned initiative will not go beyond what is necessary to achieve its objectives by targeting specific cross-border issues (i.e. the needs of direct users to access and use cross-border official company data from business registers). This could not be achieved by Member States on their own.

• Choice of the instrument

This proposal takes the form of a directive which amends Directive (EU) 2017/1132 and Directive 2009/102/EC. Directive (EU) 2017/1132 governs company law at EU level and Directive 2009/102/EC complements it with specific provisions for single-member companies.

3. RESULTS OF EX POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Ex-post evaluations/fitness checks of existing legislation

The proposal aims to introduce new provisions, and to the extent necessary complement existing ones, in order to increase the amount of company data available in business registers and/or through BRIS and improve its reliability. It also aims to enable the direct use of company data available in business registers when setting up cross-border branches and subsidiaries and in other cross-border activities and situations. Therefore, no evaluation of the existing rules took place.

• Stakeholder consultations

The Commission carried out broad consultation activities as part of this initiative to gather the views of relevant stakeholder groups. This included business registers, national authorities such as tax and labour law authorities, companies, including SMEs and business associations, legal professionals involved in company law procedures, trade unions, as well as investors, creditors, citizens and academic experts. The consultation activities included an inception impact assessment, a public consultation, a specific consultation of SMEs, targeted interviews with key stakeholders, interviews with legal professionals specialised in company law, as well as discussions with company law experts from Member State ministries and business registers in the Company Law Expert Group. The information gathered fed into the proposal.

The Commission gathered feedback on the inception impact assessment in summer 2021, with various stakeholders (including public authorities (business registers), business associations, companies, citizens and legal professionals) providing feedback. The public consultation on Upgrading digital company law ran from 21 December 2021 to 8 April 2022 ¹. The Commission received 83 responses from business associations, EU citizens, public authorities, companies, legal professionals and notaries, academic/research institutions, non-governmental organisations as well as trade unions. The specific consultation of SMEs, through an ‘SME panel’², took place between 2 May and 10 June 2022. 158 stakeholders replied, with the majority of responses submitted by SMEs in the form of limited liability companies. In addition, targeted e-surveys (with business registers, public authorities, legal practitioners, business and financial organisations and individual companies) and two virtual workshops, with companies and with business registers, were organised as part of an external contractor study ³ carried out for the Commission in the context of this initiative.

Across these consultation activities, a large majority of stakeholders, including SMEs, confirmed that they encountered difficulties when looking for information about companies. This included the fact that information about companies in different Member States was not comparable, that it was not possible to find relevant company information at EU level but only in the national business registers, and language difficulties. All stakeholder groups consulted (companies, authorities, business organisations, business registers, trade unions, legal professionals, citizens) expressed their support for making more harmonised company information available at EU level, while business associations stressed that no additional costs should be imposed on companies. A majority of stakeholders (in particular authorities, business registers and legal professionals) also considered that it would be useful to link BRIS with the EU interconnections of beneficial ownership registers and insolvency registers.

In the consultation activities, many stakeholders highlighted the importance of reliable company data. The importance of adequate checks to ensure the reliability of company data in business registers was in particular underlined by legal professionals, including notaries. Consultation activities also confirmed that companies, including SMEs, face difficulties when using the information that is already in their national business register, when dealing with competent authorities or in court proceedings or when setting up subsidiaries or branches in another Member State, in particular due to the need to provide a certified translation of company documents and get company documents legalised (apostille). Stakeholders in general expressed support for the planned measures to facilitate the cross-border use of company data. For example, many respondents, in particular SMEs, considered that not needing to resubmit information when setting up subsidiaries/branches in another Member State or having a common company extract would reduce administrative costs. Consultations with practising lawyers specialised in company law also confirmed that the application of the once-only principle and abolishment of formalities would reduce costs and the time needed for procedures. Legal professionals, including notaries, supported the idea of a common company extract.

The Commission also organised a number of bilateral meetings with key stakeholders in the area of company law representing businesses, legal professionals and employees to discuss issues of most relevance to them. It also organised a number of interviews with legal professionals working in the field of company law, which yielded concrete examples of administrative burden, costs and time needed for procedures, together with practical needs for improvement.

