COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2017/1132 as regards the use of digital tools and processes in company law and Proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions
Date: 2018-04-25
Institutions: Directorate-General for Justice and Consumers, European Commission
Subjects: access to information, codification of EU law, company law, company with share capital, cross-frontier data flow, digital single market, digitisation, disclosure of information, economic concentration, registration of a company

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   EUROPEAN COMMISSION  Brussels, 25.4.2018  SWD(2018) 142 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the document Proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2017/1132 as regards the use of digital tools and processes in company law  and  Proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions    {COM(2018) 239 final}  - {COM(2018) 241 final} - {SWD(2018) 141 final}  
 
 
Impact  assessment  on  EU  Company  Law  package:  making  the  best  of  digital  solutions  and  providing  efficient 
rules for cross-border operations whilst respecting national social and labour law prerogatives  

Executive Summary Sheet 

Why? What is the problem being addressed?  

A. Need for action 

National rules on the use of digital tools (e.g. for registration and filing to the business register) either differ from 
country to country or do not exist and current EU legislation provides for only very limited use of such tools. In 
particular, there are no provisions on registering companies online. This inability to use relevant digital tools is a 
barrier to companies exercising their right to freedom of establishment. Similarly, in the absence of a reliable EU 
legal  framework  for  cross-border  divisions  and  conversions,  and  as  a  result  of  inefficiencies  in  the  current  EU 
rules  for  cross-border  mergers,  companies  have  difficulty  in  accessing  markets  in  other  Member  States  and 
often need to find expensive alternatives to direct procedures. This can deter them, particularly if they are SMEs, 
from doing cross-border business. Relevant stakeholders (employees, creditors, minority shareholders and other 
third parties) are faced with uncertainty as to their rights and protections in cross-border situations. The divergent 
national conflict-of-law rules contribute to this situation.  

What is this initiative expected to achieve?  
The  objective  is  to  develop  the  Single  Market,  deepening  it  and  making  it  fairer  and  more  predictable,  by 
increasing  the  responsible  use  by  companies  of  the  opportunities  the  Single  Market  offers.  The  initiative  is 
expected  to  stimulate  jobs,  growth  and  investment,  with  a  particularly  positive  impact  on  SMEs.  It  is  also 
expected  to  support  the  creation  of  the  digital  single  market  by  improving  the  use  of  digital  technologies 
throughout a company’s life-cycle. It is expected to provide more legal certainty for companies and lead to cost 
reductions,  while  offering  effective  protection  for  employees,  creditors,  minority  shareholders  and  third  parties. 
Overall,  it  is  expected  to  provide  a  balanced  framework  where  the  use  of  the  freedom  of  establishment 
enshrined in the EU Treaty goes hand in hand with protecting national social and labour law prerogatives, in line 
with  the  European  Pillar  of  social  rights.  The  initiative  will  complement  other  EU  initiatives  such  as  the  Single 
Digital Gateway.  

What is the value added of action at the EU level?  

There is clear added value in addressing these problems at EU level. The current problems are mainly caused 
by divergent national rules, a lack of appropriate rules or the need to modernise the current EU rules. Member 
States  acting  individually  cannot  satisfactorily  remove  the  barriers  to  the  freedom  of  establishment,  because 
national rules and procedures would need to be compatible with each other in order to work in a cross-border 
situation.  Similarly,  Member  States  acting  alone  cannot  establish  safeguards  for  stakeholders  in  cross-border 
situations. The Court of Justice has repeatedly recognised that not all differences in national rules can be solved 
by jurisprudence, but may need to be dealt with by future legislation or conventions (C-81/87 para. 21 to 23, C-
208/00 para. 69, C-210/06 para. 108). 

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why?  
A  number  of  policy  options  were  considered  for  improving  use  of  digital  tools  and  processes,  cross-border 
mergers,  divisions  and  conversions  and  for  resolving  legal  conflicts.  For  each  of  these  policy  areas,  preferred 
options were chosen. The preferred options for improving the use of digital tools and processes would introduce 
harmonised rules on online registration of companies and branches and filing company documents, as well as 
increased  transparency  of  company-related  information  in  business registers. For  cross-border  operations,  the 
preferred  options  for  employee  information,  consultation  and  participation  would  i)  introduce  targeted 
amendments  to  existing  cross-border  mergers  rules,  ii)  also  apply  these  to  cross-border  divisions  and 
conversions, and iii) provide for specific measures for cross-border divisions and conversions as a result of the 
perceived  higher  risks  for  employees  inherent  in  such  operations.  The  preferred  options  would  also  introduce 
harmonised  rules  to  protect  creditors  and  minority  shareholders  in  all  cross-border  operations.  The  preferred 
option for cross-border conversions would introduce rules and procedures requiring Member States to assess on 
a  case-by-case  basis  whether  the  cross-border  conversion  in  question  constitutes  an  artificial  arrangement 
designed to obtain undue tax advantages or unduly prejudice the rights of employees, minority shareholders or 

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employees.  For  conflict-of-laws,  the  preferred  option  would  harmonise  the  relevant  rules,  in  particular  the 
connecting  factor  based  on  the  place  of  incorporation  of  the  company.  Overall,  the  preferred  options 
complement each other in contributing to the initiative’s policy objectives. This means that the maximum impact 
would be achieved if the package were composed of all the five policy areas. However, the policy areas are self-
standing and the package could be composed of only some of these. 

