COMMISSION STAFF WORKING DOCUMENT 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

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 25.4.2018  SWD(2018) 141 final  COMMISSION STAFF WORKING DOCUMENT  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) 142 final}  
 
 
Table of contents 

GLOSSARY ........................................................................................................................ 3 

1 

INTRODUCTION ....................................................................................................... 5 

1.1  Context .............................................................................................................. 5 
1.2  Calls for an initiative ......................................................................................... 6 
1.3  Scope of the impact assessment ........................................................................ 8 

2 

THE PROBLEM DEFINITION ................................................................................ 12 

2.1  Use of digital tools and processes throughout a company's lifecycle ............. 13 
2.2  Cross-border mergers ...................................................................................... 18 
2.3  Cross-border divisions ..................................................................................... 22 
2.4  Cross-border conversions ................................................................................ 26 
2.5  Conflict of laws rules ....................................................................................... 32 
2.6  How would the problem evolve – what is the baseline scenario? ................... 37 

3  NEED FOR ACTION AT EU LEVEL ..................................................................... 39 

3.1  Legal basis for the EU to act ........................................................................... 39 
3.2  Added value of EU action ............................................................................... 39 

4  OBJECTIVES: WHAT IS TO BE ACHIEVED? ..................................................... 40 

4.1  Policy objectives .............................................................................................. 40 
4.2  Consistency  with  other  EU  policies  and  the  Charter  of  Fundamental 

Rights ............................................................................................................... 41 

5 

POLICY OPTIONS AND ANALYSIS OF THEIR IMPACTS ............................... 42 

5.1  Use of digital tools and processes throughout a company's lifecycle ............. 43 
5.2  Cross-border operations (mergers, divisions and conversions) ....................... 53 
5.3  Conflict of laws rules ....................................................................................... 75 

6 

PACKAGE  OF  PREFERRED  POLICY  OPTIONS  AND  OVERALL 
IMPACTS .................................................................................................................. 83 

6.1  Summary of preferred policy options .............................................................. 83 
6.2  Analysis of the overall impacts of the package ............................................... 86 
6.3  Subsidiarity and proportionality of options ..................................................... 95 
6.4  Choice of legal instrument ............................................................................... 95 

7  MONITORING AND EVALUATION ..................................................................... 95 

7.1  Monitoring ....................................................................................................... 96 
7.2  Evaluation ........................................................................................................ 97 

ANNEX 1: PROCEDURAL INFORMATION ................................................................ 98 

ANNEX 2: STAKEHOLDER CONSULTATION ......................................................... 106 

ANNEX 3: WHO IS AFFECTED AND HOW? ............................................................. 122 

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ANNEX 4: PROBLEM DEFINITION – ADDITIONAL EVIDENCE.......................... 124 

ANNEX 5: EVALUATION OF THE FUNCTIONING OF RULES ON CROSS-

BORDER MERGERS ............................................................................................. 143 

ANNEX  6:  OVERVIEW  OF  ECJ  CASE-LAW  ON  CROSS-BORDER 

MOBILITY OF COMPANIES ............................................................................... 160 

ANNEX  7:  OVERVIEW  OF  MEMBER  STATES'  POSITIONS  ON  THE 

QUESTIONS OF SEAT AND CONNECTING FACTORS .................................. 169 

ANNEX  8:  METHODOLOGY  OF  KEY  ASSUMPTIONS  FOR  CROSS-

BORDER DIVISIONS AND CROSS-BORDER CONVERSIONS ...................... 172 

ANNEX  9:  CALCULATION  METHOD  FOR  POTENTIAL  SAVINGS  FOR 
COMPANIES  BROUGHT  ABOUT  BY  THE  USE  OF  DIGITAL  TOOLS 
AND PROCESSES THROUGHOUT A COMPANY'S LIFECYCLE .................. 184 

ANNEX 10: EMPLOYEE PARTICIPATION AT BOARD LEVEL ............................ 190 

ANNEX 

11: 

THE 

SME 

TEST 

– 

SUMMARY 

OF 

RESULTS………………………………… ............................................................ 192 

2 

 
 
GLOSSARY  

Acquiring company 

The  company  that  receives  the  assets  and  liabilities  from  the 
acquired company in a merger or division by acquisition. 

Business register 

Conflict of law  

Connecting factor  

The database maintained by each Member State to keep record 
of  registration  of  companies  in  the  given  Member  State  and 
subsequent changes in the information on companies. 

In  situations  with  cross-border  elements,  conflict  of  laws  rules 
determine which of possibly two or more national laws apply to 
the internal functioning of a company. 

The relevant link between a subject (in this context a company) 
and  a  legal  order  which  determines  the  applicable  law  in  a 
conflict of law situation. 

Cross-border conversion   An  operation  whereby  a  company  formed  and  registered  in 
accordance  with  the  law  of  a  Member  State  converts  into 
another company formed and registered in accordance with the 
law of the another Member State retaining its legal personality 
and without being wound up or going into liquidation. 

Cross-border division  

Cross-border merger 

Cross-Border Merger 
Directive (CBMD) 

Codification Directive 

An  operation  whereby  a  company  splits  and  transfers  all  or 
to  existing  or  new 
some  of 
company/companies in another Member State. 

its  assets  and 

liabilities 

An  operation  whereby  two  or  more  companies  from  two  or 
more  Member  States  transfer  their  assets  and  liabilities  to  an 
existing (acquiring) or a new company. 

Directive  2005/56/EC  of  the  European  Parliament  and  of  the 
Council of 26 October 2005 on cross-border mergers of limited 
liability companies. Now it is part of the Codification Directive 
(see below). 

Directive  (EU)  2017/1132  of  the  European  Parliament  and  of 
the  Council  of  14  June  2017  relating  to  certain  aspects  of 
company  law  (codification).  This  Directive  codified  in  2017 
several Directives covering different aspects of company law. 

Dividing company  

The  company  that  is  being  split  up  in  the  framework  of  a 
company division. 

3 

 
 
Freedom of 
establishment of 
companies 

The  freedom  of  establishment  applicable  to  legal  entities 
pursuant to Articles 49 and 54 TFEU. 

Group reorganisation 

The  restructuring  of  legal  and/or  operation  structure  within  a 
corporate group.  

Inbound conversion 

Limited liability 
company 

Member State(s) (MS) 

National Gazette 

The  process  of  conversion  from  the  perspective  of  the  country 
of destination, i.e. whereto the company will be registered as the 
result of the process. 

A  company  with  share  capital  and  with  legal  personality 
possessing separate assets which alone serve to cover its debts. 
It is defined in Annex II of Directive (EU) 2017/1132 relating to 
certain aspects of company law (codification). 

In  the  context  of  this  Impact  assessment,  this  covers  Member 
States of the EU and of the EEA (i.e. Iceland, Liechtenstein and 
Norway in addition to the EU). 

A  periodical  publication  authorised  to  publish  public  or  legal 
notices. In the context of this Impact Assessment it refers to the 
national gazettes in the MS that publish company information.  

Outbound conversion 

The  process  of  conversion  from  the  perspective  of  the  country 
of departure, i.e. where the company originally was registered. 

Recipient company 

The company that receives certain assets and liabilities from the 
dividing company in the framework of company division.  

Registered office 

The  office  and  the  address  under  which  the  company  is 
registered in the business register. 

Registration of 
companies 

SE 

The  process  through  which  the  competent  authorities  or 
organisations  create  and  keep  records  of  the  creation  of 
information 
companies,  changes 
(filing)  and  the  linked  documentation.  The  business  register  is 
the database where these data are recorder. 

in  companies'  registered 

Societas  Europea  (European  Company),  a  limited  liability 
company  formed  according 
the  Regulation  (EC)  No 
to 
2157/2001 on the Statute for a European company (SE). 

4 

 
 
 
INTRODUCTION  

1.1  Context 

Companies  play  a  crucial  role  in  promoting  economic  growth,  creating  jobs  and 
attracting investment in the European Union. They help deliver greater economic as well 
as  social  value  for  society  at  large.  To  achieve  this,  companies  need  to  operate  in  an 
environment  which  is  conducive  to  growth  and  adapted  to  face  the  new  economic  and 
social challenges of an increasingly globalised and digital world.  
There are around 24 million companies in the EU1, out of which approximately 80% are 
limited  liability  companies.  Around  98-99%  of  limited  liability  companies  are  SMEs2. 
Every year around 2,5 million new companies are created and a slightly smaller number 
of  companies  cease  to  exist3.  High  growth  enterprises4  play  an  important  role  in 
contributing to the economic growth and the creation of jobs. In 2014, around 145 000 
companies, or almost a tenth (9.2 %) of all enterprises with at least ten employees in the 
EU-28’s business economy were recognized as high-growth enterprises, providing work 
for over 12 million employees5.  

The possibility to operate beyond national borders is a part of the natural life-cycle of the 
company.  This  includes  the  option  to  carry  out  a  cross-border  merger,  division  or 
conversion,  offers  them  an  important  chance  to  survive  and  grow  e.g.  by  having  new 
business opportunities in other EU countries, by reorganizing, cutting organisational cost 
or  adapting  to  changing  market  conditions.  For  example,  a  survey  carried  out  in  20166 
found out that 22% of the business executives had immediate plans for expansion in the 
internal market. 

However,  cross-border  company  operations  can  have  significant  impacts  for  relevant 
stakeholders  as  well  as  society  at  large.  Therefore,  it  is  essential  that  the  protection  of 
those involved in and affected by the company affairs, namely employees, creditors and 
minority  shareholders,  keep  pace  with  the  growing  trans-nationalization  of  companies 
and that Member State authorities are able to act against abuse.  

The  current  situation  concerning  cross-border  corporate  mobility  provides  a  very 
fragmented picture across the EU. The existing EU legal framework provides rules only 
for cross-border mergers of companies, while cross-border divisions and conversions are 
subject  to  national  rules,  if  such  rules  exist  at  all.  In  addition,  it  is  not  always  certain 
which law applies to the internal functioning of companies with operations in more than 
one MS. Since  there are no harmonised rules at EU level, the case law  of the Court  of 
Justice  has  developed  the  principles,  based  on  freedom  of  establishment,  especially 

1  The  study  'Assessment  and  quantification  of  drivers,  problems  and  impacts  related  to  cross-border 
transfers of registered offices and cross-border divisions of companies' EY 2017 (hereinafter referred to as 
EY study on cross-border operations of companies) refers to 24,4 million in 2016. It makes an estimation 
based on Eurostat data of 2014.  
2 EY study on cross-border operations of companies 
3  According  to  Eurostat  data,  there  were  2,586,418  new  companies  in  EU28  in  2014,  while  2,307,036 
companies ceased to exist. In 2013, the number of new companies in EU28 was 2,487,921, with 2,329,272 
companies ceasing to exist. 
4 This refers to an enterprise with average annualised growth in number of employees greater than 10 % per 
year over a three-year period and having at least 10 employees in the beginning of the growth.  
5 Source: Eurostat. 
6  EY  Attractiveness Survey, 2016,  1,469  executives participated  in  the  survey.  MS covered  by  the  study 
were Germany, France, the Netherlands, the UK, Belgium or Portugal. 

5 

 
                                                            
related  to  cross-border  conversions7,  but  also  to  the  recognition  of  companies 
incorporated in another MS8. In its judgements, the court has always stated that it is for 
the legislator to establish a detailed procedure/rules.  

Furthermore, in today's world, the use of digital tools and processes, in particular in order 
to  initiate  economic  activity  by  setting  up  a  company  or  continuing  it  in  another  MS 
easily,  rapidly  and  cost-effectively  is  one  of  the  prerequisites  for  a  competitive  market 
and  for  competitive  companies.  However  the  current  EU  law  provides  only  for  very 
limited  use  of  such  tools  and  in  particular  there  are  no  provisions  on  the  online 
registration  of  companies.  While  the  Commission  proposal  on  the  establishment  of  a 
Single  Digital  Gateway9  covers  the  general  registration  of  business  activity  via  online 
means,  the  constitution  of  limited  liability  companies  is  carved  out  from  the  proposal 
because  it  necessitates  a  comprehensive  approach  to  be  addressed  in  the  company  law 
acquis. The Commission committed to propose specific rules for this area without delay.  

Overall, today's Single Market does not offer companies and their stakeholders optimal 
conditions in terms of clear, predictable and balanced legal framework. This is especially 
important for SMEs which are the backbone of EU economy. For them any improvement 
in  the  possible  use  of  digital  tools  and  any  possiblity  of  performing  cross-border 
operations less costly and burdensome is very important.  

While the role of companies is to create wealth, it should not only concern the well-being 
of  the  company  itself,  but  also  of  the  stakeholders  associated  with  it.  In  case  of  cross-
border  mobility  of  companies,  in  particular  the  interests  of  employees10,  creditors  and 
minority shareholders play an important role. However, today the legal uncertainty and 
lack or complexity of rules for cross-border mobility of companies also means that there 
is no clear framework to ensure effective protection of these stakeholders. This may even 
lead  to  a  situation  whereby  the  freedom  of  establishment  could  be  abused  by  some 
companies.  In  the  situation  of  a  lack  of  legal  certainty  the  protection  offered  to 
stakeholders is therefore often ineffective.  

Therefore, it is important to unleash the potential of the Single Market by breaking down 
barriers  to  cross-border  trade,  facilitating  access  to  markets,  increasing  confidence  and 
stimulating competition while offering effective protection to stakeholders. 

1.2  Calls for an initiative 

The Investment Plan for Europe11 stressed that determined efforts are needed to make the 
most of the Single Market and make it an effective launch pad for companies. The 2015 
Single  Market  Strategy12  mentioned  uncertainties  over  company  law  as  one  of  the 
obstacles  that  SMEs  complain  about  in  the  Single  Market  and  announced  that  the 
Commission  would  consider  "further  ways  of  achieving  simpler  and  less  burdensome 
rules for companies — while continuing to act against letterbox companies — including 
making  digital  solutions  available  throughout  a  company’s  lifecycle,  in  particular  in 

7 ECJ cases VALE, Cartesio, currently Polbud 
8 ECJ cases Centros, Überseering, Inspire Art  
9 Proposal for a Regulation of the European Parliament and of the Council on establishing a single digital 
gateway  to  provide  information,  procedures,  assistance  and  problem  solving  services  and  amending 
Regulation (EU) No 1024/2012 - COM(2017)256 
10 In line with the European Pillar of Social Rights. 
11 COM(2014) 903 final. 
12 COM(2015) 550 final. 

6 

 
                                                            
relation  to  their  registration  and  to  the  filing  of  company  documents  and  information" 
and would also "examine the need to update the existing rules on cross-border mergers 
and  the  possibility  to  complement  them  with  rules  as  regards  cross-border  divisions". 
The 2016 Communication on the Start-up and Scale-up Initiative13  stressed the need to 
remove barriers for start-ups to develop in the Single Market and reiterated  the call for 
measures in the area of company law. Furthermore, both the 2015 Digital Single Market 
Strategy14  and  the  2016  e-Government  Action  Plan15  stressed  the  role  of  public 
administrations in helping businesses to easily start business, operate online and expand 
across borders. The e-Government Action Plan specifically recognised the importance of 
improving  the  use  of  digital  tools  when  complying  with  company  law  related 
requirements. In addition, the Single Digital Gateway included a political commitment to 
come forward with online registration of limited liability companies in the context of the 
digitalisation of company law.  

In  addition,  the  Stockholm  programme  of  2009  called  for  an  initiative  on  uniform 
conflict of laws rules in the area of company law16.  
Against this background, the Commission 2017 Work Programme17 included a company 
law initiative to facilitate the use of digital technologies throughout a company's lifecycle 
(equally  confirmed  in  the  Digital  Single  Market  Mid-term  Review18)  and  cross-border 
mergers and divisions.  

The need to complement and improve the legal framework as regards the use of digital 
tools  and  on  cross-border  company  mobility  was  also  recognised  by  the  European 
Parliament.  In  its  2017  resolution  on  the  e-Government  Action  Plan,  it  called  on  the 
Commission  to  consider  further  ways  to  promote  digital  solutions  for  formalities 
throughout  a  company's  lifecycle  and  underlined  the  importance  of  work  on  the 
interconnection  of  business  registers19.  Furthermore,  in  its  recent  resolution  of  13  June 
201720, the European Parliament  called for a comprehensive EU framework  in order to 
simplify the procedures and requirements applicable to transfers, divisions and mergers, 
and  to  remove  obstacles  arising  from  conflicts  of  laws,  with  a  view  to  facilitating 
companies'  mobility  in  line  with  their  business  needs,  while  preventing  abuses  and 
fictitious  transfers  for  the  purposes  of  social  or  fiscal  dumping  and  duly  respecting 
employees’  representation  rights.  In  its  200921  and  201222  resolutions  the  European 
Parliament also specifically asked the Commission to come forward with a proposal on 
cross-border conversions. 

13 COM(2016) 733 final. 
14 COM(2015) 192 final. 
15 COM(2016) 179 final. 
16 Official Journal C 115 of 4.5.2010. 
17 COM(2016) 710 final; Annex 1. 
18 COM (2017) 228. 
19  European  Parliament  resolution  of  16  May  2017  on  the  EU  eGovernment  Action  Plan  2016-2020; 
(2016/2273(INI)). 
20  European  Parliament  resolution  of  13  June  2017  on  cross-border  mergers  and  divisions 
(2016/2065(INI)). 
21  European  Parliament  resolution  of  10  March  2009  with  recommendations  to  the  Commission  on  the 
cross-border transfer of the registered office of a company (2008/2196(INI)). 
22 European Parliament resolution of 2 February 2012 with recommendations to the Commission on a 14th 
company law directive on the cross-border transfer of company seats (2011/2046(INI)). 

7 

 
                                                            
The  Council  also  encouraged  the  Commission  in  its  2015  Conclusions  on  the  Single 
Market  Policy23  to  address  the  online  registration  of  companies  through  the  use  of  the 
Digital Single Market Package. Furthermore, most recently in the Tallinn declaration on 
eGovernment  the  Member  States  make  a  strong  call  to  step  up  efforts  for  provision  of 
efficient, user-centric electronic procedures in the EU24. 

The Commission has actively engaged with stakeholders and conducted comprehensive 
consultations  throughout  the  impact  assessment  process,  in  view  of  collecting  the 
evidence  needed  to  come  to  a  political  decision  on  the  scope  of  this  company  law 
package.  Stakeholder  views  are  indicated  throughout  the  impact  assessment  where 
relevant and summarised in Annex 2.  

1.3  Scope of the impact assessment 

The  purpose  of  this  impact  assessment  is  to  assess  whether  and  to  what  extent  the 
existing  company  law  legal  framework  both  at  EU  and  national  level  a)  hampers  the 
exercise of the freedom of establishment by companies and the possibility to use digital 
tools throughout companies' lifecycle as well as b) provides the effective protection for 
stakeholders,  such  as  creditors,  minority  shareholders,  employees  but  also  other  third 
parties which are affected by companies' activities. In addition, the impact of the existing 
national conflict of laws rules is assessed in this respect. The areas covered are: 

- Use of digital tools and processes throughout a company's lifecycle: Companies use a 
number  of  digital  tools  and  processes  in  order  to  comply  with  requirements  stemming 
from company law, such as registering a company as legal entity, filing documents to the 
business  register  or  applying  for  publication  in  the  national  gazette.  This  also 
encompasses digital access to company related information  by third parties. The use of 
digital tools in interactions between companies and their shareholders is not part of this 
impact assessment.  

- Cross-border mergers: A cross-border merger takes place when two or more companies 
from different MS join into one surviving entity by transferring to it all their assets and 
liabilities.  

-  Cross-border  divisions:  A  division  involves  a  transfer  of  all  or  some  assets  and 
liabilities  from  a  dividing  company  to  existing  or  new  company/companies  in  another 
MS.25 

-  Cross-border  conversions:  A  conversion  means  an  operation  whereby  a  company 
formed  and  registered  in  accordance  with  the  law  of  a  Member  State  converts  into  a 
company  formed  and  registered  in  accordance  with  the  law  of  another  Member  State 
while  retaining  its  legal  personality  and  without  being  wound  up  or  going  into 

23 Council Conclusions on Single Market Policy, 6197/15, 2-3 March 2015. 
24  The  Tallinn  Declaration  on  eGovernment  was  signed  at  the  ministerial  meeting  during  Estonian 
Presidency of the Council of the EU on 6 October 2017. 
25 Divisions can be carried out in different ways, e.g. a dividing company can be wound up and transfer its 
assets and liabilities to more than one existing or newly formed company whose shares are allocated to the 
shareholders  of  the  dividing  company  (so-called  ‘split  up’).  Alternatively,  the  dividing  company  can 
continue to exist and it can transfer some of its assets to other (new or existing) companies (so-called ‘spin-
off’) or companies to which assets are transferred can become its subsidiaries (so-called ‘hive-down’). The 
shares can be allocated to shareholders of the dividing company in proportion or disproportionately to their 
existing shareholdings, J. Schmidt, cross-border mergers and divisions, transfers of seat: Is there a need to 
legislate? Study for the EP JURI Committee, 2016 (hereinafter referred to as J. Schmidt, EP Study), p. 27.  

8 

 
                                                            
liquidation.  Unlike  cross-border  mergers  and  divisions,  which  involve  more  entities 
across MS, a cross-border conversion concerns just one company.  

- Conflict of laws rules:  In situations with cross-border elements, conflict of laws rules 
determine which of possibly two or more national laws apply to the internal functioning 
of a company. 

This impact assessment addresses those five areas which  are interrelated and contribute 
directly to a company's ability to expand their business and reap the full benefits offered 
by the Single Market. Digitalisation serves as the starting point as the pragmatic use of 
the  opportunities  offered  by  digital  tools  would  help  entrepreneurs  to  create  their 
business  and  communicate  to  the  relevant  competent  authorities  with  greater  ease  and 
less cost. Moreover, the effective use of digital safeguards would ensure the integrity of 
the information that is provided to business registers in a cross-border setting and provide 
greater transparency and security to society  at large.  Should entrepreneurs then wish to 
expand  their  business  cross-border,  the  enhancement  of  the  Cross-border  Merger  rules 
and  the  introduction  of  procedural  rules  for  cross-border  divisions  and  cross-border 
conversions would not only offer them greater ability to grow their business and explore 
new markets but would also offer robust protection to employees, minority shareholders 
and creditors.  Digitalisation strongly interacts with  these  procedures as effective digital 
communication  between  the  business  registers  through  the  EU  system  (called  BRIS26) 
would enable them to establish a clear point in time to which a company merges, divides 
and converts cross-border and changes its legal form. This would in turn provide greater 
legal certainty for business registers, entrepreneurs and stakeholders. Finally, certainty on 
the  applicable  law  is  relevant  if  a  company  finds  itself  in  a  situation  with  cross-border 
elements. 

The  present  impact  assessment  addresses  all  the  above-mentioned  areas  as  the  impact 
assessment aims at informing the political decision whether action needs to be taken in 
all  of  these  areas  or  only  in  selected  ones.  Where  possible,  the  interactions  between 
different  areas  and  between  any  preferred  options  are  spelled  out.  In  addition,  the 
assessment  refers  to  the  relevant  stakeholder  feedback  which  has  been  obtained  in 
various  consultations  confirming  the  assessment  of  relevance  (see  for  details  on 
stakeholder consultation Annex 2). 

Decisions  to  set  up  a  company,  expand,  restructure  or  move  the  company  cross-border 
depend on many factors such as business opportunities, productivity gains and business 
environment as well as the legal, tax and regulatory regime of a given MS.27 However, 
companies cannot even envisage exercising the freedom of establishment in practice, if 
the underlying legal framework does not allow them to carry out such operations or make 
them  very  costly  or  complicated.  Against  this  background,  this  impact  assessment  will 
only  analyse  the  prerequisite  condition  for  mobility,  namely  the  enabling  rules  and 
procedures  in  the  area  of  company  law.  It  will  not  address  the  EU  and  national  legal 
frameworks in other related policy areas such as labour law, insolvency, taxation or other 

26  The  system  of  interconnection  of  business  registers  was  created  with  Directive  2012/17/EU  of  the 
European  Parliament  and  of  the  Council  of  13  June  2012  amending  Council  Directive  89/666/EEC  and 
Directives  2005/56/EC  and  2009/101/EC  of  the  European  Parliament  and  of  the  Council  as  regards  the 
interconnection  of  central,  commercial  and  companies  registers,  OJ  L  156,  16.6.2012,  p.  1–9.  This 
directive is now part of the codified Directive (EU) 2017/1132 relating to certain aspects of company law.  
27 EY Attractiveness Survey – Europe 2017 

9 

 
                                                            
aspects of digitalisation not associated with company law such as cloud computing or e-
residency.  

The proposed policy options will not touch the existing acquis in these other areas which 
will remain fully applicable. In many cases, the proposed policy options would build on 
or complement the existing acquis such as use of BRIS, the e-card, once-only principle or 
make  them  applicable  for  companies  (e.g.  eIDAS).  Moreover,  the  proposed  policy 
options will have due regard for the European Pillar of Social Rights, in particular the 8th 
principle  that  seeks  to  safeguard  the  social  dialogue  and  involvement  of  workers.28  As 
such,  employee  participation  in  cross-border  operations  should  be  seen  as  part  of  the 
wider social acquis aimed to protect employees in case of cross-border operations.  

The diagram below presents the different areas subject to this impact assessment as well 
as  their  interrelations.  In  addition,  the  graph  shows  links  with  other  EU  policies  or 
initiatives.  

28 The European Pillar of Social Rights, Chapter II: Fairer working conditions. For further information see 
https://ec.europa.eu/commission/priorities/deeper-and-fairer-economic-and-monetary-union/european-
pillar-social-rights/european-pillar-social-rights-20-principles_en 

10 

 
 
                                                            
Relationship between the issues covered by this impact assessment and links with other EU initiatives 

11 

 
 
THE PROBLEM DEFINITION  

The  well-functioning  Single  Market  is  important  for  increasing  EU’s  competitiveness 
and  its  functioning  is  key  to  the  European  Union  remaining  an  attractive  location  for 
businesses, both domestic and foreign29. Together with the free movement of capital and 
the  freedom  of  establishment,  company  law  directives  and  regulations  provide  a  legal 
framework  which  has  an  impact  on  investments.  The  more  uncertainty  there  is  in 
company law the less attractive the EU is for investors. This results in untapped potential. 

The  problem  is  that  in  the  absence  of  a  reliable  legal  framework  for  cross-border 
divisions  and  conversions,  and  inefficiencies  in  the  current  EU  rules  for  cross-border 
mergers,  companies  have  difficulties  to  access  markets  in  other  MS  and  often  need  to 
find  costly  alternatives  to  direct  procedures  which  can  deter  them,  in  particular  SMEs, 
from  doing  cross-border  business.  In  addition,  the  lack  of  possibility  to  use  relevant 
digital  tools  is  also  a  barrier  to  the  exercise  of  the  freedom  of  establishment  by 
companies.  These  lead  to  unnecessary  costs  for  companies  and  hinder  or  prevent  them 
from using the opportunities offered by the Single Market. This also means that relevant 
stakeholders  (employees,  creditors,  minority  shareholders  and  other  third  parties)  are 
faced with uncertainty as to their rights and protection in cross-border situations.  

The problem tree below illustrates the main drivers, problems and consequences relevant 
for this initiative. The following sub-chapters describe the drivers and problems in more 
detail  for  each  subject  area.  Concrete  examples  of  difficulties  faced  by  companies  and 
stakeholders can be found in Annex 4. 

29 Restoring EU Competitiveness 2016 updated version, European Investment Bank. 

12 

 
 
                                                            
The  number  of  companies  currently  engaged  in  cross-border  activity  can  best  illustrate 
the  overall  scale  of  the  problem.  According  to  data  from  a  2011  study  on  the 
Opportunities for the Internationalisation of European SMEs there are only 2% of SMEs 
that have investment abroad (500,000 companies).30 Furthermore, according to Eurostat 
data  from  2014  only  0.7%  of  companies  are  intra-EU  foreign  affiliated  (i.e.  they  are 
controlled or owned by multinational enterprises that are resident in another EU MS).31 
All  of  these  companies  are  likely  to  benefit  from  the  package.  However,  due  to  the 
outdated modalities for which companies have to use when communicating with business 
registers (particularly in a cross-border setting) and the inefficient procedures companies 
have to use when operating cross-border, a significant population of EU companies are 
never even given the opportunity to make effective use of their freedom of establishment. 
Therefore,  the  number  of  companies  concerned  with  the  package  is  likely  to  be 
significantly higher.  

1.4  Use of digital tools and processes throughout a company's lifecycle 

1.4.1  Driver: What causes the problem?  

In a world where technology is part of everyone's daily life, companies increasingly use 
digital tools in their business. Companies also need to interact with public authorities, but 
this is not always possible through electronic means. The EU offers a very inconsistent 
landscape when it comes to the availability of online tools for companies in their contact 
with public authorities in the area of company law. MS provide e-government services at 

30 Final Report on the Opportunities for the Internationalisation of European SMEs (2011), p. 21. 
31 2014 Eurostat data on "foreign affiliates"  

13 

 
 
                                                            
variable  degrees:  some  are  very  advanced  and  provide  easy-to-use,  fully  online 
solutions32,  while  others  are  more  timid  in  their  efforts  and  do  not  offer  at  all  online 
solutions  for  critical  steps  in  a  company's  lifecycle  such  as  the  registration  of  the 
company as a legal entity.  

Currently  the  EU  company  law  includes  certain  elements  of  digitalisation  such  as  the 
obligation for MS to make available online information about limited liability companies 
registered  in  central,  commercial  or  companies  registers  (herein  business  registers). 
However  these  requirements  are  limited  and  lack  precision,  leading  to  a  very  diverse 
implementation at national level.  

In addition, certain digital processes are not covered at all by EU law and only a number 
of  MS  address  them  at  national  level.  For  example,  today  only  17  MS33  provide  a 
procedure for the fully online registration of companies; in the other MS the only way to 
register a company34 is by going in person to the registration authority or another body 
which  then  submits  the  application  for  registration.  This  creates  inefficiencies  and  an 
uneven playing field for companies as some MS35 only allow for face-to-face procedure 
for company registration while others36 allow both face-to-face and online procedure – or 
only online (as is the case in Estonia and Denmark). More detailed information about the 
situation in different MS can be found in Annex 4. 

The  situation  is  similar  for  the  online  registration  of  branches.  While  data  on  all 
branches  of  EU  companies  is  not  yet  available  today,  according  to  available  BRIS 
statistics,  there  are  6,000  branches  alone  in  10  MS.  Although  branches  do  not  have  a 
legal personality, they still need to be registered in the business register. The registration 
of a branch largely follows the same requirements as company registration.  

Although  the  recent  Commission  proposal  for  a  Single  Digital  Gateway  sets  out  the 
requirement for MS to  digitalise  the  registration of business activity in general, limited 
liability  companies  are  not  in  the  scope  of  this  proposal  as  it  was  deemed  more 
appropriate  to  address  this  in  the  context  of  company  law.  The  lack  of  an  EU  legal 
framework  for  limited  liability  companies  and  their  branches  would  only  perpetuate  a 
situation where unequal opportunities are offered to companies across the single market. 

Once  they  have  been  registered,  companies  and  branches  have  an  obligation  to  file 
certain  information  with  the  business  registers  during  their  life  time  (for  example, 
amendments  to  their  articles  of  constitution,  changes  in  the  names  of  company  legal 
representatives  or  their  annual  accounts).  Although  the  current  EU  law  stipulates  that 
companies  should  be  able  to  submit  the  documents  and  particulars  that  are  part  of  the 
mandatory  disclosure  requirements  "by  electronic  means"37,  the  current  definition  of 
"electronic  means"  is  not  specific  enough  and  leads  to  a  diverse  implementation  in  the 
MS  (see  also  overview  in  Annex  4).  Most  significantly,  in  several  MS  (e.g.  Belgium, 

32 A number of business registers already have in place advanced online tools and solutions, for example 
Denmark, Estonia, Latvia. 
33 Bulgaria, Denmark, Estonia, Finland, France, Italy, Ireland, Latvia, Lithuania, Malta, Poland, Portugal, 
Romania, Slovakia, Slovenia, Sweden and the UK.  
34 Company registration refers to the creation of the company as a legal entity. This is often seen as a series 
of  sub-steps,  generally  comprising  the  verification  of  the  identity  of  the  company  founder,  checking  the 
availability  and/or  appropriateness  of  the  company  name,  the  drawing  up,  signing  and  certifying  of  the 
documents for constitution of the company, followed by the actual registration with the register. 
35 For example Belgium, Germany, and Spain. 
36 For example Cyprus, Finland and UK. 
37 Article 16(2) of Directive (EU) 2017/1132. 

14 

 
                                                            
Germany,  Hungary,  and  Spain)  company  representatives  cannot  file  documents  fully 
online; instead they need to go in person in front of a notary or legal professional who 
certifies  the  documents  and  then  submits  them  online  to  the  business  registers38,  while 
some MS (e.g. Estonia, Poland) require only facultative involvement of notaries. 

Once  companies  and  branches  have  filed  the  necessary  information  with  the  business 
registers, current EU rules provide for the publication of all or part of that information in 
the national gazette. It is only by publication in the national gazette (or equally effective 
means) that the disclosed information becomes legally effective. Such requirement dates 
back to the early days of EU company law39 when the publication in the official gazette 
was  the  only  way  of  ensuring  certainty  and  transparency  of  business  information.  A 
revision  of  the  EU  rules  in  200340  introduced  the  option  for  MS  to  keep  the  national 
gazette in electronic form41, without specifying how the information should be submitted 
by the company and in particular it did not do away with possible multiple submission 
requirements in MS (i.e. both to the business register and the national gazette). Today at 
least 14 MS make their national gazettes available in electronic form42; in one of those 
(France) an additional publication in print remains mandatory. 

Overall,  the  situation  remains  divergent  in  different  MS.  Whether  online  or  on  paper, 
companies  continue  to  submit  the  same  information  to  two  different  places  (business 
register  and  national  gazette).  This  is  not  the  only  example  of  multiple  submissions  by 
companies  of  the  same  information.  For  example,  companies  that  have  a  branch  in 
another EU country need to file their annual accounts both to the business register where 
the  company  is  registered  and  to  the  business  register  in  the  MS  where  the  branch  is 
registered.  

Concerning  access  by  third  parties  to  company  information  in  business  registers,  the 
directive43 on the interconnection of business registers (BRIS) sets a minimum set of data 
which must always be provided for free44. However for the other company information 
available  in  the  business  registers  most  MS  charge  fees  for  all  or  some  of  that 
information45. Although this is in line with the existing EU rules which state that MS can 
charge fees which cannot exceed the administrative cost of storing and maintaining that 
data, this means that access to information varies across the EU, with more information 
being available free of charge in some MS than in others.  

38 Study on digitalisation of company law, Everis, 2017 (hereinafter referred to as Everis study, 2017) 
39  The  first  company  law  directive  was  adopted  in  1968  and  some  of  the  requirements,  such  as  the 
publication in the national gazette, were introduced then.  
40 Directive 2003/58/EC of the European Parliament and of the Council of 15 July 2003 amending Council 
Directive 68/151/EEC, as regards disclosure requirements in respect of certain types of companies, OJ L 
221, 04/09/2003 P. 13-16. It was the same directive that also introduced the possibility for companies to 
file documents online. 
41  MS also have the choice to replace the publication in the national gazette with equally effective means 
of publication through a central electronic platform. 
42 The following MS publish company information online: BE, CZ, CY, DK, EE, FI, FR, DE, GR, HU, PL, 
PT, ES, UK. Source: Everis study 2017. 
43 Directive 2012/17/EU of the European Parliament and of the Council of 13 June 2012 amending Council 
Directive 89/666/EEC and Directives 2005/56/EC and 2009/101/EC of the European Parliament and of the 
Council  as  regards  the  interconnection  of  central,  commercial  and  companies  registers  Text  with  EEA 
relevance, OJ L 156, 16.6.2012, p. 1–9  
44  This  includes  the  company  name,  registered  office,  legal  form,  company  registration  number  and  the 
Member State in which the company is registered.  
45 Only six MS provide all information free of charge: Belgium, Bulgaria, Czech Republic, Luxembourg, 
Slovenia and the UK. 

15 

 
                                                            
1.4.2  What is the problem for companies? 

The lack of rules for online registration, filing and publication or the divergence of such 
rules in the MS create unnecessary costs and burdens to entrepreneurs who wish to set up 
a  new  business  or  to  expand  their  business  by  registering  subsidiaries  or  branches  or 
fulfil specific requirements online. This in turn may lead to missed business opportunities 
due to delay in registering the business or in a worst case to the decision not to set up a 
business at all. The replies to the 2017 public consultation on company law confirmed the 
fact  that  the  differences  between  MS  laws  or  the  overall  lack  of  a  legal  framework  as 
regards interactions with business registers via digital tools is seen by most stakeholders, 
in  particular  business  organisations  and  public  authorities,  as  an  obstacle  to  the 
functioning  of  the  single  market.  This  problem  needs  to  be  addressed  urgently  as 
businesses  are  increasingly  going  digital  and  more  public  services  are  available  online. 
They consider that the registration of companies should be also available online.  

Concerning  the  online  registration,  evidence  from  those  MS  that  have  put  in  place 
solutions  for  online  registration  shows  that  electronic  applications  for  company 
registration  are  generally  cheaper  and  quicker  to  process  than  applications  made  in 
person and on paper. This means that companies that do not have the option to register 
online  incur  higher  costs  than  those  that  can  complete  the  procedure  fully  online.  The 
time needed to complete the procedure also adds up to the costs incurred by companies 
and when procedures require the physical presence in front of a competent authority the 
time for completing the registration is longer than when procedures are done fully online. 
In  addition  to  the  direct  costs  for  registration  or  filing,  company  founders  also  incur 
indirect costs such as travel costs (in particular when travelling abroad).  

MS 

Ireland46 

Finland47  

UK48 

Application for company registration 

Time to process the application 

Paper-based  

EUR 100 

EUR 380 

£40  

Online  

EUR 50 

Paper-based 

10 to 15 days 

Online  

Within 5 days 

EUR 350 

Up to 17 working days  Within 5 working days 

£12  

8 to 10 days49 

Within 24 hours 

For the filing of documents, the submission of documents on paper is also generally more 
costly than the submission of documents online. For example, in Belgium to file on paper 
an abbreviated model of annual accounts costs EUR 226,34, as opposed to EUR 155,67 
for online filing; in the UK, the submission of annual accounts by post costs £40, while 
the electronic submission of the same documents costs £13.  

Costs  for  registration  and  filing  are  even  higher  in  those  MS  (e.g.  Belgium,  Germany, 
Hungary, Poland, and Spain) where company founders or representatives need to come in 
person  in  front  of  a  notary  or  legal  professional.  For  instance,  the  fees  for  notarial 

46 https://www.cro.ie/Publications/Fees/Company  
47 https://www.prh.fi/en/kaupparekisteri/hinnasto/kasittelymaksut.html  
48 https://www.gov.uk/limited-company-formation/register-your-company  
49 When the company founder uses postal registration but wishes to have their application processed within 
24  hours,  then  the registration fee  is £100, compared  to  the  cost of  £12 for  the online  application which 
would be processed within the same time period. 

16 

 
 
 
                                                            
services are EUR 145 in Belgium or EUR 220 in Cyprus and can vary from EUR 150 to 
EUR 4,000 in Spain50. These fees are typically added to the registration or filing fees. 

Concerning  the  issue  of  limited  access  to  free  of  charge  information  available  in  the 
business registers, companies themselves can be affected in cases where they are looking 
up information on potential business partners. This can be particularly relevant for SMEs 
for which the costly access to information on businesses from other MS can hamper their 
business opportunities and cross-border trade in the Single Market. 

1.4.3  What is the problem for other stakeholders? 

Other  stakeholders,  such  as  creditors,  investors,  employees  or  their  representatives  or 
consumers  who  rely  on  company  information  from  the  business  registers  can  also  be 
affected by the above-mentioned drivers. For them the problem is twofold: reliability of 
data  and  the  access  to  it.  These  stakeholders  mainly  face  problem  of  limited  access  to 
free of charge information filed by companies in the business register as most registers 
charge  fees  for  that  information.  Prices  per  document  may  not  be  considered  high 
(average range from 2 to 15 Euros per document), but if more documents about the same 
company  or  about  many  companies  are  needed,  then  the  costs  add  up  and  can  become 
prohibitive  for  certain  stakeholders.  The  issue  of  the  limited  access  to  free  of  charge 
information  has  become  even  more prominent  with  the launch of the business registers 
interconnection  system  (BRIS).  BRIS  facilitates  access  to  company  data  from  the  EU 
business registers via a single European access point, but the easiness to search for this 
information  only  highlights  how  little  information  is  in  fact  available  for  free  in  the 
registers. 

In  addition,  the  fact  that  the  information  needs  to  be  filed  in  two  places  (e.g.  business 
register and national gazette) may still create uncertainty as to how stakeholders can rely 
on that information. For example, third parties may rely on information from the business 
registers  not  knowing  that  this  information  is  only  legally  effective  after  publication  in 
the  national  gazette.  In  turn,  this  creates  mistrust  in  the  EU  business  environment  and 
affects the transparency and proper enforcement of rules.  

