Cross-border business growth prompts European company law review

A new consultation will consider the current relationship between company law and corporate governance, and asks whether the existing Company Law Directives should be merged into a single document for ease of use.

It will also look at whether the EU should develop a set of rules to cover groups of companies under the same management structure or source of control.

"EU company law has played a central part in building the single market. It is now time to see whether today's needs are still met by the existing legal framework," the Commission said in a statement.

While recognising different legal traditions in the member states, the Commission said common rules offering equivalent protection to shareholders, creditors and other stakeholders who are affected by companies' actions across the EU was "crucial to ensure legal certainty and protect shareholders' rights". The current law harmonises the protection of shareholders' interests, capital rules, takeover bids, mergers and divisions, corporate governance and related areas such as financial reporting and accounting.

The Commission set up a group of experts to look at the future of company law in autumn 2010. In its report (82-page / 543KB PDF), presented at a public conference in Brussels last year, the group made a number of recommendations in areas such as cross-border mobility and corporate groups. However, it warned that harmonisation should be focussed and aimed at particular problems, and only done after "careful vetting of the facts, including appropriate public consultations and impact assessments".

From a cross-border perspective, the consultation asks how the Commission could make it easier for a company to transfer its seat, or place of establishment, to another member state. It also asks whether the rules on cross-border mergers, and on how to deal with a company splitting into different entities in different states, should be reviewed.

The consultation will also specifically consider the advantages and shortcomings of existing company forms.

Internal Market and Services Commissioner Michael Barnier will announce potential corporate governance and company law initiatives in mid-2012, he said. The Commission issued a separate consultation on corporate governance last year.

"Shaping EU policy on European company law is a challenge that we have to meet. Getting company law right makes it easier for businesses to develop across the EU to the benefit of their shareholders and customers. The landscape for company law is changing and we need to think about how best to adapt our regulatory framework," he said.

The consultation is open until 14 May 2012.