In 2021-2022, three meetings of the Company Law Expert Group (CLEG)⁴, bringing together Member State representatives from ministries responsible for company law, took place to discuss the main policy issues part of the Upgrading digital company law initiative ⁵. In general, Member States’ experts were open and expressed support for the measures planned under this proposal. Member States in general considered improving the transparency of company data important and supported the extension of company data available in BRIS. The linking of different systems of interconnection of registers with BRIS was considered useful. In discussions, Member States raised questions about the potential impact on national business registers and saw some challenges here; they also asked about the relationship between the proposed measures and existing EU and national rules. In general, Member States also acknowledged the importance of reliable company data and expressed their views on how the ex-ante checks of company information should look given the national checks already in place. There was support from many Member States for the measures to facilitate the cross-border use of company information (e.g. introduction of the once-only principle for setting up cross-border subsidiaries and branches, the common company extract and abolishing legalisation formalities). Member States also provided comments on these issues, e.g. on the information to be included in the common company extract or the importance of company documents being certified by registers.

• Collection and use of expertise

The Commission also used the results of an external contractor study ⁶, carried out to help gather evidence for this initiative. It included a legal mapping of the national company law systems of all Member States, targeted e-surveys, including two virtual workshops, and the qualitative and quantitative assessment of the impacts of potential measures.

The Informal Company Law Expert Group consisting of 17 company law academics and practitioners from 12 Member States and European Free Trade Association countries drew up two reports on issues relevant to this initiative, on transparency of company law data and on the cross-border use of company data ⁷.

• Impact assessment

The impact assessment for this proposal was examined by the Regulatory Scrutiny Board on 12 October 2022. A positive opinion with reservations was received on 14 October ⁸, and the recommendations from the Board were duly addressed in the final version of the impact assessment.

The impact assessment analysed policy options under four main areas relevant to this initiative. Three policy options were assessed to make more company data available in business registers and/or BRIS, consisting of different clusters of company data and varying in terms of whether data is already available in business registers or not as well as in terms of scope, i.e. the number of companies covered. The preferred option was to make available information about partnerships, third country company branches, cross-border group structures and ownership, place of management and of the main economic activity in national registers/BRIS. Two options were assessed to interconnect BRIS with other EU-level systems of interconnection of registers and enable better searches. The preferred option was to connect BRIS with the BORIS and IRI systems, use the European unique company identifier, and introduce new search functionalities in BRIS. Two options were assessed to ensure an adequate verification of company data before it is entered into the business register. The preferred option was to introduce an obligation to check a harmonised list of elements and some common basic procedural requirements for ensuring reliable and up-to-date company data. Furthermore, three options were assessed to enable direct cross-border use of company data from business registers in cross-border situations. The preferred option was to introduce the use of the once-only principle for setting up subsidiaries or branches in another Member State, provide a harmonised company extract in the EU, ensure mutual recognition of certain company data, and abolish formalities (apostille). The overall preferred policy option consisted of a package of the chosen measures under each of the four main issues. These were seen as mutually reinforcing and are therefore all necessary to best address the objectives of this proposal. For instance, the package would not only make more company data available and more easily accessible across the EU, but would also ensure that such data is more reliable. This in turn would be the prerequisite for enabling the direct use of such data across the single market.

The package of preferred measures, by making more company data publicly available in business registers and at EU level through BRIS and improving its reliability, is expected to reduce the administrative burden on companies overall and in turn make it easier to access finance and set up businesses. In addition, facilitation of the cross-border use of such data when setting up new subsidiaries or branches in another Member State or in other cross-border situations, including administrative or court procedures, is expected to result in significant recurrent cost savings. As a result, it should make it much easier to conduct cross-border business activities and facilitate access to other Member States’ markets.

The recurrent cost savings (administrative burden reduction) for companies setting up new cross-border subsidiaries or branches and for all companies engaging in cross-border business activities is estimated at around EUR 437 million per year. At the same time, the package will result in one-off costs for certain companies, i.e. for those that currently do not file specific information with a register, estimated at around EUR 311 million. These will be limited by the fact that Member States for example should not apply the filing fees separately for each new item of company data filed. The expected recurrent benefits for companies would therefore far outweigh the one-off costs, and the initiative will significantly reduce the administrative burden for companies in the single market.

