EU adapts company law to digital age

February 8, 2019

The Council of the European Union has reached a provisional agreement with the European Parliament’s representatives on a draft directive with the aim of facilitating and promoting the use of online solutions in a company’s contacts with public authorities throughout its lifecycle.

The new rules aim at ensuring that:

  • companies are able to register limited liability companies, set up new branches and file documents for companies and their branches, to the business register – all online;
  • national model templates and information on national requirements are made available online and in a language broadly understood by the majority of cross-border users;
  • rules on fees for online formalities are transparent and applied in a non-discriminatory manner;
  • fees charged for the online registration of companies do not exceed the overall costs incurred by the member state concerned;
  • e ‘once-only’ principle, whereby a company would only need to submit the same information to public authorities once;
  • documents submitted by companies are stored and exchanged by national registers in machine-readable and searchable formats;
  • more information about companies is made available to all interested parties free of charge in the business registers.

At the same time, the draft Directive sets out the necessary 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 an 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 provisionally agreed text will now have to be approved by the relevant bodies of the two institutions. It will then be formally adopted after the usual legal/linguistic scrutiny.  

Whether it will apply in the UK will depend on whether transitional arrangements for the UK’s exit from the EU come into force, and for how long, but it may be of interest for companies with subsidiaries in EU or EEA member states.