Jourova: EU rules on company seat transfers means savings for business

"Companies should be able to effectively exercise their right to freedom of establishment, but we also want this to happen with full respect of national social and labour prerogatives," says Vĕra Jourová. [Source: EC - Audiovisual Service ]

This article is part of our special report EU law goes digital.

European firms could save millions in start-up and merger costs if they could use EU rules on cross-border transfer of registered office, says Věra Jourová, adding the saved money would be better invested in jobs, innovation and growth.

Věra Jourová is EU Commissioner for Justice, Consumers and Gender Equality. She answered in writing to questions from EURACTIV. 

There is currently no European framework on how to deal with the cross-border transfer of company seats. So what will be the main objectives of this proposal, the key principles behind it?

The main objective of our company law package is to improve the Internal Market and make it fairer and more predictable – to stimulate sustainable jobs, growth and investments, with a positive impact on SMEs in particular.

There are 24 million companies in the EU, and 99% are small and medium sized enterprises. We want to help them flourish and expand, in particular the smaller ones that feel the effects of costs and barriers the most. In a dynamic internal market companies should be able to move across borders more easily; this stems from their need to adapt to market conditions and realise new business opportunities.

Companies should be able to effectively exercise their right to freedom of establishment, but we also want this to happen within full respect of national social and labour prerogatives. In a nutshell, the specific objectives are twofold:

  • to cut costs and administrative hurdles for companies when undertaking cross-border operations;
  • to provide for a clear legal framework with safeguards built in to guarantee the effective protection of the rights conferred particularly on employees and other stakeholders.

Last time the Commission tried to pass legislation on the topic, it failed because of resistance from the member states. What were the lessons learned in view of the forthcoming proposal? Can Brexit be a driver to get the legislation accepted this time?

I’m well aware that cross-border conversions are a complex issue that’s why we are carefully assessing how to address it.

We want to take into careful consideration all the different interests at stake. We’ve recently done an online public consultation and several other consultation activities. These consultations also collect the member states’ views and they provide essential input for assessing the best way forward.

Our initial estimates show that around €207 million could be saved in start-up and merger costs if half a percent of the companies would move within the EU and could use EU rules on cross-border transfer of registered office. The saved money would be better invested in jobs, innovation and growth.

But currently the prospect of these costs deters companies from moving, in particular small ones. At the same time we are also committed to safeguard the rights of other stakeholders, such as employees and shareholders.

We hope that these aspects will be acknowledged by member states and stakeholders and trigger their support for the eventual proposals.

How does the Commission plan to approach the question of the “unity of company seats”, which proved to be a sticking point in the previous negotiation?

In light of the results of our different consultations, we’re looking at different options for striking a balance. By this, I mean providing an efficient and attractive legal framework for companies to facilitate growth, whilst taking into account the legitimate interests of the member states and other stakeholders.

Do you think a transfer of company seat should be treated like a merger – with a certain number of procedural steps to be observed in the country of origin and the country of destination? What is the Commission’s view on this, notably regarding the protection of shareholders and creditors?

If we do include a legislative proposal on cross-border conversions in the company law package, the aim is to have a harmonised procedural framework to provide legal certainty for companies and other stakeholders.

In 2012, the European parliament made detailed recommendations on how to deal with the cross-border transfer of company seats. Which ones do you think are worth taking on board and which ones do you think should be rejected?

The Parliament has addressed the issue of cross-border conversions in several different resolutions – in 2009, in 2012 and in 2017. We’re going to a take all of these resolutions – together with other input – into account when assessing the way forward.

The recent spate of corporate tax evasion scandals (Luxleaks, Panama papers) has shone the spotlight on aggressive tax planning practices by companies operating in Europe. How can the upcoming proposal on cross-border of company seat help tackle this issue? Will so-called “letter box companies” be addressed in the proposal?”

There’s no doubt that I’m committed to fighting against the abusive use of letterbox companies. However, in general, this initiative won’t focus on the substantive requirements for setting up a company. It will only deal with specific cross-border operations.

EU eyes corporate rules shake-up with law on seat transfer

The European Commission is preparing a new directive on the cross-border transfer of company seats, a move that could have far-reaching implications for other areas of corporate governance, including tax planning and cross-border mergers, EURACTIV has learned.