This package is a continuation of developments related to digitalisation that have been taking place in company law up to now. The increased accessibility and reliability of company data, and better connections between business registers thanks to the once-only principle and also connecting other EU-level inter-connection systems with BRIS, should facilitate the work of registers due to an easier search for company data from other Member States and less need to request documents from companies. Due to the need for business registers to adapt IT systems, the one-off costs of the package are estimated at around EUR 5.4 million for all business registers together. Recurrent costs, e.g. to carry out the ex-ante verification of company data, are estimated at around EUR 4 million per year for all registers. However, Member States would be able to build on IT investments already done for BRIS in recent years, and adjustment costs for verification should be limited given the ex-ante checks already in place in many Member States. It is also likely that there will be some loss of revenue for registers, which charge fees for company extracts for cross-border use, estimated at around EUR 7.9 million for all registers.

As to the other authorities, easier access to more sets of reliable company data would facilitate also their work as they could consult company data directly in business registers and BRIS and require fewer documents from companies, resulting in some savings. Although authorities in charge of issuing apostilles will lose revenue, estimated at EUR 9.5 million per year, abolishing the apostille is expected to reduce the overall administrative burden given the current legal uncertainty and the related human resources and time needed to issue it.

The package is also expected to be highly beneficial for society in general, including consumers, due to its expected positive impact on providing more accessible and reliable company data across the EU. It will therefore allow consumers to make more informed choices when buying from or entering contracts with companies from other Member States. More available, accessible and reliable cross-border company data will also facilitate the fight against abuse and fraud. This initiative will therefore help create a fairer single market.

• Regulatory fitness and simplification

The proposal is expected to deliver considerable simplification benefits to companies, and in particular SMEs. Easier access to company data and the removal of administrative and financial barriers for its cross-border use will benefit SMEs in particular as they do not have the financial and administrative resources of large companies. SMEs will also benefit considerably from greater legal certainty as they are more affected by unclear and complex rules than bigger companies. The initiative will also benefit start-ups, as it responds to the calls to facilitate the expansion of start-ups in the EU Start-up Nations Standard ⁹.

By increasing transparency and trust in the market as well as making it easier to set up companies in another Member State and having a positive impact on cross-border activities, the proposal should stimulate cross-border trade, services and investment flows and therefore contribute to competitiveness and growth in the single market. These measures will apply to around 16 million limited liability companies and 2 million partnerships in the EU.

The proposal is expected to bring a strong positive recurrent administrative costs saving for companies, of around EUR 437 million per year. At the same time, it may result in some new one-off costs on companies for filing information to the register, estimated to amount to around EUR 311 million. Overall, the recurrent savings for companies are expected to much outweigh the one-off costs related to filing of additional company data.

This proposal upgrades EU digital company law further through the use of digital tools and processes. For instance, it aims to increase the availability of company information, in particular at cross-border level, by making more company data available online through BRIS on the e-Justice portal. To further increase transparency, it will link BRIS with other EU-level systems of interconnection of registers, which are all available via the e-Justice portal. This will in turn strongly contribute to create more connected public administrations at EU level. To remove the administrative burden when companies and public authorities use company information across the EU, it introduces the digital EU Company Certificate and digital EU power of attorney and applies the once-only principle for setting up cross-border subsidiaries and branches, the latter thanks to secure electronic exchanges of information between registers via BRIS. The proposal focuses on electronic copies and extracts of company documents or information and stresses the importance of their certification in line with the eIDAS Regulation. It is therefore digital ready as it relies heavily on the use of digital technologies and data. It also provides ‘digital by default’ solutions to increase transparency on EU companies and ‘digital by default’ company law procedures to facilitate the use of company data across the single market.

While the proposal focuses primarily on online procedures and electronic copies and extracts of company documents or information, its provisions take into account both the physical and digital environment and also address physical procedures, e.g. any other forms of formation of companies than fully online, and paper copies and extracts.