The relevant competent authorities in the MS – namely the business registers – are also 
affected by their own slow take-up of digital solutions. This is mainly proven by counter-
examples from those that have already made progress in digitalising their processes over 
the past few years. For example, after the introduction of online filing and registration in 
2008, the Slovenian business register noted a significant reduction in the time needed to 
process  an  application  (in  the  first  year  the  average  time  for  registration  was  reduced 
from  60  days  in  2007  to  4.3  days  in  2008).  Similarly,  the  Danish  business  register 
reported  that,  following  the  introduction  of  the  online  registration  and  filing  system,  in 
just  four  years  the  average  time  for  case  handling  decreased  by  69%  and  the  average 
ramp-up time for a new employee decreased by 90%51. This means that registers that are 
not  yet  offering  streamlined  online  procedures  for  companies  are  missing  out  on  the 
efficiencies that these solutions could bring to their own organisations. 

Notaries have signalled that for them a problem is legal certainty and the trustworthiness 
of  registers.  As  they  are  part  of  the  registration  processes  in  a  number  of  MS  they  are 
afraid that the digitalisation would question the need of their services, as in many MS in 
which  fully  online  registration  is  functioning  well,  the  involvement  of  a  notary  is  not 

50 Everis study, 2017. 
51 European Commerce Registers' Forum report, 2017, p. 45 and 56. 

17 

 
                                                            
necessary.  Notaries,  therefore,  as  having  a  direct  stake  in  the  registration  processes  in 
many countries, have in reality different concerns than other stakeholders which are not 
part of the process.  

1.5  Cross-border mergers 

1.5.1  Driver: What causes the problem?  

Mergers  are  used  by  companies  for  different  purposes  such  as  group  reorganisations52, 
cutting organisational costs as well as business-oriented considerations in order to enjoy 
greater  returns  to  scale,  consolidated  branding,  or  other  synergies  between  different 
business activities.  

The  introduction  of  the  Cross-Border  Merger  Directive53  (CBMD)  led  to  a  substantial 
increase in cross-border merger activity in the EU and EEA. The number of cross-border 
mergers rose by 173% between 2008 and 2012 as a total of 1,227 cross-border mergers 
were  carried  out  during  this  period,  which  indicates  that  the  procedure  set  up  by  the 
Directive  substantially  enhanced  cross-border  activity.  Indeed,  recent  further  research 
demonstrates  the  striking  impact  that  the  introduction  of  the  CBMD  on  cross-border 
merger  activity  as  between  2013  and  2017  there  were  1,163  cross-border  mergers  that 
took place in 9 EU Member States alone, almost the same as the EU-wide figure for the 
preceding 4 years.54 Stakeholders (such as law firms, business registers and trade unions) 
interviewed  for  the  2013  study  on  the  application  of  the  Directive  welcomed  the  new 
procedures,  the  procedural  simplification  and  reported  lower  costs  and  shorter 
timeframes due to the harmonised framework55.  

Despite  these  positive  developments,  the  evaluation  of  the  functioning  of  the  CBMD 
(Annex  5)  which  draws  from  the  research56  and  consultations57  demonstrates  persisting 
issues that are frustrating the full effectiveness and efficiency of the Directive.  

Concerning  protection  of  creditors  and  minority  shareholders,  the  Directive  lays  down 
minimum,  mainly  procedural  rules  and  leaves  the  substantive  rules  subject  to  national 

to 

as 

2013, 

referred 

(hereinafter 

52 The EU cross-border merger rules (see below) are seen as an effective tool for internal reorganisation of 
groups  of  companies  and  over  a  third  of  cross-border  mergers  appear  to  have  been  carried  out  within 
groups,  Bech-Bruun  and  Lexidale,  Study  on  the  Application  of  the  Cross-border  Mergers  Directive, 
2013) 
Bech-Bruun/Lexidale, 
September 
http://ec.europa.eu/internal_market/company/docs/mergers/131007_study-cross-border-merger-
directive_en.pdf , p. 973. 
53  Directive  2005/56/EU  of  the  European  Parliament  and  of  the  Council of  26  October  2005  (OJ  L  310, 
25.11.2005,  p.  1);  replaced  and  repealed  on  19  July 2017  by  Directive  (EU)  2017/1132  of  the  European 
Parliament and of the Council of 14 June 2017 relating to certain aspects of company law (codification) 
(OJ L 169, 30.6.2017, p. 46). 
54 Biermeyer, Thomas and Meyer, Marcus, Cross-border Corporate Mobility in the EU: Empirical Findings 
2017, p. 5. 
55 Bech-Bruun/Lexidale 2013, p. 5-8, 49. 
56  For  instance,  the  report  on  the  future  of  EU  company  law  by  the  expert  Reflection  Group  in  2011, 
http://ec.europa.eu/internal_market/company/docs/modern/reflectiongroup_report_en.pdf;  J.  Schmidt,  EP 
Study, 
http://www.europarl.europa.eu/RegData/etudes/STUD/2016/556960/IPOL_STU(2016)556960_EN.pdf 
Bech-Bruun/Lexidale 2013. 
572015 
http://ec.europa.eu/internal_market/consultations/2014/cross-border-mergers-divisions/docs/summary-of-
responses_en.pdf; 
http://ec.europa.eu/internal_market/consultations/2014/cross-border-mergers-divisions/index_en.htm . 

consultation 

consultation 

divisions, 

company 

mergers 

border 

future 

cross 

2012 

law, 

and 

EU 

the 

the 

on 

on 

of 

; 

18 

 
                                                            
laws.  Therefore,  the  differences  between  MS  laws  persist.  For  example,  the  Directive 
only  says  that  creditors  shall  be  protected  subject  to  national  rules,  without  further 
specifications. Similarly, the Directive lays down some rules concerning shareholders in 
general  (e.g.  information  via  the  draft  merger  terms,  merger  and  expert  reports,  voting 
during the general meetings) but leaves it to MS  to decide whether to introduce further 
protection for minority shareholders.  

In the 2015 public consultation, the under-harmonisation of such rules was noted as a key 
point of concern for stakeholders. Approximately 80% of respondents were in favour of 
harmonisation  of  creditor  rights  and  65%  in  favour  of  harmonisation  of  minority 
shareholder  protection.  This  view  was  further  reflected  in  the  2017  public  consultation 
where 80% of the MS that responded called for the substantive and procedural aspects of 
creditor  protection  to  be  harmonised.  Similar  views  were  echoed  in  a  recent  European 
Parliament Resolution.58  

As  to  employee  participation  on  board  level,  the  Directive  sets  out  a  comprehensive 
framework. It provides that the rules on employee participation shall follow the laws of 
the MS where the registered office of the successor company is situated. Since this could 
invite for forum shopping, the Directive includes three exceptions to this general rule in 
order  to  guarantee  the  status  quo  in  terms  of  employee  participation.  If  any  of  these 
exceptions apply (basically there must be some form of employee participation before the 
merger), the management can either negotiate with employees a bespoke solution on the 
participation  or  apply  standard  rules  (on  the  composition  of  the  body  representative  to 
employees,  its  competence  and  powers,  and  the  functioning  of  employee  participation) 
provided by SE Directive 2001/86/EC59. The percentage of employees required to have 
been previously covered by an employee participation system is one third (compared to 
one quarter in the SE directive rules). The current employee participation rules have been 
criticised both by companies and trade unions60  

In  addition,  the  Directive  offers  limited  possibilities  to  simplify  the  merger  procedure. 
For example, it allows waiving an independent expert report if all shareholders agree and 
does  not  require  an  expert  report  or  the  approval  by  the  general  meeting  in  case  of  a 
merger  between  a  parent  company  and  its  wholly-owned  subsidiary.  Research  and 
stakeholder consultation61 have underlined the need for further simplifications in case of 
costly  procedures  which  do  not  confer  benefits  on  the  stakeholders  concerned.  In 
addition, it has been argued that the procedure does not sufficiently integrate digital tools 
in the procedure itself (e.g. as regards submitting the documents to public authorities or 
sharing those between the authorities)62. 

1.5.2  What is the problem for companies? 

Companies often face costly legal advice and a very long delay to complete a merger due 
to the divergent national rules63. For instance, while a simple cross-border merger takes 

58  European  Parliament  resolution  of  13  June  2017  on  cross-border  mergers  and  divisions 
(2016/2065(INI)). P. 10 
59  Council  Directive  2001/86/EC  of  8  October  2001  supplementing  the  Statute  for  a  European  company 
with regard to the involvement of employees (OJ L 294, 10.11.2001, p. 22).  
60 See point 2.2.3. 
61 Bech-Bruun/Lexidale 2013 and the stakeholders in their replies to the 2015 consultation 
62 This view was expressed by experts of ICLEG. 
63  See  also  subsection  2.3.2.  of  the  evaluation  in  Annex  5  for  deficiencies  as  regards  efficiency  of  the 
current cross-border merger rules. 

19 

 
                                                            
between 2 and 4 months, some mergers can take up to 7 months depending on the MS 
involved64.  This  can  be  due  to  different  delays  for  authorities  to  issue  a  pre-merger 
certificate65 or due to different protection periods for stakeholders in different MS.  

The  divergence  between  national  rules  can  also  make  it  difficult  or  impossible  to  meet 
certain  steps  of  the  procedure66.  It  might  be  impossible  for  the  merging  companies  to 
meet  the  6-month  deadline  for  submission  of  pre-merger  certificates  if  due  to  different 
creditor  protection  periods  such  a  certificate  has  not  been  yet  issued  in  one  of  the  MS 
concerned67. 

The  more  complex  the  procedure  and  less  possibilities  for  a  simplified  procedure,  the 
higher  will  be  the  costs  for  the  merging  companies68.  For  instance,  stakeholders  have 
taken  the  view  that  drawing  up  a  management  report  on  the  impacts  of  the  merger 
involves  substantial  time  and  costs  and  is  an  unnecessary  burden  in  cases  where  the 
merging  companies  have  no  employees  or  the  shareholders  agree  not  to  require  such  a 
report69. It is estimated that drawing up such a report can amount to up to between €5,000 
and  8,000  in  Italy  and that  that  legal  advice  for  drawing  up the  necessary  reports  for  a 
cross-border  operation  can  sum  up  to  €  8.000-12.000  in  Belgium.70  Between  2008  and 
2013,  most  merging  companies  and  most  companies  resulting  from  a  cross-border 
merger were private limited liability companies71. Given that such private companies are 
mainly small or medium-size companies and they, in general, have to carry out the whole 
merger procedure which is primarily foreseen for big public limited liability companies, 
the  costs  arising  for  small  and  medium  sized  companies  can  be  bigger  than  benefits, 
having a negative impact on economic growth.  

Companies also consider the employee participation procedure too complex and leading 
to unnecessary costs and delays within the merger.72 

The evaluation of the functioning of the existing rules on cross-border mergers (Annex 5) 
found that the provisions of the CMBD have been less effective and efficient as regards 
creditors and minority shareholder protection; it further found deficiencies as regards the 
efficiency of the rules concerning the possibilities for a simplified procedure. It could not 
be conclusive on the efficiency of the employee participation procedure. 

1.5.3  What is the problem for other stakeholders? 

A cross-border merger may impact the rights of creditors who may, for example, need to 
sue  the  company  in  a  different  MS  or  may  be  in  a  worse  financial  situation  if  the 

64 Bech-Bruun/Lexidale, 2013, p. 133. 
65 A certificate conclusively attesting to the proper completion of the pre-merger acts and formalities. 
66 See also subsection 2.3.1. of the evaluation in Annex 5 for deficiencies as regards effectiveness of the 
current cross-border rules. 
67 Ibid, 2013, p. 54. 
68  See  also  subsection  2.3.2.  of  the  evaluation  in  Annex  5  for  deficiencies  as  regards  efficiency  of  the 
current cross-border merger rules. 
69 Ibid, p. 85-86. 
70 EY study on cross-border operations of companies. 
71  Among  the  merging  companies  there  were 70 percent of private  limited  liability companies  versus 28 
percent of public limited liability companies; 66 percent of the acquiring companies were of Llc type (of 
private nature), versus 32 percent of Plc type of companies, Bech Bruun/Lexidale, 2013, p. 978. 
72  E.g.  Romanian  and  Lithuanian  companies  and  legal  advisors  considered  the  rules  on  employee 
participation as being very cumbersome or complex, Polish and Italian ones saw the employee participation 
procedure as major obstacle for the completion of a cross-border merger, Bech-Bruun/Lexidale, 2013, p. 
207, 213, 221, 226. 

20 

 
                                                            
liabilities  of  the  acquiring  company  exceed  its  assets.73  Shareholders,  in  particular 
minority  shareholders,  may  become  shareholders  of  a  company  they  do  not  wish  to  be 
part of or be affected by an inadequate exchange ratio. 

The current minimum standards and reference to national rules on protection of creditors 
and minority shareholders in the Directive create complexity and legal uncertainty74. This 
triggers  the  need  of  stakeholders  to  ask  for  legal  advice.  In  case  they  cannot  afford  it, 
their  rights  might  become  unenforceable.  Due  to  the  lack  of  specific  safeguards  and 
harmonised rules, creditors and minority shareholders benefit from more rights in some 
MS than in the others or they suffer from the lack of protection in some MS.  

The CBMD does not provide substantive protection rights for minority shareholders, but 
it allows MS to adopt provisions designed to ensure appropriate protection for minority 
shareholders.  The  duration  of  the  period  when  minority  shareholders  can  request 
protection varies between MS (from 10 days to 3 months). The content of the protection 
rights  provided  by  national  law  also  differ.  In  most  MS  minority  shareholders  have  a 
right  to  sell  their  shares  against  adequate  cash  compensation  (so-called  "exit  rights"), 
while some MS offer also a right to additional cash compensation if the share exchange 
ratio is not adequate or a right of investigation, and/or additional procedural safeguards 
such  as  majority  of  75%  is  required  in  the  general  meeting  to  approve  a  cross-border 
merger).  Some  MS  have  not  introduced  specific  minority  shareholders'  protection  in 
national  law.  These  divergences  in  MS  laws  lead  to  unequal  treatment  of  stakeholders 
within the same cross-border merger operation and to legal uncertainty. They create costs 
for shareholders, as they do not know their rights and remedies in all MS. There is not 
even a minimum standard to which they could refer to.  

Concerning  the  protection  of  creditors,  the  general  rule  of  the  CBMD  provides  that  a 
company  taking  part  in  a  cross-border  merger  shall  comply  with  the  provisions  and 
formalities of the national law to which it is subject. In accordance with the Directive on 
domestic mergers national laws have to provide "adequate protection" for the interests of 
creditors. MS' rules diverge on the time limit for the protection of creditors' claims and 
on the period of time during which creditors can exercise their rights. The rules also vary 
on  the  nature  of  protection,  e.g.  in  all  MS  with  rules  creditors  can  demand  a 
guarantee/security to guarantee that the company resulting from a merger will meet their 
claims but in many MS creditors even have a veto right over the merger75. Similarly as 
for  shareholders,  these  divergences  lead  to  additional  costs  for  creditors  as  they  do  not 
know  their  rights  and  remedies  in  all  MS.  There  is  not  even  a  minimum  standard  to 
which they could refer to.  

Cross-border  mergers  may  impact  the  position  of  employees  in  two  ways.  Firstly, 
generally,  employees  require  comprehensive  information  about  a  cross-border  merger. 
Currently,  the  situation  of  employees  is  only  considered  generally  in  the  management 
report addressed predominantly to shareholders. It has been criticised that employees are 
not  sufficiently  informed  about  the  details  and  implications  of  a  cross-border  merger76. 
Secondly,  there  is  an  impact  on  employees'  rights  in  those  cases  where  there  are 
representatives  of employees in boards of the merging  companies  (or at least in one of 

73 Reynolds/Scherrer, 2016, p. 37. 
74  See  also  subsection  2.3.1.  and  2.3.2.  of  the  evaluation  in  Annex  5  for  deficiencies  as  regards 
effectiveness and efficiency of the current cross-border merger rules. 
75 See also Annex 4 for more details on the problems caused by the lack of specific rules. 
76  See  for  instance  T.  Biermeyer/M.  Meyer,  Identification  of  Cross-Border  Mergers  where  the  Issue  of 
Employee Participation has arisen (2008-2012), European Trade Union Institute, 2015. 

21 

 
                                                            
them). The CBMD provides for rules dealing with the question of the transfer of acquired 
rights, focusing on the employee participation in the company resulting from the merger 
(as described in detail in section 2.2.1). These rules are considered problematic by trade 
unions as not giving enough protection for employees77.  

1.6  Cross-border divisions 

1.6.1  Driver: What causes the problem?  

In a similar way as in mergers, divisions offer a way for companies to change or simplify 
their  organisational  structure,  adapt  to  changing  market  conditions  and  realise  new 
business  opportunities  in  another  MS,  as  confirmed  by  respondents  to  the  2015 
consultation on cross-border mergers and divisions78. For instance, divisions may be used 
to sell part of the business, to transfer it to other companies belonging to the same group 
or  to  distribute  different  parts  of  a  company  between  different  heirs  or  shareholders  in 
conflict79. Companies might be interested in separating their business to concentrate on 
part of it, to better allow specific parts – which operate in different business sectors – to 
meet  their  long-term  objectives  or  due  to  different  regulatory  requirements.  It  appears 
that  divisions  are  more  often  used  by  bigger  companies  than  by  SMEs,  which  rather 
search for cross-border partnerships than divide80.  

Despite  relatively  numerous  divisions  at  national  level  –  thousands  or  hundreds  in 
Denmark, France, Italy, Sweden, Romania, Estonia, Croatia, Poland or Finland81, cross-
border divisions are rarely carried out.82 Recent studies estimate that the range of cross-
border division activity in the EU was between 50 – 200 operations in 2016.83   

The high  number of national divisions confirms that such operations are very useful as 
corporate  restructuring  tools.  The  main  reason  behind  a  small  number  of  cross-border 
divisions  is  the  divergence  or  non-existence  of  national  rules  and  the  absence  of  EU 
rules.  The  existing  EU  company  law,  Directive  82/891/EEC,  sets  out  rules  for  national 
divisions of public limited liability companies only. 84   

As regards national rules, only less than half of the MS (e.g. Austria, Belgium, Bulgaria, 
Italy,  Lithuania, 
Croatia,  Czech  Republic,  Denmark,  Spain,  Finland,  France, 
Luxembourg, Romania,  the Netherlands, Portugal, Sweden, Spain  and  the UK)  provide 
for specific rules on cross-border divisions or allow them by relying on other legislation 
or  case  law.  For  instance,  Czech  Republic,  Denmark  and  Finland  have  specific  rules 

77 See also Annex 5 for deficiencies as regards efficiency of the current cross-border merger rules. 
78 http://ec.europa.eu/internal_market/consultations/2014/cross-border-mergers-divisions/index_en.htm. 
79 Schmidt, EP Study, p. 26 
80 EY study on cross-border operations of companies 
81 According to results of the 2015 public consultation and additional information from national authorities, 
there were about 700 national divisions per year in Denmark during the 5 preceding years; over a thousand 
national divisions in France, around 500 in Poland and Estonia, around 200 in Finland, Latvia and Sweden, 
and around 150 in Belgium.  
82  Data  on  cross-border  divisions  is  also  generally  difficult  to  obtain.  According  to  research  and 
calculations, 55 cross-border divisions took place in Sweden, one in Denmark, and 3 in France in 2016, and 
it  is  assumed  that  overall  around  100  cross-border  divisions  could  take  place  each  year  in  the  EU.  The 
estimate  of  the  EY  study  on  cross-border  operations  of  companies  is  based  on  numbers  of  cross-border 
divisions  in  2016,  which  in  turn,  were  obtained  either  from  business  registers  where  available  or  were 
calculated on the basis of numbers of domestic divisions and attractiveness of the countries.  
83 EY study on cross-border operations of companies, p. 25. 
84 OJ L 378, 31.12.82, p. 47; MS have to permit divisions only in cases where they do so at national level. 

22 

 
                                                            
based  on  the  national  rules  transposing  the  EU  provisions  on  cross-border  mergers.  In 
France,  Romania,  Italy,  Luxembourg,  Spain  and  the  UK  cross-border  divisions  are 
allowed without specific rules, often following the case law of the Court of Justice (e.g. 
SEVIC  case  C-411/03)  or  by  applying  national  provisions  on  cross-border  mergers  or 
domestic divisions85 by analogy86. For example, in France a national court has confirmed 
that corporate restructuring between French and Dutch companies is possible if the Dutch 
law  recognizes  the  validity  of  the  operation  and  if  the  restructuring  complies  with  the 
relevant national legislation in the MS concerned87. In Italy, in the absence of legal rules, 
academics  take  the  view  that  cross-border  divisions,  being  similar  to  cross-border 
mergers, can be carried out88.  

Even when MS allow companies to divide cross-border, the relevant national provisions 
are often divergent or even incompatible. In a number of MS carrying out a direct cross-
border  division  is  not  possible89.  Therefore,  there  have  been  a  number  of  calls  for  the 
Commission  to  propose a  new  procedure  for  cross-border  divisions  to  sit  alongside the 
CBMD.  This  was  the  case  in  the  2017  public  consultation90  and  recent  European 
Parliament Resolution that called on the Commission to propose a procedure and noted 
that "introducing harmonised standards at EU level in the field of cross-border divisions 
would lead to a simplification of operations and a reduction of costs and duration of the 
procedures".91 

1.6.2  What is the problem for companies? 

The  current  legal  situation  means  that  carrying  out  a  direct  cross-border  division  is 
usually very difficult, costly or sometimes even impossible. With diverging national rules 
and  in  particular  in  the  absence  of  specific  national  procedures,  companies  often  face 
legal  uncertainty  and  need  to  seek  legal  advice.  68%  of  the  respondents  to  the  2015 
consultation  mentioned  the  legal  uncertainty  due  to  the  lack  of  EU  rules  as  the  main 
obstacle to completing a cross-border division and 51% of the respondents the duration 
and complexity of the current procedures92.  

For instance, if the dividing company and the recipient company are situated in different 
MS,  the  companies  may  need  to  meet  different  requirements  (e.g.  type  and  content  of 
documents they need to draw up, involvement of independent experts or deadlines). Such 
different requirements make it difficult to structure the cross-border operation and render 
it more complex and costly. In some cases, costs involved or incompatibility of national 
rules  could lead  companies to  decide  not to  divide  at  all  and  therefore  result in  missed 
business opportunities.  

85  For  instance,  Spain  and  Luxembourg  permit  cross-border  divisions  on  the  basis  of  rules  for  domestic 
divisions; EY study on cross-border operations of companies. 
86  On  the  basis of  the  EY  study  on  cross-border operations  of  companies,  Bech  Bruun/Lexidale  2016,  J. 
Schmidt, EP Study, and additional research. 
87 See Bech Bruun/Lexidale 2016, p. 103.  
88 Ibid, p. 561 on transposition into Italian law. 
89  E.g.  Cyprus,  Germany,  Hungary,  Latvia,  Malta,  Poland,  Slovak  Republic  and  Slovenia,  EY  study  on 
cross-border operations of companies. 
90 Annex 4 – p. 84 
91  European  Parliament  resolution  of  13  June  2017  on  cross-border  mergers  and  divisions,  P15_TA-
PROV(2017)0248. 
92  See  summary  of  replies,  p.  20-22.  http://ec.europa.eu/internal_market/consultations/2014/cross-border-
mergers-divisions/index_en.htm 

23 

 
                                                            
This  means  that  companies  face  unnecessary  costs  when  they  want  to  sell  a  part  of 
business or transfer it to other companies belonging the same group, but cross-border. On 
average  the  costs  of  a  cross-border  division  at  EU  level  are  estimated  to  be  between 
€55,000  and  €70,000.93  The  same  costs  are  faced  when,  for  instance,  the  two  main 
shareholders, or their heirs situated in two different MS, do not agree any longer about 
the  strategy  of  a  company,  and  the  easiest  solution  to  save  business  would  be  then  to 
divide a company cross-border. 

Impact  on  companies  can  be  seen  by  comparing  the  costs  between  cross-border  and 
domestic  divisions.  The  costs  of  a  national  division  are  estimated  to  be  overall  low. 
However, with regard to cross-border divisions, the costs can vary depending on whether 
a MS has specific procedure in place or whether the division is carried out indirectly. For 
instance,  in  Finland,  where  there  is  a  set  procedure  for  a  direct  division,  the  costs  are 
estimated to be below €30,000. This differs significantly from the UK, where there are no 
procedural rules and the company has to effect a cross-border division through a merger, 
where the costs of a cross-border division can rise over €100,000.94 

Member State95  Cost of domestic division 

Cost of cross-border division 

Austria 

Belgium 

€ 10,000 - 60,000 

€10,000 – 30,000 

€ 30,000 - 60,000 

€ 30,000 – 60,000 

United Kingdom 

€30,000 - 60,000 

€60,000 – 100,000+ 

Bulgaria 

Denmark 

Finland 

Italy 

Below €10,000 

Below €10,000 

Below €10,000 

€ 10,000 - 60,000 

Lithuania 

€10,000 – 30,000 

Below €10,000 – 30,000 

€10,000 – 30,000 

€10,000 – 30,000 

€ 30,000 – 100,000 

€ 30,000 – 60,000 

Sweden 

Spain 

Below €10,000 – 30,000 

€10,000 – 60,000 

€10,000 – 30,000 

€10,000 – 30,000 

Source: EY study on cross-border operations of companies 

When  companies  cannot  carry  out  a  direct  cross-border  division  or  this  would  be  too 
complicated or expensive, they tend to use alternative indirect procedures. For instance, 
they  might  divide  at  national  level  and  merge  cross-border  with  another  company  or 
create  a  new  company  abroad  and  transfer  part  of  their  assets  and  liabilities  to  it.  As 
indicated  by  stakeholders,  such  indirect  ways  involve  additional  procedures,  legal 
uncertainty and need of legal advice which lead to even higher costs. For instance, when 
carrying  out  a  national  division  and  a  cross-border  merger,  a  company  would  in  most 
cases  need  to  prepare  all  the  documents  twice  (i.e.  draft  terms  of  each  operation, 
management  reports,  independent  expert  reports),  organise  two  general  meetings  of 
shareholders  and  receive  all  the  necessary  certificates  from  the  public  authorities 

93 EY study on cross-border operations of companies, p. 28. 
94 Cost estimations are divided into three categories: legal and tax advisory costs (60%); registration costs 
(5%) and: time to operate the division costs (35%). For instance in Austria the legal fees are estimated to 
be approx. €30,000, other advisory fees to be approx. €20,000 and notary and registration fee to be approx. 
€10,000. For further analysis see EY study on cross-border operations of companies, p. 89.  
95 Denmark and Finland have national rules for cross-border divisions and the other MS in the table allow 
direct cross-border divisions by relying on other national provisions by analogy. 

24 

 
                                                            
separately  for  each  operation,  leading  to  unnecessary  costs.96  For  around  half  of  the 
respondents  to  the  2015  consultation,  the  costs  of  such  an  indirect  procedure  were  the 
main obstacle to carrying out a cross-border operation as compared to a domestic one.  

1.6.3  What is the problem for other stakeholders? 

As  in  case  of  cross-border  mergers,  the  rights  of  stakeholders  such  as  employees, 
creditors or minority shareholders are likely to be impacted by a cross-border division, as 
they  would  be  subject  to  divergent  national  rules.  While  there  is  no  clarity  whether 
national  rules  apply  to  the  stakeholders  concerned  in  all  cases  and  in  all  MS,  the 
following descriptions explain the complexity of the current situation.  

The  national  rules  on  creditors'  protection  differ  significantly.  In  case  of  domestic 
divisions, in the Czech Republic creditors have a right to petition the court for protection, 
while  in  Denmark,  an  independent  expert  evaluates  if  creditors'  claims  would  be 
endangered.  In  Italy,  this  can  be  assessed  either  in  an  expert  report  or  by  a  court.  For 
cross-border  divisions,  in  the  Czech  Republic  creditors  are  entitled  to  seek  a  guarantee 
provided  that  it  will  be  more  difficult  to  recover  their  claims  after  division  while  in 
Denmark  creditors  can  claim  protection  if  the  valuation  expert  concludes  that  the 
creditors  would  not  be  sufficiently  protected  after  the  division.  The  timing  to  provide 
creditor  protection  also  varies:  e.g.  creditors  can  claim  protection  for  example  1)  up  to 
four  weeks  after  the  general  meeting,  2)  within  three  months  from  the  issuance  of  the 
public notice by the registration authority or 3) within six months after the cross-border 
divisions becomes effective. In Italy and Sweden, cross-border merger rules are usually 
applied by analogy, while in Belgium and France domestic division ones are used.  

The  national  rules  also  differ  on  minority  shareholder  protection.  Through  the  cross-
border  division,  shareholders  may  become  shareholders  of  a  company  in  a  jurisdiction 
(another  MS)  where  they  did  not  wish  to.  Some  MS  (e.g.  Denmark,  Ireland,  Italy, 
Poland) allow shareholders to sell their shares for adequate compensation, some require 
high  majorities  when  voting  in  the  shareholders'  meeting  (e.g.  90%  in  Austria  as 
compared  to  75%  in  case  of  proportionate  divisions,  75%  in  Denmark  as  compared  to 
66% for the proportionate ones), some others provide for an ex-ante court scrutiny of the 
fairness of the terms of division (UK) or the possibility to set aside a resolution tainted by 
abuse of majority power (France).  

Such divergence can result in  varying treatment of stakeholders  of a dividing company 
across  MS.  In  some  cases,  stakeholders  might  not  receive  any  protection  at  all.  For 
instance, in real life cases involving Italian and UK companies, creditors had the right to 
oppose  the  division  according  to  Italian  law  but  not  according  to  the  UK  rules.  In  a 
hypothetical  case  of  a  division  involving  Danish  and  French  companies,  minority 
shareholders in a Danish dividing company would have a possibility to sell their shares 
for  adequate  compensation  if  they  voted  against  the  division  at  the  general  meeting 
whereas the shareholders of a French company would not have such a right97.  

96 E.g. drawing up of a management report can amount to up between €5,000 and 8,000 in Italy and legal 
advice for drawing up the necessary reports for a cross-border operation can add up to €8,000 and 12,000 
in Belgium; and organisation of a shareholder meeting can cost between €2,000 and 5,000 in Ireland and 
lead to legal advice costs of between €3,000 and 5,000 in Italy (with €2,500 and 4,500 for notarial fees as 
required  in  Italy  for  cross-border  operations,  Data  from  the  EY  study  on  cross-border  operations  of 
companies. 
97 On the basis of the Danish rules for cross-border divisions and French rules for domestic ones. 

25 

 
                                                            
In case of domestic divisions, some MS provide for protection, e.g. in Belgium, where in 
principle, the employment contracts of the employees are transferred automatically to the 
receiving  company  while  maintaining  acquired  rights,  or  Denmark  (considerable 
protection where a business changes ownership) or the Netherlands (a works council – if 
at least 50 employees – has the right to provide formal advice on all reorganisations of a 
company and could bring a dispute before a court if the company board goes against their 
advice), whereas in a number of others (e.g. in France, Ireland, Italy, Lithuania, Spain or 
the  United  Kingdom)  there  are  no  specific  provisions  in  place.  But  these  domestic 
protections are not easily transferrable to the cross-border context.  

As  regards  employees'  rights  in  case  of  cross-border  divisions,  the  provisions  differ 
between  protection  based  on  information  and  procedure  in  Denmark  and  based  on 
information  rights  in  Czech  Republic  and  no  specific  rights  in  Finland;  in  MS  where 
other  national  rules  are  applied  by  analogy,  those  rules  also  differ,  e.g.  in  Belgium 
safeguards  from  domestic  divisions  would  apply  whereas  in  Sweden  –  the  ones  from 
cross-border merger rules. 

Moreover,  more  generally,  there  is  no  specific  requirement  to  inform  companies  about 
the  cross-border  division  and  its  implications  –  which  appears  particularly  problematic 
given that divisions are considered as risky in terms of safeguarding employment rights.  

Due  to  the  lack  of  rules,  in  case  of  a  cross-border  division,  the  employees'  rights  can 
diminish since the division can  lead to  lower number of employees. In case of a lower 
number  of  employees,  the  national  law  might  not  require  the  same  level  of  employee's 
rights as before the division. Companies might use cross-border divisions and the legal 
uncertainty around it to avoid the need to apply potential domestic rules for employees' 
participation.  The  problem  of  "avoiding"  national  participation  rules,  by  performing  a 
cross-border  division  below  the  threshold,  may  be  much  more  significant  for  cross-
border divisions than for cross-border mergers (where the overall number of employees 
grows)  In  cases  where  companies  carry  out  cross-border  divisions  indirectly,  (e.g. 
through a division at national level and then through a cross-border merger), the situation 
is  even  more  complicated  for  stakeholders.  They  would  need  to  understand  how  they 
would be protected (if at all) under each separate procedure and under diverging national 
rules  on  creditors  and  minority  shareholders  in  domestic  divisions  and  cross-border 
mergers. This would result in legal uncertainty and need of legal advice98. 

1.7  Cross-border conversions 

1.7.1  Driver: What causes the problem?  

Cross-border conversions are important for those companies that would like to continue 
operating  in  another  MS  without  losing  their  business  contracts.  Conversion  is  a  direct 
process whereby the company's legal personality is preserved as it converts its legal form 
to a legal form in the new MS (without needing to wind up or to liquidate its assets and 
liabilities in the initial MS). A conversion is particularly attractive for a small company 
that  does  not  have  enough  financial  resources  to  search  for  expensive  legal  advice  and 
conduct  a  cross-border  merger.99  A  move  by  a  small  company  to  another  MS  is  often 
done for the same reasons which are behind free movement of persons, i.e. personal or 
language reasons, search for better business opportunities and better financing, closeness 
to  the  clients  or  finding  a  more  business  friendly  legal  environment.  For  bigger 

98 See also Annex 4 for more details on the problems caused by the lack of specific rules. 

26 

 
                                                            
companies,  or  groups  of  companies,  the  tax  consideration  is  important,  but  often 
companies  move  to  adjust  their  corporate  governance  or  capital  structure,  or  financial 
disclosure requirements. 

In its jurisprudence, the Court of Justice has firmly established the right of legal entities, 
within  the  meaning  of  Article  54  TFEU,  to  carry  out  a  cross-border  conversion.  This 
right  is  protected  as  an  inherent  aspect  of  the  freedom  of  establishment  pursuant  to 
Articles  49  and  54  TFEU.  The  case-law  (see  Annex  6)  can  be  summarised  as  follows: 
MS should allow cross-border conversions if national conversions are allowed. However, 
the more detailed conditions for conversions are left to national laws, but they should not, 
in  principle,  impede  the  freedom  of  establishment.  Such  conditions  may  be  justified  as 
overriding reasons of general interest, in a non-discriminatory and proportionate manner 
(assessed on a case-by-case basis by European and national courts).  
The recent Polbud judgment 100 made it clear that a general requirement of winding-up of 
companies  before  carrying  out  a  cross-border  conversion  is  an  unjustified  restriction  to 
the freedom of establishment. In this case, the Court also held that companies may rely 
directly on Article 49 TFEU to transfer their registered office to another Member State, 
even  where  they  do  not  transfer  their  real  head  office.  The  Court  recalled  its  earlier 
jurisprudence  that  the  fact  that  either  the  registered  office  or  real  head  office  of  a 
company  was  established  in  accordance  with  the  legislation  of  a  Member  State  for  the 
purpose  of  enjoying  the  benefit  of  more  favourable  legislation  does  not,  in  itself, 
constitute abuse. 

However,  despite  being  judicially  recognised,  the  right  to  exercise  a  cross-border 
conversion  remains  largely  unrealised  for  a  number  of  companies.  Recent  studies  have 
estimated  that  the  range  of  volume  of  cross-border  transfers  of  a  registered  office  for 
2016 to be between 350 – 900 operations.  101 Therefore, they constitute less than 1% of 
domestic transfers. This is largely due to the lack of common procedures in EU law and 
the divergent approaches at national level.  

There are a number of MS that allow cross-border conversions according to their national 
legislation  (i.e.  Belgium,  Cyprus,  Czech  Republic,  Denmark,  France,  Greece,  Italy, 
Luxembourg,  Malta,  Portugal,  Slovakia,  and  Spain).  A  certain  number  of  these  MS 
enable  and  regulate  conversions  through  law  and  procedure  (e.g.  Cyprus,  Czech 
Republic, Denmark, Malta and Spain); in some others, discussion about a national law is 
currently ongoing (e.g. the Netherlands) and the others provide more limited rules, e.g. 
France where a cross-border conversion requires a unanimous agreement of shareholders.   

As the cross-border conversion means that the company leaves one MS and incorporates 
in another MS, the divergences of the national rules on cross-border conversions, if they 
exist, make cross-border conversions very difficult. In practise, a cross-border conversion 
can  only  happen  in  cases  where  both  MS  have  compatible  rules  –  the  MS  which  a 
company leaves and the MS to which a company moves to.  

Even between those MS which have enacted legislation on conversions, the procedures 
put  in  place  are  inconsistent.  For  instance,  MS  have  adopted  divergent  approaches  to: 
information  and  disclosure  requirements  prior  to  a  cross-border  conversion;  dates  and 
deadlines  to  be  met;  publication  requirements;  steps  required  for  the  execution  of  a 

99 See also the European Added Value Assessment - Directive on the cross-border transfer of a company’s 
registered office 14th Company Law Directive (European Parliament). 
100 C-106/16 
101 EY study on cross-border operations of companies, p. 19. 

27 

 
                                                                                                                                                                                 
conversion;  safeguards  afforded  to  stakeholders  (employees,  creditors  and  minority 
shareholders).  Furthermore,  these  rules  may  differ  depending  on  whether  it  is  an 
outbound  or  inbound  conversion,  which  adds  to  the  complexity.  For  instance,  Hungary 
does  not  allow  Hungarian  companies  to  convert  into  companies  in  another  MS 
(outbound), whereas conversions of foreign companies into Hungary are allowed subject 
to specific conditions set by the Hungarian Supreme Court following the Court of Justice 
judgment in the VALE case (C-378/10) (inbound). 

In  addition,  more  than  half  of  the  MS  do  not  provide  any  specific  rules  allowing  for 
cross-border  conversions  (Austria,  Bulgaria,  Croatia,  Estonia,  Finland,  Germany, 
Hungary, Ireland, Lithuania, Latvia, Poland, Romania, Slovenia, Sweden and the UK). It 
is  to  be  noted  that  the  Commission  has  pointed  out  this  problem  in  the  framework  of 
country  reports  under  the  European  Semester.  In  some  of  those  MS,  it  might  be  still 
possible to convert on a cross-border basis of analogous interpretation of CJEU case-law 
e.g.  Germany102.  Some  other  MS  might  permit  inbound  transfers  on  the  basis  of  CJEU 
jurisprudence  but  have  incorporated  rules  into  their  national  law  which  require  that  a 
company winds up and therefore make outbound transfers of registered office impossible 
(Croatia, Hungary, Ireland, Lithuania, Poland, Romania and the UK)103.  

In 2008, the CJEU stressed that it is the EU legislator who is solely competent to resolve 
the issue regarding the coupling of the head office with the registered office.104 However, 
this  has  yet  to  happen  and  as  such  there  are  cases  on  conversions  currently  pending 
before  the  CJEU.105  In  2017,  the  Commission  received  a  letter  from  6  MS  specifically 
calling for an EU instrument on conversions. This view was further reflected in the 2017 
public  consultation  which  showed  broad  support  from  MS/stakeholders  alike  as 
approximately  85%  of  all  respondents  were  of  the  opinion  that  there  should  be  an  EU 
instrument on this matter.  

1.7.2  What is the problem for companies? 

In the absence of clear rules at EU level, companies that wish to undergo a cross-border 
conversion  can  try  to  carry  out  direct  conversions  by  relying  on  the  national  rules  for 
cross-border conversions (in case those are in place) and CJEU jurisprudence or carry out 
indirect conversions through other existing EU procedures (e.g. on cross-border mergers 
or  SEs106).  They  can  also  wind-up  a  company  and  create  a  new  one  in  another  MS 
transferring them all assets and liabilities. This creates unnecessary costs and burdens for 

102 See recent judgment by the German High Court of Frankfurt (Oberlandesgericht Frankfurt) in a case of 
a  cross-border  conversion  of  a  German  private  limited  liability  company  (GmbH)  to  Italy  (OLG 
Frankfurt/M., judgement of 3 January 2017 – 20 W 88/15, ZIP 2017, 611). 

103  See  Polbud  judgement  where  the  Court  considered  that  the  general  requirement  of  winding-up  is  an 

unjustified restriction to the freedom of establishment. 

104 CJEU case Cartesio (Case C-210/06, 16 December 2008), para. 108 – "The question whether – and, if 
so, how – the registered office (siège statutaire) or real seat (siège réel) of a company incorporated under 
national law may be transferred from one Member State to another, are problems which are not resolved 
by  the  rules  concerning  the right of  establishment,  but which  must be  dealt with  by  future  legislation  or 
conventions." 
105 Polbud C-106/16 – delivery of judgement is scheduled on 25 Oct 2017 
106  Statute  for  a  European  Company  (Regulation  2157/2001)  includes  a  very  special  procedure  for  the 
transfer of seat which applies only to European Companies (SEs). It is not a cross-border conversion, sensu 
stricto, since a SE is not converting into another company law form. The conversion/transformation of a 
public  limited  liability  company  into  SE  is  a  pre-condition  for  applying  the  rules  of  the  Regulation  on 
transferring the registered office. 

28 

 
                                                            
companies.  In  a  number  of  cases  conversions,  or  operations  leading  to  an  equivalent 
result, are simply impossible for smaller companies. 

First, relying on a case-law often means long "legal battles" with registration authorities 
who do not have the habit to apply directly the case-law, but rather base their decisions 
on national procedures.107 This is too costly for small companies. It is not expected that 
the  situation  will  fundamentally  change  in  this  regard  after  the  Polbud judgment  as  the 
CJEU  recognised  that  companies  can  rely  on  the  freedom  of  establishment  to  convert 
across borders. However, absent EU harmonisation, the situation remains that it is highly 
possible  that  each  case  would  be  treated  differently  by  the  individual  Member  States' 
authorities without EU harmonised procedure. 

