EU plans to simplify company registrations

The European Council has adopted a directive designed to make setting up a company in the EU simple and cheaper by promoting online options for company registration

The new rules will mean companies are able to register limited liability companies, set up new branches and file documents in the business register fully online.

There will be national model templates and information on national requirements available online and in a language broadly understood by the majority of cross-border users.

The changes to EU company law require that the rules on fees for online formalities are transparent and applied in a non-discriminatory manner, and that the fees charged for the online registration of companies do not exceed the overall costs incurred by the member state concerned.

The directive is based on the 'once-only' principle, meaning that a company will only need to submit the same information to public authorities once. The documents submitted by companies are stored and exchanged by national registers in machine-readable and searchable formats.

In addition, the rule changes mean more information about companies is made available to all interested parties free of charge in the business registers.

‘The directive will provide improved online procedures, creating a modern and safe way for businesses to dismantle the obstacles involving setting up companies, registering their branches or filing documents, especially in cross border operations,’ said Romanian minister of justice, Ana Birchall. 

The directive also sets out safeguards against fraud and abuse in online procedures, including control of the identity and legal capacity of persons setting up the company and the possibility of requiring physical presence before a competent authority. It maintains the involvement of notaries or lawyers in company law procedures as long as these procedures can be completed fully online. It also foresees exchange of information between member states on disqualified directors in order to prevent fraudulent behaviour.

The directive does not harmonise substantive requirements for setting up companies or doing business across the EU.

The directive has still to be signed and published in the Official Journal of the EU, but will enter into force on the 20th day following publication. It will apply two years from that date, although a number of provisions will only apply four years from the date by 2022 at the latest. Depending on the UK's post-Brexit position, British companies looking to set up offices in Europe should be able to use the simplified process.

According to the European Commission, there are around 24m companies in the EU, out of which approximately 80% are limited liability companies. The overwhelming majority of limited liability companies are small and medium-sized enterprises, which should benefit from the simplification to the rules.

Amending Directive (EU) 2017/1132 on use of digital tools and processes in company law

Pat Sweet

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