Thanks to the increased possibility to use digital procedures and tools between business registers and companies, and also between business registers, and an increased application of the once-only principle, this proposal is likely to have some small positive environmental impacts. Therefore, it is seen as consistent with the ‘do no significant harm’ principle, with the climate-neutrality objective set out in Article 2(1) of European Climate Law ¹⁰ and the 2030 and 2040 targets. This proposal will also contribute indirectly to the Sustainable Development Goal 8 on decent work and economic growth as it will enhance the business environment in the single market.

• Fundamental rights

The proposal will facilitate the implementation of the right of establishment in all Member States, as prescribed by Article 15(2) of the EU Charter of Fundamental Rights. There should be a positive impact on companies benefiting from the opportunities offered by the single market, in particular concerning the freedom to conduct business set out in Article 16 of the Charter. The proposal will require certain processing, including disclosure of personal data that will interfere with the right to protection of personal life as laid down in Article 7 and right to personal data protection as laid down in Article 8 of the EU Charter of Fundamental Rights. Most notably, the proposal will require the disclosure of and cross-border access to certain information in relation to legal entities (e.g. partnerships), including certain personal data such as information about partners and single-member shareholders. This data is usually already publicly disclosed in Member States, and this proposal makes such data available cross-border through BRIS. Member States may also process some personal data to verify the company data, which is already the case in Member States. Linking BRIS with other EU interconnection systems will not impact the protection of personal data as each system will keep its rules and requirements related to access. The proposed solutions are necessary and proportionate to improve transparency, create trust between Member States and ensure legal certainty and protection of third parties when using company information cross-border and contribute to the fight against fraud and abuse and thus contribute to well-functioning of single market. The Member States will also ensure the protection of personal data in line with Article 8 of the Charter, the EU law on data protection including the relevant case-law ¹¹.

This proposal will increase the availability of company information in business registers, in particular at cross-border level. In this context, specific attention must be paid to its accessibility for persons with disabilities, given the extra barriers they face. The Union’s policies regarding persons with disabilities are grounded in EU primary law, including Article 26 of the Charter of Fundamental Rights of the European Union (on the right of persons with disabilities to benefit from measures designed to ensure their independence, social and occupational integration and participation in the life of the community) and the UN Convention on the Rights of Persons with Disabilities (UN CRPD). Among others, the UN CRPD, to which both the Union and its Member States are parties, requires State Parties to take appropriate measures to ensure that persons with disabilities have access, on an equal basis with others, to information and communications, including information and communications technologies and systems, and to other facilities and services open or provided to the public. In line with this, the Strategy for the Rights of Persons with Disabilities 2021-2030 underlines that accessibility to the built and virtual environments, to information and communication technologies (ICT), goods and services, including transport and infrastructure, is an enabler of rights and a prerequisite for the full participation of persons with disabilities on an equal basis with others. Consequently, the access to company information in business registers should be granted in accordance with accessibility requirements for persons with disabilities provided in applicable Union and national law. In addition, to ensure access to company information provided by the business registers in all the Member States on an equal basis with other users, the review should include an assessment of whether additional measures should be taken to fully address the needs of persons with disabilities.

4. BUDGETARY IMPLICATIONS

The proposal is expected to have some budgetary impact for Member States, which was estimated in the impact assessment for this proposal and is described in the section above about the impact assessment.

As regards the impact on the EU budget, this proposal enlarges the scope of the BRIS system. This will require the further development of existing technical specifications and standards, further software development work on the system and coordination of the activities undertaken by national authorities to put the required IT developments into place at national level. To carry out these tasks, it will not be necessary to increase the current resources in the Commission working on BRIS business management (1 full-time equivalent/FTE) and project management (1.25 FTEs). Furthermore, the funds provided for regular maintenance of the BRIS system (currently around 2 million EUR per year, provided by the Digital Europe programme) will also be sufficient to carry out the tasks required under this proposal.