Secondly,  if  two  national  procedures  which  relate  to  cross-border  conversions,  do  not 
match, a cross-border conversion is simply impossible or too costly (judicial path). Even 
if the procedures match, a cross-border conversion itself is estimated to cost, on average, 
at the present state of law, between €20,000 to €40,000 depending on the MS involved 
and the size of a company.108 This is prohibitive for small companies.  

Costs and administrative burdens result from the potentially different requirements in the 
departure  and  destination  MS  as  regards  the  type  and  content  of  documents  to  be 
prepared  (e.g.  draft  terms  of  conversions,  pre-conversion  certificate109),  different 
procedures and the related deadlines or other additional requirements. For instance, in the 
Czech  Republic's  conversion  procedure  the  seat  transfer  proposal  contains  much  more 
information than its Italian counterpart110. In respect of publication, in Spain the transfer 
is to be published in the Official Gazette (accompanied by a call for a general meeting) 
and in the main newspapers in the province where the company is domiciled, whereas in 
Cyprus it must only be published in two daily newspapers.  

Thirdly, due to difficulties or impossibility to carry-out a direct conversion procedure, a 
company may choose to do this in indirect way by first creating a subsidiary abroad and 
then merging with it. So there is at least one step (the creation of a new company) that is 
not  necessary  in  comparison  with  the  direct  conversion.  Moreover,  in  cross-border 
mergers, there are at least two companies at stake, therefore there is a need for having for 
example expert reports for each company, whereas in a cross-border conversion there is 
one  company  and  therefore  one  report.  The  cost  of  at  least  one  extra  report  is 
unnecessary  for  the  conversion.  Due  to  this  and  other  complexities  of  dealing  with  at 
least two companies, instead of one, the costs of carrying out a conversion on foot of a 

107 The difficulties with the legality of a cross-border conversion and the interaction between registers have 
recently been exemplified in a recent judgment by the German High Court of Frankfurt in a case of a cross-
border  conversion of  a  German  private  limited  liability  company (GmbH)  to  Italy.  OLG  Frankfurt/M.  v. 
03.01.2017 – 20 W 88/15, ZIP 2017, 611.  
108 It is important to note that these costs only account for Member States where there is a set procedure or 
they  permit  conversions  by  analogous  interpretation  of  CJEU  case  law.  These  costs  can  increase 
significantly when there is a court procedure involved (as is the case in the UK). Similar to cross-border 
divisions  60%  of  the  costs  can  be  attributed  to  advisory  fees,  5%  to  registration  and  35%  to  operational 
costs. For further analyses see EY study on cross-border operations of companies, p. 24. 
109 A certificate conclusively attesting to the proper completion of the pre-conversion acts and formalities 
110  In  the  Czech  Republic,  aside  from  data  such  as  the  company  name,  seat  registration  number,  it  also 
needs  to  include  the  articles  of  association,  an  assessment  of  the  consequences  of  the  conversion  for 
employees  and  a  schedule  of  the  transfer.  Furthermore,  information  rights  of  shareholders,  creditors  and 
other entitled persons and information on the law governing the internal affairs after the transfer have to be 
provided. 

29 

 
                                                            
cross-border mergers are estimated to be between €80,000 to €100,000 depending on the 
MS and types of companies involved. 111 This can often be prohibitive for SMEs. 

Another  "alternative  path",  i.e.  converting/transforming  a  company  into  an  SE  is  also 
complex and normally only accessible for bigger companies. In such a case, there need to 
be  either  two  companies  or  one  public  limited  liability  company  with  a  subsidiary  in 
another MS for at least 2 years. These requirements could be much easier met by groups 
of  companies  or  bigger  companies.  Most  small  companies  would  not  be  public  limited 
liability  companies  and  would  not  be  able  to have  a  subscribed  capital  of  not  less  than 
€120,000  which  is  required  by  SE  Regulation.  Also,  the  purpose  of  cross-border 
conversions is different from the aim behind creating SEs. In case of conversions the aim 
is to move from one MS to another, whereas the purpose of SE is to have a company that 
operates in the whole EU without having to move anywhere, since precisely the Statute 
allows it to operate easily in all MS (with common rules). The sole procedure of transfer, 
without counting the creation of SE, is estimated to cost around €30,000.112  

Finally, if a company chooses to wind-up a company and transfer assets and liabilities to 
a newly created one in another MS, it may cost around €24,000 for SMEs and more than 
€100,000 for a bigger company.113 

Similar to cross-border divisions, the impact which the lack of procedural rules has for 
companies can be best demonstrated by comparing the costs of a cross-border conversion 
to the costs of a national conversion. A study found a significant divergence between the 
costs  of  a  national  conversion,  that  require  costs  inferior  to  €10,000  in  all  the  MS  for 
which  data  was  collected  and  the  estimated  costs  for  cross-border  conversion  which 
require higher costs than undertaking a domestic transfer in the majority of the MS. For 
instance,  for  Cyprus,  where  there  is  a  set  procedure  in  place,  the  cost  difference  is  not 
significant,  with  costs  estimated  to  be  below  €10,000  for  both  procedures.  Conversely, 
for  Austria,  where  cross-border  conversions  are  authorised  by  applying  the  SE 
Regulation by analogy, the costs differ between less than €10,000 for a national transfer 
and  €30,000-60,000  for  a  cross-border  transfer.  The  most  distinguishable  difference  in 
costs  can  be  identified  in  the  United  Kingdom  where  cross-border  conversions  are  not 
authorised  and an  indirect procedure has  to be used.  Here the costs are estimated to be 
€10,000 for a national conversion but can rise to over €100,000 for an indirect procedure 
to achieve the same result as a cross-border transfer.114 

All of this shows that there are real difficulties faced by companies, especially by SMEs. 
As E&Y study provides that: 

Through  interviews  with  legal  practitioners  in  the  MS  and  the  Expert  Panel  with 
experience  advising  companies  on  (cross-border  conversions),  it  was  indicated  that  the 
tendency  to  abandon  the  transfer  of  a  registered  office  will  mainly  apply  to  smaller 
companies such as SMEs who do not have the means nor the time to either (1) appeal the 
refusal to transfer the registered office through the use of the CJEU jurisprudence or (2) 
use finances for alternative solutions to undertake the transfer. 

At the same time, it has been found115 that a very large percentage of domestic transfers 
concerns  SMEs  (99,3%  in  Italy,  99,9%  in  Estonia).  It  is  likely  that  the  same  would  be 

111 EY study on cross-border operations of companies, p. 56. 
112 EY study on cross-border operations of companies, p. p. 66. 
113 EY study on cross-border operations of companies, p. 54. 
114 EY study on cross-border operations of companies, p. 64.  
115Study 
https://bookshop.europa.eu/en/study-on-the-law-applicable-to-companies-pbDS0216330/. 

Companies, 

Applicable 

2017, 

LSE, 

Law 

the 

on 

to 

available 

at: 

30 

 
                                                            
true  for  cross  border  conversions.  Therefore,  given  that  99%  of  all  limited  liability 
companies in the EU are SMEs116 and that a cross-border conversion procedure might be 
of  particular  interest  for  them,  the  above-mentioned  problems  can  lead  to  considerable 
lost opportunities for the internal market. 

1.7.3  What is the problem for other stakeholders? 

Similar  to  other  cross-border  operations,  the  rights  of  stakeholders  such  as  employees, 
creditors or minority shareholders might be affected: when a company converts from one 
MS to another, in principle, the rights of such stakeholders may also change because they 
become stakeholders of the transferred company in the receiving MS. 

The  protection  of  stakeholders  would  very  much  depend  on  the  approach  used  by  a 
company in the absence of EU rules. If companies choose to carry out direct conversions 
by relying on the national rules for cross-border conversions (in case those are in place) 
and  CJEU  jurisprudence,  this  means  application  of  divergent  and  often  incompatible 
rules and procedures. In addition, the protection offered by case-law is insufficient, since 
the case-law so far has dealt only with limited aspects of protection and its guidance is by 
its nature offered on case by case basis.  

As  regards  employee  protection,  some  MS  have  specific  rules  on  it;  some  do  not  have 
rules  at  all.  For  example,  in  the  Czech  Republic  employees  involved  in  the  outbound 
conversion  have  the  right  to  be  acquainted  with  the  transfer  report and  to  express  their 
opinion  on  the  transfer,  while  in  Cyprus  and  in  Malta  there  is  no  such  protection.  The 
problem for employees might be the same as under cross-border divisions: there is a risk 
that  companies  use  cross-border  conversion  and  the  lack  of  relevant  rules  to  avoid  the 
provision of employees' rights by moving to another MS with more favourable rules for 
companies  in  this  respect.  The  problem  of  "avoiding"  national  participation  rules,  by 
performing a cross-border conversion below the national threshold, may be much more 
significant for cross-border conversions than for cross-border mergers (where the overall 
number of employees grows). Moreover, more generally, employees are not sufficiently 
informed about a cross-border conversion – this appears particularly problematic as the 
cross-border conversion is considered risky for employment rights. 

Furthermore, a possibility offered by a combination of MS laws which would allow the 
creation  of  letter-box  companies  in  the  destination  MS  is  not  welcome  by  many 
stakeholders,  including  employees.  Concerns  are  raised  that  companies  having  a 
registered  office,  but  not  a  head  office  in  the  destination  MS  after  conversion  may  be 
used  to  avoid  many  obligations  of  the  MS  where  they  have  a  real  head  office.  This 
problem  has  become  more  prominent  following  the  Polbud  judgement  which  stipulates 
that  the  freedom  of  establishment  is  applicable  when  only  the  registered  office  is 
transferred.  

As far as creditor protection is concerned, some MS (usually those with specific rules on 
cross-border  conversions)  provide  the  creditors  with  a  right  to  request  a  security  or  to 
object  the  reincorporation  (e.g.  Cyprus,  Czech  Republic,  Denmark,  Malta,  Spain  and 
draft  bill  under  discussion  in  the  Netherlands).  In  Spain  creditors are allowed  to  object 
the reincorporation, in Cyprus a creditor may object to the reincorporation but the court 
may intervene; while in the Czech Republic a creditor may demand security for unpaid 

116 Eurostat 

31 

 
                                                            
debts. Some other MS (e.g. France, Greece, Luxembourg and Portugal) do not regulate 
this issue at all.  

As far as  minority shareholders protection is concerned, the existing rules in MS range 
from  no  special  rules  (e.g.  the  UK)  to  rather  elaborate  protection  regimes  (e.g.  in 
Germany where minority shareholder have an exit right against cash compensation and a 
right to additional cash compensation if the share exchange ratio is not adequate). There 
are  also  in  some  cases  different  majorities  required  to  approve  a  conversion  by 
shareholders;  often  supermajority  is  required  (e.g.  Belgium,  Czech  Republic,  Malta, 
Spain, Portugal) but in some cases even unanimity (e.g. in Luxembourg, France, Greece 
for some companies), which is more protective of minority shareholders but might make 
such conversions close to impossible in practice.117 

In  the  absence  of  a  direct  conversion  procedure,  as  explained  above,  companies  may 
choose to carry out indirect conversions through other existing EU procedures. In respect 
of indirect conversions, the SE Regulation and cross-border merger rules (see point 2.2) 
contain  specific  provisions  on  protection  of  stakeholders.  As  to  the  SE  Regulation,  it 
provides  for  a  number  of  safeguards,  but  the  SE  does  not  offer  a  real  conversion 
procedure  and  for  the  reasons  explained  in  point  2.4.2  it  contains  complex  rules  which 
are not suited for smaller companies. As to the cross-border merges, the weaknesses of 
protection offered by cross-border merger directive are described in point 2.2. Naturally, 
when  a  company  winds-up  and  reincorporates  the  acquired  rights  are  extinguished  and 
the new rights depend entirely on the national regime of the new MS.  

This  plethora  of  unsatisfactory  options  and  lack  of  efficient  solutions  leads  to  legal 
uncertainty  or  clearly  incompatible  rules.  The  protection  of  stakeholders  in  such  cross-
border transactions, in contrast to national conversions, is therefore often ineffective.  

1.8  Conflict of laws rules  

1.8.1  Driver: what causes the problem?  

Legislation regulating companies has only been partially harmonised at the EU level and 
the  national  company  rules  vary.  Therefore,  companies  operating  across  borders  or 
considering  such  cross-border  activities  face  the  risk  of  being  governed  by  different  or 
contradictory  laws  depending  on  where  they  are  formed  or  active.  They  are  also 
confronted with a lack of legal certainty as to which law applies, including in situations 
where  the  applicable  law  changes  as  in  a  cross-border  conversion  but  also  in  static 
situations  where  a  company  engages  in  significant  cross-border  operations.  As  a 
consequence,  the  effect  of  the  freedom  of  establishment  on  the  mobility  of  companies 
across MS is still rather limited and foreign incorporations take place in other MS only to 
a small extent118. In the UK there are between 227,000 and 270,000 foreign incorporated 
companies, in  Estonia, Romania, France,  Germany and Slovakia around 30,000, and in 
all other MS even less than that. An empirical survey of lawyers from all MS found that 
the  divergence  of  national  private  international  law  regarding  companies  causes  legal 
uncertainty for economic actors and their owners (shareholders), directors and managers 
operating within the internal market and for MS as to the question which rules of national 

117 Information on the basis of the EY study on cross-border operations of companies and the Study on the 
Law  Applicable  to  Companies,  LSE,  2017,  available  at:  https://bookshop.europa.eu/en/study-on-the-law-
applicable-to-companies-pbDS0216330/. 
118Study 
the 
https://bookshop.europa.eu/en/study-on-the-law-applicable-to-companies-pbDS0216330/ 

Companies, 

Applicable 

available 

2017, 

LSE, 

Law 

at: 

on 

to 

32 

 
                                                            
law applies to foreign companies operating on their territory. Such legal uncertainty has 
an adverse effect on the cross-border mobility of companies, on foreign incorporations as 
well as on cross-border conversions.119  
It  is  argued120  that  this  is  also  due  to  the  absence  of  uniform  conflict-of-law  rules.  At 
present, conflict of laws rules in the area of company law are regulated by MS and the 
content  of  these  rules  differs  substantially.  In  particular,  the  connecting  factor 
determining the applicable law, i.e. the criterion that is decisive on which law applies to 
companies with cross-border activities, varies among MS. Traditionally, some MS follow 
the real seat theory, i.e. the law governing a company is determined by the place where 
the central administration of that company is located. Other MS follow the incorporation 
theory, i.e. the law governing a company is determined by the place of its incorporation 
(the  place  of  its  registered  seat).  It  is  important  to  distinguish  the  connecting  factor 
determining the applicable law from effective residence requirements under substantive 
company law which exist in several MS and which make the incorporation of a company 
subject to such requirements, with the consequence that companies are only registered if 
they have effective residence in the MS concerned. Connecting factors for conflict of law 
rules  based  on  the  incorporation  theory  are  independent  from  and  have  no  link  to 
effective residence requirements under substantive company law. In other words, where a 
MS  follows  the  incorporation  theory  for  the  determination  of  the  applicable  law,  it 
applies the substantive law of the MS where a company is incorporated but that law may 
require a real seat on its territory for the incorporation of a company. Under this point, 
the  terms  'incorporation  theory'  and  'real  seat  theory'  as  well  as  the  term  'connecting 
factor'  are  used  exclusively  in  the  context  of  determining  the  law  applicable  to  a 
company.  

The difference between the two theories concerning conflict of laws rules could lead to 
situations where a company incorporated in MS A, but with its central administration in 
MS  B,  would  be  recognised  as  a  company  of  MS  A  by  MS  that  followed  the 
incorporation  theory,  but  in  MS  that  followed  the  real  seat  theory  that  same  company 
would  be  governed  by  the  law  of  MS  B.  Potentially,  a  company  could  therefore  be 
subject to different and possibly contradictory laws at the same time.  

The  Court  of  Justice  of  the  EU  has  addressed  some,  but  not  all,  of  these  uncertainties 
faced  by  companies  in  the  internal market121  in  the  context  of  the  relationship  between 
national company laws and the freedom of establishment.  The case-law of the Court of 
Justice has considered that certain practices in MS imposing their company law rules on 
companies incorporated in other MS (hereinafter also 'foreign companies') on the basis of 
the real seat approach are unjustified restrictions of the freedom of establishment where 
they lead to the non-recognition of foreign companies not having their real seat in the MS 
of incorporation. In its present state, EU law guarantees that a company incorporated in a 
MS  must  be  recognised  throughout  the  EU  provided  that  it  has  any  of  its  registered 
office,  central  administration  or  principal  place  of  business  in  a  MS.122  Besides  formal 
recognition  of  companies  as  legal  persons,  MS  cannot  impose  additional  obligations 
unless such obligations are justified by overriding mandatory requirements.123 The same 
principles apply in that MS may not prevent a seat transfer accompanied by a change of a 

119 Study on the Law Applicable to Companies, p. 16. 
120 Study on the Law Applicable to Companies, idem. 
121 See Annex 6: Overview: ECJ case-law on the mobility of companies. 
122 Case C-212/97, Centros, Case C-208/00 Überseering. 
123 Case C-167/01, Inspire Art, para. 101 et seq. 

33 

 
                                                            
company´s governing law, provided that this is possible under the law of the MS which 
the company wishes to adopt.124  

The  above-mentioned  case-law  of  the  Court  has,  however,  addressed  existing  obstacles 
only  partially  and  only  on  a  case-by-case  basis.  As  a  consequence,  there  is  significant 
variation  in  how  the  relevant  connecting  factor  determining  the  applicable  law  is 
formulated  and  whether  the  conflict  rules  contain  exceptions  to  this  connecting  factor 
where the foreign company has substantial links to the new state. In several MS, conflict 
of  laws  rules  applicable  to  companies  are  unclear,  uncertain,  underdeveloped  or  even 
non-existing or do not fully comply with the case law of the Court of Justice on freedom 
of establishment. Some MS still formally adhere to the real seat doctrine, but effectively 
disapply it in practice because of the use of presumptions. Some apply their domestic law 
to foreign companies at the choice of third parties if the company’s real seat is located 
within the new state. Other MS apply specific provisions of their domestic company law 
to  foreign  companies  if  idiosyncratic  links  of  differing  intensity  with  the  new  state  are 
present, for example the location of assets in the new state or the carrying out of business 
activity.  MS  seem  therefore  to  be  split  into  four  categories:  those  which  apply  a  pure 
incorporation theory (BG, CY, CZ, FI, HU, IE, LT, MT, NL, SK, SE, UK); those where 
the incorporation theory is applied but this is unclear to non-experts or those where the 
incorporation is subject to exceptions but there is clarity in the legal framework (AT, BE, 
HR, EE, FR, DE, IT, RO, SI, ES); those where the incorporation is subject to exceptions 
and there is no clarity in the legal framework for no-experts (DK, EL, LV, LU) and those 
where even legal experts cannot identify whether the country follows a connecting factor 
based upon the incorporation theory or not (PL, PT)125. 

This  situation,  combined  with  insufficient  awareness  of  the  case-law  in  MS  authorities 
and  even  lower  courts,  results  in  an  enhanced  risk  of  having  to  go  through  protracted 
litigation  to  benefit  from  the  freedom  of  establishment.126  The  recent  Polbud  judgment 
does not help to resolve the existing legal uncertainty in this respect, since the Court does 
not  address  the  issue.  It  is  important  to  distinguish  between  the  connecting  factor 
determining the applicable law from effective residence requirements under substantive 
company law.  

Finally,  the  boundaries  between  the  law  applicable  to  the  internal  functioning  of 
companies  (not  yet  regulated  at  EU  level)  and  other  areas  of  conflict  of  laws  (already 
regulated  at  EU  level,  such  as  contract,  tort  and  insolvency  law)  can  raise  legal 
uncertainties.  For  instance,  there  is  significant  variation  in  how  the  MS  define  the 
liability of directors in insolvency towards shareholders, creditors, or other third parties.  

The  laws  and  practices  of  MS  with  regard  to  the  law  applicable  to  companies  reveal 
therefore lack of uniformity and legal certainty as to several important aspects. All these 
elements may constitute obstacles to cross-border activities and corporate mobility in the 
EU  and  limit  the  possibility  of  companies  to  make  effective  use  of  the  freedom  of 
establishment. 

124  Case  C-210/06,  Cartesio.  See  also  the  Study  on  the  Law  Applicable  to  Companies  which  contains  a 
thorough description and analysis of the case law, pp. 28-31. 
125  See  Annex  7,  which  is  based  on  the  information  gathered  by  the  Study  on  the  Law  Applicable  to 
Companies, pp. 100-127. 
126 Case C-378/10, VALE, para. 41. 

34 

 
                                                            
A number of the national public authorities and business organisations that replied to the 
2017  public  consultation  considered  that  the  differences  between  the  MS  laws  or  the 
overall  lack  of  legal  framework  in  respect  to  conflict-of  law  rules  for  companies  to  a 
certain extent constitute obstacles to the proper functioning of the internal market - with 
28% considering it as an obstacle to a large or very large extent. The picture is different 
among trade unions (which predominantly see it only as a problem to some extent), and 
notaries (who predominantly do not see it as a problem at all).  

1.8.2  What is the problem for companies? 

As a result of the lack of uniform conflict of laws rules, companies present or aiming to 
be  present  in  more  than  one  MS  may  incur  additional  costs  and  even  refrain  from 
exercising their freedom of establishment: The lost opportunities resulting from this latter 
aspect  cannot  be  quantified  but  there  is  evidence  that  the  extent  to  which  private 
international  laws  differ  between  a  given  country  pair  is  significantly  and  negatively 
related  to  the  foreign  incorporations127.  Countries  that  have  a  clear-cut  version  of  the 
incorporation  theory  seem  to  benefit  in  the  market  for  incorporations,  as  compared  to 
countries that have retained elements of the 'real seat' theory128: high numbers of foreign 
incorporations  can  be  found  in  the  UK  (with  ca  60%  of  all  foreign  incorporated 
companies in the EU), SK and FR129.  

Differences between the national conflict of laws rules create additional costs in both so-
called  'static'  situations  (where  there  is  no  change  of  applicable  law)  and  in  dynamic 
situations  (where  a  company  wishes  to  change  the  law  applicable  to  its  internal 
functioning, and therefore to convert into a company subject to a different national law).  

Illustrations of a static situation which may lead to a conflict of laws 

A  Finnish  businesswoman  wants  to  set  up  a  business  which  has  a  registered  office  in 
Finland but with all its economic operations in Estonia. She is uncertain whether she can 
safely rely on the applicability of Finnish law to that business.  

Illustration of dynamic situations which may lead to a conflict of laws 

A  company  registered  in  Slovakia  with  operations  in  Germany  wishes  to  change  its 
applicable law, without affecting its operations.  

127 Study on the Law Applicable to Companies, p. 14. 
128 Study on the Law Applicable to Companies, p. 63. 
129  Study  on  the  Law  Applicable  to  Companies,  p.  43.  However,  it  is  also  clear  that  other  elements 
contribute as well, since jurisdictions which retained some elements of 'real seat' are also scoring high (EE, 
RO). About 15% of foreign incorporations are due to foreign EU citizens in the country in question. Across 
the EU, an estimated 500,000 companies are foreign incorporated companies. 

35 

 
                                                            
Legal  uncertainty  as  to  the  applicable  law  has  been  most  often  quoted  as  a  practical 
problem (together with costs of translations)130.  

In  static  situations,  legal  costs  may  be  incurred  ex  ante,  when  a  company  establishes 
itself in more than one MS. The need to determine which rules it will be subject to may 
require  specialised  legal  advice.  Even  where  companies  are  not  taking  such  advice  ex 
ante,  costs  may  need  to  be  incurred  ex  post,  for  example  when  the  company  needs  to 
determine the shareholders' rights or the duties of directors to or when it needs to defend 
itself against potential lawsuits.  

The  legal  uncertainty  regarding  which  rules  apply  and  the  risk  that  more  than  one  law 
may be applicable to a company or that a company may be found to fall foul of company 
law obligations (e.g. minimum capital requirements) in a given country are an obstacle to 
the exercise of the freedom of establishment and therefore an element which undermines 
growth, innovation and job creation131.  

In dynamic situations, when a company wishes to perform a cross-border conversion, the 
lack of uniform conflict of laws rules will lead to additional legal costs which come on 
top of those incurred as a result of differences in the substantive laws of the MS132. These 
may also be incurred ex ante or ex post (as in static situations) and a company may need 
to employ legal experts from at least two jurisdictions (more if the company is comparing 
the legal regimes in several potential new states).  

In addition, in both static and dynamic situations, there are different costs associated with 
the  two  main  approaches  to  determining  the  law  applicable  to  companies.  All  limited 
liability companies (representing some 80% of all companies in the EU) have currently a 
place of registration/incorporation133.  

However, several  MS retain elements of the  'real seat' as  additional connecting  factors. 
Companies  with  establishments  in  these  countries  may  experience  additional  costs  and 
obstacles  to  corporate  mobility  when  compared  with  those  established  exclusively  in 
countries applying the incorporation theory. For example, companies established in 'real 
seat' MS will have to ascertain the fact-based links which are relevant for the purposes of 
determining  the  applicable  law  and  which  differ  considerably  between  MS:  place  of 
central administration, head office, main operations, economic link or a combination of 
these as factors determining the applicable law. Such remnants of the real seat theory are 
consistently  statistically  significant  for  companies'  decision  to  perform  a  cross-border 
conversion134.  Lawyers  and  practitioners  from  'real  seat'  jurisdictions  also  indicated 
practical problems such as objections by the commercial register to register a company 
whose  headquarters  were  situated  in  another  MS,  legal  uncertainty  and  lack  of  support 
from local lawyers and notaries135. 

130 Study on the Law Applicable to Companies, p. 91. 
131 The conflict of laws rules applicable in a MS are obviously not the only factor which companies take 
into account when establishing themselves in a Member State: many companies take also geographic and 
linguistic proximity into account (e.g. Cyprus and Greece, the Czech Republic and Slovakia, Finland and 
Estonia),  see  Study  on  the  law  applicable  to  companies,  p.  46.  Furthermore,  the  high  number  of  foreign 
incorporation  in  Central  and Eastern  European  MS may  also  be  explained by  more  business-friendly  tax 
and labour law conditions designed to attract foreign investors. 
132 See the analysis above in section 2.3. 
133 Directive (EU) 2017/1132, Article 16. 
134 Study, p. 60. 
135 Study, p. 75. 

36 

 
                                                            
Where the place of incorporation cannot be determined, e.g. for unincorporated entities, 
another connecting factor would have to apply, which could point to the law of the 'real 
seat'  or  another  law  with  which  a  company  is  more  closely  connected.  However,  such 
cases are likely to represent a small proportion in practice and will therefore not lead to 
substantial costs. 

1.8.3  What is the problem for other stakeholders? 

The  lack  of  harmonised  conflict  of  laws  rules  may  also  mean  uncertainty  as  to  the 
protection afforded to stakeholders, in both static and dynamic situations. 

In  static  situations,  stakeholders  (creditors,  shareholders,  employees)  may  not  be  clear 
about  which  rules  apply  to  their  protection  and  may  as  a  consequence  incur  additional 
costs  to  ensure  against  such  risks  or  refrain  from  acting  in  the  most  economically 
beneficial  way. As long  as  the law applicable  to a company is  not  easily ascertainable, 
stakeholders  will  need  to  incur  additional  legal  costs,  either  ex  ante  (before  entering  a 
legal relationship with the company) or ex post (after entering such a legal relationship, 
e.g.  when  there  is  a  breach  of  a  duty  on  the  part  of  a  director),  as  well  as  opportunity 
costs  (when  refraining  from  entering  a  legal  relationship  with  a  company  whose  legal 
status  is  unclear  because  the  law  applicable  to  it  is  unclear).  For  example,  creditors  in 
particular need to be able to determine which law applies to the capacity of a company to 
enter  legal  relations,  and  what  the  consequences  are  when  directors  act  ultra  vires. 
Employees may need to know what their rights to participate in decision making are. 

In dynamic situations, minority creditors and shareholders as well as employees may find 
themselves in a situation where they need to incur additional costs to be able to determine 
which  law  protects  their  rights  in  the  event  of  a  cross-border  conversion.  National 
conflict of laws rules may differ in respect of (1) determining the law applicable to the 
protection  of  pre-existing  stakeholders,  and  (2)  determining  the  law  applicable  to  the 
condition for re-incorporation of the company  in  the new MS. The new law will affect 
the  protection  of  stakeholders  entering  a  legal  relationship  with  the  company  after  the 
conversion  took  place,  so  clarity  about  which  law  applies  after  the  change  is  of 
importance to stakeholders. 

The situation of employees 

Employees  are  a  special  category  of  stakeholders:  for  them,  legal  certainty  about  the 
applicable law may not be sufficient protection and they would require in fact protection 
under the law of the country where they are performing their activity in performance of 
an employment contract136.  

1.9  How would the problem evolve – what is the baseline scenario? 

As regards the use of  digital tools and process during the company’s lifecycle, with no 
initiative at the EU level, national company law procedures would continue to integrate 
digital solutions at different pace, further increasing inconsistencies between the levels of 
digitalisation in the MS. In addition, the Commission proposal for a European services e-

136 This is recognised in other EU instruments where workers are protected by the mandatory rules of the 
country  where  they  habitually  carry  on  their  work  (Regulation  593/2008  on  the  law  applicable  to 
contractual obligations) or where they are temporarily posted (ref. Directive on posted workers). 

37 

 
                                                            
card137  does  not  cover  procedures  and  requirements  under  company  law.  The 
Commission proposal for a Single Digital Gateway138 covers the general registration of 
business  activity  and  excludes  the  constitution  of  limited  liability  companies  as  this 
necessitates  a  comprehensive  approach  which  would  be  more  appropriately  included  in 
the company law acquis. 

Concerning  cross-border  mobility  of  companies,  with  no  initiative  at  EU  level, 
companies and stakeholders would continue to rely on the existing rules for Cross-Border 
Mergers enshrined in the Codified Directive139, on the national legislation if in place for 
cross-border divisions and conversions, on the Court's case law and on indirect ways of 
carrying out cross-border divisions and conversions.  

For cross-border mergers, no substantial changes could be expected without a proposal at 
EU  level.  Some  MS  could  change  their  national  rules  which  are  not  harmonised  in  the 
Directive,  e.g.  on  protection  of  creditors  or  minority  shareholders.  However,  such 
changes are likely to be limited and importantly unlikely to be compatible with changes 
introduced by other MS. 

For cross-border divisions and conversions, some MS who do not have specific national 
rules yet, may unilaterally introduce such provisions following the case-law of the Court. 
For instance, rules on cross-border conversions were  introduced  in  Denmark soon after 
the Court's decision in the VALE case. In the Netherlands, the discussions on a national 
draft  law  on  cross-border  conversions  are  currently  ongoing.  The  examples  of  recent 
cases,  such  as  the  judgement  by  the  German  High  Court  of  Frankfurt  (see  section  on 
problems  in  cross-border  conversions),  and  the  currently  ongoing  case  (C-106/16)  in 
front of the Court, legal practitioners in an increasing number of MS might acknowledge 
that cross-border conversions should be permitted, which could in turn lead to more MS 
considering rules.  This  might  be  less  likely  in  the  case  of  cross-border divisions  where 
there are less ongoing cases and less discussion in the legal literature. 

At  the  same  time,  any  such  developments  towards  more  recognition  and  legislation  at 
national level might be slow and incomplete. For instance, the Romanian Brasov Court 
of  Appeal  rejected  a  request  of  a  Romanian  company  to  convert  to  the  UK  in  2014, 
arguing, among others, that the Court's judgment in the Cartesio case does not clarify the 
reincorporation proceeding and no specific rules have been implemented in Romania140. 
In  Hungary,  the  developments  following  the  VALE  case  opened  up  a  possibility  of 
carrying  out  cross-border  conversions  into  Hungary,  without,  however,  changing  the 
situation as regards converting out of the country. 

Although the Court of Justice may further clarify some principles, in particular as regards 
cross-border  conversions  (including  in  the  currently  ongoing  case  C-106/16),  it  would 
likely  provide  only  partial  answers,  on  a  case  by  case  basis,  and  would  not  set  out  a 
uniform procedure.  

As  regards  conflict  of  laws,  continued  reliance  on  the  jurisprudence  of  the  Court  of 
Justice of the EU in the area of freedom of establishment will not by itself remove legal 

137 COM (2016) 823 and 824. 
138 Proposal for a Regulation of the European Parliament and of the Council on establishing a single digital 
gateway  to  provide  information,  procedures,  assistance  and  problem  solving  services  and  amending 
Regulation (EU) No 1024/2012 - COM(2017)256 
139 Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017  relating to 
certain aspects of company law (codification), OJ L 169, 30.6.2017, p. 46. 
140 See the study on the law applicable to companies, p. 232. 

38 

 
                                                            
differences  between  MS'  conflict  of  laws  rules141,  nor  will  it  eliminate  the  associated 
legal  uncertainty  and  costs  for  market  actors.  The  Court  has  considered  that  certain 
practices  in  MS  imposing  their  company  law  rules  on  companies  incorporated  in  other 
MS  are  unjustified  restrictions  of  the  freedom  of  establishment  where  they  lead  to  the 
non-recognition of companies established in another MS. There are, however, problems 
stemming from the potential for conflicts of laws which would remain. Companies would 
continue  to  run  the  risk  to  be  governed  by  several  laws  at  the  same  time.  Legal 
uncertainty would persist as to which rules of national law may be applied to companies 
established in another MS. 

NEED FOR ACTION AT EU LEVEL 

1.10  Legal basis for the EU to act 

Depending on the policy option, the Union could take a legislative action in accordance 
with Article 4(2) (a) TFEU in order to ensure the functioning of the internal market and 
further develop and implement the general principles of right of establishment enshrined 
in Article 49 of the TFEU. The EU action could consist of several measures. Directives 
based  on  Article  50  TFEU,  in  particular  Article  50(2)  (f)  (progressive  abolition  of 
restrictions  on  freedom  of  establishment)  and  50(2)  (g)  (coordination  measures 
concerning  the  protection  of  interests  of  companies’  members  and  other  stakeholders) 
could be envisaged. Article 114 TFEU could also apply. As regards the conflict of laws, 
the  EU  action  could  be  based  on  Article  81(2)  (c)  TFEU  empowering  the  EU  to  adopt 
measures  aimed  at  ensuring  the  compatibility of  the  rules applicable  in  MS  concerning 
conflict of laws. 

1.11  Added value of EU action 

There  is  clear  added  value  to  address  the  problems  at  EU  level  rather  than  through 
individual action by MS. As the problems described earlier show, the current situation is 
mainly  caused  by  divergent  national  rules,  lack  of  appropriate  rules  or  the  need  to 
modernise  EU  rules.  Therefore,  MS  acting  individually  could  not  satisfactorily  remove 
the barriers to the freedom of establishment because rules and procedures would need to 
be  compatible  in  order  to  work  in  a  cross-border  situation.  Concerning  the  online 
registration, as limited liability companies are not covered by the Commission proposal 
for a Single Digital Gateway, MS would continue to apply their own rules in this respect 
with  little  prospect  that  such  rules  would  address  the  cross-border  situations  in  a 
comparable  manner.  The  problems  related  to  the  requirements  of  a  systematic  physical 
presence before the competent authorities of certain MS would remain. 

For example, it is highly unlikely that MS could introduce sufficiently similar rules and 
procedures  to  enable  fully  online  cross-border  registration,  divisions  or  conversions  of 
companies, to ensure smooth carrying out of such acts across the EU or to remove legal 
uncertainty  created  by  divergent  national  conflict  of  laws  rules.  Similarly,  MS  acting 
alone could not establish safeguards for stakeholders in cross-border situations.  

141 See the study on the law applicable to companies, p. 63. 

39 

 
                                                            
The Court of Justice has also repeatedly recognised that all differences of national rules 
could  not  be  solved  by  the  jurisprudence  concerning  the  freedom  of  establishment,  but 
had to be dealt with by future legislation or conventions142.  

Many stakeholders, especially MS and businesses, share the view of added value of the 
EU  action  with  regard  to  the  use  of  digital  tools  and  the  necessity  of  laying  down  the 
rules for cross-border operations such as conversions and divisions. 

OBJECTIVES: WHAT IS TO BE ACHIEVED? 

1.12  Policy objectives 

The general objective of the initiative is to develop the Single Market, to deepen it and 
make it fairer and more predictable, by enhancing the responsible use by companies of 
the  opportunities  offered  by  the  Single  Market.  It  should  stimulate  jobs,  growth  and 
investments, with a positive impact on SMEs in particular. It would also contribute to the 
creation  of  a  digital  single  market  by  enhancing  the  use  of  digital  technologies 
throughout a company's life-cycle. 

More precisely, to deal with the identified problems and drivers presented in section 2, 
the initiative has the following specific objectives: 

  Cut  unnecessary  costs  and  burdens  for  companies  with  regard  to  procedures 
throughout their lifecycle as well as by providing clear and predictable rules, and 

  Offer  effective  protection  for  the  other  stakeholders  (employees,  creditors, 

minority shareholders and third parties) 

This would mean that companies, including SMEs, can effectively exercise the freedom 
of establishment enshrined in the TFEU, and at the same time stakeholders, in particular 
creditors,  minority  shareholders  and  employees  would  be  effectively  protected.  The 
initiative  aims  to  offer  more  choice  for  companies  in  relation  to  how  they  operate, 
restructure and move within the Single Market and facilitate the use of digital tools and 
procedures, in particular in the cross border context. At the same time, the initiative also 
aims to provide more trust and protection by making digitally performed actions trusted, 
by  increasing  legal  certainty  both  for  companies  and  stakeholders  on  the  rights  and 
obligations of the actors involved and by offering more transparency.  

142 C-81/87 para. 21 to 23, C-208/00 para. 69, C-210/06 para. 108 

40 

 
                                                            
Consistency with other EU policies and the Charter of Fundamental Rights 

This initiative will contribute to the success of many Commission initiatives which  aim 
to improve the functioning of the Single Market and make it fairer and to build a digital 
Europe.  

The digital strand of this initiative will build on existing digital elements of EU company 
law in particular the Business Registers Interconnection System (BRIS). It will enhance 
the  interaction  between  administrations  and  citizens/businesses  and  promote  the  use  of 
the once-only principle which is now largely supported in Commission initiatives such as 
the  e-Government  Action  Plan.  It  will  also  complement  the  use  of  the future  European 
services  e-card143  in  case  of  cross-border  service  provision  through  the  setting-up  of  a 
branch and contribute, through the interconnection of data, to applications for e-cards by 
companies  in  all  other  situations  of cross-border  establishment.  This  initiative  will also 
provide the necessary legal foundations for the use of digital tools and processes in order 
to enable companies to benefit from the use of  eID and e-signature through the eIDAS 
Regulation144.  It  will  also  directly  complement  the  recent  Commission  proposal  for  a 
Single Digital Gateway which  requires that certain key procedures for companies, such 
as business registration, will be fully digitalised and linked to the gateway. Finally, the 
online  registration  of  companies  will  also  benefit  from  the  recent  Public  Document 
Regulation145  which  will  require  MS  to  accept  a  series  of  documents  from  citizens 
without further verification and translation by the end of 2018.  

This initiative will also contribute to the Investment Plan for Europe and to the Capital 
Markets Union146 by making the legal framework for companies clearer, more predictable 
and  stable  in  order  to  icentivise  investment  in  Europe.  At  the  same  time,  this  initiative 
will also be coherent with the objective of creating a deeper and fairer economic union 

143 Proposal for a regulation of the European Parliament and of Council introducing a European services e-
card and related administrative facilities Brussels, 10.1.2017 COM(2016) 824 final. 
144  Regulation  (EU)  No  910/2014  of  the  European  Parliament  and  of  the  Council  of  23  July  2014  on 
electronic identification and trust services for electronic transactions in the internal market and repealing 
Directive 1999/93/EC. 
145 Public Document Regulation (EU) 2016/1191. 
146 COM(2015) 468 final. 

41 

 
                                                            
and its European Pillar of Social Rights147 which sets out a number of key principles and 
rights  to  support  fair  and  well-functioning  labour  markets  and  welfare  systems.  In 
particular,  by  enhancing  the  protection  and  transparency  for  relevant  stakeholders 
including employees, the initiative will directly contribute to the principle stipulating that 
employees  or  their representatives have  the right  to be informed  and consulted in good 
time on matters relevant to them, in particular on the transfer, restructuring and merger of 
undertakings and on collective redundancies.  

Although this initiative will not deal with taxation, it will be in line with the objective of 
creating a fair and efficient corporate tax system in the European Union148. In particular, 
increased  cross-border  accessibility  to  company  related  information  and  the  aim  of 
avoiding the use of letter box companies will contribute to increased transparency and to 
ensuring fair taxation where profits are generated.  

The  proposal  on  harmonising  the  conflict  of  law  rules  will  further  the  EU  policy  of 
making private international law rules more legally certain across the EU and will fill in 
an  important  gap  which  has  been  identified  in  the  Stockholm  programme,  as  there  are 
currently uniform EU rules on conflict of law rules only in contractual relations (Rome I 
Regulation),  non-contractual  relations  (Rome  II  Regulation)  and  -  even  more 
significantly - insolvency proceedings. But while there are uniform conflict of law rules 
addressing the end of a company's life cycle, there are no uniform conflict of law rules 
addressing its formation and internal operation.  