Who supports which option?  
Based on the outcome of stakeholder consultations, harmonised rules related to digital tools and processes are 
strongly supported by the majority of Member States and businesses, while trade unions do not consider them 
as  a  priority  and  notaries  are  against.  Harmonised  rules  for  cross-border  conversions  are  supported  by  all 
stakeholders,  in  particular  all  those  who  replied  to  the  2017  public  consultation.  Cross-border  divisions  are 
supported  by  Member  States,  businesses,  notaries,  but  not  by  trade  unions.  The  need  to  revise  the  Cross-
border Mergers Directive is acknowledged by all respondents, except notaries, although respondents consider it 
a  lower  priority.  With  regard  to  conflict-of-laws,  Member  States  and  businesses  which  replied  to  the  2017 
consultation support the proposed measures, while trade unions and notaries do not see the need for EU action. 

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)?  
The initiative would allow companies to fully register, file and amend their data in business registers online. For 
new  companies  registered  in  the  EU,  the  savings  from  introducing  online  registration  are  estimated  to  be 
between €42-84 million. Companies would also be able to file certain information only once; stakeholders would 
have  easier  access  to  company  information  in  business  registers.  New  rules  on  cross-border  divisions  and 
conversions  are  expected  to  save  between  €12 000  and  €37 000  per  operation  for  divisions  and  €12 000  and 
€19 000  per  operation  for  conversions,  although  the  exact  cost  reductions  will  depend  on  the  final  procedural 
rules  adopted  and  on  the  related  compliance  costs.  A  positive  social  impact  is  expected  to  result  from  the 
protection  of  rights  related  to  employee  participation  and  from  improved  information  for  employees  in  cross-
border operations. Creditors and minority shareholders would benefit from harmonised protection and thus legal 
certainty. The conflict-of-law rules would improve legal certainty and thus bring economic benefits. 

What are the costs of the preferred option (if any, otherwise main ones)?  
The  initiative  would  require  Member  States  to  enact  rules  and  build  or  adapt  systems  which  would  allow 
companies  to  register  online.  However,  experience  from  countries  that  have  already  digitised  their  registration 
and  filing  procedures  shows  that  the  costs  related  to  such  developments  are  quickly  recovered  and  the 
functioning  of  public  administration  is  rendered  more  efficient.  Although  the  role  of  notaries  as  such  is  not 
impacted, it may be that in some Member States the way in which notarial services are provided would need to 
be  adapted  in  line  with  the  preferred  options  and  legislation  already  in  force  (e.g.  the  e-IDAS  Regulation). 
Increased cross-border operations could result in a net reduction in the number of companies in some Member 
States and a net increase in others. This might have a negative impact on taxation in some Member States, but 
this should be mitigated by the introduction of safeguards against the risks of social and tax abuse.  

How will businesses, SMEs and micro-enterprises be affected?  
SMEs, and especially small and micro-enterprises, would be particularly positively impacted by these proposed 
measures,  as  they  are  the  ones  with  the  greatest  need  for  new  cross-border  operations  rules.  They  cannot 
afford expensive, indirect or sequential cross-border operations. The same applies to the proposed measures to 
improve  the  use  of  digital  tools,  which  are  mostly  needed  by  smaller  companies  to  cut  costs  and  stay 
competitive. The legal certainty provided by conflict-of-law rules would also benefit these companies.  

Will there be significant impacts on national budgets and administrations?  
The  biggest  challenge  would  be  in  building  or  adapting  infrastructures  to  allow  for  the  use  of  digital  tools  and 
processes in company law. However, as explained under ‘costs of the preferred option’, this is not expected to 
have significant negative impacts on national budgets and administrations due to economies of scale. 

Will there be other significant impacts?  
The  package  would  have  a  positive  impact  on  competition  and  competitiveness  through  improved  business 
opportunities  in  the  Single  Market.  Introducing  harmonised  rules  for  using  digital  tools  and  cross-border 
operations would make it easier and more cost-effective to set up companies domestically and cross-border, and 
to establish operations in other Member States. Efficiency gains for companies could have a positive impact on 
consumers in terms of price and offer. Companies could better adapt to market realities (e.g. volatile business 

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opportunities), leading to increased competition. The use of digital tools should stimulate entrepreneurship and 
innovation,  as  it  would  offer  more  opportunities  to  set  up  innovative  start-ups.  With  regard  to  cross-border 
operations  by  companies,  the  package  would  provide  employees  with  improved  protection  across  the  Single 
Market compared to the situation today.  

When will the policy be reviewed?  
The policy should be reviewed 5 years after the adoption or transposition of the relevant rules. 

D. Follow up 

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