5. OTHER ELEMENTS

• Implementation plans and monitoring, evaluation and reporting arrangements

The Commission will help Member States transpose the provisions under this proposal through close cooperation with national company law experts in the CLEG and by providing guidance as necessary (e.g. by organising transposition workshops, providing bilateral advice)¹. The Commission will also monitor implementation of the proposed measures and ensure that it is in line with the Interoperable Europe Act proposal ² and the European Interoperability Framework ³, thus fostering cross-border and cross-sector interoperability in Europe. Monitoring will consist of analysing the impact of the proposal on the accessibility and reliability of company data in business registers and through BRIS via targeted contacts with relevant stakeholders, discussions with business registers within the CLEG and on the basis of information that could be gathered through BRIS or other EU systems of interconnection of registers such as BORIS or IRI. Monitoring would also include analysing to what extent the direct use of company data cross-border has been facilitated and to what extent the measures introduced by this proposal are being used by stakeholders, e.g. by analysing the trends in setting up cross-border subsidiaries and branches across the EU or checking the numbers of EU Company Certificates issued. Some of the relevant information could be obtained from BRIS and the Commission could gather other information through targeted contacts with relevant stakeholders, surveys and if necessary targeted studies. An evaluation report should be drawn up to assess the impact of this proposal once sufficient experience has been gained on the application of the proposed provisions. It would also analyse the potential of cross-sector interoperability with other EU level systems providing mechanisms for cooperation between competent authorities, e.g. in the areas of taxation or social security or the Once-only Technical System under the SDG Regulation, to build on the “first hand” information about companies in business registers, their interconnection at EU level and the use of EUID to link the information available about a particular company across different EU systems, and to avoid duplication and contribute to creating more connected public administrations cross-border in the single market. The provision of information for monitoring and evaluation should not impose any unnecessary administrative burden on the stakeholders concerned.

• Explanatory documents (for Directives)

The proposal is an amendment to Directive 2009/102/EC on single-member private limited liability and to Directive (EU) 2017/1132 relating to certain aspects of company law. To ensure the proper implementation of this complex Directive, the explanatory document, e.g. in the form of correlation tables, would be necessary.

• Detailed explanation of the specific provisions of the proposal

Amendment to Directive 2009/102/EC

Article 3 of Directive 2009/102/EC is replaced. The new provision aims to ensure that the identity of the single member is always disclosed in national business registers and made accessible through the system of interconnection of registers.

Amendments to Directive (EU) 2017/1132

Article 1 extends the subject matter falling under Directive (EU) 2017/1132 to those new areas to which this proposal adds measures.

Article 7 is extended to cover partnerships in line with Article 10.

Article 10 is replaced by a new provision introducing the requirement to have a preventive administrative or judicial control and a procedure for the legality check of the instrument of constitution of both limited liability companies and partnerships in a fully online, hybrid or offline mode of formation. If a partnership does not have an instrument of constitution, the legality check applies to any document that provides the same information as the instrument of constitution.

Amended Article 13 includes, where specified in the relevant provisions, partnerships under the scope of Sections 1 and 1A of Directive (EU) 2017/1132.

Article 13a includes definitions related to the new Article 14b on groups of companies and to the new Article 16d on exemption of legalisation.

Article 13b is amended to align it with the revision of the eIDAS Regulation in respect to the European Digital Identity Wallet.

Article 13c is amended to ensure that the national rules on the authenticity, accuracy, reliability, trustworthiness and appropriate legal form of documents or information will not prevent the application of the new provisions on the EU Company Certificate, digital EU power of attorney, documents exempted from legalisation/apostille and the translation of these documents.

Amended Article 13f on information requirements includes information about rules related to partnerships and information about the rules and procedures related to filing deadlines and other rules on keeping the register information up to date.

Article 13g is amended to include the once-only principle whereby a company does not need to resubmit information that is in its own registers when forming a company in another Member State. Instead, the registers exchange this information, whereby the register where the company is to be formed retrieves this information from the register of the company.

Article 13h is amended to be in line with the amended Article 10.

Article 13j is aligned with amended Articles 10 and 15.

Article 14 is amended to include in the list of documents and information to be disclosed in the business register the place of central administration and the principal place of business in case these are not in the same Member State as the place of the registered office.