The proposed rules of this initiative ensure the full respect of the rights and principles set 
out  in  the  e  Charter  of  Fundamental  Rights  of  the  European  Union  and  contribute  to 
implementation  of  several  of  those  rights.  In  particular,  the  main  objective  of  this 
initiative is to  facilitate the rights  of establishment in  any MS, as  prescribed by Article 
15(2)  of  the  Charter  and  ensuring  the  principle  of  non-discrimination  on  grounds  of 
nationality  (Article  21(2)).  The  initiative  aims  to  reinforce  the  freedom  to  conduct  a 
business in accordance with Union law and national laws and practices (Article 16). The 
right to property set out in Article 17 of the Charter is also strengthened by the initiative 
through  the  safeguards  provided  for  shareholders.  Although  the  initiative  will  provide 
rules  for  companies  in  the  framework  of  company  law,  it  will  also  contribute  to  the 
workers' right to information and consultation within the undertaking (Article 27 of the 
Charter)  by  providing  more  transparency  for  employees  in  case  of  cross-border 
operations  of  companies.  The  protection  of  personal  data  shall  be  ensured  in  line  with 
Article  8  of  the  Charter.  Prohibition  of  abuse  of  rights,  namely  of  the  freedom  of 
establishment, shall be duly considered, as prescribed by Article 54 of the Charter. The 
basic  rights  and  freedoms  protected  by  the  Treaties,  in  particular  the  freedom  of 
establishment, are also relevant for this measure. 

POLICY OPTIONS AND ANALYSIS OF THEIR IMPACTS 

The policy objectives set out in the previous section can be addressed through a selection 
and combination of different policy options. Given the nature of this initiative consisting 
of a package of several complementary measures as explained in section 1.3., this impact 
assessment  focuses  on  those  options  for  each  topic  where  consultative  and  other 

147 COM(2017) 2600 final. 
148 A Fair and Efficient Corporate Tax System in the European Union: 5 Key Areas for Action COM 
(2015) 312 final. 

42 

 
                                                            
preparatory work has identified the most pressing need. The respective stakeholder input 
is fleshed out when describing the relevant options.  

This section provides a description and analysis of the policy options which are: 

  specific for the use of digital tools,  

  common for cross-border mergers, divisions and conversions, one specific option 

on conversions, and  

  conflict of law rules 

In each case, a preferred option is presented. Following the identification of the preferred 
options, they are presented and assessed as an overall package in sections 6.1 and 6.3.  

In  line  with  the  scope  of  this  impact  assessment,  all  the  described  policy  options  are 
limited  to  measures  in  the  area  of  company  law.  The  proposed  options  do  not  include 
introduction  of  international  solutions  at  EU  level,  because  no  relevant  initiatives  have 
been identified. 
Concerning  the  substantive  requirements149  for  the  incorporation  of  limited  liability 
companies  in  the  EU,  the  approaches  vary  across  MS.  There  are  three  groups  of  MS: 
those  requiring  for  incorporation  only  the  registered  office  (BG,  HR,  CY,  CZ,  DK,  FI, 
HU, IE, MT, NL, PT, RO, SI, SE and UK), those requiring both the registered office and 
the real seat in their territory (AT, BE, SI and ES), and those with mixed systems with 
differing features (EE, F, DE, EL, IT, LV, LT, LUX, PL)150. Although this diversity of 
incorporation  requirements  plays  a  role  in  relation  to  company  mobility  in  the  EU,  the 
following policy options do not include a harmonisation of the substantive incorporation 
requirements  for  all  limited  liability  companies.  The  proposed  options  are  limited  to 
digitalisation  of  procedures  as  well  as  specific  cross-border  operations  (i.e.  company 
mobility). This is because the objective of this initiative is to harmonise procedures and 
safeguards  which  are  considered  necessary  to  facilitate  cross-border  operations  while 
preventing their use for abusive purposes.  

The harmonisation of substantive incorporation requirements would be beyond the scope 
of this Impact Assessment. An overall harmonisation of the incorporation requirements 
for  all  limited  liability  companies,  including  for  companies  that  do  not  carry  out  any 
cross-border  activities  could  also  raise  issues  of  proportionality  and  subsidiarity. 
Currently,  at  the  EU  level,  the  incorporation  requirements  are  only  harmonised  for  the 
European Company, which represents a special European company law form and which 
has as a legal basis Article 352 TFEU.  

1.13  Use of digital tools and processes throughout a company's lifecycle  

The results of the 2017 public consultation on company law showed that most groups of 
stakeholders,  in  particular  the  business  organisations  (87%)  consider  the  action  in  this 
field  as  a  priority.  A  majority  of  the  trade  unions  expressed  only  moderate  support  for 
new rules concerning the use of digital tools in company law, while notaries151 strongly 

149 As explained in section 2.5.1, such requirements under substantive company law which exist in several 
MS have to be distinguished from the connecting factor determining the applicable law. 
150 For details on MS laws on this issue, see Annex 7. 
151  Notaries  represented  85%  of  the  respondents  who  felt  that  the  EU  should  not  be  dealing  with 
digitalisation of company law. Also, notaries that replied to the consultation came almost entirely from two 
MS (47% from DE and 51% from AT). 

43 

 
                                                            
opposed  the need  for such EU rules.  The lack of support  by this group  of stakeholders 
may be due to the fact that in certain MS notaries are traditionally involved in the process 
of setting up a company and they have concerns about the impact of digital solutions on 
their role in the process. Furthermore, in the recent Tallinn declaration on eGovernment 
the  MS  make  a  strong  call  to  step  up  efforts  for  provision  of  efficient,  user-centric 
electronic procedures in the EU152. 

The following issues have been selected as being the most relevant for this area with a 
view to achieving the objectives of this initiative in respect to the use of digital tools and 
processes:  online  registration  and  filing;  multiple  submission  of  company  information; 
and  limited  access  to  free  of  charge  company  information.  These  issues  have  been 
brought up by a majority of stakeholders (business associations, trade unions, notaries or 
chambers  of  commerce)  throughout  different  consultations.  The  results  of  the  2017 
public  consultation  on  company  law  also  confirmed  that  new  rules  on  digitalisation 
should give priority to these issues. New rules on these issues would be modifying and 
complementing  the  existing  company  law  acquis.  To  recall,  the  current  EU  legal 
framework does not provide rules for online registration but it includes certain provisions 
on  online  filing  of  information  by  companies.  Furthermore,  the  existing  rules  require 
companies to file the same data twice. As to the access to company information, although 
it is now possible to search online for information from all EU business registers via one 
single European access point thanks to the interconnection of business registers (BRIS), 
only a very limited set of company data is available free of charge. 

In addition to the issues for which different policy options are presented, other accessory 
modifications would be introduced in order to ensure the best use of digital solutions in 
company  law  and  to  make  the  rules  and  procedures  fully  digital  and  operational.  They 
will also take into account the Single Digital Gateway. For example, the new provisions 
on  online  registration  of  companies  and  branches  would  require  MS  to  lay  down  rules 
concerning e.g.  non-discriminatory conditions for acceptability  of electronic documents 
or  data  originating  from  another  MS  or  for  the  control  of  the  legal  capacity  of  the 
founding member/representative of the company and his/her identity. The new provisions 
would also require MS to make available national online templates for the constitution of 
a company.  

1.13.1  Online  registration  (creation  of  a  company  as  legal  entity)  and  filing  of 

documents to the business register 

1.13.1.1 Description of options 

Option 0 – the baseline scenario would mean that MS continue to have diverging rules 
or no rules about the possibility to register a company or branch online. MS would also 
continue to have diverging rules about the online submission of company information to 
the business register.  

Option  1  would  provide  rules  on  the  online  registration  of  company  and  branch  and 
online  filing  of  company  documents  with  the  possibility  for  MS  to  decide  whether  the 
physical presence of the founder or company representative is necessary. In this scenario, 
no harmonised provisions on safeguards for electronic identification would be laid down 
at EU level, but those would be left to MS.  

152  The  Tallinn  Declaration  on  eGovernment  was  signed  at  the  ministerial  meeting  during  Estonian 
Presidency of the Council of the EU on 6 October 2017. 

44 

 
                                                            
Option  2  would  entail  that  in  all  MS  the  physical  presence  of  company  founders  or 
representatives  is  not  required  when  completing  these  procedures  online153.  To  ensure 
uniform implementation between the MS, this option would also introduce safeguards for 
electronic identification laid down at EU level.  

Option  3  would  have  all  the  elements  of  option  2  but  it  would  differ  in  that  it  would 
allow MS to exceptionally require physical presence, on case-by case basis, when there is 
a genuine suspicion of fraud (e.g. there are strong reasons to believe that the electronic 
identity is fraudulent or is being used fraudulently).  

It  should  be  noted  that  options  2  and  3  would  also  address  the  concerns  expressed  by 
notaries in  the  recent public consultation on company law. Both options would include 
rules  on  the  mutual  recognition  of  secure  identification  means  based  on  eIDAS 
standards154 and preventive control of registration by MS. Moreover, those MS in which 
the legality of registration, including the legal capacity of the founder or representative is 
checked  by  notaries,  the  role  of  notaries  would  be  preserved  in  procedures  related  to 
online  registration  and  filing,  as  long  as  company  founders  or  representatives  can 
complete the procedure fully online (except for the cases of genuine suspicion of fraud 
mentioned in option 3).  

1.13.1.2 Analysis of impacts  

Impacts 

Option 1 

Option 2 

Option 3 

Effectiveness in 
cutting the 
unnecessary 
costs/burdens 
for companies 

to 

the 
Compared 
baseline  scenario,  this 
option  would  cut  costs 
for 
by 
companies 
making  it  possible  for 
them  to  use  the  online 
procedure  for  company 
registration.  However 
the  impact  would  be 
limited  in  cases  where 
MS  would 
impose 
physical presence of the 
founder. 
company 
Concerning  the  online 
filing, this option would 
the  rules 
not  modify 
the 
to 
compared 

leading 

faster 
way 

option  would 
This 
and 
ensure 
cheaper 
for 
companies  to  complete 
these  procedures  fully 
online, 
to 
potentially 
significant 
reduction  of  costs  and 
burdens  on  companies. 
Online 
registration 
could  take  on  average 
half  of  the  time  needed 
to  process  a  paper-
based  registration  and 
the  cost 
for  online 
registration could be up 
to  3  times  cheaper  than 

cases 

This option would have 
the  same  effectiveness 
as  option  2,  except  for 
where 
the 
presence 
physical 
would 
required. 
However such cases are 
be 
deemed 
to 
exceptional 
occur  only  when  there 
is  genuine  suspicion  of 
fraud. 

and 

be 

to 

153 In general, obtaining identification means is subject to specific rules which are not in the scope of this 
impact  assessment.  Such  identification  means  may  be  used  for  many  different  purposes  and  are  not 
exclusively used for the online registration of companies (for example, some MS use bank identification 
tokens  for  the  company  registration  purposes).  Although  the  issuance  of  an  identification  means  may  in 
some  case  imply  physical  presence,  this  would  only  happen  once,  at  the  time  where  the  original 
identification  takes  place  and  the  identification  means  is  provided  to  the  person.  Once  this  is  done, 
normally no further physical presence is necessary. As such, the physical presence required for issuance of 
identification  means  that  can  be  used  for  multiple  purposes  (not  only  company  law  procedures)  is  not 
understood as a requirement for physical presence under the options herein.  
154  Regulation  (EU)  No  910/2014  of  the  European  Parliament  and  of  the  Council  of  23  July  2014  on 
electronic identification and trust services for electronic transactions in the internal market and repealing 
Directive 1999/93/EC. 

45 

 
                                                            
Effectiveness in 
offering cross-
border 
protection for 
the other 
stakeholders/ 
third parties  

Efficiency: 
compliance 
costs for 
companies 

Impacts on MS 
including on 
national legal 
systems 
(including 
implementation) 

baseline scenario. 

effect 

This option would have 
limited 
in 
providing  protection  of 
against 
stakeholders 
possible 
fraudulent 
entries  in  the  register, 
creation  of 
fictitious 
companies  or  hijacking 
of companies due to the 
lack  of  any  harmonised 
EU  rules  on  safeguards 
electronic 
for 
identification. The level 
of  protection  would  be 
very  different  in  each 
MS.  

The  compliance  costs 
for  companies  would 
differ  per  MS  and 
would  be  higher 
in 
those  MS,  where,  e.g. 
physical 
presence 
would still be required.  

For  the  online  filing, 
this  option  would  bring 
no changes compared to 
the baseline scenario.  

the 
registration155.  

paper-based 

This  option  would  be 
more 
than 
effective 
option  1  in  providing 
of 
protection 
stakeholders 
against 
possible 
fraudulent 
entries  in  the  register, 
fictitious 
creation  of 
companies  or  hijacking 
of  companies  thanks  to 
harmonised EU rules on 
for 
safeguards 
electronic 
identification.  

The  compliance  costs 
for 
this  option  are 
expected  to  be  lower 
than  for  option  1.  Even 
though 
some 
administrative fees may 
still  apply,  company 
founders 
or 
representatives  would 
save  time  and  money 
(costs of visits, costs of 
travel)  by  completing 
procedures 
fully 
online156. 

All  MS  would  need  to 
transpose  the  new  EU 
rules  into  national  law, 
but 
those  MS  which 
currently  do  not  use 
digital  solutions  would 
most  likely  also  incur 
costs  for  adapting  their 
IT  systems.  However, 
while  possibly  high  in 
the  beginning, 
those 
setting  up  costs  would 
the 
be 
medium  and  long  term 
through saving time and 
resources 
their 
administration  (e.g.  see 

recovered 

in 

in 

impact 

This option would have 
a  similar 
to 
option 1, but in addition 
it  would  bring  changes 
that 
those  MS 
in 
already 
digital 
use 
solutions for part of the 
for  online 
procedure 
filing, 
registration  or 
but  still 
the 
physical  presence  of 
company  founders  and 
representatives.  These 
MS  would  need 
to 
update 
their  national 
laws  and  may  need  to 
put  in  place  further  IT 

require 

not 

option  would 
This 
provide 
the  most 
effective  protection  of 
stakeholders as it would 
include 
only 
harmonised  EU  rules 
on 
for 
safeguards 
electronic 
identification,  but  also 
allow  MS  to  deal  with 
such  cases  in  case  of 
genuine  suspicion  of 
fraud.  

The  compliance  costs 
would  be  the  same  as 
for  option  2,  except  for 
the  exceptional  cases 
physical 
where 
the 
presence  would 
be 
required  and  where  the 
procedure  could 
take 
longer  to  complete  and 
be 
more 
expensive. 

overall 

Impact similar to option 
2,  since  everything  still 
needs  to  be  in  place  to 
allow for completion of 
procedures fully online, 
while physical presence 
may  be  required  only 
exceptionally. 

155 Based on a World Bank report. The numbers apply on average percentage of income per capita. 
156 See also previous footnote on the issuance of "multiple purpose" identification means for which the one-

off requirement for physical presence is not covered by this IA. 

46 

 
                                                            
following 

the  example  of 
the 
Danish business register 
the 
where, 
introduction  of  online 
registration  and  filing 
system,  between  2011-
2015  the  average  time 
for 
handling 
decreased  by  69%  and 
ramp-up 
the  average 
new 
a 
time 
employee  decreased  by 
90%157).  

case 

for 

solutions  to  allow  for 
fully online procedures. 
For  MS  in  which  the 
legality  of  registration 
is  checked  by  notaries, 
the 
role  of  notaries 
could  be  preserved  as 
company 
long 
or 
founders 
representatives 
can 
complete  the  procedure 
fully online. 

as 

1.13.1.3 Comparison of options 

According to the results of a public consultation in 2016158, the registration of business 
activity  including  registration  of  a  company  was  seen  as  the  most  important  online 
procedure  for  businesses  that  should  be  available  online.  In  addition,  the  2017  public 
consultation on company law showed strong support from business organisations (70%) 
and MS (64% of respondent MS) for the introduction of new rules on online registration 
and filing.  

The  baseline  scenario  (option  0)  would  not  respond  to  these  calls  as  it  would  not 
introduce  any  EU  wide  rules.  Maintaining  the  status  quo  would  also  mean  ignoring all 
the evidence that shows the benefits of e-government solutions, in particular for company 
registration.  As  an  example,  in  its  response  to  the  public  consultation  the  Polish 
government reported an increase by 47.25% in the birth-rate of Polish companies in 2015 
after the introduction of online registrations in 2012.  

There  are  2.5  million  new  companies  established  in  the  EU  annually.  It  is  difficult  to 
estimate how many of those companies would register online if this was possible across 
the EU. However, for purposes of illustration, calculations for a sample representing just 
above  70%  of  new  companies  registered  in  the  EU  clearly  indicate  the  cost  savings 
compared to the costs for paper-based registration, if companies chose to register online. 
The savings are estimated to be between 42 – 84 million Euro (see annex 9 for details on 
how  these  savings  were  calculated).  Overall,  creating  online  registration  procedures 
could  also  incentivise  MS  to  reassess  the  cost-benefit  ratio  of  organisation  of  their 
procedures,  while  maintaining  legal  certainty  and  possibly  differentiating,  for  instance, 
on the basis of complexity. In addition, the introduction of rules on fully on-line filing of 
company information would also bring additional savings for companies.   

Concerning the costs for MS, it is to be noted that all MS already provide for electronic 
business  registers  since  2007  following  a  requirement  introduced  into  EU  law  at  the 
time159.  For  all  options  it  is  expected  that  any  costs  for  upgrade  of  IT  systems  would 
outweigh the related initial costs (as illustrated by the Danish example in the box above). 

157 European Commerce Registers' Forum report, 2017, p. 56. 
158  Commission  staff  working  document  -  Synopsis  report  on  the  stakeholder  consultation  on  the  Single 
Digital Gateway, SWD(2017) 212 final, p.4. 
159 Directive 2003/58/EC of the European Parliament and of the Council of 15 July 2003 amending Council 
Directive 68/151/EEC, as regards disclosure requirements in respect of certain types of companies, OJ L 
221 , 4.9.2003, p. 13. 

47 

 
                                                            
For MS who already have in place tools for the fully online registration of companies the 
setting-up costs varied from EUR 100,000 in PL (for private limited liability companies), 
to EUR 42,000 in IE or around EUR 120,000 in LV160. Other MS have partial solutions 
in  place,  as  for  example  the  electronic  registration  is  available  to  notaries  or  legal 
advisors (but not directly to the company founder). This means however that these MS 
would be able to build on their existing tools without significant costs.  

Concerning  options  1,  2  and  3,  one  of  the  main  differences  between  them  refers  to 
whether physical presence would be required or not. While option 1 would reduce costs 
for companies, some of these could be off-set by the requirement for physical presence. 
However  options  2  and  3  would  provide  most  cost  savings  for  companies.  A  2017 
study161 shows that "e-procedures could reduce costs by yearly EUR 19 million for cross-
border businesses and EUR 810 million for domestic businesses. The greatest gain would 
be  achieved  for  countries  and  procedures  where  currently  submission  in  person  is 
required  (EUR  11  and  516  million  for  cross-border  and  domestic  businesses 
respectively)".  Even  though  these  numbers  refer  to  several  types  of  e-procedures, 
business registration – including of registration of a company – is one of the procedures 
covered by the study.  

The issue of physical presence is important as some stakeholders (in particular notaries 
and to some extent trade unions) express concerns about the use of digital solutions e.g. 
for  the  identification  of  the  company  founder  or  company  representative.  However, 
experience from the countries where procedures can be completed fully online shows that 
various solutions such as e-ID cards, digital signatures or banking authentication can be 
successfully used for this purpose. The digital signatures could be particularly helpful to 
sign the documents constituting the company. The digital signatures framework is a part 
eIDAS Regulation and any questions of implementation with regard to digital signatures 
are related to that Regulation. However, digital signatures are only one of the possibilities 
to  perform  fully  on-line  process.  Fully  on-line  registration  of  companies  could  also  be 
done via video-conference with all parties present in the digital space and the authorised 
person, such a notary, signing the documents on behalf of the parties.  
In  addition,  recent  research162  has  found  that  the  use  of  digital  solutions  for  online 
registration  without  any  physical  presence  does  not  enhance  fraud,  but  rather  has  the 
effect of reducing it. In any case, options 2 and 3 would both respond to such concerns 
and to the feedback received from the 2017 public consultation on company law, where 
there was support from stakeholders, in particular business organisations (70%) and MS 
(64%) for harmonised safeguards on electronic identification. Annex 2 gives more details 
on the questions related to safeguards.  

At the same time, situations may arise where the competent authority responsible for the 
company  registration  or  filing  of  documents  has  strong  reasons  to  suspect  a  fraudulent 
use of the digital solutions for completion of company law online procedures. It therefore 
seems  justified  to  still  allow  MS  to  exceptionally  ask  for  the  company  founder  or 
representative to be present in person – but only in rare and well justified cases. This is 

160  Based  on  Commission  staff  working  document,  Impact  assessment  accompanying  Proposal  for  a 
Directive  of  the  European  Parliament  and  of  the  Council  on  single-member  private  limited  liability 
companies, SWD(2014) 123 final, p. 29. 
161  Ecorys  Netherlands  in  association  with  Mazars:  "Study  about  administrative  formalities  of  important 
procedures and administrative burdens for businesses", p. 5 (our highlight). 
162  Assessment  of  the  impacts  of  using  digital  tools  in  the  context  of  cross-border  company  operations, 
Optimity (hereinafter referred to as Optimity study impacts of using digital tools). 

48 

 
                                                            
why  option  3,  which  is  highly  cost-effective  for  companies  while  offering  the  highest 
protection for stakeholders, is considered to be the preferred option.  

1.13.2  Multiple submission of the same information by companies 

1.13.2.1 Description of options 

Option 0 – the baseline scenario would mean the current rules would continue to apply, 
asking companies to file certain information with different authorities (business register 
and  national  gazette)  or  different  registers  (register  of  the  company  and  register  of  the 
branch).  Concerning  the  filing  of  information,  today  it  is  only  after  publication  in  the 
national gazette that company information becomes legally effective. 

Option  1  would  seek  simplification  by  introducing  rules  requiring  MS  to  ensure  that 
once  the  company  information  filed  with  the  register,  it  is  the  register  that  sends  it 
electronically  to  the  national  gazette  for  publication  (as  opposed  to  the  company 
representative submitting the same documents twice). In this respect, this option would 
not change the baseline scenario in relation to publication in national gazette as the way 
to  ensure  that  company  information  becomes  legally  effective.  Similarly,  when  the 
register receives certain data from the company (e.g. change of company name, change 
of registered office or latest annual accounts), it would then send it to the register of the 
branch  in  another  MS  (as  opposed  to  the  company  doing  that).  This  option  would 
implement the once-only principle at EU level through several concrete cases. 

Option  2  would  differ  from  option  1  in  that  it  would  make  the  requirement  for 
publication  of  company  information  in  the  national  gazette  optional.  This  means  that 
company information would become legally effective once it is available in the business 
register.  MS  could  still  have  the  choice  to  publish  such  information  in  the  national 
gazette,  but  on  the  condition  that  it  is  the  register  (and  not  the  company)  that  sends  it 
electronically to the gazette. As regards filing of information on branches, option 2 would 
correspond to option 1, i.e. when the register receives certain data from the company, it 
would send it to the register of the branch in another MS. 

1.13.2.2 Analysis of impacts  

Impacts 

Effectiveness 
in cutting the 
unnecessary 
costs/burdens 
for companies 

Option 1 

Option 2 

Compared  to  the  baseline  scenario,  both  options  would  be  very  effective  in 
cutting costs and burdens for companies, which would save time  and money 
by no longer having to file the same information twice. While exact savings of 
these measures are difficult to estimate, the new rules would partly contribute 
to the overall savings that the implementation of the once-only principle at EU 
level can bring. It has been estimated that such overall savings could result in 
annual net savings of as much as €5 billion per year163. 

Effectiveness 
in offering 
cross-border 
protection for 
the other 

This  option  would  be  effective  in 
that  the  transfer  of  information  via 
digital  channels  from  one  authority 
significantly 
to  another  would 
having 
of 
risk 
the 
reduce 

This  option  would  be  more  effective 
than option 1 as it would ensure that the 
information  files  by  companies  takes 
legal  effect  faster  than  today  (i.e.  once 
it  is  available  in  the  business  register 

163 Based on Final Report: Study on eGovernment and the Reduction of Administrative Burden (SMART 
2012/0061), p. VI. More details about the calculation method for this figure are provided in annex 9. 

49 

 
                                                            
stakeholders / 
third parties 

Efficiency: 
compliance 
costs for 
companies 

Impacts on MS 
including on 
national legal 
systems 

that 

and not after publication in the national 
gazette).  It  would  also  eliminate  any 
rely  on 
third  parties 
risk 
information  from  the  business  register 
without  knowing  that  the  respective 
information is only legally effective if it 
has also been published in the gazette.   

between 

discrepancies 
the 
information  available  online  e.g.  in 
the  business  register  vs  national 
gazette  as  in  the  baseline  scenario. 
In  addition,  it  is  expected  that  the 
information  would  be  available 
more quickly in the national gazette 
or in the register of the branch. This 
would offer very good cross-border 
protection  to  those  that  rely  on  the 
information  from  the  registers  and 
national gazettes. 

Both  options  would  be  very  efficient  in  reducing  the  compliance  costs  for 
companies,  in  particular  if  more  "once-only"  cases  are  introduced  (such  as 
communication of certain changes in company data between the register of the 
company and the register of the branch in another MS). For companies filing 
their  annual  accounts  in  the  register  of  the  branch  in  another  MS,  this  could 
also cut costs for translation into the local language.  

This  option  would  require  MS  to 
adapt their national laws to reflect the 
new  EU  rules.  It  would  also  most 
likely involve costs for adapting their 
IT  systems  mainly  in  respect  to  the 
electronic  transmission  of  company 
information  from  the  register  to  the 
national  gazette.  However, 
those 
costs  would 
typically  be  one-off 
costs and significantly reduced in the 
medium  and  long  term.  This  option 
would have no impact on the national 
gazettes in MS as the requirement of 
publication  in  these  gazettes  would 
be kept.  

electronic 

transmission 
from 

As option 1, this option would require 
MS  to  adapt  their  national  laws  to 
reflect the new EU rules. It would also 
most likely involve costs for adapting 
their  IT  systems  mainly  in  respect  to 
the 
of 
the 
information 
company 
register  to  the  national  gazette.  These 
costs would be less significant than in 
option  1,  as  they  would  only  arise  in 
the 
case  MS  decide 
requirement of publishing information 
in the national gazette. In addition, as 
in option 1, these costs, if any, would 
and 
typically  be  one-off 
significantly  reduced  in  the  medium 
and  long  term.  As  MS  may  still 
continue 
publishing 
requiring 
information  in  the  national  gazette,  it 
is  expected  that  MS  would  make  use 
of 
fear 
otherwise  significant  impact  is  on  the 
national gazettes. 

this  option  where 

to  keep 

costs 

they 

1.13.2.3 Comparison of options 

Compared to option 0 – baseline scenario, both options 1 and 2 would provide important 
cost savings and simplifications for companies and MS, including the business registers. 
Recent research164 shows that EU governments that have already embraced the once-only 
principle  have  done  it  for  one  or  more  of  the  following  reasons:  (1)  reducing  the 

164 Study by Jonathan Cave, Maarten Botterman (GNKS Consult BV), Simona Cavallini, and Margherita 
Volpe (FORMIT):  EU-wide digital Once-Only Principle for citizens and businesses  - Policy options and 
their impacts, 2017, p. vii. 

50 

 
 
                                                            
administrative  burden  on  citizens  and  businesses;  (2)  more  efficient  (lower-cost,  more 
effective) government administration; and (3) fraud prevention. 

The main difference between the options 1 and 2 is whether company information should 
still be published in the national gazette or should be an optional choice for MS. In this 
respect,  option  2  would  better  reflect  today's  reality  where  third  parties  would  rely  on 
information once this is available online (in this case in the business register) and would 
not expect to have to check whether the same information has also been published in the 
national gazette or in another electronic platform with equally effective means165. Having 
a  simple  rule  where  information  is  legally  effective  by  being  made  available  in  the 
register increases legal certainty and provides more protection to third parties.  

Making  publication  in  the  national  gazette  optional  takes  into  account  previous 
experience  as  an  earlier  attempt  to  eliminate  the  publication  in  the  national  gazette  (or 
similar platform) failed due to strong opposition from the MS166. Option 2 now offers a 
more  balanced  solution  as  it  still  gives  the  choice  to  MS  to  continue  to  publish  in  the 
gazette  if  they  wish  so;  it  is  only  the  effect  of  publication  that  is  transferred  to  the 
register. Overall, option 2 is the preferred option as it consists of a modern and practical 
solution while providing increased protection of third parties.  

1.13.3  Online access to company information held in business registers 

1.13.3.1 Description of options 

Option 0  –  the  baseline scenario  would  mean  that  only  a limited  set of  company  data 
(company name, address, legal form and registration number) is available for free in all 
business registers, while most MS continue to charge fees for most data.  

Option 1 would propose to expand this set of data to be provided free of charge by all 
business registers, but MS could still charge fees for other information. The "always free-
of-charge" data could include e.g. information on the legal status of the company; other 
names of the company (former names or secondary/alternative names) if any; company 
website (if any); object of the company (if national law requires to have this information 
in  the  business  register);  and  information  on  whether  the  company  has  any  branches 
established in another MS. In addition, the set of free data could also include the names 
of  the  company's  legal  representatives  which  are  considered  important  to  stakeholders 
and the Commission has had calls for promoting easy access to it.  

Option 2 would be much more ambitious and require MS to make available all company 
information free of charge for everyone. 

implementation,  both  options  would  build  also  on 

the 
As  regards  practical 
interconnection of business registers (BRIS): while users could access the information in 
the individual registers, the information would also be available through the European e-
Justice portal which is the central access point for BRIS. 

1.13.3.2 Analysis of impacts  

165 A number of MS are already using the option to publish company data in a central electronic platform 
other than the national gazette; however it is still only publication by such equally effective means that the 
information becomes legally effective.  
166  The  2008  Commission  Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council 
amending  Council  Directives  68/151/EEC  and  89/666/EEC  as  regards  publication  and  translation 
obligations of certain types of companies was later withdrawn by the Commission. 

51 

 
                                                            
Effectiveness in 
cutting the 
unnecessary 
costs/burdens 
for companies 

Effectiveness in 
offering cross-
border 
protection for 
the other 
stakeholders/ 
third parties 

Efficiency: 
compliance costs 
for companies 

Impacts 

Option 1 

Option 2 

Same as option 1. 

This  option  would  have  limited 
impact  on  companies,  except  for 
situation  where  companies 
the 
themselves  would  be 
the  one 
looking for information about other 
companies in the business registers. 
Otherwise  companies  would  most 
likely  continue  to  pay  fees  when 
filing information in the registers. 

information 

This option would be very effective 
in  increasing  the  transparency  of 
and 
company 
facilitating  free  of  charge  access  to 
more  company  data,  thus  offering 
better protection to third parties that 
the 
information 
rely  on 
business registers. 

from 

Companies  would  continue  to  pay 
fees for filing so in this respect the 
situation  would  stay  the  same  as 
today 
terms  of 
(baseline) 
compliance costs. 

in 

Impacts on MS 
including on 
national legal 
systems 

This option would require most MS 
to  introduce  some  changes  in  their 
the 
national 
common  free  set  of  data  may  also 
have  an  impact  on  the  revenues  of 
some of the business registers.  

laws.  Extending 

This  option  would  be 
the  most 
effective  in  providing  protection  to 
other  stakeholders  who  would  have 
free access to all company data in the 
registers. 

This option could lead to a potentially 
significant increase in the fees paid by 
companies  for  filing  information  as 
business 
registers  could  consider 
charging  companies  more  in  order  to 
make up for the loss of revenue from 
fees paid by end-users.  

This  option  would 
significantly 
impact the business registers and their 
financing  model.  Some 
current 
registers,  in  particular  those  that  are 
self-funded,  would  need  to  seek  new 
source  of  income  to  make  up  for  the 
revenues  coming  from  charging  end-
users. 

1.13.3.3 Comparison of impacts 

Compared  to  option  0  –  baseline  scenario,  both  options  1  and  2  would  significantly 
improve  the  access  to  company  information  and  lead  to  increased  transparency  about 
companies  and  their  functioning  across  the  EU.  Companies  themselves  would  benefit 
from having easier and extended access to data about potential business partners in other 
MS, which in turn would lead to more legal certainty and increased cross-border trade.  

While  option  1  would  increase  the  amount  of  information  available  for  free,  option  2 
would  have  the  most  impact  in  terms  of  transparency  by  providing  all  company 
information for free and would thus be welcome by many stakeholders. However, option 
2 would at the same time have a significant impact on the business registers which may 
need  to  change  their  financing  structure.  For  example,  one  MS  reported  that  the  fees 
collected  by  their  business  register  in  one  year  for  access  to  details  about  company 
directors amounted to approximatively EUR 250,000. If this information were provided 
for  free,  the  same  amount  would  need  to  be  recuperated  from  somewhere  else  –  most 
likely  from  companies  when  they  file  changes  to  company  information.  As  the  details 

52 

 
about company directors are only one type of information in the business registers, this 
example gives an idea of the potential total loss in revenue for registers if all information 
were to be provided for free.  

Feedback  from  business  registers  shows  that  in  some  MS  these  organisations  are  self-
funded  and  charging  both  companies  and  users  is  their  only  source  of  revenue.  If  no 
revenues would come from charging end-users, registers could decide instead to raise the 
fees for companies for filing information. Although EU governments are more and more 
supportive of transparency and open/free data, providing "all data free of charge" would 
have a significant impact on business registers and their business models and would need 
to  be  built  up  progressively  over  a  reasonable  long  period  of  time.  The  latest  annual 
report  of  a  business  registers'  organisation  also  acknowledges  that  both  in  Europe  and 
worldwide there is still a way to go until all registers will be able to be fully open and 
provide  all  information  for  free167.  On  balance,  it  seems  premature  and  unrealistic  to 
propose option 2 at this point in time. 

Overall, option 1 offers increased transparency and protection to third parties compared 
to the baseline. It also responds to stakeholders' call for more free-of-charge information, 
while taking into account the revenue structures of business registers. It also strikes the 
best balance between the demands for free data by third parties and the need to avoid an 
increase in compliance costs for companies who could be charged more when filing data 
in the registers. Therefore, option 1 is the preferred option; it could be combined with a 
review clause in order to make sure that further developments are assessed. 

1.14  Cross-border operations (mergers, divisions and conversions)  

The 2017 consultation produced divergent views on the overall need of action in the area: 
most stakeholders (businesses, MS, trade unions and notaries) saw the need to deal with 
the  issue  of  cross-border  conversions.  As  regards  the  need  of  amending  cross-border 
merger rules and introducing rules on divisions, most MS and businesses were in favour, 
whereas trade  unions were  more sceptical. The notaries saw some  need  for introducing 
rules on cross-border divisions, but less for amending cross-border mergers. 

However,  similarly  to  the  2015  public  consultation,  most  stakeholders  identified  the 
same  issues  as  problematic:  the  protection  of  creditors,  the  protection  of  minority 
shareholders and the protection of employee rights. The question of scope  of rules was 
mainly raised by the European Parliament and in many academic discussions. In the 2017 
consultation, the respondents were also divided as to the needs of safeguards, especially 
whether  their  importance  is  the  same  for  cross-border  mergers,  divisions  and 
conversions. Particularly trade unions and notaries stressed the importance of safeguards. 
Based on the stakeholders' views and relevant research, a number of policy options will 
be  assessed  in  relation  to  the  most  relevant  issues  linked  to  the  cross-border  mergers, 
divisions  and  conversions.  The  policy  options  would  be  part  of  an  overall  harmonised 
legal framework.  

In case of the cross-border mergers such a framework consists of the existing EU rules 
on  cross-border  mergers.  Some  of  the  existing  provisions  would  be  modified  or  new 
provisions  added  in  order  to  introduce  the  chosen  policy  options  on  employee 
participation  as  well  as  creditor  and  minority  stakeholder  protection.  In  addition,  other 

167 ECRF report 2017, p.78-79 

53 

 
                                                            
modifications would be introduced such as further simplified formalities (i.e. possibility 
to waive the management report in case all members agree) clarification of the existing 
accounting  rules,  online  filing  of  draft  terms  of  cross-border  mergers  and  other  cross-
border merger related data as well as the use of BRIS for the transmission of pre-merger 
certificates  between  national  authorities.  The  evaluation  of  the  existing  cross-border 
merger rules (annex 5) analyses the need to modify the existing cross-border rules.  

In case of cross-border divisions and conversions, the initiative would introduce new 
EU wide harmonised procedures and rules which would follow to a large extent the rules 
on cross-border mergers including the use of digital procedures and BRIS. However, they 
would need  to  be adapted to  the specificities  of these  cross-border  operations  – i.e. the 
company being split in cross-border divisions and one company moving cross-border in 
cross-border conversions. The need to have such new procedural rules is assessed below.  

A  common  issue  for  all  the  cross-border  operations  is  the  scope  of  application  which 
would determine which types of companies could benefit from the harmonised rules and 
procedures. The current rules for cross-border mergers apply to private and public limited 
liability  companies  and  leave  out  other  legal  entities  within  the  meaning  of  Article  54 
TFEU (e.g. partnerships, cooperatives, foundations). Some of the respondents to the 2015 
and  2017  consultations,  some  researchers168  and  the  European  Parliament  in  its  June 
2017  resolution169  asked  for  the  scope  of  the  CBMD  to  be  broadened  to  cover 
partnerships  and  cooperatives.  Same  calls  were  made  for  cross-border  divisions  and 
conversions. 

As  also  referred  to  in  the  evaluation  of  the  functioning  of  the  existing  cross-border 
merger rules170 existing data shows a very limited use of the cross-border merger rules by 
entities other than limited liability companies. 66 percent of the acquiring companies and 
70  percent  of  the  merging  companies  involved  in  cross-border  mergers  were  private 
limited liability companies, whereas 32 percent of acquiring companies and 28 percent of 
the  merging  companies  involved  in  cross-border  mergers  were  public  limited  liability 
companies171. In addition, for all cross-border operations, extension of the scope would 
lead  to  potential  practical  difficulties  related  to  EU  company  law  and  accounting  rules 
which only apply to limited liability companies. For example, it would be unclear what 
rules  they  should  follow  in  some  parts  of  the  procedure  (e.g.  as  regards  disclosure  and 
publication of documents). Therefore, in line with the conclusions of the evaluation of for 
cross-border  mergers172,  it  is  considered  that  the  existing  scope  of  application  of  the 
cross-border  merger  rules  provides  the  most  effective  solution  for  all  cross-border 
operations.  

1.14.1  New procedural rules for cross-border divisions and cross-border conversions 

1.14.1.1 Description of options 

168 J. Schmidt, EP Study 
169  http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P8-TA-2017-
0248&language=EN&ring=A8-2017-0190  
170 Subsection 2.3.1. of the evaluation in Annex 5 for deficiencies as regards effectiveness of the current 
cross-border merger rules.  
171 Data relates to period 2008-2012, Bech-Bruun/Lexidale, 2013 p.80 
172 Subsection 2.3.1. of the evaluation in Annex 5 for deficiencies as regards effectiveness of the current 
cross-border merger rules.  

54 

 
                                                            
Option 0 - baseline scenario means that there are no harmonised rules at EU level for 
cross-border  divisions  and  cross-border  conversions.  Therefore,  for  cross-border 
divisions,  companies  that  wish  to  divide  cross-border  must  either:  (i)  establish  a  new 
company in the destination MS and by way of contractual agreement transfer part of the 
assets  to  that  new  company  in  the  destination  MS  (indirect  division)  or;  (ii)  divide 
nationally, establish a new company in the destination MS and merge part of the divided 
company with the newly formed entity or: (iii) rely on national rules that authorise cross-
border  divisions  on  foot  of  analogous  application  of  national  division  procedures  or 
analogous  application  the  CBMD.  Similarly,  for  cross-border  conversions,  companies 
that  wish  to  transfer  their  registered  office  are  in  reliance  on  following:  (i)  national 
procedures for cross-border conversions that only exist  in a limited  number of MS; (ii) 
the  application  of  CJEU  jurisprudence  in  situations  where  the  practitioners  and 
authorities have sufficient awareness of the case-law; (iii) the use of indirect procedures 
on foot of the Cross-border Merger Directive and the SE Regulation or; winding-up the 
company  in  the  departure  MS  and  re-incorporating  in  the  destination  MS  and  then 
transferring all of the assets and liabilities.   

Option 1 would introduce harmonised EU procedures to enable companies to carry-out 
direct cross-border divisions and cross-border conversions. The rules would follow to a 
large  extent  the  rules  on  cross-border  mergers,  but  they  would  be  adapted  to  the 
specificities of these cross-border operations. Main rules would comprise the following: 
common  draft  terms  of  the  cross-border  division/conversion  and  their  disclosure, 
management  report  to  the  members,  examination  of  the  draft  terms  and  reports  to  the 
members  and  employees  by  independent  expert(s),  the  disclosure  of  the  independent 
expert  report,  approval  by  the  general  meeting,  pre-division/conversion  certificate(s) 
delivered  by  the  competent  authority,  scrutiny  of  the  legality  of  the  cross-border 
division/conversion, registration, the date on which the cross-border division/conversion 
takes affect and the consequences of the cross-border division/conversion.  