New Article 14a introduces a list of documents and information to be mandatorily disclosed to the business register by partnerships.

New Article 14b introduces a disclosure requirement for group-related information. This requirement should be fulfilled by both the ultimate parent company and the subsidiary. If the ultimate parent is established outside the EU, then the EU intermediate parent company should carry out the relevant disclosure requirement. In case no intermediate parent company is governed by the law of a Member State, the subsidiary company governed by the law of a Member State should disclose the required information. The EU ultimate parent or the EU intermediate parent company or the subsidiary needs to disclose information related to the EU and non-EU subsidiaries of the group. This information should also be shared with the registers of the subsidiaries. A visualisation of the group is made available through the system of interconnection of registers.

Article 15 is replaced. The new provision introduces a time limit for the filing of changes to documents and information in the register and those to be made publicly available by the register. It also requires Member States to have in place procedures to keep the information in the business register up-to-date, including the status of companies.

Article 16 is amended to include partnerships and disclosed information related to partnerships in its scope, and the group information in line with Article 14b to be recorded in the business register.

Article 16a is amended to include information about partnerships and groups in the scope and to ensure compatibility with the proposal xxx European Digital Identity Wallet.

New Article 16b introduces the harmonised EU Company Certificate.

New Article 16c provides a standard model for the Digital EU power of attorney that can be used in cross-border procedures in the context of Directive 2017/1132. While the power of attorney should be drawn up and revoked in accordance with national law, the provision introduces some mandatory verifications for when it is being drawn up. The power of attorney should be filed in the business register of the company, and third persons with a legitimate interest should have access to it.

New Article 16d requires Member States to ensure that copies and extracts of documents of information provided, and certified true copies by business registers as well as notarial acts and administrative documents and their certified copies, as well as certified translations are exempted from any form of legalisation or similar formality as long as they meet certain minimum requirements related to the origin of the document.

New Article 16e provides for safeguards in case the authorities to which the copies and extracts of documents of information provided, and certified true copies by business registers are presented have doubts about the origin and authenticity of the documents. In case of doubt, a procedure to verify the origin of the documents through registers is introduced.

New Article 16f requires Member States to exempt from translation copies of documents and information provided by business registers and that are used in cross-border situations where the information is accessible through the system of interconnection of registers via explanatory labels referred to in Article 18 or where the specific information is included in the EU Company Certificate referred to in Article 16b. The provision also limits the certified translations of the instrument of constitution and the statutes or other documents provided by the business registers to strictly necessary.

Article 17 is extended to apply to the information to be disclosed about partnerships.

Article 18 is extended to apply to information about partnerships and groups. In addition, amended Article 18 specifies which personal data should be made available through the system of interconnection of registers. It also clarifies that Member States should not store personal data transmitted through the system of interconnection of registers for specific purposes unless otherwise provided by Union or national law.

New Article 19a introduces rules on fees to be charged for information on partnerships available through the system of interconnection of registers similarly with the existing rules for information on limited liability companies (i.e. the current Article 19).

Amended Article 21 also applies to information to be disclosed about partnerships and groups.

Article 22 is amended to provide for the access links between the system of interconnection of registers, the beneficial ownership registers interconnection ⁴ and the insolvency registers interconnection ⁵.

Amended Article 24 includes the relevant new implementing acts required to implement the specific provisions.

Article 26 is amended to apply to partnerships.

Amended Article 28 specifies that penalties should be effective, proportionate and dissuasive and lists the mandatory cases where penalties should be applied.

Article 28a is amended to specify details for the application of the once-only principle for filing for branches (to align it with the rules in Article 13g (as amended) for setting up cross-border subsidiaries) when a company registers a branch in another Member States.

Article 28b is amended in line with the amended Article 15.

Article 30 is amended by deleting point b of paragraph 2 as this is now covered by the Article 16b on the EU Company Certificate.

Amended Article 36 provides that information about third country branches should be made publicly available through the system of interconnection of registers and specifies which information should be accessed free of charge.

Article 40 is amended to require that penalties should be effective, proportionate and dissuasive.

Annex IIB introduces the list of partnerships in the Member States covered by the Directive.