1.14.1.2 Analysis of impacts  

Impacts 

Effectiveness in 
cutting the 
unnecessary 
costs/burdens 
for companies 

Option 1 

Compared to the baseline scenario, this option would significantly cut the 
legal fees and operational costs for companies that wish to execute a cross-
border division or a cross-border conversion. Companies would no longer 
be  in  reliance  on  costly  indirect  procedures,  incompatible  national 
procedures or CJEU case law but would have a direct procedure for which 
they  can  convert  or  divide  cross-border.  This  would  in  turn  remove 
barriers  faced  by  companies  and  thus  enable  companies  to  fully  benefit 
from the Single Market. 

The introduction of new procedural rules is expected to result in and cross-
border  divisions  costing  130%  -  200%  of  national  division  and  cross-
border conversions costing 130% - 180% of a national conversion.173 This 

173 EY study on cross-border operations of companies, pp. 102 & 117. Study estimated that the lowest cost 
of  the  procedure  would  be  slightly  higher  than  the  national  procedure  but  slightly  higher,  without  being 
twice  as  high.  The  procedure  is  expected  to  require  some  additional  time  (i.e.  to  prepare  additional 
documents  than  during  domestic  procedures).  Costs  are  based  on  the  legal  advisory  costs  (60%), 
registration  costs  with  public  services  (5%)  and  costs  to  execute  the  procedure  (i.e.  production  of 
documents, organisation of general meetings, man days etc. – 35%). The estimation was used to obtain a 

55 

 
 
 
 
                                                            
 
is estimated to result in costs savings of €12,000 - €37,000 for cross-border 
divisions  and  €12,000  -  €19,000  for  cross-border  conversions.  It  is 
important  to  note  that  the  estimated  cost  reductions  for  cross-border 
conversions  apply  to  situations  where  the  operation  is  permitted  through 
analogous  application  of  CJEU  case  law  or  analogous  application  of  the 
CBMD. Therefore, the cost reductions will be significantly higher in MS 
where conversions are carried out though an indirect procedure (additional 
procedures  of  a  cross-border  merger  is  estimated  to  cost  €80,000  - 
€100,000 while transfer of an SE is estimated to cost €30,000). 

The  exact  costs  savings  would  depend  on  the  detailed  procedural  rules 
adopted. For example, if the independent expert report is not obligatory for 
micro  and  small  enterprises,  this  means  significantly  less  costs  for  such 
companies (again depending on whether and under which circumstances it 
could be required). 

Compared  to  the  baseline  scenario,  the  introduction  of  procedural  rules 
will  enhance  the  legal  situation  for  stakeholders  as  employees,  minority 
shareholders  and  creditors  will  have  a  reliable  legal  framework  upon 
which  they  can  enforce  their  rights.  This  would  therefore  improve  legal 
certainty. In particular, in addition to the management report and the report 
to the employees, the draft terms of cross-border divisions and conversions 
and  the  expert  report  which  would  be  disclosed  would  significantly 
enhance  the  information/consultation  rights  of  these  stakeholders.  These 
stakeholders  would  be  further  protected  by  the  policy  options  that  are 
chosen  in  relation  to  employee  participation  in  boards  of  companies, 
creditor and minority shareholder protection as discussed below. 
Companies  would  need  to  comply  with  the  new  procedural  rules  and 
would thus incur compliance costs such  as drawing  up draft terms of the 
operation,  preparation  of  management  report  to  the  members.  In  cases 
where an independent expert report is required, companies would also bear 
the  costs  of  such  a  report.  Compliance  costs  would  also  arise  from  any 
measures taken as regards protection of employees, creditors and minority 
shareholders  which  are  considered 
the 
compliance costs would be lower than in baseline scenario. This is because 
companies would need to comply with one set of harmonised rules instead 
of    overlapping  and  double  MS'  requirements  or  in  case  of  indirect 
operation with several consequent procedures.  
MS would have to transpose the EU rules into national law and, therefore, 
modify their rules and procedures (in case MS have rules) for cross-border 
divisions  and  conversions  or  adopt  new  rules.  The  introduction  of  new 
procedures  for  cross-border  conversions  and  divisions  would  have  a 
particular  impact  on  those  MS  that  do  not  currently  authorise  these 
operations.    However,  to  the  extent  that  the  rules  follow  cross-border 
mergers,  the  costs  for  MS  should  be  rather  limited.  The  introduction  of 
procedural rules for conversions will provide clear and unambiguous rules 
for national business registers to distinguish the point in time to which the 
converting company leaves the business register in the departure MS and 
enters the business register of the destination MS and when the conversion 
in turn becomes effective. This will significantly increase legal certainty in 

turn  below.  However, 

in 

Effectiveness in 
offering cross-
border 
protection for 
the other 
stakeholders/ 
third parties 

Efficiency: 
compliance costs 
for companies 

Impacts on MS 
including on 
national legal 
systems 
(including 
implementation) 

range of expected saving per unit, when compared to the initial costs of cross-border transfers today (data 
collected from Member State Fiches – see EY Annex, p. 48). 

56 

 
                                                                                                                                                                                 
this  area  and  reduce  likelihood  of  companies  being  simultaneously 
registered in the business registers such as was the case in Polbud.174 This 
is likely to result in less litigation costs for MS. 

1.14.1.3 Comparison of impacts 

The results of the 2017 public consultation showed strong support from national public 
authorities,  business  organisations  and  legal  academics  for  the  introduction  of  new 
procedural  rules  for  cross-border  divisions.  The  vast  majority  of  notaries  were 
moderately supportive of this initiative while the overwhelming majority of trade unions 
were  extremely  sceptical  but  submitted  that  cross-border  divisions  could  work  if  there 
was an appropriate solution found in respect of employees' rights.175 

As  for  cross-border  conversions,  the  2017  public  consultation  showed  that  there  was 
considerable support from all stakeholder groups for the introduction of new procedure 
for  cross-border  conversions.  Approximately  73%  of  all  respondents  felt  the  lack  of 
legislation  in  this  area  was  creating  problems  for  the  internal  market.  Furthermore,  in 
comparison to other areas of the package, the introduction of new rules for conversions 
was deemed the highest overall priority – approximately 85% approval. 176 
In its recent resolution of 13 June 2017177, the European Parliament inter alia called for a 
comprehensive  EU  framework  for  conversions and  divisions.  In  its  2009178  and  2012179 
resolutions  the  European  Parliament  also  specifically  asked  the  Commission  to  come 
forward with a proposal on cross-border conversions. 

When compared to the baseline, the option 1 introducing new harmonised rules for cross-
border  divisions  and  conversions  would  provide  significant  clarity  for  companies  and 
result  in  significant  cost  savings.  For  cross-border  divisions,  such  cost  savings  are 
expected to be between €12,000 - €37,000 per operation and for cross-border conversions 
approximately  €12,000  -  €  19,000180.  It  is  important  to  note  that  the  estimated  cost 
reductions  depend  on  the  final  procedural  rules  adopted.  For  cross-border  conversions, 
the  estimations  apply  to  situations  where  the  operation  is  permitted  through  analogous 
application of CJEU case law or analogous application of the CBMD. Therefore, the cost 
reductions will be significantly higher in MS where conversions are carried out through 
an indirect procedure.  

In  terms  of  stakeholder  protection,  the  introduction  of  harmonised  procedural  rules  for 
both  operations  will  result  in  a  reliable  legal  framework  for  employees,  creditors  and 
minority shareholders and enhance the exercise of their information/consultation rights.  
In addition, these stakeholders would be further protected through harmonisation of the 

174 Polbud C-106/16 – delivery of judgement is scheduled on 25 October 2017 
175 For further discussion see Annex 2. It was submitted by the European Trade Union Confederation that 
while they do not see the need for new legislation in this area, there must be strong employee rights by way 
of information, consultation and participation rights should it be passed. 
176 Combined % number of respondents who clicked "to some extent", "to a large extent" and "to a very 
large  extent"  to  Question  1.1    and  "low  priority",  "priority"  and  "top  priority"  to  Question  1.2  in  the 
consultation. For further explanation see Annex 2. 
177  European  Parliament  resolution  of  13  June  2017  on  cross-border  mergers  and  divisions 
(2016/2065(INI)). 
178  European  Parliament  resolution  of  10  March  2009  with  recommendations  to  the  Commission  on  the 
cross-border transfer of the registered office of a company (2008/2196(INI)). 
179 European Parliament resolution of 2 February 2012 with recommendations to the Commission on a 14th 
company law directive on the cross-border transfer of company seats (2011/2046(INI)). 
180 For explanation of the estimates see above in section 5.2.1.2. 

57 

 
                                                            
safeguards  in  relation  to  employee  participation  in  boards  of  companies,  creditor  and 
minority shareholder protection as discussed below. 

For  MS  the  costs  resulting  from  the  implementation  of  such  rules  should  be  rather 
limited, also because they follow to a large extent the procedure that is already laid down 
in the existing CBMD. Moreover, the increased legal certainty is likely to result in fewer 
contentious litigation costs concerning the validity of a conversion. Therefore, Option 1 
is the strongly preferred option for both operations. 

1.14.2  Employee information, consultation and participation 

1.14.2.1 Description of the policy option 

Option  0  -  baseline  scenario  means  keeping  the  existing  rules  on  the  employee 
participation in CBMD unchanged. Also there are no employee participation rules at EU 
level in cross-border divisions and conversions which implies that MS are free to choose 
whether to provide for employee participation rules or not.  For more information about 
employee participation systems, see Annex 10. 

Option  1  would  apply  the  existing  rules  on  the  employee  participation  in  boards  from 
cross-border  mergers  to  cross-border  divisions  and  conversions.  The  existing system  in 
cross-border  mergers  originates  from  the  Council  Directive  2001/86/EC  of  8  October 
2001 supplementing the Statute for a European company with regard to the involvement 
of  employees181.  According  to  the  rules  in  cross-border  mergers,  companies  that  are 
subject  to  employee  participation  rules  must  either  enter  into  negotiations  with 
employees  to  determine  specific  rules  of  employee  participation  or  choose  to  apply 
immediately  standard  rules182  without  any  prior  negotiation.  These  standard  rules  lay 
down the composition of the body representative of the employees, rules for information 
and  consultation  and  rules  for  participation.  In  case  a  company  chooses  to  conduct 
negotiations,  it  must  create  a  special  negotiation  body,  which  shall  comprise  of  the 
representatives  of  the  employees  of  the  merging  companies.  If  negotiations  fail,  the 
standard rules shall apply.  

Option 2 would build on option 1 and add a number of safeguards for employees. This 
option is composed of several elements which as a combined effect aiming to provide the 
necessary  protection  for employees.  The  option consists  of  targeted  amendments  to  the 
existing cross-border mergers rules, while at the same time providing specific measures 
for  the  perceived  higher  risks  for  employees  in  cross-border  divisions  and  conversions. 
While  the  report  on  employees  aims  to  inform  the  employees  about  the  cross-border 
operation  in  question,  all  the  other  elements  are  linked  to  the  employee  participation 
system.183   

Such  safeguards  would  include  for  all  cross-border  operations  (cross-border  mergers, 
divisions and conversions): 

  a  new  special  report  prepared  by  the  company's  management  to  describe  the 
impact  of  the  cross-border  operation  on  jobs  and  the  situation  of  employees  in 

181 OJ L 294, 10.11.2001, p. 22. 
182 As defined in the Annex 1 of the directive 2001/86/EC 
183  These  different  elements  are  bundled  in  one  option  because  it  is  considered  that  they  together  (as 
combined  effect)  achieve  the  necessary  protection  for  the  employees  in  each  relevant  cross-border 
operation. However, it is clear that it can be decided to adopt only some of the elements in which case 
the effect would be reduced.  

58 

 
                                                            
case  of  cross-border  mergers,  divisions  and  conversions  with  a  possibility  for 
employees  to  provide  their  opinion.  This  would  go  beyond  the  current 
requirement in cross-border merger rules of a general management report, which 
is  predominately  addressed  to  shareholders  and  does  not  sufficiently  take  into 
account  the  employment  context.  The  newly  introduced  report  addressed  to 
employees could not be waived, unless the companies including their subsidiaries 
involved in the cross-border operation do not have any employees;  

  an  "anti-abuse"  rule  providing  that  during  3  years  following  the  cross-border 
merger,  division  or  conversion,  the  company  would  not  be  able  to  perform  a 
subsequent  cross-border  or  domestic  operation  which  would  result 
in 
undermining  the  system  of  employee  participation.  The  rule  is  based  on  the 
existing  cross-border  mergers  which  would  be  adapted  to  cover  not  only 
subsequent domestic merger but also other cross-border and domestic operations. 

59 

 
For  cross-border  divisions  and  conversions,  this  option  2  would  maintain  the  existing 
rules  on  employee  participation  for  cross-border  mergers  but  would  introduce  the 
following modifications compared to cross-border mergers: 

  as  in  the  European  Company  (SE),  in  cross-border  divisions  and  conversions, 
negotiations would always need to be carried out and companies could not choose 
to apply standard rules without negotiations. This would mean that, in contrast to 
cross-border mergers, where standard rules could be immediately applied by the 
management, without negotiations, in the cross-border divisions and conversions 
the  negotiations  would  be  obligatory.  As  a  result  of  negotiations,  the 
representatives of the employees would have a choice: either to accept the result 
of negotiations or accept standard rules184; 

  companies  would  be  obliged  to  negotiate  an  employee  participation  system  in 
case of the cross-border division or conversion even if the company being divided 
or  carrying  out  a  cross-border  conversion  would  not  be  operating  under  the 
employee  participation  system,  but  the  company  dividing  or  converting  across 
borders  is  governed  by  national  law  which  provides  for  the  employee 
participation  rules  and  has  at  least  4/5  of  the  number  of  employees  required  for 
the application of the employee participation (in contrast to 500 employees in the 
cross-border merger directive). 

The  reason  for  differentiation  between  the  approaches  for  cross-border  mergers  and 
cross-border  conversions  would  be  the  perceived  higher  riskiness  of  cross-border 
divisions and conversions for employee participation: in mergers, two or more companies 
merge  into  one  so  that  the  threshold  from  which  the  employee  participation  is  applied 
would  be  met  even  quicker.  In  contrast,  cross-border  divisions  or  conversions  could 
potentially be used to "escape" the employee participation rules as the company divides 
into smaller ones or maintains its current size but changes the law applicable to it. 

Under both options 1 and 2, the following EU legislation, which provides the rights for 
employees, including the rights to information and consultation, remains fully applicable: 

  Directive  2009/38/EC  of  the  European  Parliament  and  of  the  Council  of  6  May 
2009  on  the  establishment  of  a  European  Works  Council  or  a  procedure  in 
Community scale undertakings and Community scale groups of undertakings for 
the purposes of informing and consulting employees (Recast),185  

  Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of 
the MS relating to collective redundancies186,Council Directive 2001/23/EC of 12 
March 2001 on the safeguarding of employees' rights in the event of transfers of 
undertakings187,  

  Directive 2002/14/EC of the European Parliament and of the Council of 11 March 
2002 establishing a general framework for informing and consulting employees in 
the European Community188. 

184 See Annex to Council Directive 2001/86/EC called "standard rules". 
185 OJ L 122, 16.5.2009, p. 28. 
186 OJ L 225, 12.8.1998, p. 16. 
187 OJ L 82, 22.3.2001, p. 16. 
188 OJ L 80, 23.3.2002, p. 29. 

60 

 
                                                            
Discarded  options.  The  option  of  directly  importing  the  employee  participation  rules 
from the SE Regulation and Directive is discarded, as the European Company (SE) is a 
special company law form which has its own statute. The rules on employee participation 
in SE were negotiated in this specific context of a separate EU legal form and therefore 
are not directly transferable to the cross-border operations of other company types than 
SE. The cross-border operations such as divisions or conversions would be performed by 
limited  liability  companies  other  than  SEs  (SEs  already  have  their  own  rules  on  cross-
border  conversions).  Also,  the  SE  form  is  only  accessible  for  very  large  companies  as 
EUR 120,000 minimum capital is required. As in cross-border merger rules, the rules in 
cross-border divisions and conversions refer to SE rules where appropriate. 

In addition, the option of providing employee participation rules for all limited liability 
companies in the EU was discarded. The system of employee participation in companies' 
boards  is  embedded  in  MS'  company  law  and  corporate  governance  traditions.  Current 
systems are very divergent, with many MS not providing for any participation systems of 
employees in boards (see Annex 10). Therefore, an EU wide participation system would 
not be politically feasible at this stage. 

1.14.2.2 Analysis of impacts  

Impacts  

Effectiveness 
in cutting the 
unnecessary 
costs/burdens 
for companies 

Option 1  

Option 2  

As 
the 
in  option  1.  However, 
compliance costs would be higher (see 
below).  

A  further  limitation  in  cutting  costs 
for  companies  would  come  from  the 
anti-abuse  clause  which  would  limit 
the freedom of companies. Companies 
would not be able to perform domestic 
or  cross-border  operations  which 
the  participation 
would  undermine 
rights at least for 3 years. 

Compared  to  the  baseline  scenario, 
whereby  harmonisation  at  EU  level 
exists only for cross-border  mergers 
and  not  for  cross-border  divisions 
and  conversions, 
the  harmonised 
rules  on  employee  participation 
should provide legal certainty and in 
this  way  lead  to  less  need  for  legal 
advice,  reduce  the  costs  and  delays 
in 
the 
the  procedure.  However, 
practical implementation of the rules 
would  incur  costs  for  companies 
(see  below  on  compliance  costs). 
However,  these  compliance  costs 
should  be  seen  in  the  context  of 
overall 
to 
harmonised  procedures  for  cross-
border  divisions  and  conversions 
explained  above  in  section  5.2.1. 
Also 
long-term  benefits  of 
employee  participation  in  boards  as 
well  as  the  benefits  of  negotiations 
(involvement of employees in taking 
important decision for the company) 
could  offset,  at  least  partially,  the 
initial costs. 

savings 

cost 

due 

the 

61 

 
 
 
 
Effectiveness 
in offering 
cross-border 
protection for 
employees 

be 

than 

better 
Employees  would 
protected 
the  baseline 
in 
scenario  through  harmonised  rules 
not  only  for  cross-border  mergers 
but  also  for  cross-border  divisions 
and  conversions.  However, 
the 
protection  would  be  limited  only  to 
employees  of  those  companies  and 
would  not  be  effective  in  offering 
protection to the employees of those 
approaching  national 
companies 
thresholds. 
Moreover,  the  protection  would  not 
be  fully  effective,  as  companies 
would be able to perform a domestic 
or cross-border operation (other than 
a cross-border merger) right after the 
cross-border  division  or  conversion 
to abolish participation rights. 

Also  employees  would  not  benefit 
from  any  extended  reporting  on  the 
cross-border 
of 
implications 
operations focusing on employment. 

Efficiency: 
compliance 
costs for 
companies 

There  would  be  higher  compliance 
costs  for  companies  than  in  the 
baseline  scenario  since  they  would 
need  to  comply  with  the  new  rules 
on  employee  participation  when 
performing  cross-border  divisions 
and conversions, although given that 
these rules would be the same as for 
cross-border 
the 
compliance  costs  for  cross-border 
divisions and conversions would not 
be  much  higher  than  for  cross-
border mergers.  

mergers, 

Overall,  requirements  for  employee 
participation,  on  the  basis  of  the 

The  protection  for  employees  would 
be  very  high.  As 
in  option  1, 
representatives  would 
employee 
always have  the right to negotiate the 
employee  participation  system  once 
companies  decide  to  perform  cross-
border  conversions  or  division  and 
already  operate  under  the  employee 
participation  system.  Moreover,  the 
enhanced 
protection  would 
since 
1, 
compared 
companies  having  4/5  of  employees 
required  for  the  participation  system 
and  not  currently  operating  under  an 
employee  participation  system,  but 
established in MS having participation 
rules,  would  also  be  obliged 
to 
negotiate employee participation when 
performing  cross-border  division  or 
conversion. 

be 
option 

to 

to  option  1, 

In  addition, 
the  effectiveness  of 
protection  would  be  reinforced  in 
comparison 
since 
companies  would  be  prohibited  to 
carry  out  any  subsequent  operation 
which would undermine the employee 
participation system. 

to 

informed 

the 
report 

In  addition,  employees  would  be 
the 
properly 
about 
cross-border 
implications  of 
operation 
the 
(i.e. 
employees) and would be able to have 
their  say  on  it.  Currently,  insufficient 
information  to  employees  is  criticised 
by trade unions189.  
The compliance costs would be higher 
than  under  option  1.  The  costs  for 
companies  would  increase,  as  there 
would  be  more  companies  subject  to 
these  rules  (not  only  those  already 
subject  to  employee  participation  but 
also  the  ones  which  have  4/5  of  the 
the 
required 
employees 
participation 
and  which 
system 
operate  in  MS  that  have  employee 
participation  rules).  Also  companies 
subject  to  these  rules  would  need  to 
negotiate instead of applying standard 
rules  which  would  create  additional 
to  option  1. 
costs 

in  comparison 

for 

189  T.  Biermeyer/M.  Meyer,  Identification  of  cross-border  mergers  where  the  issue  of  employee 
participation has arisen (2008-2012), European Trade Union Institute, 2015.  

62 

 
  
                                                            
current  employee  participation  rules 
in MS (see Annex 10), would apply 
to  a  very  small  percentage  of 
companies,  although  with  a  large 
workforce,  and  most  SMEs  would 
not be impacted. 

Moreover,  companies,  similarly  to 
cross-border mergers, would need to 
take  a  legal  form  allowing  for  the 
exercise of the participation rights in 
the  new  MS.  This  may  generate 
costs 
compliance 
additional 
in 
comparison 
base-line 
the 
scenario. 

to 

Impacts on MS 
including on 
national legal 
systems  

The  impact  on  MS  would be  higher 
than  in  the  baseline  scenario  as  MS 
would  need  to  extend  the  cross-
border merger rules on the employee 
participation 
cross-border 
to 
divisions  and  conversions.  MS 
would  also  need  to  check  that  the 
employee 
is 
determined  according  to  the  rules 

participation 

for  companies  where 

However, this option, similar to option 
1, on the basis of the current employee 
participation  rules  in  MS  (see  Annex 
10),  would  apply  to  a  very  limited 
percentage  of  companies,  although 
with large workforce, and most SMEs 
would not be impacted.  The EU wide 
figure 
the 
employee  representatives  in  boards 
have  a  significant  role  (e.g.  AT,  DE) 
is very small as it concerns only large 
companies.  For 
studies 
carried  out  by 
the  Hans  Böckler 
Foundation found that there are 1,477 
companies  in  DE  with  between  500 
and  2,000  employees  and  640  with 
2,000+  employees  and 
therefore 
subject 
to  employee  participation 
rules.190  These  figures  are  relatively 
small  when  compared  to  the  total 
number  of  limited  liability  companies 
in  Germany  which  is  approximately 
1,338,000. 

instance, 

Therefore, for most companies and for 
most  SMEs  in  AT  and  DE,  there 
would not be any additional impact. 

of 

Also preparing a special report on the 
employment  situation  could  be  an 
additional  burden  for  companies.  For 
example, it is estimated that in Italy a 
preparation 
a  management 
report/general  report  costs  between 
€5,000  to  €8,000  depending  on  the 
complexity of the operation191. On the 
other hand, the possibility to waive the 
management  report  to  the  members 
under certain conditions can offset the 
cost  of  preparing 
to 
employees 
Compared to option 1, MS would also 
need  to  transpose  the  additional  rules 
(i.e. 
the 
the  report)  as  well  as 
mandatory  negotiation  (in  case  of 
cross-border 
and 
conversions).  As  in  option  1,  MS 
would  also  need  to  check  that  the 
employee  participation  is  determined 
according  to  the  rules  and  properly 

divisions 

report 

the 

190  Drittelbeteiligung  in Deutschland  –  Ermittlung von Gesellschaften, die dem  DrittelbG unterliegen, by 
W.  Bayer  Hans-Böckler-Stiftung;  Mitbestimmung  in  Deutschland:  Daten  und  Fakten  2014,  Hans-
Böckler-Stiftung 2014 and Statistiken zur Mitbestimmungslandschaft, Hans-Böckler-Stiftung 

191 EY study on cross-border operations of companies, p. 86  

63 

 
                                                            
and properly enforced.   

enforced.   

1.14.2.3 Comparison of impacts 

Overall,  in  the  2017  public  consultation  trade  unions  and  notaries  considered  the 
introduction of safeguards for employees as very important. It was less important for MS 
(mainly  those  without  employee  participation  rules)  and  businesses.  Against  this 
background,  option  0  which  would  not  introduce  any  employee  participation  rights  for 
cross-border divisions and conversions would not appear appropriate. 

The  consultation  was  not  conclusive  as  to  whether  these  safeguards  needed  to  be  the 
same  in  cross-border  mergers,  divisions  and  conversions.  41%  of  the  respondents 
(especially those from trade unions) to the 2015 consultation were in favour of modifying 
the CBMD  employee participation procedure whereas 28% saw no necessity  to  change 
the rules. 

As for the comparison of options 1 and 2, the analysis of the impacts show that option 1 
would  entail  less  compliance  costs  for  companies  and  at  the  same  time  offer  less 
protection for employees whereas option 2 creates more compliance costs for companies, 
but  offers  more  protection  for  employees.  The  impacts  of  both  options  on  MS  are  not 
significantly  different.  It  would  therefore  be  necessary  to  weigh  the  elements  of 
compliance  costs  and  employee  protection  against  each  other  while  also  assessing 
whether it appears appropriate to propose different approaches on employee participation 
in cross-border mergers on the one hand and cross-border conversions and divisions on 
the other hand in order to conclude upon a preferred option. 

All  cross-border  operations  entail  consequences  for  employees.  Therefore,  a  special 
report  explaining  the  economic  reasoning  of  the  operation  and  its  consequences  to 
employees combined with the possibility for employees to have a say on it would greatly 
enhance their stake in the operation. Currently, trade unions argue that employees are not 
sufficiently  informed.  As  to  the  employee  participation,  divisions  and  conversions  are 
perceived by trade unions as more risky operations which could aim at getting rid of the 
system  of  employee  participation  by  dividing  into  a  company  size  below  the  employee 
participation thresholds or converting into a less stringent employee participation regime. 
Against this background, option 2 has a much more positive impact on employees than 
option  1,  as  it  empowers  employees  by  providing  them  specific  information  about  the 
implications of the operation to the employees and prevents companies from moving out 
of  a  legal  regime  providing  for  employee  participation  before  the  thresholds  for 
employee participation are reached. 

This perception of the aim of such operations undertaken to circumvent the participation 
rights  is  based  on  the  argument  that  a  number  of  transformations  into  SEs  (European 
company)  took  place  only  to  by-pass  the  German  system  of  employee  participation192. 
Also trade unions responding to the 2015 consultation were concerned that cross-border 

192  ETUC  response  to  European  Commission’s  First  phase  consultation  of  Social  Partners  under  Article 
154  TFEU  on  the  possible  review  of  Directive  2001/86/EC  supplementing  the  Statute  for  a  European 
company with regard to the involvement of employees) C(2011) 4707 final. 

64 

 
 
                                                            
divisions could be used to selectively divide the assets and liabilities, which might leave 
employees in the resulting companies in a financially weaker situation. Furthermore, as a 
result  of  a  division  the  size  of  the  dividing  company  is  reduced,  which  might  result  in 
lower  number  of  employees  below  the  employee  participation  threshold  and  the 
employees losing their rights to participate in the board. 

In contrast to a stronger protection need for employees in divisions and conversions, the 
risk of bypassing the employee participation rules in mergers is smaller for the reasons 
mentioned above. Also, there is no evidence that companies merge cross-border in order 
to  avoid  employee  participation  rules  (in  contrast  to  the  creation  of  SEs  where  such 
evidence has been referred to by ETUC193). It has also to be considered that the difficult 
compromise  on  mergers  was  only  achieved  after  years  of  negotiations  and  therefore  it 
should not be opened without a pressing need. 

Companies and their associations might be critical of option 2 given the compliance costs 
related  to  the  preparation  a  report  to  the  employees.  In  addition,  they  already  find  the 
cross-border  merger  procedure  related  to  employee  participation  cumbersome  (e.g.  in 
their comments to the 2015 consultation). At the same time, having a uniform procedure 
and  being  able  to  carry  out  a  cross-border  division  or  conversion  in  a  legally  certain 
manner,  without  the  current  high  costs  of  legal  advice,  would  be  likely  to  encourage 
companies to use the rules regardless of the reinforced protection measures. In addition, 
the compliance cost resulting from the need to prepare a special report to the employees 
could be offset by the possibility to waive the management report if all members agree 
and  the  rules  on  employee  participation  would  only  apply  to  companies  which  have  a 
board  level  employee  participation  system.  There  are  relatively  few  such  companies  in 
the EU. Therefore, option 2 would not create extra burden for most companies (mostly 
SMEs  which  in  most  cases  do  not  have  an  employee  participation  system  as  in  DE  or 
AT). 

In  weighing  the  options  against  the  objectives,  namely,  cutting  the  costs  of  companies 
and  yet  providing  protection  for  stakeholders,  both  options  would  contribute  to  the 
increased  protection  of  employees,  while  creating  compliance  costs  for  companies.  As 
outlined, option 2 would provide for higher protection of employees than option 1, but at 
the  same  time  also  for  higher  compliance  costs  for  companies.  However,  the  costs  for 
companies resulting from the application of the rules under option 2 should be considered 
in the context of the overall legal framework providing for a direct procedure for cross-
border  conversions  and  divisions  and  weighted  against  the  cost  savings  resulting  from 
harmonised procedures. While option 2 would provide the necessary protection and anti-
abuse  mechanisms,  it  would  nevertheless  allow  companies  to  perform  much  easier  the 
cross-border  conversions  or  divisions  which  today  are  very  difficult  or  impossible  to 
perform.  The  assessment  should  also  take  into  account  the  wider  political  objective  of 
promoting  an  upward  convergence  of  social  standards  and  workers'  rights  within  the 
Single  Market  in  line  with  the  European  Pillar  of  Social  Rights.  Therefore,  the  overall 
benefits  of  option  2  including  societal  benefits  and  the  political  acceptability  of  the 
proposed solutions would outweigh its costs. After all, therefore, the preferred option 2 
provides the best balance between cost reduction on the one hand, and the high level of 
protection on the other. 

193  ETUC  response  to  European  Commission’s  First  phase  consultation  of  Social  Partners  under  Article 
154  TFEU  on  the  possible  review  of  Directive  2001/86/EC  supplementing  the  Statute  for  a  European 
company with regard to the involvement of employees) C(2011) 4707 final. 

65 

 
                                                            
1.14.3  Creditor protection 

1.14.3.1 Description of options 

The  option  0  -  baseline  scenario  means  keeping  the  existing  references  to  national 
creditor  protection  in  the  CBMD  unchanged  and  no  EU  rules  on  creditor  protection  in 
cross-border  conversions  and  divisions.  The  current  cross-border  merger  rules  do  not 
provide for harmonisation of creditor protection rules. They only require MS to provide 
for creditors' protection, while leaving the details of this protection to national law. They 
also require  the  inclusion  of  the analysis  of  implications  for  creditors  of  a  cross-border 
merger  in  the  in  the  management  report.  The  evaluation  of  the  CBMD  (see  Annex  5) 
considers  the  lack  of  harmonisation  of  creditor  protection  rules  as  one  of  the  major 
shortcomings of the existing rules.  

Option 1 would provide the same harmonised rules to protect creditors’ for cross-border 
mergers, divisions and conversions, building on existing creditor protection mechanisms 
in national laws. It means that the existing cross-border merger rules would be modified 
and  that  new  rules  would  be  provided  for  cross-border  divisions  and  conversions.  The 
rules  for  cross-border  divisions  and  conversions  would  be  identical,  mutatis  mutandis, 
with the new rules for cross-border mergers. These rules would provide that the situation 
of creditors should be assessed in the draft terms of any cross-border operation. Creditors 
who  are  not  satisfied  with  the  protection  offered  by  the  company  would  be  able  to 
petition the court to offer adequate protection. The creditors would be presumed not to be 
prejudiced by the cross-border operation if a company offered them security or guarantee 
that their claims would be met, or an independent expert report concluded that there was 
no reasonable likelihood that the creditors would be prejudiced. If the expert report found 
that  the  creditors  were  to  be  prejudiced,  then  a  company  would  not  be  able  to  benefit 
from  the  presumption  in  the  procedure.  This  option  would  provide  for  the  deadlines  to 
apply  to  the  court  and  would  thus  comply  with  all  stakeholders'  views  on  the  need  to 
harmonise the deadlines. This option would also include contingent and future liabilities 
which  would  offer  protection  to  those  creditors  whose  liabilities  are  known  at  the 
moment of the cross-border operation and yet their amount cannot be fully determined. 
In this way, the liabilities connected to pensions or environmental damage (if it occurred 
before the cross-border operation) would be protected. MS would not be able to provide 
any other safeguards. 

Option  2  would  provide  for  the  same  harmonised  rules  as  option  1,  but  MS  would  be 
able to provide for additional safeguards. Such additional safeguards could be the same 
for  all  cross-border  operations  or  MS  could  alternatively  provide  different  safeguards 
depending  on  the  operation  in  question.  For  example,  some  MS  may  consider  that 
divisions may need additional rules to protect creditors, in comparison to mergers, since 
divisions raise a specific problem of liability. During a division assets and liabilities of 
the dividing company are transferred to different companies, rather than to one company 
as  in  the  case  of  mergers.  There  is  therefore  a  risk  that  the  allocation  of  assets  and 
liabilities may be done in a manner that would not enable creditors to recover fully their 
debts after the division. In such a scenario, creditors may find it more difficult to sue for 
any owed debts and to claim back what is owed to them if the assets were divided in such 
a way that the debtor company was not able to repay debts, yet other companies were not 
obliged  to  take  over  this  responsibility.  As  to  the  conversions,  their  volume  might  be 
much more important than mergers and divisions and therefore cross-border enforcement 
of claims in a different jurisdiction on a big scale could potentially be costly. The cross-
border conversion may also result in the change of the applicable law into less favourable 

66 

 
for creditors in  case  of future  insolvency. MS may offer additional measures to  protect 
creditors which are already in place in case of domestic operations. Such measures may 
be of an informative or substantial nature.  

Discarded  option:  An  option  which  would  provide  for  a  harmonisation  for  all  cross-
border operations, but which would provide more far reaching harmonisation for  cross-
border divisions and conversions than for cross-border mergers is discarded at this stage. 
The considered options 1 and 2 would provide for the harmonisation of essential rules at 
EU level which would provide legal certainty for companies and stakeholders. The issue 
of creditor protection is sensitive to MS and is often embedded into a larger framework 
beyond company law and therefore the option 2 provides flexibility for Member States to 
apply additional rules in particular in cross-border divisions and conversions.   

1.14.3.2 Analysis of impacts  

Impacts  

Option 1 

Option 2 

Effectiveness 
in  cutting  the 
unnecessary 
costs/burdens 
for companies 

Compared  to  the  baseline  scenario 
whereby  no  harmonisation  at  EU 
level  exists  in  any  of  cross-border 
operations, companies would benefit 
from  harmonised  rules  on  creditor 
them.  This 
in  all  of 
protection 
should  lead  to  less  need  for  legal 
advice, reduce significantly the costs 
and  delays 
the  procedure. 
Therefore,  it  would  be  effective  in 
cutting 
unnecessary 
costs/burdens for companies. 

the 

in 

Impact would be similar to option 1, as 
it  would  provide  more  legal  certainty, 
cutting  the  costs  of  legal  advice  and 
reducing  significantly  the  delays  in 
procedure as compared to the baseline. 
However,  if  MS  introduced  additional 
protective  measures,  then  this  could 
lead  to  more  costs  for  companies  than 
option  1.  The  protection  offered  to 
creditors  in  this  option  is  high  and 
resembles the one offered by most MS. 
Therefore,  it  is  not  expected  that  MS 
fundamentally 
would  provide 
for 
the  ones 
different 
provided  by  this  option,  especially 
knowing  that  all  contingent  or  future 
liabilities  (like  the  ones  of  pensioners) 
would be protected. 

remedies 

than 

Effectiveness 
in offering 
cross-border 
protection for 
creditors 

Creditors  would  benefit  from  a 
harmonised 
level  of  protection 
because  they  would  not  face  legal 
uncertainty due to differing national 
rules.  Providing  the  creditors  whose 

In  addition  to  option  1,  in  those  MS 
which  decide  to  introduce  a  higher 
level  of  protection,  creditors  would 
benefit  from  increased  protection.  If 
there  are  certain  specific  risks  for 

67 

 
 
 
 
creditors  in  certain  specific  MS,  this 
option would provide for taking care of 
such specificities.  

In  principle, 
the  compliance  costs 
would be the same for companies as in 
option 1 if MS decided not to introduce 
additional  protective  measures.  If  they 
decided  to  introduce  such  measures, 
then 
for 
compliance 
companies  might  be  higher  for  cross-
border  divisions  and  conversions  than 
for mergers.  

costs 

the 

therefore,  adapt 

As  in  option  1,  MS  would  have  to 
transpose the EU rules into national law 
and, 
their  current 
creditor protection rules and procedures 
for cross-border mergers, divisions and 
conversions.  However,  the  impact  on 
MS'  laws  might  be  smaller  than  in 
option  1,  as  MS  would  be  able  to 
maintain 
additional 
protection  for  creditors  adapted  to  the 
national specificities.  
The  precise  impact  would  then  depend 
on national specificities and the role of 
creditors in their national legal systems. 

introduce 

or 

Efficiency: 
compliance 
costs for 
companies  

Impacts on 
MS including 
on national 
legal systems  

claims  would  be  endangered  by  a 
cross-border  merger,  division  or 
to 
conversion  with  a  possibility 
petition 
for  adequate 
security/  guarantee,  would  offer 
them high level of protection across 
the EU.  

the  court 

The compliance costs would depend 
on  how  many  creditors  successfully 
claim  securities/guarantees  in  the 
courts. The better protection offered 
to  creditors  in  draft  terms  of  cross-
border  mergers, 
or 
conversions, the smaller compliance 
cost  for  companies  (less  litigation). 
Also  companies  may  invest  in  the 
independent  expert  report  which 
could  also  diminish  the  costs  of 
litigation by creditors.  

divisions 

law 

into  national 

petitions 
in  most  MS 

MS would have to transpose the EU 
and, 
rules 
therefore, adapt their current creditor 
protection  rules  and  procedures  for 
cross-border  mergers,  divisions  and 
conversions.  There  might  be  some 
administrative costs for courts when 
from 
dealing  with 
creditors,  but 
the 
creditor  protection  is  offered  in  a 
very  similar  way  and  therefore  only 
the 
could 
of 
cases 
potentially 
increase.  This  option, 
however, provides for uniform rules 
for  all  operations  and  these  rules 
cannot  be  adapted  to  the  national 
specificities. Therefore the impact of 
this  option  on  MS  laws  would  be 
bigger  than  in  option  2,  at  least  as 
regards  cross-border  divisions  and 
conversions. 

number 

1.14.3.3 Comparison of impacts 

In the 2015 public consultation, 80% of  respondents were in favour of harmonising the 
rules  on  creditors'  rights  including  a  preference  for  granting  guarantees/securities  to 
creditors  and  for  having  the  creditor  protection  period  start  before  the  cross-border 
merger becomes effective (‘ex-ante’). This is confirmed also by the results of the 2017 
public  consultation.  For  MS  and  businesses  the  protection  of  creditors  was  very 
important. Trade unions preferred other measures which related more directly to rights of 
employees,  but  were  not  against  the  harmonisation  of  rights  of  creditors.  Therefore, 
option  0  –  baseline  scenario  which  does  not  offer  protection  at  all  for  cross-border 

68 

 
 
 
 
divisions and conversions, and for cross-border mergers essentially provides for complete 
divergence of MS rules on creditor protection, is not considered to be appropriate. 

As to whether the safeguards needed to be the same for cross-border mergers, divisions 
and  conversions,  the  views  of  the  stakeholders  varied.  In  the  2017  consultation, 
businesses,  notaries,  private  individuals  and  others  had  a  preference  for  minimum 
harmonisation.  The  position  of  trade  unions  was  not  very  clear.  Those  MS,  which 
participated in the 2017 consultation, preferred rather uniform safeguards, whereas most 
MS  during  the  meetings  with  stakeholders  expressed  their  preference  for  minimum 
standards. 

However, MS, businesses and notaries seemed to have rather a preference for minimum 
safeguards for divisions and conversions rather than uniform safeguards, although input 
was not very clear. 

Both  options  1  and  2  would  significantly  reduce  cost  and  burdens  on  companies  in 
comparison to the baseline scenario, as the harmonised rules on creditor protection would 
provide  for  more  legal  certainty  and  less  need  for  legal  advice  for  any  cross-border 
operation.  Option  1  would  offer  the  biggest  savings  for  companies,  while  savings  in 
option 2 might be smaller, since MS could provide for additional safeguards which could 
be  costly  or  burdensome  for  some  companies  (e.g.  need  to  provide  guarantees  for  all 
creditors). The protection offered to creditors in option 2 is high and resembles the one 
offered  by  most  MS.  Therefore,  it  is  not  expected  that  MS  would  provide  for 
fundamentally different remedies than the ones provided by this option. Especially those 
MS  which  attach  importance  to  the  transfer  of  liabilities  attached  to  pensions  or 
environmental  damage  would  not  need  to  introduce  additional  rules,  as  such  liabilities 
would be covered by the protection offered in this option. 

Options 1 and 2 would also differ in terms of effectiveness in offering creditor protection. 
Option 1 would improve the creditor protection in all cross-border operations compared 
to the existing situation by giving them material safeguards, instead of the description of 
implications  presently  offered  in  management  report  in  cross-border  mergers.  Option  2 
would provide for more complete and targeted protection due to the possibility granted to 
MS  to  assess  the  national  specificities  of  creditor  protection  and  to  introduce  more 
safeguards.  

In  weighing  the  options  against  the  objectives,  namely,  cutting  the  costs  of  companies 
and yet providing protection for stakeholders, both of the options would contribute to the 
increased  protection  of  creditors,  while  at  the  same  time  creating  compliance  costs  for 
companies.  As  outlined,  option  2  would  provide  for  higher  protection  of  creditors  than 
option  1,  but  at  the  same  time  potentially  for  higher  compliances  costs  for  companies. 
However,  the  overall  benefits  of  option  2  including  societal  benefits  and  the  political 
acceptability  of  the  proposed  solutions  would  outweigh  its  costs.  Achieving  effective 
protection  offered  for  creditors  in  a  cross-border  context  is  important  for  stakeholders 
concerned. At the same time the costs for companies resulting from the application of the 
rules  from option 2 should  be considered in  the context of the overall legal framework 
providing for a direct procedure for cross-border conversions and divisions. While option 
2  would  provide  the  necessary  protection,  it  would  nevertheless  allow  companies  to 
perform  much  easier  all  cross-border  operations,  but  in  particular  the  cross-border 
conversions or divisions which today are very difficult or impossible to perform. Also the 
impact  on  MS  would  be  higher  in  option  1  than  in  option  2.  Therefore,  the  preferred 
option 2 provides the best balance between cost reduction, a high level of protection and 
an appropriate impact on MS. 

69 

 
1.14.4  Minority shareholder protection 

1.14.4.1 Description of options 

The option 0 - baseline scenario encompasses existing rules on minority shareholders' 
protection in cross-border mergers. These rules are fairly general and include information 
in  the  reports  (management  and  independent  expert)  and  the  ultimate  approval  of  the 
cross-border merger by the general meeting. There are currently no EU rules for minority 
shareholder  protection  in  cross-border  divisions  and  conversions  and  this  option  would 
not introduce any EU rules for divisions and conversions. 

Option  1  would  build  on  the  rules  for  cross-border  mergers,  but  in  addition  it  would 
provide for harmonised rules. Moreover, this substantive harmonisation of protection of 
minority  shareholders  would  be  introduced  for  all  cross-border  operations  (merger, 
division  and  conversion).  Minority  shareholders  would  be  offered  a  same  level  of 
protection at EU level and MS would not be able to introduce additional safeguards. In 
this option minority shareholders would be able to sell their shares against compensation 
if they did not agree with the cross-border operation. They may challenge the adequacy 
of  it.  Moreover,  in  cross-border  mergers  and  divisions,  where  the  share  exchange  ratio 
plays a role – as there is more than one company involved  – the minority shareholders 
might also challenge the adequacy of the share exchange ratio. The information provided 
by companies to the minority shareholders would also be significantly improved by the 
detailed description of mandatory information in the management report. 

Option  2  would  provide  for  the  same  harmonised  rules  as  option  1,  but  MS  would  be 
able  to  provide  for  additional  safeguards.  The  protection  of  minority  shareholders  is 
embedded in the MS' overall company law and corporate governance frameworks and is 
therefore a part of a broader picture of the existing national legal framework. Given that 
such frameworks differ, MS should be able to continue to apply the national safeguards 
as long as they do not contradict the harmonised safeguards or the harmonised procedural 
framework.  

Discarded  options:  An  option  which  would  provide  for  a  harmonisation  for  all  cross-
border  operations,  but  which  would  provide  differentiation  between  cross-border 
mergers,  divisions  and  conversions  is  discarded  at  this  stage.  The  considered  options  1 
and  2  would  provide  for  the  harmonisation  of  essential  rules  at  EU  level  which  would 
provide legal certainty for companies and minority shareholders. However, given the MS' 
different  traditions  as  regards  minority  shareholder  protection  as  part  of  their  broader 
company  law  framework,  the  option  2  provides  flexibility  for  Member  States  to  apply 
additional rules in line with their existing systems.  

1.14.4.2 Analysis of impacts  

Impacts  

Option 1 

Option 2 

Effectiveness 
in cutting the 
unnecessary 
costs/burdens 
for companies 

Compared  to  the  base  line-scenario, 
rules  would  be  the  same  in  all  MS 
for  all  cross-border  operations, 
which  should  lead  to  less  need  for 
legal advice, reduce significantly the 
costs  and  delays  in  the  procedures. 
Therefore,  it  would  be  effective  in 
unnecessary 
cutting 

the 

Impact would be similar to option 1, as 
it  would  provide  more  legal  certainty, 
cutting  the  costs  of  legal  advice  and 
reducing  significantly  the  delays  in 
procedure  as  compared  to  the  baseline. 
However,  if  MS  introduced  additional 
protective  measures,  then  this  could 
lead  to  more  costs  for  companies  than 

70 

 
option  1.  However,  it  is  not  expected 
that  all  MS  would  avail  themselves  of 
this opportunity.  

In  addition  to  option  1,  in  those  MS 
which  decide  to  introduce  higher  level 
of  protection,  minority  shareholders 
would  enjoy  even  more  benefits  from 
increased  protection.  Moreover, 
the 
protection  would  be  much  more 
complete with rules possibly adapted to 
the nature of different operations in line 
with the existing safeguards in national 
law.  

Compliance  costs  would  be  similar  to 
option 1, as the requirements would be 
the  same.  If  MS  introduced  additional 
protective  measures,  then  this  could 
lead  to  more  costs  for  companies  than 
option  1.  However,  it  is  not  expected 
that  all  MS  would  avail  themselves  of 
this opportunity, because the protection 
offered to minority shareholders by this 
option  is  already  comprehensive  and 
includes the most important remedies. 

Effectiveness 
in offering 
cross-border 
protection for 
minority 
shareholders 

Efficiency: 
compliance 
costs for 
companies 

costs/burdens for companies 

for 

the 

need 

rules 

under 

prepare 

and 
in  case 

Minority  shareholders  would  be 
better  protected  than  in  a  baseline 
scenario  since  there  would  be  a 
uniform and comprehensive rules in 
terms  of  an  exit  right  against  cash 
additional 
compensation 
the  share 
compensation 
exchange ratio is inadequate (as they 
were  not  always  guaranteed  such 
rights 
national 
protection194).  
Compared  to  the  baseline  scenario, 
also  companies  carrying  out  cross-
border  divisions  and  conversions 
the 
to 
would 
management  and  expert  reports  and 
to  seek  the  approval  of  the  general 
meeting  for  the  operation  (as  in  the 
cross-border 
current 
mergers). Companies would need to 
comply  with  harmonised  rules.  The 
compliance  costs  would  depend  on 
how  many  minority  shareholders 
would  exit  the  companies  or  claim 
additional compensation. This would 
depend  on  the  offer  to  shareholders 
the  companies  and 
prepared  by 
whether  the  company  took  enough 
care  to  provide  for  the  adequate 
share-exchange  ratio.  Even  with  the 
best  intentions  of  companies,  there 
would  always  be  a  group  of 
shareholders who would not support 
the  cross-border  operation.  This 
would  mean  that  in  some  cases  this 
option  may  require  companies  to 
keep  liquid  assets  in  order  to  assure 
the  cash  payments  against  exit  right 
and  the  additional  compensation. 
However,  the  burden  on  companies 
would  be  reduced  if  compensation 
the 
could  be  provided  not  by 
company, 
by  majority 
but 
shareholders or third parties.  

194 For instance, several out of 30 EEA MS (e.g. Belgium, Lithuania, Lichtenstein, Norway) have chosen 
not to use the option to implement additional minority shareholder protection rules in case of cross-border 
mergers; and although most of the other MS offer exit right against cash compensation, only some provide 
for additional compensation in case of an inadequate share exchange ratio (e.g. Estonia, Germany, Greece, 
Slovenia). 

71 

 
 
 
                                                            
Impacts on 
MS 
including on 
national 
legal systems  

All MS would have to transpose the 
EU  rules  into  national  law  and, 
therefore,  adapt,  at  least  to  some 
extent,  their  current  protection  of 
minority  shareholders.  Additionally, 
there  might  be  some  administrative 
costs  for  judicial  authorities  when 
dealing  with  addition  compensation 
claims  from  minority  shareholders 
(in  particular  for  those  MS  who  did 
not offer such an option to minority 
shareholders  in  their  national  rules 
so far).  

1.14.4.3 Comparison of impacts 

procedures 

therefore,  adapt 

As  in  option  1,  MS  would  have  to 
transpose the EU rules into national law 
and, 
their  current 
minority  shareholders'  protection  rules 
and 
cross-border 
mergers,  divisions  and  conversions. 
However, the impact on MS laws might 
be  smaller  than  in  option  1,  as  MS 
would be able to  maintain or introduce 
additional  protection  for  creditors  in 
line with the national specificities.  

for 

In the 2017 public consultation, MS and businesses considered the issue of the protection 
of  minority  shareholders  as  important,  although  less  important  than  the  creditor 
protection.  It  was  not  the  priority  issue  for  trade  unions.  For  notaries  the  issue  was 
equally important as the creditor protection. Against this background, it does not appear 
preferable to maintain the option 0 – baseline scenario. 

The consultation was not conclusive as to whether these safeguards need to be the same 
for  cross-border  mergers,  divisions  and  conversions.  In  the  consultation,  businesses, 
notaries,  private  individuals  and  others  had  a  preference  for  minimum  harmonisation. 
The position of trade unions was not very clear. Those MS, which participated in 2017 
consultation, preferred rather uniform safeguards, whereas most MS, during the meetings 
with  stakeholders,  expressed  their  preference  for  minimum  standards.  65%  of 
respondents to the 2015 consultation supported harmonisation of minority shareholders' 
rights  and  this  included  a  preference  for  allowing  minority  shareholders  to  request 
compensation and for harmonising the starting date of the protection period. 

Both  options  1  and  2  would  significantly  reduce  cost  and  burdens  on  companies  in 
comparison  to  the  baseline  scenario,  in  which  there  is  no  harmonised  protection  for 
cross-border  divisions  and  conversions  and  the  protection  offered  to  minority 
shareholders  in  cross-border  mergers  is  mainly  left  to  MS.  The  harmonised  rules  on 
minority  shareholders  protection  would  provide  for  more  legal  certainty  (including  on 
deadlines  for  protection)  and  less  need  for  legal  advice,  especially  for  cross-border 
divisions  and  conversions  for  which  there  are  currently  no  EU  rules  at  all.  Option  1 
would  offer  the  biggest  savings  for  companies,  while  savings  in  option  2  might  be 
smaller,  since  MS  could  provide  for  additional  safeguards.  The  protection  offered  to 
minority  shareholders  in  option  2  is  high  and  comprehensive.  Therefore,  it  is  not 
expected  that  MS  would  provide  for  fundamentally  different  remedies  than  the  ones 
provided by this option.  

Both  options  1  and  2  could  also  cause  some  compliance  costs  for  companies  as  they 
would be obliged to pay the shareholders in case of them exiting the company or provide 
them  with  additional  compensation  for  the  inadequate  share  exchange  which  could  in 
turn  impose  more  liquidity  constraints.  The  draft  terms  of  mergers,  divisions  or 
conversions  together  with  the  management  report  and  expert  report  should  constitute 
sufficient  guaranties  that  the  issue  of  minority  shareholders  protection  was  taken 
seriously  during  the  preparation  of  the  respective  cross-border  operation  which  should 
reduce  surprises  for  companies.  Moreover,  possible  liquidity  concerns  should  be 

72 

 
 
mitigated by the companies establishing the correct share-exchange ratio and a possibility 
for majority shareholders or third parties to acquire the shares of those shareholders who 
would like to exit the company following the cross-border operation. 

Both options 1 and 2 would increase the minority shareholder protection across the EU. 
However,  the  option  2  would  provide  the  most  adapted  protection  of  minority 
shareholders – minimum standards would be the same across the EU, but MS could go 
beyond and introduce additional rules. The impact on MS of option 2 would be smaller, 
as  they  could  introduce  more  safeguards  taking  into  account  national  specificities.  The 
additional rules introduced by MS, if any, could be coherent with the existing protection, 
in  particular  with  these  applicable  to  domestic  operations.  As  the  system  of  minority 
shareholders  protection  is  often  part  of  the  core  of  company  law,  it  does  not  seem 
politically feasible to provide for rules which would not leave enough flexibly to MS. 

In  weighing  the  options  against  the  objectives,  namely,  cutting  the  costs  of  companies 
and yet providing protection for stakeholders, both of the options would contribute to the 
increased  protection  of  minority  shareholders,  while  at  the  same  time  creating 
compliance  costs  for  companies.  Option  2  would  provide  for  higher  protection  of 
minority  shareholders  than  Option  1,  but  at  the  same  time  potentially  for  higher 
compliances  costs  for  companies.  However,  the  overall  benefits  of  option  2  including 
societal  benefits  and  the  political  acceptability  of  the  proposed  solutions  would 
overweight its costs. Achieving effective protection offered for minority shareholders in 
a cross-border context is very important for a number of stakeholders concerned. At the 
same time, the costs for companies resulting from the application of the rules from option 
2  should  be  considered  in  the  context  of  the  overall  legal  framework  providing  for  a 
direct  procedure  for  cross-border  conversions  and  divisions.  While  option  2  would 
provide  the  necessary  protection,  it  would  nevertheless  allow  companies  to  perform 
much  easier  the  cross-border  operations,  particularly  cross-border  conversions  or 
divisions which today are very difficult or impossible to perform. Also the impact on MS 
would be higher in option 1 than in option 2. Therefore, the preferred option 2 provides 
the best balance between cost reduction, the high level of protection and the impact on 
MS. 

1.14.5  Cross-border conversions – risk of abuse 

Many  stakeholders  and  MS  have  called  for  an  EU  legal  framework  for  cross-border 
conversions that stimulates growth but does not lead to abuse, including a proliferation of 
"letter-box"  companies  for  abusive  purposes  such  as  for  avoiding  labour  standards  or 
social  security  payments  as  well  as  aggressive  tax  planning.  Therefore,  the  connection 
that the converting company's business activity has with the new MS is crucial.  

During the public consultations, certain stakeholders, in particular trade unions, called for 
a  solution  whereby  the  company  carrying  out  cross-border  conversion  would  need  to 
transfer  the  registered  office  together  with  the  head  office  to  the  destination  MS. 
However,  the  very  recent  Court  decision  in  the Polbud  case,  which  was  delivered  only 
after  the  public  consultations  were  already  closed,  stipulates  that  the  freedom  of 
establishment  applies  to  cases  where  only  the  registered  office  is  moved  cross-border. 
Therefore, such a solution cannot be envisaged. Other equivalent means to fight against 
use of letter box companies for abusive purposes would therefore need to be considered. 

73 

 
1.14.5.1 Description of options 

Option 0 – baseline scenario means no EU rules would be introduced for cross-border 
conversions.  Cross-border  conversions  would  need  to  be  carried  out  on  the  basis  of 
divergent national rules, when they exist, and of the case-law of the CJEU. Following the 
Polbud judgement and in the absence of EU harmonised rules, MS could set out rules for 
the fight against fiscal or other abuses. However, such rules would need to comply with 
EU law and, in particular, with the right of establishment.  

Option 1  would introduce rules  and procedures according  to which MS  would need  to 
assess  on  a  case-by-case  basis  whether  the  cross-border  conversion  in  question 
constitutes an artificial arrangement aiming at obtaining undue tax advantages or unduly 
prejudicing the rights of employees, minority shareholders or employees. The assessment 
would  draw  from  the  independent  expert  report  and  take  into  account  the  views  of  the 
relevant stakeholders. Based on its in-depth assessment, MS could decide not to authorise 
the  conversion  in  question  in  case  it  constitutes  such  an  artificial  arrangement  i.e.  a 
letterbox company used for abusive purposes.  

1.14.5.2 Analysis of Options 

Impact  

Effectiveness 
in cutting the 
unnecessary 
costs/burdens 
for companies 

Effectiveness 
in offering 
cross-border 
protection for 
creditors, 
minority 
shareholders, 
employees 

Option 1 

Overall,  introduction  of  harmonised  procedural  rules  is  expected  to  lead  to  a 
reduction in costs and burdens for companies compared to the baseline scenario 
whereby companies must comply with non-existent or divergent national rules. In 
addition,  the  harmonised  rules  and  procedures  for  the  assessment  of  a  possible 
artificial arrangement would lead to enhanced legal certainty and thus less need 
for legal advice as in the case of baseline scenario whereby MS can apply their 
own rules. However, there would be compliance cost for companies (see below). 

Compared to the baseline scenario, this option would improve the protection for 
stakeholders  by  providing  legal  certainty  about  the  applicable  rules  and 
procedures  and  through  stakeholder  involvement  in  the  assessment  of  possible 
fraudulent/abusive  behaviour  of  the  company  intending  to  carry  out  the  cross-
border  conversion.  Finally,  the  fact  that  MS  could  block  a  cross-border 
conversion  which  constitutes  an  artificial  arrangement  would  provide 
stakeholders  with  the  ultimate  protection  against  fraudulent  or  abusive  use  of 
freedom  of  establishment.  The  effectiveness  of  Option  1  for  protecting 
stakeholders should be read in the light of the preferred policy options concerning 
protection for employees, creditors and minority shareholders. 
Companies  would  need  to  comply  with  the  procedure  established  by  the  new 
rules  and  MS'  decisions.  The  compliance  cost  for  companies  related  to  the  MS' 
assessment  about  possible  artificial  arrangement  are  mainly  embedded  in  the 
harmonised  procedures  and  result  from  the  need  to  prepare  draft  terms  and 
relevant  reports  including  costs  related  to  the  appointment  of  the  independent 
expert  by  those  companies  subject  to  this  requirement.  However,  these  costs 
should  be  weighed  against  overall  cost  savings  resulting  from  harmonised 
procedures  as  explained  in  section  5.2.1.  The  ultimate  cost  for  the  companies 
resulting  from  the  MS'  assessment  related  to  artificial  arrangement  is  that  the 
envisaged  operation  could  be  blocked  while  the  company  must  bear  all  the 
incurred procedural costs. However, this should be not the case for any company 
planning to move to another MS for genuine business reasons. 

Efficiency: 
compliance 
costs for 
companies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

74 

 
 
Impacts on 
MS including 
on national 
legal systems  

MS  would  need  to  transpose  the  new  rules  into  their  national  legislation.  In 
addition,  MS  would  incur  costs  associated  with  the  carrying  out  the  assessment 
including collection of companies' and stakeholders' views. 

1.14.5.3 Comparison of options 

When compared to the baseline scenario, the option 1 would be a part of the procedure 
allowing  companies  to  convert  cross-border  and  therefore  the  additional  compliance 
costs  would  not  specific  to  the  assessment  of  the  possible  artificial  arrangement.  They 
would  result  from  the  need  to  prepare  draft  terms  and  relevant  reports  including  costs 
related to the appointment of the independent expert for certain companies embedded in 
the harmonised procedure. The ultimate cost for companies would stem from the fact that 
the envisaged cross-border conversion could be blocked by the MS, while the company 
would need to bear all incurred procedural costs. However, for companies that envisage a 
genuine move, this procedural step should not present any risk. As to the MS, they would 
need  to  transpose  and  implement  those  rules  which  incur  some  administrative  and 
organisational costs.   

Option 1 would lead into enhanced stakeholder protection. Stakeholders would be able to 
provide  their  views  throughout  the  procedure  and  ultimately  be  protected  against 
circumvention of rules by fraudulent companies. Option 1 would thus directly contribute 
to the fight against circumvention of rules and thus against abusive or fraudulent use of 
letterbox companies.  

Similarly to the options on employees, creditors and minority shareholders, in weighting 
the  objectives  of  cutting  the  costs  of  companies  and  yet  providing  protection  for 
stakeholders,  the  preference  is  given  to  the  objective  of  protection.  Although  option  1 
might  not  be  fully  supported  by  businesses  due  to  the  procedural  costs  and  it  might 
discourage some companies from using the procedure, it would allow striking the balance 
between the freedom of establishment and social protection. It would respond to the calls 
to make the Single Market fairer. Option 1 would also be in line with the European Pillar 
of  Social  Rights  and  the  objective  of  the  fight  against  aggressive  tax  planning.  In 
addition,  the  overall  costs  for  companies  would  be  cut  in  comparison  to  the  baseline 
scenario through the harmonised procedure for cross-border conversion that would make 
possible for companies to exercise the freedom of establishment in practise. The Option 1 
is therefore the preferred option.  

Given that inherent risks are similar in divisions as in conversions, it could be considered 
to  also  extend  this  option  to  divisions.  It  can  be  expected  that  the  impacts  would  be 
similar to those described for conversions. 

1.15  Conflict of laws rules 

An  instrument  on  conflict  of  laws  would  complement  the  harmonisation  of  substantive 
company law. The instruments are complementary because they have common objectives 
– cutting costs and unnecessary burdens for companies and offering effective protection 
for the other stakeholders, but they address different aspects of the problems. The cross-
border  operations  (mergers,  divisions,  conversions)  part  is  aimed  at  harmonising  the 
requirements  for  the  operation  to  be  completed  in  procedural  terms  in  MS  in  order  for 
such  operations  to  be  effective,  whereas  conflict-of-law  rules  determine  the  applicable 

75 

 
 
 
 
law where no such harmonisation has occurred (or where harmonisation is only partial) 
and more than one national law could be applicable to a company´s internal and external 
matters. Conflict-of-law rules would come therefore into play where substantive rules are 
not harmonised and can generate therefore conflicts of laws.  

But  conflict  of  laws  rules  go  further  than  the  substantive  harmonisation  in  terms  of 
personal  and  material  scope  of  application.  In  contrast  to  substantive  law  instruments 
which concern only cross-border operations (i.e. cross-border mergers, conversions and 
divisions), the conflict-of law instrument would apply and determine the applicable law 
in  all  situations,  even  where  no  cross-border  operation  has  been  carried  out  (e.g. 
recognising  companies  incorporated  in  another  MS  without  further  conditions  being 
attached). In terms of personal scope of application, whereas the instruments concerning 
cross-border operations cover only limited liability companies, the conflict-of-law rules 
would  cover  all  companies,  whether  incorporated  or  unincorporated,  limited  liability 
companies as well as any other types of companies possible under the laws of the MS. 
Finally, for the substantive company law issues it is considered sufficient to deal with the 
existing problems in Directives and leave room for national legislation, whereas the legal 
certainty to be achieved by the harmonisation of conflict-of-law rules could be attainable 
only in a Regulation which is directly applicable in MS195.  

Whilst  some  private  international  law  rules  could  be  included  in  substantive  company 
law  instruments,  this  would  not  have  the  same  benefits  as  a  separate  conflict  of  law 
instrument.  A  separate  instrument  would  have  a  horizontal  coverage  and  be  wider,  for 
instance, in terms of scope and coverage of non-harmonised situations. For this reason, 
from the legal perspective and if politically feasible, it would be more appropriate to put 
separate instruments in place196.  

Together,  substantive  and  private  international  law  rules  would  constitute  a  legal 
framework  which  provides  legal  certainty  to  companies  in  areas  where  such  certainty 
does not exist today. 

195 See all EU private international law instruments adopted in the past 17 years, inter alia the Rome I and 
Rome  II  Regulations,  the  Insolvency  Regulation,  the  Brussels  I  Regulation  on  jurisdiction  and  the 
recognition and enforcement of judgments. 

196 See also below on choice of legal basis and type of instrument. 

76 

 
                                                            
1.15.1  Connecting factor for determining the law applicable to a company's formation 

and internal functioning 

1.15.1.1 Description of options 

Option 0: No EU rules. National conflict of laws rules continue to apply (see annex 7). 

Option  1:  Harmonised  connecting  factor  on  the  basis  of  the  incorporation  theory, 
meaning that the law applicable to a company will be the law of its incorporation (or its 
registered seat).  

Option  2:  Option  1  (i.e.  connecting  factor  on  the  basis  of  the  incorporation)  and  in 
addition  some  specific  rules  pointing  to  the  law  of  the  'real  seat',  more  specifically  the 
law of the MS within the territory of which the central administration of the company is 
located at the moment of formation of the company or another law in specific situations, 
such as when the place of incorporation cannot be determined or for rules on disclosure, 
for the protection of third parties. 

Discarded option: Harmonised connecting factor on the basis of the real seat. The Court 
of Justice of the EU has considered that certain practices in MS imposing their company 
law rules on companies incorporated in other MS on the basis of the real seat approach 
are  unjustified  restrictions  of  the  freedom  of  establishment where  they lead to  the non-
recognition of foreign companies not having their real seat in the MS of incorporation. A 
general  real  seat  connecting  factor  would  lead  to  the  non-recognition  of  companies 
established in other MS. This would happen in a situation when the real seat is not in the 
same MS where the company is incorporated. Therefore it would not be compatible with 
the  freedom  of  establishment  enshrined  in  the  Treaty,  as  interpreted  by  the  Court  of 
Justice. For this reason, this option has been discarded. However, real seat elements are 
possible  as  long  as  they  do  not  touch  upon  the  issue  of  recognition  of  companies 
established in other MS. Therefore a default connecting factor based on the real seat of a 
company in cases where the place of incorporation cannot be determined as in option 2 is 
in line with the Treaty.  

1.15.1.2 Analysis of impacts  

Impacts 

Option 1 

Option 2 

Same  as  option  1,  but  in  addition 
this  option  will  provide  even  more 
legal  certainty  through  a  fall-back 
rule  in  cases  where  the  place  of 
incorporation  of  a  company  cannot 
be determined. In such cases, a 'real 
seat' connecting factor could apply. 
in 
This 
relevance 
particular 
unincorporated 
companies.  

is  of 
for 

rule 

Effectiveness 
in cutting the 
unnecessary 
costs/burdens 
for companies 

Building on the case law of the Court of 
Justice on freedom of establishment, this 
option  provides  more  legal  certainty  to 
companies  and  promotes  the  choice  of 
law.  Companies  will  be  subject  to  one 
single  legal  regime.  Furthermore,  for 
80% of companies, there is presently an 
obligation to make public  the registered 
office – information which is accessible 
from  any  other  MS.  The  registered  seat 
indicates  the  place  of  incorporation  and 
is  legally  unambiguous  and  in  line  with 
the  principle  of  party  autonomy  in 
private international law. 

The  increase  of  legal  certainty  could 
further  reduce  still  existing  obstacles  to 

77 

 
Impacts 

Option 1 

Option 2 

the mobility of companies. In particular, 
the harmonised connecting factor would 
provide clarity that a company formed in 
accordance  with  the  law  of  a  MS  in 
registered  office 
its 
which 
exercises its freedom of establishment in 
another  MS.  The  Treaty  and  the  case 
law  of  the  Court  of  Justice  require  that 
MS recognise the company.  

it  has 

laws 

under 

requirements 

This option will NOT oblige MS to give 
national 
up 
that 
company 
substantive 
companies  registered  on  their  territory 
also have the real seat there. Applicable 
law  rules  only  determine  the  applicable 
substantive  company  law.  MS  remain 
free 
conditions  on 
substance  (effective  residence  or  real 
seat requirements). 

to  determine 

Same  as  option  1,  but  in  addition 
special  rules  pointing  to  the  real 
seat  with 
rules  on 
disclosure and capacity will provide 
for  additional  protection  of  third 
parties. 

regard 

to 

In  conclusion,  the  increase  of  legal 
certainty  can  contribute 
to  cutting 
unnecessary burdens. 

Effectiveness 
in offering 
cross-border 
protection for 
the other 
stakeholders 
(employees, 
creditors, 
minority 
shareholders) 

a  direct 

Whilst  the  connecting  factor  in  itself 
does  not  have 
impact, 
shareholders will be protected better and 
across the whole EU through a provision 
that  in  case  of  a  change  of  the  law 
applicable, the law applicable before the 
change  continues  to  apply  to  measures 
of  minority 
protection 
for 
shareholders  and  creditors  of 
the 
company.  

the 

registers 

business 

National 
are 
June  2017, 
as  of 
interconnected 
therefore the information about the place 
of 
liability 
companies  will  be  easily  ascertainable 
by  third  parties  with  important  benefits 
for their protection. 

registration  of 

limited 

Employees'  rights  will  be  safeguarded 
by  excluding  labour  relationships  and 
employees  rights,  including  rights  of 
the 
participation 
company, 
the 
instrument.  This  will  leave  MS  the 
freedom 
the  real  seat  as 
to  apply 
connecting factor in that respect. 

the  organs  of 
the  scope  of 

in 
from 

An  incorporation  connecting  factor  for 
the  determination  of  the  applicable  law 
for  companies  would  not  determine  the 

78 

 
Impacts 

Option 1 

Option 2 

the 
requirements 
substantive 
incorporation of companies, and as such 
will  not  impact  on  the  spread  of  letter-
box companies. 

for 

Efficiency: 
compliance 
costs for 
companies, MS 

Impact on MS 
including on 
national legal 
systems 

No  compliance  costs  for  companies.  MS  will  not  be  required  to  change  their 
laws since the Regulation will be directly applicable. More clarity in the law is 
likely to reduce litigation and therefore costs for companies. 

Since  many  MS  effectively  apply  the  incorporation  theory  for  intra-EU 
companies as a result of ECJ case-law, these options would not lead to  major 
changes in the legal systems of MS. Both options will ensure due protection of 
the public interests of any other State in which the company may be operating 
or  with  which  it  may  have  connections.  This  will  be  achieved  through 
provisions  on  overriding  mandatory  requirements  and  public  order.  This 
approach  will  guarantee  a  fair  balance  between  the  laws  of  the  State  of 
incorporation  and  those  of  any  other  State  where  the  company  may  be 
operating. 

Courts  will  benefit  significantly  from  increased  legal  certainty.  In  particular, 
they will not have to apply possibly differing national private international law 
rules any more, but can rely on a clear and uniform set of harmonised conflict 
of laws rules.  

1.15.1.3 Comparison of options 

The preferred option is Option 2, which would balance the need to comply with the ECJ 
interpretation of the principle of freedom of establishment, the need to reduce costs and 
remove obstacles for companies exercising that freedom while at the same time to ensure 
effective  protection  of  third  parties.  Subject  to  political  feasibility,  this  option  would 
legally provide an improvement compared to the status quo since in all cases of potential 
and  actual  conflicts  of  law,  it  would  be  possible  for  the  first  time  to  determine  the 
applicable law very easily, without any need to have recourse to the case law of the Court 
of  Justice,  national  private  international  laws  as  well  as  national  jurisprudence.  This 
would  improve  legal  certainty  for  businesses  and  reduce  costs  connected  with 
establishing the applicable law for companies. This would also be largely in line with the 
answers of MS, business organisations and some trade unions in the public consultation; 
those  MS  that  have  expressed  an  opinion  on  the  connecting  factor  are  in  favour  of  the 
place  of  incorporation  as  the  connecting  factor,  subject  to  overriding  mandatory 
provisions  and  public  policy  exceptions.  A  small  majority  of  trade  unions  and  the  vast 
majority of notaries were in favour of a 'real seat' connecting factor. This choice would 
be without prejudice to any substantive law conditions for registering the company in the 
host  MS  in  case  of  a  cross-border  conversion,  which  would  be  harmonised  in  the 
substantive law part of the package. 

1.15.2  Change of applicable law 

1.15.2.1 Description of options 

Option 0: No change. National applicable law rules continue to apply. 

79 

 
 
Option 1: Uniform general conflict of laws safeguards, but no special rules on change of 
applicable law. 

Option 2: Option 1 + specific safeguards in case of a change of applicable law, such as: 

- rule to clarify that a change of applicable law shall preserve the legal personality of the 
company (with all the consequences);  

-  rule  to  clarify  what  matters  should  be  covered  by  the  'old'  law  (e.g.  creditor  and 
minority  shareholder  protection)  and  which  by  the  'new'  law  (e.g.  conditions  for  re-
incorporation). 

1.15.2.2 Analysis of impacts 

Impacts 

Option 1 

Option 2 

Effectiveness in 
cutting the 
unnecessary 
costs/burdens 
for companies 

Effectiveness 
in offering 
cross-border 
protection for 
the other 
stakeholders 
(employees, 
creditors, 
minority 
shareholders) 

Efficiency: 
compliance 
costs for 
companies, 
MS 

Impact on 
MS including 
on national 
legal systems 

Legal  certainty  for  companies,  since 
it will be clear that, when operating a 
change  of  applicable  law,  they  will 
need  to  abide  by  other  laws  when 
there  are  overriding  mandatory 
provisions 
policy 
concerns.  

public 

and 

Furthermore, 
enjoy  uniform 
application in the EU.  

these  concepts  will 
interpretation  and 

and 

Stakeholders  will  have  certainty  that 
any  change  of  applicable  law  will 
take  place  respecting  the  overriding 
policy 
mandatory 
provisions of the forum or of another 
MS  where 
company  has 
activities.  However,  these  concepts 
are  rather  strictly  interpreted  by  the 
ECJ.  

public 

the 

legal 

certainty 

Enhanced 
for 
companies  since  they  will  also  have 
clarity  as  to  which  matters  continue 
to  be  governed  by  the  'old'  law  and 
which by the 'new law'.  

stakeholders  of 

In  addition  to  the  benefits  under 
Option  1, 
the 
company  before 
the  change  of 
applicable law will continue to enjoy 
the protection they had under the 'old' 
law. Since the 'new' law will regulate 
the  conditions  for  re-incorporation, 
stakeholders of the company after the 
change  of  applicable  law  will  be 
protected by the new law.  

This  option  does  not  entail  any 
compliance costs for companies. MS 
will  not  be  required  to  change  their 
laws  since  the  Regulation  will  be 
directly  applicable.  More  clarity  in 
the law is likely to reduce litigation.  

When  compared  to  Option  1,  this 
option 
legal 
introduces  more 
certainty  as  to  which  matters  are 
governed by which law and case of a 
transfer  and  therefore  is  likely  to 
result in even less litigation.  

Both  options  will  ensure  due  protection  of  the  public  interests  of  any  other 
State  in  which  the  company  may  be  operating  or  with  which  it  may  have 
connections.  This  will  be  achieved  through  provisions  on  overriding 
mandatory requirements and public order. This approach will guarantee a fair 
balance between the laws of the State of incorporation and those of any other 
State where the company may be operating. 

Courts will benefit significantly from increased legal certainty. In particular, 
they  will  not  have  to  apply  possibly  differing  national  private  international 
law  rules  any  more,  but  can  rely  on  a  clear  and  uniform  set  of  harmonised 
conflict of laws rules.  

80 

 
1.15.2.3 Comparison of options 

The preferred option is option 2 which would offer the highest protection to stakeholders. 
This would also be in line with the answers of MS in the public consultation, which were 
largely in favour of addressing the possibility of a change of the applicable law through a 
cross-border  conversion  to  another  MS  without  loss  of  legal  personality,  as  well  as  for 
specifying  which  matters  should  be  covered  by  the  "old  law"  and  which  by  the  "new 
law".  Any  procedural  aspects  of  such  transfers  are  a  matter  of  substantive  law  which 
would be addressed in the substantive law directive. 

1.15.3  Conflict of laws rules on employee participation 

1.15.3.1 Description of options 

Option 0: No change. National conflict of laws rules on employee participation continue 
to apply. 

Option 1: No uniform conflict of law rules on employee participation in company boards 
(exclusion  from  the  scope  of  a  possible  instrument).  In  contrast  to  option  0,  there  are 
uniform  rules  on  the  law  applicable  to  companies,  but  labour  law  and  worker 
representation are excluded from the scope of application of these uniform rules. 

Option 2: Special conflict of laws rule for employee participation, pointing for example 
to the law of the MS where the head-office of the company is located, complemented by 
public policy and overriding mandatory provisions exceptions. 

Discarded  option:  Subjecting  employee  representation  to  the  law  which  is  more 
favourable  to  the  employees.  Such  a  solution  must  be  discarded  since  it  would  bring 
considerable legal uncertainty for both workers and companies (the most favourable law 
may change over time, e.g. where the company grows and therefore reaches or falls short 
of certain thresholds in national law). Such a connecting factor would not sit well with 
and does not exist in any private international law instruments which have provisions to 
protect  weaker  parties  (e.g.  Rome  I  which  harmonises  the  law  applicable  to  individual 
employment contracts). 

1.15.3.2 Analysis of impacts  

Impacts 

Option 1 

Option 2 

Effectiveness 
in cutting the 
unnecessary 
costs/burdens 
for companies 

to 

No  change  compared 
the 
current  situation:  the  employee 
participation  will  continue  to  be 
governed  by  national  conflict  of 
law rules. 

This option may be more legally certain 
but  also  more  complex  for  companies, 
since  it  might  imply  the  application  of 
three  laws:  law  of  incorporation  for 
general  matters,  law  of  head-office  for 
board  level  employee  participation  and 
in 
overriding  mandatory 
provisions  and  public  policy  of  the 
forum. 

addition 

Effectiveness 
in offering 
cross-border 
protection for 

No  change  compared 
the 
current  situation:  the  employee 
participation  will  continue  to  be 
governed  by  national  conflict  of 

to 

81 

This  option  may  potentially  be  more 
protective  but  also  more  complex  for 
employees.  It  combines  a  'real  seat' 
level 
connecting 
employee participation with the standard 

for  board 

factor 

 
Impacts 

Option 1 

Option 2 

employees 

law rules. 

Efficiency: 
compliance 
costs for 
companies, MS 

Impact on MS 
including on 
national legal 
systems 

No compliance costs. 

 No  change  compared 
current situation. 

to 

the 

conflict  of  laws  protection  (e.g.  public 
policy). 

Some  companies  may  need  to  revise 
their approach to employee participation 
in light of the fact that the law of the MS 
of  the  head  office  and  the  forum  might 
govern such matters. No costs for MS. 

This option may change the approach to 
employee  participation  in  the  board  of 
companies  in  some  MS,  albeit  in  a 
for 
direction  which 
employees. 

positive 

is 

1.15.3.3 Comparison of options 

The preferred option is option 1 which excludes employee participation matters from the 
scope of application of uniform rules. In the absence of such uniform rules, the national 
conflict of law rules will apply. This option is in line with the views expressed by trade 
unions and notaries in the public consultation.  

This option is without prejudice to employee participation rules developed in the area of 
substantive company law. 

1.15.4  Territorial scope of application 

1.15.4.1 Description of options 

Option 0: No change. National conflict of laws rules continue to apply. 

Option 1: Instrument to cover only companies established in the EU. 

Option 2: Universal application, covering also companies established in third countries. 

1.15.4.2 Analysis of impacts  

Impacts 

Option 1 

Option 2 

Effectiveness in 
cutting the 
unnecessary 
costs/burdens for 
companies 

This option will not change the 
current  situation,  although  it 
will  increase  legal  certainty 
for  all 
and 
companies.  

reduce  costs 

foreign 
This  option  could  help 
companies  operating 
the  EU 
benefit  from  the  application  of  the 
law  of  a  third  country  in  the  EU, 
without any additional costs. 

in 

Effectiveness in 
offering cross-border 
protection for the 
other stakeholders 
(employees, 
creditors, minority 
shareholders) 

This option will not change the 
current  situation,  although  it 
will  increase  legal  certainty 
and 
for  all 
stakeholders.  

reduce  costs 

There  could  be  a  negative  impact 
treatment  of  EU 
through  unfair 
creditors  or  minority  shareholders  if 
the 
law 
third  country  company 
requirements are too lax.  

82 

 
Impacts 

Option 1 

Option 2 

Efficiency: 
compliance costs for 
companies, MS 

Impact on MS 
including on national 
legal systems 

No compliance costs. 

in 

This  option  would 
its 
territorial  scope  correspond  to 
the  case  law  of  the  Court  of 
the  freedom  of 
Justice  on 
establishment  of  companies  - 
which is necessarily limited to 
the 
to 
companies  established  in  the 
EU.  This  option  is  therefore 
sufficient 
internal 
from  an 
market perspective. 

internal  market, 

i.e. 

exclude 
it  would 
Also, 
possible  cases  in  which  local 
creditors 
minority 
or 
shareholders  might be unfairly 
prejudiced  by  the  application 
of  the  company  law  of  a  third 
country.  

This  option  would  correspond  to  the 
territorial  scope  of  other  European 
instruments  in  the  area  of  private 
international law, such as the Rome I 
and  the  Rome  II  Regulations.  Like 
option  2,  it  is  compatible  with  the 
case law of the Court on the freedom 
of establishment, but goes beyond the 
case  law  and  covers  also  companies 
established in third countries. 

creditors 

This  option  implies,  however,  the 
risk  that  it  could  unfairly  prejudice 
local 
minority 
shareholders by the application of the 
company  law  of  a  third-country, 
without  bringing  any  added  value  to 
the internal market. 

or 

1.15.4.3 Comparison of options 

The preferred option is  option 1. MS would still be free to  implement similar rules for 
third country companies. In the public consultation, MS and business organisations who 
answered  this  question  were  slightly  in  favour  of  universal  application,  while  trade 
unions and notaries were against. However, the majority of respondents did not express 
an opinion.  

PACKAGE OF PREFERRED POLICY OPTIONS AND OVERALL IMPACTS 

1.16  Summary of preferred policy options  

From the analysis above the following package of preferred options is constituted. 

Use of digital processes and tools throughout a company's lifecycle – preferred options  

Online registration and 
filing of documents to the 
business register 

Multiple submissions of 
the same information by 
companies  

Option  3:  Rules  on  fully  online  registration  of  companies/ 
branches  and  filing  of  company  documents  without  any  physical 
presence  required.  Safeguards  for  electronic  identification  laid 
down at EU level. Possibility for MS to require physical presence, 
on case-by-case basis, in case of genuine suspicion of fraud. 

Option  2:  Company  information  submitted  only  once  and  sent 
electronically  (a)  by  the  business  register  to  the  national  gazette 
(only if the MS requires publication in the national gazette) and (b) 
by the business register of the company to the business register of 
the branch in another MS. 

Online access to company  Option  1:  More  information  added  to  the  set  of  company  data 

83 

 
information held in 
business registers 

provided free of charge by all business registers, but fees may still 
be  charged  for  other  information.  Easier  and  non-discriminatory 
access to information.  

Cross-border operations – preferred options  

New procedural rules for 
cross-border divisions 
and cross-border 
conversions 

Employee information, 
consultation and 
participation  

Creditor protection: 
Option 2 

Minority shareholder 
protection 

Cross-border conversions 
– risk of abuse 

Option  1:  Introduce  harmonised  EU  procedures  that  enable  cross-
border divisions and cross-border conversions. 

Option  2:  Existing  rules  for  cross-border  mergers  applied,  with 
modifications,  to  cross-border  divisions  and  conversions.  In 
addition,  a  special  report  by  the  company's  management  on  the 
impact  of  the  cross-border  operation  on  jobs  and  the  situation  of 
employees in cross-border mergers, divisions and conversions.  

Existing rules on information and consultation of employees remain 
unaffected 

Option  2:  Same  harmonised  rules  for  cross-border  mergers, 
divisions  and  conversions.  In  addition,  MS  may 
introduce 
additional protective measures. 

Option 2: Building on the cross-border merger rules, introduction 
of  same  harmonised  rules  for 
the  protection  of  minority 
shareholders at EU level for mergers, divisions and conversions. In 
addition, MS may introduce additional protective measures. 

Option  2:  Case-by-case  assessment  by  MS  to  determine  whether 
the  cross-border  conversion  in  question  constitutes  an  artificial 
arrangement  aiming  at  obtaining  undue  tax  advantages  or  unduly 
prejudicing  the  rights  of  employees,  minority  shareholders  or 
employees. 

Conflict of law rules – preferred options  

Connecting factor 

Conflict of laws rules on 
protection for 
stakeholders in case of a 
change of applicable law 

Option  2:  Connecting  factor  on  the  basis  of  the  place  of 
incorporation  of  the  company  and  in  addition  some  specific  rules 
pointing  to  the  law  of  the  'real  seat'  or  another  law  in  specific 
situations,  such  as  when  the  place  of  incorporation  cannot  be 
determined  or  for  rules  on  disclosure  and  capacity,  for  the 
protection of third parties.  

Option 2: - the overriding mandatory provisions of the forum or of 
another  country  with  which  the  company  has  a  connection  will 
prevail over the provisions of the applicable law;  

-  the  law  of  the  forum  will  prevail  where  there  are  public  policy 
consideration at play;  

- the CJEU will have jurisdiction to give a uniform interpretation of 
these concepts. 

+ specific safeguards in case of a change of applicable law, such as: 

-  rule  to  clarify  that  a  change  of  applicable  law  shall  preserve  the 
legal personality of the company (with all the consequences);  

-  rule  to  clarify  what  matters  should  be  covered  by  the  'old'  law 
(e.g. creditor and minority shareholder protection) and which by the 

84 

 
'new' law (e.g. conditions for re-incorporation). 

Conflict of laws rules on 
employee participation at 
board level 

Option  1:  No  uniform  conflict  of  laws  rules  on  employee 
participation  at  board  level  (national  conflict  of  laws  rules  will 
apply). 

Territorial scope of 
application 

Option  1:  Instrument  to  cover  only  companies  established  in  the 
EU.  

85 

 
1.17  Analysis of the overall impacts of the package  

This section will present the combined impacts of the package which would be composed 
of the preferred options presented in section 6.1.  

Overall,  the  preferred  options  complement  each  other  in  contributing  to  the  policy 
objectives of the initiative, i.e. making the Single Market deeper and fairer, specifically 
by  cutting  the  unnecessary  costs  and  burdens  for  companies  and  offering  effective 
protection  for  the  other  stakeholders,  in  the  areas  of  use  of  digital  tools  and  processes, 
cross-border operations and conflict of laws. The complementarity of the options means 
that the maximum impact could be achieved if the package would be composed of all the 
five  different  policy  issues.  However,  although  the  different  elements  of  the  package 
interact,  the  five  policy  issues  are  self-standing  and  therefore  the  package  could  be 
composed  of  only  some  of  them.  The  interactions  between  five  policy  issues  are 
explained below in section 6.2.9.  

1.17.1  Overall economic impact  

Introducing harmonised rules and procedures regarding the use of digital tools and cross-
border operations (mergers, divisions, conversions) would make it easier and more cost-
effective  to  set-up  companies  both  domestically  and  cross-border  and  to  establish 
operations  in  another  MS.  There  are  currently  more  than  20  million  limited  liability 
companies  across  EU197  and  99%  of  them  are  SMEs.198  The  package  would  offer  new 
opportunities to them.  

Impact on companies  

First,  thanks  to  the  use  of  digital  tools,  companies  would  be  able  to  register,  file  and 
amend their data in the registers fully online, which would significantly reduce costs for 
EU companies. With more than 2 million new companies registering in the EU each year, 
the  new  rules  would  have  a  significant  economic  impact  in  both  cross-border  and 
domestic registrations. The following cost savings could be foreseen:  

-  Online registration could take on average half of the time needed to process a paper-
based registration and the cost for online registration could be up to 3 times cheaper 
than the paper-based registration199. In addition, the introduction of rules on fully on-
line  filing  of  company  information  would  also  bring  additional  savings  for 
companies.   

-  For new companies registered in the EU, the savings from the introduction of online 
registration are estimated to be between €42 – 84 million (see Annex 9 for details). 
Such  savings  would  be  higher  in  MS  where  online  registration  is  currently  not 
available. 

-  Costs  would  also  be  reduced  by  submitting  required  company  information  once 
(once-only  principle).  The  reduction  of  submissions  would  contribute  to  the  overall 

197 EY study. 
198 Ibidem 
199 Based on a World Bank report. The numbers apply on average percentage of income per capita. 

86 

 
                                                            
savings,  estimated  at  €5  billion  per  year200,  which  can  be  brought  by  the 
implementation of the once-only principle at EU level.  

-  The online submission of documents would also bring cost savings. For example, in 
Belgium to file on paper an abbreviated model of annual accounts costs €226,34, as 
opposed to €155,67 for online filing; in the UK, the submission of annual accounts by 
post costs £40, while the electronic submission of the same documents costs £13. 

Second, companies would be provided with EU wide harmonised rules and procedures 
allowing them to perform cross-border operations (such as divisions and conversions) 
which  are  very  difficult  or  impossible  to  perform  today.  Existing  rules  on  cross-border 
mergers would be streamlined. 

-  Given that the introduction of the harmonised rules for cross-border mergers lead to 
173% increased from 2008 to 2012201, it is estimated that further streamlining of the 
rules would further increase cross-border mergers by making them more accessible to 
a  broader  population  of  companies,  thereby  opening  up  a  bottleneck  in  economic 
activity across the EU. 

-  The operational costs of a new procedure for cross-border divisions are expected to 
amount to costs between 130% - 200% of a national procedure.202 This would result 
in savings between €12,000 - €37,000 depending on the size of the companies and the 
MS  involved.  The  current  volume  of  cross-border  divisions  is  expected  to  range 
between 50  –  200 operations  per  year.203 Assuming a  10%  increase of cross-border 
division  activity  the  cost  savings  for  companies  could  potentially  amount  to  over 
€57M over 5 years, assuming a 20% increase in activity the savings could potentially 
amount to €73.5M companies while assuming a 30% increase (most likely scenario 
in  line  what  was  experienced  following  the  introduction  of  the  CBMD)  the  cost 
savings could amount to €94.5M over 5 years. 

Cross-border Divisions 

Scenario 1 - Volume + 10% increase 

Low Volume + Low Cost (50 operations x €12,000) 

High Volume + Low cost (200 operations x €12,000) 

Low Volume + High Cost (50 operations x €37,000) 

High Volume + High Cost (200 operations x €37,000) 

€4,629,366 

€18,517,464 

€14,273,879 

€57,095,514 

200 Based on Final Report: Study on eGovernment and the Reduction of Administrative Burden (SMART 
2012/0061) 
201 Bech-Bruun/Lexidale, 2013, p. 4 
202 EY study on cross-border operations of companies, p. 102. Study estimated that the lowest cost of the 
procedure would be slightly higher than the national procedure but slightly higher, without being twice as 
high. The procedure is expected to require some additional time (i.e. to prepare additional documents than 
during  domestic  procedures).  Costs  are  based  on  the  legal  advisory  costs  (60%),  registration  costs  with 
public  services  (5%)  and  costs  to  execute  the  procedure  (i.e.  production  of  documents,  organisation  of 
general meetings, man days etc. – 35%). The estimation was used to obtain a range of expected saving per 
unit, when compared to the initial costs of cross-border transfers today (data collected from Member State 
Fiches – see EY Annex, p. 48).  
203 EY study on cross-border operations of companies, p. 25. For further explanation see Annex 8. 

87 

 
 
 
                                                            
Scenario 2 – Volume + 20% increase 

Low Volume + Low Cost (50 operations x €12,000) 

High Volume + Low cost (200 operations x €12,000) 

Low Volume + High Cost (50 operations x €37,000) 

High Volume + High Cost (200 operations x €37,000) 

Scenario 3 – Volume + 30% increase 

Low Volume + Low Cost (50 operations x €12,000) 

High Volume + Low cost (200 operations x €12,000) 

Low Volume + High Cost (50 operations x €37,000) 

High Volume + High Cost (200 operations x €37,000) 

€5,957,952 

€23,831,808 

€18,370,351 

€73,481,408 

€7,653,618 

€30,614,472 

€23,598,656, 

€94,394,622 

-  As for cross-border conversions, the introduction of a new procedure is expected to 
result  in  operational  costs  being  approximately  130%  -  180%  of  a  domestic 
conversion  procedure.204  This  is  estimated  to  reduce  costs  by  cost  by  €12,000  – 
€19,000  per  operation.  Currently,  the  volume  of  cross-border  conversions  based  on 
national  procedures  and  analogous  application  of  CJEU  case-law/existing  EU 
legislation  coupled  with  sound  practitioner  knowledge  is  relatively  low.  It  is 
estimated to be between 350 – 900 operations per year.205 It can be assumed that the 
number of cross-border conversions would significantly increase as it happened with 
the introduction of harmonised rules on cross-border mergers. 

As a conversion is comparatively a simpler procedure than a cross-border division as 
it only involves one company and appeals to a much broader population of companies 
it can be assumed that the increase in volume is likely to be higher than that of cross-
border divisions and mergers. Therefore, it can be assumed for scenario 3 (i.e. 40 % 
increase) a possible cost saving of €176M – 279M over 5 years. 

In  terms  of  long  term  impacts,  the introduction  of  a  conversion  procedure  could  be 
monumental for the SME market. The accessibility of the procedure will put them on 
equal  footing  with  larger  companies  to  engage  in  cross-border  activity  and  could 
potentially open up a bottleneck of conversion activity. By providing a direct pan-EU 
procedure it can be assumed that over the long-term we will see as many, if not more, 
small and medium enterprises engaging in cross-border activity and reaping the full 
benefits  of  the  internal  market  as  there  currently  are  large  companies.  Using  the 
Eurostat's  data  on  foreign  affiliated  companies  as  a  point  of  comparison,  this  could 
potentially result in approximately €0.6BN - €2BN in savings for small and medium 
enterprises.206 

204 Same as footnote 169.  
205 EY study on cross-border operations of companies, p. 19. For further explanation see Annex 8. 
206  The  only  data  available  concerning  the  volume  of  companies  operating  cross-borders  is  contained  in 
Eurostat's  manual  on  Foreign  Affiliates  Statistics.  The  data  concerns  companies  that  are  "controlled"  by 
companies that are resident in other EU MS. This broadly covers branches and subsidiaries. The statistics 
shows  that  0.7%  of  EU  companies  are  controlled by  a  company that is  resident  in  another  EU  MS  - the 
majority of which are large companies which hold a disproportionately high representation of employment, 
turnover or value added. Assuming the introduction of a conversion procedures allows as many small and 

88 

 
                                                            
 
Cross-border Conversions 

Scenario 1 - Volume + 20% increase 

Low Volume + Low Cost (350 operations x €12,000) 

High Volume + Low cost (900 operations x €12,000) 

Low Volume + High Cost (350 operations x €19,000) 

High Volume + High Cost (900 operations x €19,000) 

Scenario 2 – Volume + 30% increase 

Low Volume + Low Cost (350 operations x €12,000) 

High Volume + Low cost (900 operations x €12,000) 

Low Volume + High Cost (350 operations x €19,000) 

High Volume + High Cost (900 operations x €19,000) 

Scenario 3 – Volume + 40% increase 

Low Volume + Low Cost (350 operations x €12,000) 

High Volume + Low cost (900 operations x €12,000) 

Low Volume + High Cost (350 operations x €19,000) 

High Volume + High Cost (900 operations x €19,000) 

€41,705,664 

€107,243,136 

€66,033,968 

€169,801,632 

€53,575,326 

€137,765,124 

€84,827,600 

€218,128,113 

€68,560,128 

€176,297,472 

€108,553,536 

€279,137,664 

- 

It should be noted that that the baseline volumes for both cross-border divisions and 
cross-border conversions only concerns direct procedures. For divisions this concerns 
operations  in  MS  that  have  their  own  cross-border  procedures  in  place  at  MS  level 
(CZ,  DK  and  FI),  MS  that  permit  cross-border  divisions  through  analogous 
application  of  the  national  division  procedures  (AT,  BE,  BU,  ES,  FR,  HR,  LT,  PT 
and SE) and MS that permit cross-border divisions through analogous application of 
the CBMD (AT, BE, IT, LT, NL, PT and SE). The baseline volumes exclude cross-
border  mergers  that  have  been  carried  out  in  order  to  achieve  the  same  effect  as  a 
cross-border division. Similarly, cross-border mergers that are carried out to achieve 
the same effect as a cross-border conversion are also excluded.  

-  Due to the difficulties in estimating the number of cross-border mergers at EU level 
and isolating the mergers that used to achieve the result as a cross-border division or 
cross-border transfer, a significant volume of indirect operations were not taken into 
account.  Therefore,  in  reality  the  overall  cost  savings  will  be  significantly  higher 

medium sized companies engage in cross-border activity as there currently are large companies we could 
see the following savings: low scenario (0.2% SMEs in engaging in cross-border activity) - €595,200,000; 
mid  scenario  (0.5%  SMEs  in  engaging  in  cross-border  activity)  -  €1,488,000,000;  and  high  scenario  (0.7% 
SMEs in engaging in cross-border activity) - €2,083,200,000. For further information see: 
 http://ec.europa.eu/eurostat/statistics-explained/index.php/Foreign_affiliates_statistics_-_FATS 

89 

 
 
 
                                                                                                                                                                                 
given  that  the  costs  of  an  additional  merger  amount  to  approximately  €80,000  - 
€100,000.207  

-  Similar rationale applies to conversions carried out through an SE transfer where the 
procedure for the transfer, without accounting for the creation of the SE, amounts to 
approximately €30,000208. 

-  Overall, it is important to note that the final cost reductions which companies will be 
able  to  enjoy  depend  on  the  final  procedural  rules  adopted  and  on  the  compliance 
costs arising from these. 

Overall, the combined impact of these would lead to efficiency gains to companies which 
could  have  an  impact  on  consumers  in  terms  of  price  and  offer.  Companies  would  be 
better adapted to market realities (volatile business opportunities appearing in some parts 
of the Single Market and disappearing in others), leading to increased competition. This 
would  in  turn  have  a  positive  impact  on  growth,  jobs  (net)  and  EU  competitiveness 
through enhanced business opportunities in the Single Market.  

Impact on Member States  

The  package  would  cause  costs  for  national  administrations  associated  with  the 
introduction  of  legislative  rules  at  national  level  (preparation,  consultation,  adoption, 
adaptation  of  existing  ones).  In  MS  where  there  are  no  cross-border  procedures  or  no 
rules  on  online  registration  the  impact  would  be  bigger  than  in  other  MS  where  such 
procedures  exist  and  they  would  only  need  to  be  adapted.  Moreover,  there  would  be 
impact on national authorities such as registration bodies, courts or notaries which would 
have more cross-border cases to handle.209 

There will especially be an impact on administrations in those MS where digital tools are 
not  fully  developed  (e.g.  BE,  DE,  NL,  RO).  However,  as  shown  in  the  assessment  of 
options related to digitalisation, the initial costs for IT development are recovered in the 
medium or even short term and the use of digital tools210, combined with the application 
of the once-only principle, bring benefits and efficiency in the longer term.  

-  For  example,  in  the  case  of  the  Danish  business  register  where,  following  the 
introduction  of  online  registration  and  filing  system,  between  2011-2015  the 
average time for case handling decreased by 69% and the average ramp-up time 
for a new employee decreased by 90%211. 

In  addition,  the  online  registration  together  with  well-structured  business  register  will 
have  positive  spill-over  effects  on  tax  administration  through  better  connection  of 
company related data and tax data. Moreover, some costs deriving from the adaptation of 
IT systems could be borne by intermediaries and costs related to electronic identifications 
or  electronic  signatures  are  part  of  the  more  general  costs  of  the  modernisation  of  MS' 
digital systems. 

207 EY study on cross-border operations of companies, p. 56. 
208 EY study on cross-border operations of companies, p.66. 
209 The impact is difficult to measure as it depends on too many variables: the increase of number of cross-
border divisions and conversions per Member State. The overall increase does not tell us  
210 See also the costs of developing the system of online registration in Poland in Impact Assessment on the 
Single Member Company. 
211 European Commerce Registers' Forum report, 2017, p. 56 

90 

 
 
                                                            
MS would also incur administrative costs where they need to set up new administrative 
procedures, including collection of companies' and stakeholders' views, which would be 
for instance the case as regards the assessment concerning an artificial arrangement. 

1.17.2  Impact on SMEs 

The  impact  on  SMEs  would  be  particularly  significant,  as  they  constitute  99%  of  all 
limited liability companies. SMEs are especially sensitive to the reduction of costs. They 
do not have in-house lawyers so in most cases SMEs have to rely on external expertise in 
cross-border  situations.  Therefore  any  initiative  that  increases  legal  certainty  has 
significant  positive  impact  on  them  thanks  to  the  reduction  of  legal  costs.  Especially, 
cross-border conversions would be designed for SMEs, as bigger companies have today 
the means to perform alternative operations to reach the same results and SMEs do not. 
In addition, the use of digital tools for online registration and filing would reduce costs 
for SMEs by eliminating the need for physical presence and travel costs.  

In particular, most SMEs (93%) in the EU have less than 10 employees (and do not have 
employee participation at board level). Therefore, those micro enterprises would not be 
impacted  by  the  rules  concerning  employee  participation.  Those  rules  could  only  be 
exercised if a company was operating under the participation system or has at least 4/5 of 
the  number  of  employees  required  for  the  application  of  the  employee  participation 
before division or conversion – but this would not be the case for at least for 93% of all 
SMEs. 

The  use  of  digital  tools  in  company  law  should  also  stimulate  entrepreneurship  and 
innovation,  as  it  would  offer  more  chances  to  set  up  innovative  start-ups.  Given  that 
SMEs employ 2 out of every 3 employees in the EU, this could lead to creation of new 
jobs (directly or indirectly)212. 

1.17.3  Social impacts (impacts on social rights, fraud, access to information) 

The  package  includes  measures  which  enhance  employees'  rights  (discussed  separately 
below),  increase  the  access  to  information  contained  in  business  registers  and  reduce 
fraud.  Research  shows  that  in  most  cases  it  is  impossible  to  establish  any  causal  link 
between the use of digital tools in company law and fraudulent or anti-social behaviour 
of companies. Moreover, it is shown that using digital tools has rather a positive impact 
by reducing undesired or fraudulent behaviour213. In cases of genuine suspicion of fraud, 
there is always a possibility of enhanced safeguards such as requesting physical presence 
before a notary or a lawyer. 

Moreover,  the  package  contains  provisions  which  will  contribute  to  the  fight  against 
negative phenomena often caused by letter-box companies.214 In case of conversions, the 
company converting in another MS should not be able to circumvent the rules and create 
an artificial arrangement aimed at obtaining undue tax advantages or unduly prejudging 
the rights of minority shareholders, creditors or employees. Conversions should be driven 
by  real  business  needs  and  carried  out  by  companies  which  intend  a  genuine  move  to 

212 In 2015, SMEs generated €3.9 trillion in value added and employed 90 million people which equates to 
67%  of  total  non-financial  business  sector  employment.  Annual  Report  on  European  SMEs  2015/2016, 
European Commission 
213 Optimity study on impacts of using digital tools 
214 For negative phenomena caused by letter-box companies, see ETUC' Project on letterbox companies - A 
hunters game : how policy can change to spot and sink letterbox-type practices, December 2016 

91 

 
                                                            
another  MS.  SMEs  would  be  most  interested  in  this  possibility.  In  most  cases  small 
companies would move abroad for personal reasons or in order to seize a new business 
opportunity  or  have  a  new  business  partner,  rather  than  for  tax  optimisation  which  is 
generally performed by larger companies or groups. 

Although some cross-border operations (e.g. mergers) could lead to reduction in number 
of  jobs,  this  should  be  balanced  against  the  fact  that  the  cross-border  operation  in 
question may have been the way to keep the business alive and avoid that all jobs could 
have been lost. The overall net impact in the EU should therefore be positive. In addition, 
as a result of the cross-border operations employees may also benefit from the employee 
participation  system  which  otherwise  they  would  not  (in  MS  which  do  not  provide  for 
such an opportunity)  

1.17.4  Impact on employees (information, consultation, participation in the board)  

In case of cross-border operations by companies, the package would provide employees 
with enhanced protection across the Single Market compared to the situation today. The 
report on the impact of the cross-border operation (mergers, divisions and conversions) 
on  jobs  and  situation  of  employees  would  provide  information  to  employees  or  their 
representatives  about  the  consequences  of  the  operation  on  jobs  as  well  as  possible 
changes in employment conditions. Moreover, in  those companies  that already have an 
employee  board  level  participation  system,  the  cross-border  divisions  or  conversions 
could  not  be  completed  without  negotiation  with  the  employees.  This  would  mainly 
apply to large companies with a significant workforce (see the point on SMEs above).  

In  addition, according  to  the  research,  the  use  of  digital  tools  in  company  law,  such  as 
online  registration  or  filing,  does  not  by  itself  create  any  negative  effects  on 
employees.215 

1.17.5  Impact on creditor and minority shareholders  

The introduction of harmonised rules for creditor protection and minority shareholders in 
cross-border  operations  would  improve  their  protection  in  a  cross-border  situation 
compared to a situation today where the conflicting national rules or lack of such rules 
can result in varying treatment of these stakeholders or leave them without any protection 
at all. At present national solutions are applied to them which are often incompatible. MS 
could  also  introduce  additional  rules  in  line  with  their  national  traditions  if  deemed 
necessary.   

1.17.6  Impact on tax and state aid rules and other related policies  

The facilitation of creation of companies by digital tools together with the facilitation of 
cross-border  operations  (mergers,  divisions,  conversions)  could  negatively  impact  tax 
revenues  in  some  MS  (as  a  consequence  of  de-localisation  of  companies).  Given  the 
current  state  of  harmonisation  in  the  tax  field,  some  companies  may  use  cross-border 
operations to obtain tax benefits which could lead some MS to reduce their corporate tax 
rate to attract companies. However, this risk is mitigated by actions undertaken in the tax 
field  to  fight  tax  avoidance  and  increase  tax  transparency.  Moreover,  the  cross-border 
operations,  in  particular  cross-border  conversions  should  be  tax  neutral  in  a  sense  that 

215 Optimity study impacts of using digital tools 

92 

 
                                                            
MS should receive the taxes that are due by companies even if a company is in another 
jurisdiction.  

More  precisely,  Member  States  have  adopted  a  number  of  measures  to  counteract 
corporate  tax  avoidance  in  recent  years.  On  8 December  2015,  Member  States  adopted 
EU Council Directive 2015/2376216 that provides for mandatory automatic exchange of 
information on advance tax rulings and advance pricing arrangements between Member 
States. In addition, Member States have adopted EU Council Directive 2016/881216 that 
provides  for  mandatory  automatic  exchange  of  information  of  country-by-country 
reporting  by  MNE’s.  On  20  June  2016  the  Council  adopted  the  Directive  (EU) 
2016/1164217  laying  down  rules  against  tax  avoidance  practices  that  directly  affect  the 
functioning of the internal market, including provisions on exit tax to prevent companies 
from  avoiding  tax  when  re-locating  assets.  Political  agreement  by  Member  States  was 
reached on 13 March 2018 on the Commission proposal218 for a Directive on mandatory 
disclosure by intermediaries for tax planning schemes, which is expected to be adopted 
shortly. 

There should not be any direct impact on state aid rules. 

The  inclusion  of  clearer  and  more  harmonised  rules  aiming  at  protecting  companies’ 
shareholders and at enhancing the scrutiny of the legality of the cross-border conversion, 
would also bring an additional step in the mitigating measures against the risks posed by 
organised crime organisations in the creation and business activities of legal entities, such 
as companies. This package would thus complement the ambitious rules that are already 
in  place  under  Directive  (EU)  2015/849  on  the  prevention  of  the  use  of  the  financial 
system  for  the  purposes  of  money  laundering  or  terrorist  financing  and  under  which 
corporate  structures  should  disclose  their  beneficial  owners  to  entities  in  charge  of 
applying anti-money laundering and terrorist financing requirements219. 

1.17.7  Impact on fundamental rights  

The package will facilitate the implementation of the rights of establishment in any MS, 
as  prescribed  by  Article  15(2)  of  the  Charter  and  ensuring  the  principle  of  non-
discrimination on grounds of nationality (Article 21(2)). The proposed legal framework 
will enable companies to perform cross-border divisions and conversions and will make 
such  mergers  easier.  The  current  legal  uncertainty  and  lack  of  rules  will  not  hinder 
anymore companies to expand their business to the MS' markets. Moreover, the proposed 
rules on the online registration and filing will make it more accessible for businesses to 
create enterprises in other MS.  

There should be positive impact on companies benefiting from the opportunities offered 
by the Single Market, in particular concerning the freedom to conduct business set out in 
Article 16 of the Charter. The key obstacles to cross-border operation should be removed 
(at least for SMEs). 

216 https://ec.europa.eu/taxation_customs/business/tax-cooperation-control/administrative-cooperation/ 

enhanced-administrative -cooperation-field-direct-taxation_en 

217  http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:  OJ.L_.2016.193.01.0001.01.ENG&toc= 

OJ:L:2016:193:TOC 

218 https://ec.europa.eu/taxation_customs/business/company-tax/transparency-intermediaries_en 
219 The beneficial ownership information should, in addition, be held in a national central register.  

93 

 
                                                            
The proposal will have a positive impact on the right to property set out in Article 17 of 
the  Charter  insofar  as  shares  can  be  considered  under  the  concept  of  property.  The 
safeguards proposed for shareholders in case of cross-border operations will ensure that 
the shareholders rights stemming from the shares are protected. 

Although  the  initiative  will  provide  rules  for  companies  in  the  framework  of  company 
law, it will also contribute to the workers' right to information and consultation within the 
undertaking (Article 27 of the Charter) by providing more transparency for employees in 
case of cross-border operations of companies. Nevertheless, it will not change the current 
rules which provide for information and consultation of workers under EU law nor will it 
prescribe how such consultation and information should be effected. 

1.17.8  Impact on data protection 

The  package  will  ensure  the  protection  of  personal  data  in  line  with  Article  8  of  the 
Charter. There will be at least some exchange of personal data, e.g. information about the 
person  founding  a  company  or  its  director  in  online  registration,  filing  and  also  in 
necessary documents for cross-border operations (mergers, divisions, conversions). Also 
personal data would be accessible via business  registers. As to  the impact of the latter, 
the  recent  jurisprudence  of  the  ECJ  makes  it  clear  that  the  disclosure  of  the  data  in 
registers is essential, since the only safeguards limited liability companies offer to third 
parties  are their assets, which constitutes  an increased economic risk for the latter. The 
Court held that it appears justified that natural persons who choose to participate in trade 
through  such  a  company  are  required  to  disclose  the  data  relating  to  their  identity  and 
functions within that company, especially since they are aware of that requirement when 
they decide to engage in such activity.220  

1.17.9  The interlinkages between different policy issues 

The preferred options with regard to the use of digital tools and processes throughout a 
company's  lifecycle  relate  to  all  limited  liability  companies  and  are,  in  most  parts, 
independent from the companies' cross-border operations such as mergers, divisions and 
conversions.  They  relate  to  the  establishment  of  companies  and  their  functioning 
independently whether they merge, divide or convert cross-border. However, the use of 
digital tools and processes could be very useful to perform such cross-border operations.  

The preferred options with regard to the cross-border operations are closely intertwined 
with  each  other,  as  the  solutions  proposed  for  cross-border  mergers,  in  particular  for 
creditor and minority shareholders' protection are the basis for solutions in cross-border 
divisions  and  conversions.  However,  each  cross-border  operation  can  be  performed 
independently. The more cross-border operations are possible, the bigger is the choice for 
companies and bigger protection for stakeholders.  

As  to  the  cross-border  conversions  and  conflict  of  laws,  they  are  complementary  in 
contributing  to  the  initiative's  objectives.  However,  the  cross-border  conversions 
procedure  could  improve  the  situation  and  address  many  of  the  problems  identified 
without  a  separate 
the  more 
harmonisation  of  substantive  law  is  provided,  the  less  need  there  is  for  conflict-of-law 
rules The proposed options on conversions would establish a harmonised procedure for 
the  cross-border  conversions  as  well  as  harmonised  rules  for  the  protection  of 

instrument  with  conflict-of-law  rules.  Generally, 

220Judgment of the Court of 9 March 2017, Case C-398/15 Manni 

94 

 
                                                            
stakeholders. In addition, an instrument on the cross-border conversion procedure could 
contain some conflict of laws  elements in the form of specific provisions clarifying that 
the  company  may  change  its  applicable law  and,  in  the interest  of  stakeholders,  setting 
out  which matters  shall  be  covered  by  the  'old'  law  and  which  by  the 'new'  law.  Those 
provisions  would  come  into  play  to  the  extent  that  the  respective  rules  are  not 
harmonised in the substantive part, including on the protection of minority shareholders 
and creditors.  

1.18  Subsidiarity and proportionality of options 

As  regards  the  principle  of  proportionality,  the  proposed  EU  action  seems  suitable  to 
achieve  the  legitimate  objectives  of  cutting  the  costs  for  companies  and  providing 
protection to stakeholders and thus comply with the proportionality principle. Also based 
on efficiency analysis, the cost and benefits of every option for companies, stakeholders 
and  MS,  it  appears  that  the  proposed  actions  do  not  go  beyond  what  is  necessary  to 
achieve the aim and that positive impacts of the proposed measures exceed the possible 
negative impacts. 

1.19  Choice of legal instrument 

To ensure legal certainty, the online registration of companies and the filing requirements 
as  well  as  the  rules  on  cross-border  operations  such  as  mergers,  divisions  and 
conversions  should  be  embedded  in  law  and  be  enforceable  in  the  MS'  legal  systems. 
Self-regulation is, therefore, excluded.  

A  recommendation  would  not  succeed  in  creating  uniform  set  of  rules  in  all  MS  and 
would  not  be  able  to  change  already  existing  requirements  which  are  laid  down  in 
national  laws.  Also  at  EU  level  the  law  of  companies  is  regulated  by  legislation 
(Directive (EU) 2017/1132) and not by recommendations or communications. 

Thus, in order to achieve the objectives mentioned in part 4 of this IA, the EU must act 
via  legislation.  For  company  law  operations,  the  legal  basis  is  Article  50  TFEU  which 
does  not  leave  a  choice  of  instrument  to  the  European  legislator.  The  only  available 
instrument is a directive.  

Concerning  the  harmonisation  of  conflict  of  law  rules,  the  legal  basis  is  Article  81 
TFEU221. Since the desired legal certainty of conflict of law rules can only be achieved 
through a Regulation with direct application in all participating MS, the appropriate legal 
instrument  is  a  Regulation.  This  choice  is  in  line  with  a  longstanding  tradition  of 
adopting  uniform  rules  of  private  international  law  by  means  of  Regulations  (see  the 
Rome I and Rome II Regulations, the Insolvency Regulation, the Brussels I Regulation 
on jurisdiction and the recognition and enforcement of judgments). 

MONITORING AND EVALUATION 

The  Commission  will  monitor  the  implementation  of  the  chosen  package  of  preferred 
policy  options  and  will  assess  the  progress  achieved  in  meeting  the  objectives.  In  this 
activity, the Commission will cooperate closely with national authorities e.g. the national 
company law experts in the Company Law Expert Group (CLEG), business associations, 

221  Legislation  adopted  under  this  legal  basis  will  not  bind  DK,  while  the  UK  and  Ireland  will  have  the 
possibility to opt in. 

95 

 
                                                            
trade unions, company law experts and any other relevant stakeholders in this area. The 
provision  of  information  for  monitoring  and  evaluation  should  not  impose  any 
unnecessary administrative burden on the stakeholders concerned. 

1.20  Monitoring 

Initially,  the  Commission  would  closely  follow  the  implementation  of  the  chosen 
package  of  preferred  policy  options  to  ensure  that  they  were  clearly  and  consistently 
transposed  and  implemented  by  MS.  In  that  context,  the  Commission  may  provide 
assistance  and  guidance  (e.g.  by  organising  implementation  workshops  or  providing 
advice on bilateral basis). CLEG could also provide a good forum for exchange of best 
practices. 

In  the  mid-to-long  term,  the  Commission  would  focus  on  monitoring  the  effects  of  the 
initiative, in particular to what extent it will succeed in meeting the objectives defined in 
section 4.1. of this impact assessment. 

The following main indicators would be used for the purposes of this monitoring: 

To  what  extent  the  initiative  has  reached  its  goal  of  cutting  unnecessary  costs  and 
burdens for companies could be assessed on the basis of the following indicators: 

  monitoring trends in cross-border activities of companies: 

o 

o 

through  the  numbers  of  cross-border  mergers,  divisions  and  conversions 
(these  numbers  can  be  collected  via BRIS  as  there  will  be  notifications  sent 
for each of these operations through the system); 
through  the  numbers  of  cross-border  online  registration;  national  registers 
would need to collect data on the nationality of the founder or the place from 
which it performs its operation (where possible, this data could be collected at 
the  occasion  of  the  identification  in  the  course  of  the  registration  procedure 
through eIDAS); 

  monitoring costs of companies' operations within the scope of the initiative: 

o 

o 

through  collection  of  costs  for  online  registration  (in  some  MS,  these  costs 
might include the costs for compulsory  involvement of intermediaries in the 
process; these would be included where possible); 
through  collection  of  costs  for  cross-border  mergers,  divisions  and 
conversions  (such  costs  could  only  be  collected  from  companies  directly,  as 
they  might  be  confidential  it  would  appear  difficult  to  obtain  these  costs;  it 
could  be  attempted  to  collect  such  costs  through  studies,  surveys  or  other 
stakeholder contacts). 

To what extent the initiative  has reached its goal of offering effective protection to the 
other stakeholders (employees, creditors, minority shareholders and third parties) would 
be monitored on the basis of the following indicators: 

 

the  number  of  requests  for  free  data  on  the  European  e-Justice  portal  (this  data 
would be available through BRIS); 

  whether  and  to  what  extent  stakeholders  and  stakeholder  organisations  indicate 
satisfaction  with  the  protection  of  their  rights  in  the  relevant  cross-border 
operations; 

  absence of an accumulation of court cases or complaints in the area. 

In  order  to  gather  the  required  data,  it  would  be  necessary  to  include  some  reporting 
obligations for MS to provide annual statistic data on the numbers of cross-border online 
registration  and  the  costs  for  online  registration.  With  a  view  to  gathering  the  required 

96 

 
stakeholder input, the Commission could send questionnaires to stakeholders or organize 
specific surveys. 

The  Commission  would  also  monitor  which  rules  were  introduced/maintained  by  MS 
which would go beyond the minimum standards of protection in  cross-border  divisions 
and conversions (notification requirement). 

1.21  Evaluation 

An evaluation of the chosen package of preferred policy options should be carried out in 
order to assess the impact of the actions and verify if the objectives have been achieved. 
It  would  be  carried  out  by  the  Commission  on  the  basis  of  the  information  gathered 
during  the  monitoring  exercise  and  additional  input  collected  from  the  relevant 
stakeholders, as necessary. An evaluation report could be issued 5 years after the end of 
the transposition period. 

In particular, the evaluation could focus on whether:  

 

 

 

 

there has been any change in cutting the costs of setting up companies abroad and 
performing filing digitally ; 

there  has  been  a  cut  in  costs  in  performing  cross-border  mergers,  divisions  and 
conversion and whether any other practical problems for such operations remain; 

there  has  been  increase  in  protection  of  stakeholders  (especially  position  of 
employees, creditors and minority shareholders);  

the  actions  have  been  consistently  implemented  in  MS  legislation  and  what 
justification  is  given  to  possible  further-going  measures  in  specific  MS,  with 
specific focus on key elements, such as digital tools, protection elements in cross-
border  operations  and  conflict-of law  rules,  and  whether  any  additional  relevant 
developments have taken place at national level, and what possible problems may 
come up. 

97 

 
 
 
ANNEX 1: PROCEDURAL INFORMATION 

1. Lead DG 

DG Justice and Consumers (DG JUST) 

2. Agenda planning and Work Programme References 

The Agenda Planning Reference is PLAN/2017/1091.  

The  company  law  initiative  to  facilitate  the  use  of  digital  technologies  throughout  a 
company’s  lifecycle  and  cross-border  mergers  and  divisions  was  mentioned  in  the 
Commission  Work  Programme  for  2017222.  Uniform  rules  on  applicable  law  to 
companies  were  called  for  in  the  2009  Stockholm  Programme.  The  company  law 
initiative may consist of measures in the following areas:  

  Use of digital tools and processes throughout a company’s lifecycle 

  Cross-border mergers 

  Cross-border divisions 

  Cross-border conversions 

  Conflict of law rules  

3. Inter-Service Steering Group  

An Inter-Service Steering Group (ISSG) was set up in 2017. The ISSG met three times in 
preparation of this impact assessment: on 25 April 2017, 29 June 2017 and 7 September 
2017. 

The  following  services  were  consulted:  BUDG,  CNECT,  COMP,  DIGIT,  ECFIN, 
EMPL, FISMA, GROW, JUST, LS, MOVE, TRADE, TAXUD. The feedback received 
from services has been taken into account in the impact assessment.  

4. Consultation of the Regulatory Scrutiny Board 

The Impact Assessment Report was examined by the Regulatory  Scrutiny Board on 11 
October  2017.  A  negative  opinion  of  the  RSB  was  issued  on  13  October  2017.  The 
recommendations below were put forward. They were addressed in a revised version of 
the  Impact  Assessment  submitted  to  the  Board  on  20  October  2017.  The  Board  gave  a 
positive opinion with reservations on 7 November 2017. 

RSB considerations of 13 October 2017 

How taken into account? 

Main considerations 

report  does  not  adequately 
 (1)  The 
document  the  scope  of  the  initiative  and 
explain why it assesses five different issues 
separately in the same impact assessment. 

The  scope  of  the  initiative  has  been 
specified (section 1.3). It is also explained 
(section  1.3)  why  five  different  issues  are 
treated  in  the  same  impact  assessment.  A 
diagram  has  been  included  to  show  the 
interrelations of the different elements. 

222 COM(2016) 710, 25.10.2016, Annex I on new initiatives. 

98 

 
 
 
 
 
                                                            
(2)  The 
report  does  not  sufficiently 
establish how big the alleged problems are, 
explain the timing of the initiative, or show 
how  the  initiative  relates  to  existing  EU 
legal  acquis,  related  EU  policies  and 
planned initiatives. 

(3)  The  policy  options  are  not  sufficiently 
developed. 
lack 
important  details,  including  about  possible 
choices regarding practical implementation. 

descriptions 

Their 

impact 

analysis  does  not 
(4)  The 
the  different 
sufficiently  examine  how 
options might affect interests of employees, 
creditors and minority shareholders. 

(introduction 

It  is  now  clearly  explained  (section  1.3.) 
that  all  the  parts  of  the  package  are 
complementary  and  together  achieve  the 
objectives.  It  is  also  clarified  that  the 
impact  assessment  aims  at  informing  the 
political  decision  whether  action  needs  to 
be  taken in all  of the five areas or  only  in 
selected ones. 
Additional  information  about  the  size  of 
to  Chapter  2, 
problems 
sections  2.1.,  2.3.  and  2.4)  has  been 
introduced. Also the need for the initiative 
has  been  explained,  particularly  stressing 
the political context of the package and its 
parts  (different  sections  in  Chapter  2)  and 
some current factors adding to the urgency 
(section  2.4.1).  References  to  stakeholder 
calls  for  the  initiative  have  been  added  in 
particular throughout chapter 2.  
More  description  has  been  included  on 
the 
the  various  components  of 
how 
package  relate  to  existing  acquis  and 
related  policies.  The  comments  have  been 
implemented  in  particular  in  sections  1.1., 
3.2, 4.2 and 5.2. 
The policy options and their assessment, in 
particular  on  digitalisation  (section  5.1) 
and  on  cross-border  operations  (section 
5.2)  have  been  significantly  developed 
including  the  practical  implementation.  In 
the section on cross-border operations,  the 
question  on  whether  to  introduce  new 
harmonised  procedures  for  cross-border 
conversions  and  divisions  is  now  assessed 
(section  5.2.1). 
as  a  separate  option 
Discarded  options  have  been  added 
(sections 5.2 and 5.3).  
For  the  conflict  of  law  part  the  IA  also 
develops  further  options,  e.g.  on  worker 
participation (section 5.3.3.1). 
Given  that  the  options  have  now  been 
developed and described in great detail, the 
impacts, 
in  particular  on  employees, 
creditors and minority shareholders (see in 
particular sections 5.2.1, 5.2.2, 5.2.3) have 
also  been  clearly  described.  The  impacts 
on  companies  have  also  been  further 
developed,  in  particular  by  clarifying  that 
the  specific  policy  options  in  cross-border 
operations  have  to  be  assessed  as  part  of  

99 

 
 
 
 
(5) The report does not justify convincingly 
the choice of the preferred policy options. 

Further 

(C) 
adjustment requirements 

considerations 

and 

(1) Scope and problem definition 

operations, 

The  report  should  better  explain  the 
historical  and  regulatory  context  of  the 
initiative. The report should clarify how it 
relates  to  other  EU  legislation  on  cross-
border 
policy 
initiatives such as the European company 
directive,  the  single  digital  gateway,  and 
EU online registration facilities. It should 
also  explain  why  it  deals  separately,  in 
the  same  impact  assessment,  with  five 
different issues. 

and 

to 

the 
The  report  should  elaborate  on 
the 
timing  of 
the 
magnitude  and 
problems, referring to e.g. recent case law 
or  demands  from  the  private  sector,  the 
European Parliament or the Council. The 
demonstrate  more 
report 
responsiveness 
to  stakeholder  views, 
accounting  for  critical  ones  (e.g.  from 
notaries)  and  explain  how  these  have 
been taken into account. 

should 

For  cross-border  mergers, 
the  annex 
should further specify the areas where the 
initiative  is  expected  to  further  improve 
the  current  cross-border  mergers  regime. 
reported 
It 
stakeholders'  views  with  more  data  and 
economic analysis. 

supplement 

should 

the 

the new harmonised procedural framework 
for companies (see sections 5.2.1 and 6.2). 
The  weighing  of  the  options  and  the 
balance  of  costs  and  benefits  have  been 
developed  (in  particular  sections  5.2.2, 
5.2.3  and  5.2.4.)  Justifications  as  regards 
the  choice  of  the  preferred  policy  options 
have  been  specified,  taking  into  account 
the  criteria  of  effectiveness,  efficiency, 
impact on MS and political feasibility (the 
whole chapter 5). 

the  historical 

and 
Explanations  on 
regulatory  context  of  the  initiative  have 
been added (section 1.3). 
Explanations  as  regards  the  interrelations 
between other pieces of existing legislation 
and  the  recent  proposals  adopted  by  the 
Commission  have  been  added  (sections 
1.1, 3.2, 4.2 and 5.2). 
Also the question of five different issues in 
the same impact assessment has now been 
explained  (See  in  particular  sections  1.3, 
6.2)  

More  information  about  the  magnitude  of 
problems as well as references to the views 
of  stakeholders  and  recent  case-law  of  the 
Court  has  been  added.  The responsiveness 
to  stakeholder  views,  including  the  ones 
from  notaries  and  trade  unions  has  been 
described  and  explained  how  these  have 
been  taken  into  account  (see  in  particular 
section  1.1,  modifications 
throughout 
chapter 2 and section 5.1). 

Taking  into  account  the  limitations  in  the 
availability  of  data,  the  annex  on  cross-
border mergers has been further developed. 
The  areas  where  improvement  is  expected 
have  been 
additional 
information  has  been  added 
available 
(Annex  5).  Data  limitations  have  been 
clarified. 

specified 

and 

(2) Policy options 
The  report  should  flesh  out  the  policy  The  policy  options  and  their  features,  in 

100 

 
 
 
 
 
 
 
 
 
 
 
(including  as 

options.  It  should  more  fully  describe 
their features and implementation details, 
and  clarify  the  main  differences  across 
the policy options. The report should also 
show  how  options  relate  to  the  existing 
regards 
legal  acquis 
employee  involvement,  which  comprises 
information, 
and 
participation).  In  the  section  on  options, 
the report should clarify the differences in 
regime  between  cross  border  merger, 
noting 
division 
for 
protection 
differences 
employees, 
and  minority 
shareholders per operations. 

and 
conversion, 
the 
in 
creditors 

consultation 

It  should 

In relation to the real seat discussion, the 
it  defines 
report  should  clarify  how 
economic  activity. 
further 
explain  on  what  grounds  the  option  has 
been  discarded 
the 
connecting factor on the basis of the real 
seat. The report should also show how the 
preferred 
an 
option  would 
improvement  over  the  status  quo  with 
regard to addressing conflicts of laws. 

to  harmonise 

be 

The  report  should  do  more  to  anticipate 
problems  with  practical  implementation 
of 
recognition  of 
(e.g. 
electronic  signatories)  and  discuss  ways 
to address these. 

the  options 

(3)  Impact  analysis  and  comparison  of 
policy options 

The report should attempt to quantify costs 
and benefits as far as possible (in particular 
administrative costs for enterprises and the 
costs  for  public  administrations).  It  should 
document  methodologies, 
underlying 
assumptions  and  the  sensitivity  of  the 
the 
results 
analysis 
and 
quantitative  elements,  the  report  needs  to 
clarify  the  basis  on  which  the  preferred 

these  assumptions.  As 

qualitative 

both 

has 

to 

have 

been 

operations 

particular  in  digitalisation  and  in  cross-
fully 
border 
described.  The  relation  to  the  existing 
acquis, including in particular social acquis 
has  been  explained  (sections  1.1,  3.2,  4.2 
and  5.2).  The  differences  between  cross 
border  mergers,  division  and  conversions 
as  well  as  the  link  between  substantive 
harmonisation  of  company 
law  and 
uniform conflict of law rules has also been 
clarified (sections 5.2, 5.3 and 6.2). 

It is clarified that, when it is not possible to 
determine  the  connecting  factor  on  the 
basis  of  the  general  rule,  the  default 
connecting  factor  is  the  place  of  the 
company's  central  administration  at  the 
moment  of  the  formation  of  the  company 
(section 5.3.3.1). It is further explained that 
the  underlying  case  law  on  the  basis  of 
which  the  option  of  a  real  seat  as  a  main 
connecting  factor  is  not  compatible  with 
the  Treaty  (section  5.3.3.1),  as  well  as  the 
reasons  why  the  preferred  option  is  an 
improvement  over  the  status  quo  (section 
5.3.1.3).  
The  on-line  procedure  has  been  explained 
including  how 
issue  of  digital 
the 
signatures is to be tackled (section 5.1). 

The  costs  and  benefits  have  been 
quantified as far as possible in much more 
detailed way than in the original version of 
the IA. A separate new Annex (now Annex 
8)  has  been  added. 
the 
methodologies  for  cross-border  divisions 
and  conversions,  underlying  assumptions 
and  the  sensitivity  of  the  results.  Annex  9 
for  potential 
on  calculation  methods 
savings  through  better  use  of  digital  tools 

It  explains 

101 

 
 
 
 
 
 
 
policy options were selected. What criteria 
does  it  use  to  assess  the  trade-off  between 
the  two  specific  objectives  (cost/burden 
reduction  for  companies  and  cross  border 
protection  of  employees,  creditors  and 
minority shareholders)? 

has  been  further  developed.  The  reasons 
for  selecting  preferred  options  are  greater 
elaborated upon (section 5 and Annex 8). 

RSB considerations of 7 November 2017 

How taken into account? 

The Impact Assessment has been revised to 
take into account the Polbud judgement of 
25 October 2017 which was published after 
the  second  submission  of 
the  Impact 
Assessment  to  the  Regulatory  Scrutiny 
Board.  Only  when  the  Polbud  judgement 
has a bearing on the relevant description or 
assessment, 
this  has  been  explicitly 
explained and the report has been modified 
concern  mainly 
accordingly.  These 
sections  (2.4.1,  2.4.2  and  5.2.5)  related  to 
cross-border conversions.  

In  particular,  the  section  5.2.5  on  the 
prevention of cross-border conversions for 
fraudulent  purposes  has  been  adapted. 
Following the Polbud judgement a solution 
whereby  the  company  carrying  out  cross-
border  conversion  would  need  to  transfer 
the registered office together with the head 
office  to  the  destination  MS  could  not  be 
envisaged  any  more.  Therefore,  the  report 
now  assesses  other  equivalent  means  to 
address  abuse,  risk 
including  fighting 
against  use  of  letter  box  companies  for 
abusive purposes. 

law 

latest  CJEU  case 

Main consideration 
 (1)  The  report  does  not  take  into  account 
(Polbud 
the 
judgement of 25 October 2017). It does not 
assess any potential implications for the  
scope  of 
the  problem 
initiative, 
definition  and  the  baseline,  as  well  as  for 
the  policy  options  (the  real  seat  proposal 
for  cross  border  conversions,  conflict  of 
law 
for  stakeholder 
protection). 

rules,  safeguards 

the 

the 

Further  considerations  and  adjustment 
requirements 
(1) The European Court of Justice issued a 
judgement  on  the  case  C-106/16  (Polbud), 
i.e. after the date of the second submission 
impact  assessment.  The  report 
of 
should  be  revised  to  take  this  judgement 
into  account. 
its 
consequences  for  the  relevant  parts  of  the 
report  (conversions,  conflicts  of  law).  It 
should  adapt,  if  appropriate,  the  scope  of 
the  initiative,  the  problem  definition,  the 
baseline, the policy options and the impact 
analysis. 

should  explain 

It 

conversions 

In  particular,  the  revised  report  should 
analyse  whether  and  to  what  extent  the 
Court  ruling  may  have  a  bearing  on  the 
design  of  the  policy  options  for  cross-
border 
5.2.4), 
the  proposed 
especially  regarding:  (a) 
safeguards  for  employees,  creditors  or 
minority 
the 
prevention  of  cross  border  operations  for 
fraudulent  purposes  (letterbox  companies) 
and forum shopping. 

shareholders 

(section 

and 

(b) 

the  same  vein, 

In 
the  report  should 
elaborate  on  any  implications  the  Court 
judgement may have for the policy options 

102 

 
 
 
 
 
 
 
creditors 

to  safeguards 

regarding  the  conflict  of  law  rules,  paying 
for 
particular  attention 
employees, 
or  minority 
shareholders. 
Main consideration 
(2)  The  report  expresses  uncertainty  as  to 
the final scope of the initiative. But it does 
not present clearly the interactions between 
the  different  elements  in  order  to  facilitate 
the  specific 
the  political  decision  on 
content of the initiative.  

Further  considerations  and  adjustment 
requirements 
(2)  Beyond  the  analysis  of  the  overall 
impacts  of  the  preferred  policy  package 
(section  6.2),  the report should  explain  the 
extent of the interlinkages between the five 
policy  issues.  It  should  assess  any  risks  or 
implications that may result from a reduced 
scope of the initiative. 
Main consideration 
(3)  The  report  does  not  elaborate  on  the 
practical 
the  policy 
options  and  does  not  explain  how  the 
policy  options  were  composed.  This  is 
particularly lacking for the definition of the 
safeguards. 

implementation  of 

Further  considerations  and  adjustment 
requirements 
(3)  The  report  should  be  more  explicit  on 
certain  practical  aspects  of  the  policy 
options: 

access 
the 

the  online 
information, 

  Regarding 
to 
report 
company 
mentions that physical presence may be 
required  for  the  recognition  of  the 
electronic signatories.  As this seems  to 
take away the main difference between 
options  1  and  2,  further  clarification 
would be useful. 

A  new  section  6.2.9  has  been  added  to 
explain the interlinkages between different 
policy issues.  

The  report  has  been  modified  to  provide 
additional  information.  In  particular,  the 
section  5.1.1.1  on  description  of  options 
related to online registration (creation of a 
company  as  legal  entity)  and  filing  of 
documents to the business register has now 
been  developed  to  explain:  1)  what  does 
the  physical  presence  required  for  the 
recognition  of  the  electronic  signatories 
to 
mean  and  2)  how 
prohibition  of  physical  presence  when 
completing these procedures online.  

is  related 

this 

In addition, the report has been modified to 
explain why various policy measures were 
bundled  into  policy  options  and  why  the 
many  policies  composing  option  2  were 
selected (section 5.2.2). The sections 5.2.3 
and 5.2.4 have also been modified.  

  The  report  should  be  more  transparent 
on  how  the  various  policy  measures 
were  selected  and  then  bundled  into 
policy  options.  In  particular,  regarding 
employee protection, the policy options 
are now more developed. However, the 
report should explain how and why the 
many policies composing option 2 were 

103 

 
 
 
  
 
safeguards 

selected.  It  should  be  more  specific  on 
for  creditors  and 
the 
minority  shareholders  protection.  It 
should also indicate what proportionate 
safeguards are. 
Main consideration 
 (4)  The  report  does  not  substantiate 
sufficiently 
the  selection  of  preferred 
policy  options  and  makes  no  clear 
difference between economic/social criteria 
and  political  considerations.  It  does  not 
provide  credible  reasons  for  discarding 
certain policy options. 

Further  considerations  and  adjustment 
requirements 
(4)  The  report  should  further  clarify  the 
criteria  for  the  selection  of  the  preferred 
policy  options.  It  should  also  explain, 
without  referring  exclusively  to  political 
preferences,  why  it  discards  certain  policy 
options  (such  as  the  full  harmonisation  of 
incorporation  requirements  at  EU  level). 
The  report  should  focus  on  explaining  the 
economic  and  social  pros  and  cons  of  the 
policy options. 

The  report  now  clarifies  the  difference 
between  economic/social  and  political 
considerations. 
section 
5.2.2.3  has  been  modified  to  explain  how 
the  preferred  option  contributes  to  the 
wider political agenda.  

In  particular, 

the 

The  report  has  been  developed  to  explain 
why 
of 
incorporation  requirements  does  not  fall 
under the scope of Impact Assessment.  

harmonisation 

full 

5. Studies and consultation to support the Impact Assessment 

The impact  assessment is based on existing research/analyses  done by the  Commission 
over the last years:  

-  Bech-Bruun/Lexidale,  Study  on  the  application  of  the  cross-border  mergers  directive 
(September 2013),  

- LSE, Study on the law applicable to companies (June 2016),  

- Everis, Study on digitalisation of company law (draft final report available) 

-  Optimity,  Study  assessing  the  impacts  of  using  digital  tools  in  the  context  of  cross-
border company operations (draft final report available) 

- EY, Study on cross-border transfers of registered offices and cross-border divisions of 
companies (draft final report available). 

Valuable input has also been found in several other studies, for example: 

-  Jonathan  Cave,  Maarten  Botterman  (GNKS  Consult  BV),  Simona  Cavallini,  and 
Margherita  Volpe  (FORMIT):  "EU-wide  digital  Once-Only  Principle  for  citizens  and 
businesses - Policy options and their impacts" (2017) 

- Ecorys Netherlands in association with Mazars: "Study about administrative formalities 
of important procedures and administrative burdens for businesses" (2017) 

104 

 
 
 
 
 
- European Parliamentary Research Service, Reynolds/Scherrer: "Ex-post analysis of the 
EU framework in the area of cross-border mergers and divisions" (2016)  

- European Added Value Assessment: "Directive on the cross-border transfer of a 
company’s registered office 14th Company Law Directive"  

- J. Schmidt: "Cross-border mergers and divisions, transfers of seat: Is there a need to 
legislate?". Study for the JURI Committee (June 2016). 

105 

 
 
 
 
ANNEX 2: STAKEHOLDER CONSULTATION 

The Commission has actively engaged with stakeholders and conducted comprehensive 
consultations throughout the impact assessment process. The consultation strategy223 set 
out  a  number  of  actions  for  the  Commission  to  organise  as  part  of  the  consultation 
including 
process,  notably  an  online  public  consultation,  stakeholder  meetings 
discussions  with  Member  State  experts  in  Company  Law  Expert  Group  and  Civil  Law 
Committee  Expert  Group,  and  with  academic  professors  and  practitioners  in  ICLEG 
(expert groups) as well as with the European Judicial Network on Civil and Commercial 
matters.  The  consultation  strategy  also  included  several  studies.  In  addition,  the 
Commission  made  use  of  public  consultations  carried  out  since  2012  and  previous 
research.  

The  information  gathered  through  all  these  means  fed  into  the  impact  assessment.  The 
views  of  different  stakeholders  are  indicated  throughout  the  impact  assessment  where 
relevant. 

This  annex  summarises  the  results  of  the  stakeholder  consultation  process  with  an 
emphasis on the public consultation of 2017. 

1. FEEDBACK RECEIVED ON THE INCEPTION IMPACT ASSESSMENT  

The  Commission  received  two  reactions  to  the  Inception  Impact  Assessment.  One  was 
submitted by a national authority - Legal Policy Department Austrian Federal Economic 
Chamber, the second by the academic/research institution originating from Italy. 

The  Austrian  Economic  Chamber  expressed  its  general  support  for  the  introduction  of 
digital tools in the company life-cycle, however they were sceptical about abolishing the 
physical presence or other means of the identification of individuals and replacing it with 
fully online procedures, as it might lead to misuse or manipulation in case of fraudulent 
intention  of  applicants.  The  Italian  academics  showed  a  great  support  for  cross-border 
operations, especially for SMEs, which would offer the chance to expand their activity. 

2. PUBLIC CONSULTATIONS 

2.1. Summary of the public consultation of 2017 

2.1.1 Overview  

The  online  public  consultation,  entitled  "EU  Company  law  upgraded:  Rules  on  digital 
solutions  and  efficient  cross-border  operation",  was  launched  on  10th  May  2017  and 
ended on 6 August 2017. Its aim was to collect input from stakeholders on problems in 
company law, gather what evidence they have on such problems and hear their possible 
solutions on how to address the problems at EU level.  

There  were  207  responses  submitted  online  through  the  EU  Survey  portal  and  2 
responses  submitted  via  email.  The  MS  with  the  most  number  of  contributions  was 
Germany followed by Austria and Belgium.  

223 https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-2377472_en#initiative-details 

106 

 
                                                            
Figure 1: Numbers and origin of all respondents 

100

50

0

56 

19 

85 

2  2  2  1  2  5 

1  1  3  1  2  2  4  4  1  1  3  2  8  2 

T
A

E
B

R
H

Z
C

K
D

I

E F
E

R
F

E
D

U I
E
H

T
I

T
L

U
L

T
M

L
N

L
P

T
P

K
S

S
E

E
S

K
U

r
e
h
t
O

The responses came from various stakeholder groups such as national public authorities, 
regional  public  authorities,  business  organisations,  notaries,  trade  unions,  private 
businesses, national business registers, legal academics as well as private individuals.  

11 contributions were received from national public authorities of EU MS (AT, HR, CZ, 
DE, DK, EE, FI,  FR, HU, MT and  PL) and 1 contribution from an authority of a third 
country (LI). The national public authority from Germany submitted a position paper to 
the  consultation  as  opposed  to  a  direct  response  to  the  questions  asked  on  EU  Survey. 
Therefore,  their  comments  will  be  harvested  in  the  analysis  but  excluded  in  the 
percentage breakdowns. 

Out of the 207 total responses, 122 responses were received from individuals responding 
in  their  professional  capacity  and  87  responses  from  individuals  in  their  personal 
capacity. Within the 87 personal responses 61 responses shared nearly identical views on 
digitalisation and cross-border mergers and all came from 2 MS (32% from Germany and 
68% from Austria). It was identified that these replies came from notaries who replied in 
their private capacity. Furthermore, 8 of the 11 regional public authorities that replied to 
the consultation came from regional chambers of notaries in Germany. For the purposes 
of  this  consultation,  all  notaries,  notary  chambers  and  notaries  who  replied  in  private 
capacity will be treated collectively as one group called "notaries". 

Notaries were the largest stakeholder group represented and they make up approximately 
47%  of  all  of  the  responses  received  (36  responses  from  notaries  acting  in  their 
professional capacity while there were 61 responses from notaries replied in their private 
capacity). This was followed by business organisations (25 responses), trade unions (22 
responses),  private  individuals  (22),  research  institutions  &  academic  views  (14)  and 
Public Authorities (12). Other views came from legal practitioners (4) legal associations 
(4), private businesses (5), regional ministries (2) and national business registers (2).  

2.1.2 Analysis of the results 

The  following  section  will  provide  an  analysis  of  the  stakeholders  views  on  all  of  the 
areas addressed in the consultation (digital processes or tools throughout the lifecycle of 
a company, cross-border operations and conflicts of law rules). 

I. The use of digital tools and processes throughout the lifecycle of a company 

i.  Digital interactions between companies and Member States' authorities 

Question: 

To  what  extent  do  the  differences  between  Member  States’  laws  or  the 
overall lack of a legal framework,  in the area of digitalisation in regards 
interactions  with  business  registers  constitute  obstacles  to  the  proper 
functioning of the single market? 

107 

 
 
No opinion/Not answer
To a large extent

Not at all
To a very large extent

To some extent

120%
100%
80%
60%
40%
20%
0%

Nat. Auth.

Business
Org.

Trade Unions Notaries

Academic

Individuals

Others

Question:  

To what extent does the introduction of new measures in this area to rank 
as an EU priority? 

No opinion/Not answer
Low priority

This issue should not be addressed at all
Priority

100%
80%
60%
40%
20%
0%

Nat. Auth.

Business
Org.

Trade Unions Notaries

Academic

Individuals

Others

The public authorities that replied to the consultation considered this to be a priority for 
the  EU  with  9  offering  positive  responses.  Notably,  the  response  of  the  Polish 
government  illustrated  the  benefits  of  digitalisation  and  having  an  efficient  online 
company  register  by  disclosing  that  there  was  a  47.25%  increase  in  the  birth-rate  of 
polish  companies  in  2015  since  it  first  began  accepting  online  registrations  in  2012. 
There was 1 public authority that did not feel that the lack of legislation was causing a 
problem. 

Business  organisations  were  supportive  of  all  of  the  legislative  initiatives  in  this  area 
(particularly end-to-end registration, electronic identification standards and the once-only 
principle  and  deemed  it  to  be  a  strong  EU  priority  for  fostering  economic  activity  and 
removing undue barriers for companies wishing to operate cross-borders. The majority of 
trade unions (i.e. 87% of the trade unions which replied) expressed moderate support for 
a  legislative  initiative  in  this  area.  They  are  primarily  concerned  with  safeguards  and 
would like to see the real seat as a precondition to online registration. 

Academics and research institutions were also broadly in favour of a legislative initiative 
in this area with circa 68% deeming to be a priority issue. End-to-end registration/filing 
and safeguards being were highlighted as key points to address.  

Notaries  almost  unanimously  rejected  the  notion  of  the  lack  of  legislation  being 
problematic and strongly felt that the EU should not be addressing this issue at all. They 
made  up  85%  of  the  overall  respondents  who  felt  the  EU  should  not  be  touching 
digitalisation. 

108 

 
 
 
 
 
ii.  The  use  of  digital  tools  for  interactions  between  companies  and 

shareholders 

Question:  

To  what  extent  do  the  differences  between  Member  States’  laws  or  the 
overall lack of a legal framework, in the area of digitalisation in regards to 
corporate governance constitute obstacles to the internal market? 

No opinion/Not answer Not at all

To some extent

To a large extent

To a very large extent

100%
80%
60%
40%
20%
0%

Nat. Auth.

Business
Org.

Trade Unions Notaries

Academic

Individuals

Others

Question:  

To what extent does the introduction of new measures in this area to rank 
as an EU priority? 

No opinion/Not answer
Low priority
Top priority

This issue should not be addressed at all
Priority

100%
80%
60%
40%
20%
0%

Nat. Auth.

Business
Org.

Trade Unions Notaries

Academic

Individuals

Others

The  national  public  authorities  offered  a  mix  response  in  regard  to  digitalisation  from 
corporate governance prospective as 6 public authorities noted that, to some extent, the 
lack of legislation on the matter is problematic while there were 4 public authorities that 
did not have any express views on the matter. Notably, the Estonian Ministry for Justice 
submitted  that  the  EU  should  not  be  regulating  this  issue  at  all.  The  chief  corporate 
governance  issues  highlighted  national  public  authorities  concerned  participation  and 
voting  in  general  meetings  (6  positive  responses),  communication  outside  of  general 
meetings  (6  positive  responses)  and,  to  a  lesser  extent,  the  communication  with 
shareholders on general meetings (5 positive responses). 

Conversely,  business  organisations  offered  roundly  positive  feedback  as  approximately 
90%  considered  the  lack  of  legislation  on  this  matter  to  be  problematic  and  an  EU 
priority.  Notably,  35%  of  business  organisations  were  strongly  of  the  opinion  that  that 
the  lack  of  legislation  is  highly  problematic  and  that  the  introduction  of  EU  measures 
should  be  a  top  priority.  Communication  with  shareholders  regarding  general  meetings 
(70%),  participation  and  voting  at  meetings  (65%)  and  communication  outside  of 
meetings (52%) were highlighted as key points of concern. 

109 

 
 
 
Similar  to  digitalisation  aspects  discussed  in  section  2.1.3.1,  notaries  were  strongly 
against the introduction of new measures in this area, the majority of trade unions were 
tentatively receptive to reform  while  the majority  of research and  academic institutions 
were supportive of new initiatives. Trade Unions were particularly strong on the use of 
digital tools for shareholder identification and felt that not only companies but also their 
workers should have easy access to this information. 

II. Cross-border Mobility 

i.  Cross-border mergers 

Question:  

To  what  extent  do  the  differences  between  Member  States’  laws  or  the 
overall  lack  of  a  legal  framework,  in  the  area  of  cross-border  mergers 
constitute obstacles to the proper functioning of the single market? 

No opinion/Not answer Not at all

To some extent

To a large extent

To a very large extent

100%
80%
60%
40%
20%
0%

Nat. Auth.

Business
Org.

Trade Unions Notaries

Academic

Individuals

Others

Question:  

To what extent does the introduction of new measures in this area to rank 
as an EU priority? 

No opinion/Not answer
Low priority
Top priority

This issue should not be addressed at all
Priority

100%
80%
60%
40%
20%
0%

Nat. Auth.

Business
Org.

Trade Unions Notaries

Academic

Individuals

Others

The majority of the national public authorities that responded to the consultation were of 
the opinion that there are problems with the existing Cross-border Merger Directive and 
that those problems do constitute obstacles to the internal market but to a varying degree 
(6 agreed to some extent, 3 agreed to a large extent and 1 agreed to a very large extent). 
When  asked  if  they  could  illustrate  the  size  of  the  problems,  it  was  disclosed  by  the 
Polish Ministry of Justice that the number of cross-border mergers taking place involving 
Polish  companies  is  very  low  (hardly  a  dozen).  In  terms  of  prioritisation,  there  was  a 
mixed  response  as  there  were  3  authorities  that  considered  the  introduction  of  new 
directive to be a top priority, 4 a priority and 4 a low priority.  

110 

 
 
 
In respect of safeguards, all national public authorities which replied were of the opinion 
that creditor protection measures should be addressed while 70% were of the opinion that 
minority shareholder protection measures should also be addressed. 80% felt it important 
to harmonise procedural as well material aspects of creditor protection and 50% feel that 
it is important for minority shareholders to be able to block the merger and oppose the 
share exchange. 

Business organisations also broadly welcome the need to amend the directive for cross-
border  mergers  with  a  majority  of  40%  considering  this  to  be  top  priority,  22% 
considering this to be priority and 22% considering this a low priority. Points raised by 
business  organisations  concerned  simplification  of  rules  (fast-track  procedure), 
harmonised  rules  for  creditor  and  minority  shareholder  protection,  simplified  employee 
protection rules and removing the requirement for merger procedures to be signed before 
public notaries as is the case in certain MS. 

Similarly, trade unions were also receptive of the need to modify the cross-border merger 
rules  -  83%  agreeing  that  the  problems  with  the  existing  directive  to  some  extent 
constitute obstacles to the proper functioning of the internal market and 73% considering 
reform  to  be  a  low  priority.  However,  they  are  primarily  concerned  with  strengthening 
employee  protection  by  way  of  stronger  information,  consultation  and  participation 
rights.  

The  prevailing  view  from  the  academics  and  research  institutions  was  that  the  lack  of 
harmonised as well as simplified rules circumvents the full effectiveness of the directive 
(30%  to  a  large  extent  and  43%  to  some  extent).  However,  there  were  2  research 
institutions that heeded caution in  this  regard due to  the social consequences stemming 
from cross-border mergers. 

Conversely,  notaries  were  overwhelmingly  of  the  opinion  that  the  existing  directive 
functions very well and they do not see the need for any EU measures in this regard (88% 
and 77% respectively). 

Legal groups such as the Deutscher Anwaltsverein and the Bar Council of England and 
Wales  called  for  simplified  procedures  such  as  the  possibility  to  omit  a  joint  merger 
report in certain situations as well as providing a merger procedure allowing the company 
to merge only part of their business rather than in its totality. 

ii.  Cross-border divisions 

Question: 

To  what  extent  do  the  differences  between  Member  States’  laws  or  the 
overall  lack  of  a  legal  framework,  in  the  area  of  cross-border  divisions 
constitute obstacles to the proper functioning of the single market? 

No opinion/Not answer Not at all

To some extent

To a large extent

To a very large extent

80%

60%

40%

20%

0%

Nat. Auth. Business Org.Trade Unions Notaries

Academic

Individuals

Others

111 

 
 
 
Question:  

To what extent does the introduction of new measures in this area rank as 
an EU priority? 

No opinion/Not answer
Low priority
Top priority

This issue should not be addressed at all
Priority

100%
80%
60%
40%
20%
0%

Nat. Auth.

Business
Org.

Trade Unions Notaries

Academic

Individuals

Others

The majority of public authorities were in favour of new rules for cross-border divisions 
and they marginally appear to deem an initiative in this area as an EU priority more so 
than cross-border mergers (4 authorities considering this a top priority, 3 a priority and 3 
a low priority). It was highlighted by  the Finnish Ministry for Justice that the lack of a 
division  procedure  in  certain  MS  means  that  divisions  to  and  from  such  MS  are 
extremely difficult if not impossible. Regarding issues concerning stakeholder protection, 
some  public  authorities  highlighted the  importance  of  having  strong  rules  on  employee 
protection for divisions while others felt that whatever is decided for mergers should also 
apply for divisions. 

The business organisations were strongly in favour of new rules as 44% considered this 
to  be  a  top  priority  and  26%  viewed  this  as  a  priority.  The  vast  majority  of  business 
organisations viewed the lack of procedural rules for divisions as constituting an obstacle 
to the proper functioning of the internal market. Furthermore, it was submitted by several 
organisations that its procedural framework should follow what is in the existing Cross-
border Merger Directive. 

Notaries  also  appear  to  support  divisions  with  the  vast  majority  (80%)  expressing 
moderate  support  for  new  rules  by  deeming  it  a  low  EU  priority.  They  feel  that  the 
procedure for divisions should be identical to what is in the existing Cross-border Merger 
Directive (i.e. no harmonised rules for stakeholder protection or fast-track procedure). 

Trade  Unions  were  extremely  sceptical  regarding  divisions  due  to  the  dilution  of 
employee protection thresholds and the risk of appropriating employees and liabilities in 
a financially weaker company – 70% of Trade Unions were of the opinion that the EU 
should not be legislating for this. ETUC commented that should MS decide favourably 
for divisions, rules concerning information and consultation of employees would have to 
be strengthened. 

Approximately 70% of academics were in favour of the introduction of procedural rules 
and  that  it  should  follow  what  is/will  be  laid  out  for  mergers.  It  was  submitted  by  one 
academic  that  should  minimum  safeguards  be  applied,  and  MS  in  turn  go  beyond  and 
provide stronger protection for stakeholders, the Commission should be notified and the 
safeguards be published. 

112 

 
 
 
 
 
The  following  graph  provides  an  overview  of  the  feedback  received  from  stakeholders 
when asked what areas a possible instrument on of cross-border divisions could address: 

Nat. Auth.

Business Org.

Trade Unions

Notaries

Academic

Individuals

Others

Procedure - leaving the
question of safeguards to
Member States

Procedure with uniform
safeguards for stakeholders
across all Member States

Procedure with minimum
safegaurds for stakeholders

Other measures

No need for further EU
measure

No Opinion/No Answer

0%

20%

40%

60%

80%

100%

iii.  Cross-border conversions 

Question:  

To what extent do the differences between Member States’ laws or overall 
lack  of  a  legal  framework,  in  the  area  of  cross-border  conversions 
constitute obstacles to the proper functioning of the single market? 

No opinion/Not answer Not at all

To some extent

To a large extent

To a very large extent

100%
80%
60%
40%
20%
0%

Nat. Auth.

Business
Org.

Trade Unions Notaries

Academic

Individuals

Others

Question:  

To what extent does the introduction of new measures in this area rank as 
an EU priority? 

113 

 
 
 
 
 
No opinion/Not answer
Low priority
Top priority

This issue should not be addressed at all
Priority

100%
80%
60%
40%
20%
0%

Nat. Auth.

Business
Org.

Trade Unions Notaries

Academic

Individuals

Others

There is a higher distribution of positive feedback for cross-border conversions than for 
any  of  the  other  cross-border  operations.  The  majority  of  public  authorities  agreed  that 
the lack of procedural rules for conversions do constitute obstacles to the internal market 
with 3 agreeing to some extent, 4 agreeing to a large extent and 3 agreeing to a very large 
extent.  There  were  5  considering  this  top  priority,  3  considering  this  a  priority  and  3 
considering  this  a  low  priority.  Several  authorities  submitted  that  they  were  more 
concerned with the issue of seat than they were with stakeholder protection mechanisms 
and said that they would support a conversion initiative to the extent that companies can 
only move their real seat for genuine business purposes rather than conclude transfers of 
letterbox companies for fraudulent purposes. 

The  business  groups  supported  the  introduction  of  a  conversion  procedure  with  similar 
percentage as the public authorities. Approximately 44% of business groups considered 
this to be a top EU priority, 22% a priority and 22% a low priority. On the issue of seat 
there were some  organisations that suggested that the mere transfer  of registered  office 
should be sufficient (BDI & BusinessEurope). Concerning stakeholder protection, certain 
business  groups  urged  to  apply  the  employee  protection  rules  set  out  in  the  existing 
CBMD rather than what is laid out in the SE Regulation.  

Trade  unions  and  notaries  were  both  moderately  supportive  of  new  procedural  rules 
concerning  conversions  (74%  and  79%  deeming  this  a  low  EU  priority  respectively). 
Both the trade unions and the CNEU (representative body of notaries) were keen to stress 
that  companies  should  only  be  allowed  to  transfer  their  registered  office  if  it  is 
accompanied  by  the  transfer  of  their  real  seat  with  Trade  Unions  further  stressing  the 
need for a horizontal instrument for employee information, consultation and participation 
rights. 

Academics  were  also  broadly  in  favour  of  the  introduction  of  a  conversion  procedure. 
Some academics submitted that MS should be able to determine their own requirements 
to  be  recognised  under  their  law  and  indeed  whether  they  require  that  the  real  seat  be 
transferred.  It  was  further  submitted  that  digitalisation  should  be  used  as  much  as 
possible  (i.e.  for  publication  of  information  and  for  the  company  registries  to 
communicate. Others suggested that a MS should only be able to block a conversion in 
very exceptional circumstances on grounds of public interest. 

The following graph provides an overview of the feedback from stakeholders when asked 
what areas a possible instrument on of cross-border conversions could address: 

114 

 
 
Nat. Auth.

Business Org.

Trade Unions

Notaries

Academic

Individuals

Others

New procedure but question of
seat and safeguards left to MS

New procedure with uniform
safeguards for stakeholders

New procedure with minumum
safeguards for stakeholders

Stakeholders' protection
covered through conflict-of-
law rules
New procedure with specific
rules on seat

Other measures

No need for EU measure

No Opinion/No Answer

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

III. Conflicts of Law 

Question: 

To  what  extent  do  the  differences  between  Member  States’  laws  or  the 
overall  lack  of  a  legal  framework,  in  the  area  of  applicable  law  for 
companies  constitute  obstacles  to  the  proper  functioning  of  the  single 
market? 

No opinion/Not answer Not at all

To some extent

To a large extent

To a very large extent

100%
80%
60%
40%
20%
0%

Nat. Auth.

Business
Org.

Trade Unions Notaries

Academic

Individuals

Others

Question:  

To what extent does the introduction of new measures in this area rank as 
an EU priority? 

No opinion/Not answer
Low priority
Top priority

This issue should not be addressed at all
Priority

100%
80%
60%
40%
20%
0%

Nat. Auth.

Business
Org.

Trade Unions Notaries

Academic

Individuals

Others

115 

 
 
 
 
A  majority  of  60%  of  the  national  public  authorities  and  business  organisations  that 
replied  to  the  consultation  considered  that  the  differences  between  the  Member  States' 
laws  or  the  overall  lack  of  legal  framework  in  respect  to  conflict-of  law  rules  for 
companies to a certain extent constitute obstacles to the proper functioning of the internal 
market  -  with  28%  considering  it  as  an  obstacle  to  a  large  or  very  large  extent.  It  is 
important to note that there was only one national authority from an EU Member State 
(from  France)  which  considered  that  there  is  no  internal  market  obstacle  at  all.  The 
picture is different among trade unions (which predominantly see it only as a problem to 
some extent), and notaries (who predominantly do not see it as a problem at all). 

Varying  support  came  from  60%  of  the  national  public  authorities  and  business 
organisations  with  34%  considering  it  a  priority,  14%  a  top  priority  and  11%  a  low 
priority,– among which around half of business organisations considered it to be either a 
priority or top priority. Conversely, most answers from trade unions considered it a low 
priority and most replies from notaries considered that this issue should not be addressed 
by the EU. Again, it is important to note that only public authority from an EU Member 
State (from France) was of the opinion that this issue should not be addressed by the EU 
and  that  only  for  two  public  authorities  (from  Austria  and  Malta)  it  is  a  low  priority 
whereas for the others it is a priority or top priority. 

National  public  authorities  and  –  to  a  lesser  extent  –  business  organisations  considered 
that  various  problems  arise  when  national  conflict-of-law  rules  differ,  in  particular 
problems with the connecting factor, problems related to the possibility that the company 
law  of  more  than  one  MS  may  apply  to  a  company,  problems  with  the  applicable 
company  law  and  other  fields  of  law  and  problems  with  the  application  of  overriding 
national  rules  of  domestic  law.  On  the  other  hand,  trade  unions  largely  considered that 
there  were  problems  related  to  the  protection  of  employees´  rights,  in  particular 
concerning employee participation in cases of split seats, whereas a majority of notaries 
considered that there is no problem at all. 

A  vast  majority  of  public  authorities  and  a  large  majority  of  business  organisations 
considered  that  companies  should  be  governed  by  the  law  of  the  country  of 
incorporation. The authorities in favour of the place of incorporation included countries 
which  traditionally  followed  the  real  seat  approach  (such  as  Germany)  or  where  the 
connecting  factor  in  national  law  is  not  clear  (such  as  Poland).  The  only  national 
authority  that  chose  the  real  seat  option  in  the  questionnaire  was  the  Austrian  Ministry 
for  Justice which  in  its  explanation,  however,  suggested that  the  place of  incorporation 
should be the connecting factor, but that MS can continue to apply real seat requirements 
under  their substantive company  laws.  Therefore,  in  fact,  all  national  public authorities 
that have chosen one of the two options are in favour of the place of incorporation as the 
connecting factor. In its reply, the public authority from France has not chosen one of the 
two  options,  but  expressed  the  opinion  that  a  harmonisation  of  the  connecting  factor 
would be difficult and that therefore in this regard the current status quo on the basis of 
the  ECJ  case  law  should  be  maintained.  By  contrast,  a  vast  majority  of  notaries  and  a 
large majority of trade unions answered that the applicable law should be the law of the 
country where companies have their real seat. 

Notaries were mostly (circa 80 %) in favour of an extensive list of internal and external 
matters which the lex societatis should cover, whereas trade unions were in favour of an 
extensive list to the least extent. National public authorities (circa 40 %) and – to a lesser 
extent business organisations – were to a certain extent in favour. 

116 

 
Notaries  and  trade  unions  were  to  large  extent  in  favour  of  excluding  certain  matters 
from the scope of a uniform conflict-of-law instrument, reflecting wider policy goals and 
choices.  Most  national  public  authorities  and  business  organisations  did  not  express  an 
opinion. The by far most frequently mentioned example for an exclusion from the scope 
are employees´ rights and in particular employee participation. 

Answers from public authorities were slightly in favour of universal application, business 
organisations  clearly  in  favour.  However,  in  both  cases,  the  majority  of  replies  did  not 
express  an  opinion.  By  contrast,  trade  unions  were  rather  against  universal  application, 
and notaries were strongly opposed. 

The  majority  of  public  authorities  and  of  business  organisations  was  in  favour  of 
addressing  the  possibility  of  a  change  of  the  applicable  law  through  a  cross-border 
conversion  to  another  MS  without  loss  of  legal  personality.  Trade  unions  were  rather 
opposed, but a majority had no opinion, notaries were strongly opposed. 

The majority of public authorities and of business organisations was in favour of 
specifying which matters should be covered by the "old law" and which by the "new 
law". Trade unions were rather opposed, but a majority had no opinion, notaries were 
strongly opposed. 

2.2 Summary of the public consultation of 2015 

In  2014-15  the  Commission  carried  out  a  public  consultation  on  cross-border  mergers 
and divisions. The questions focused on two main sets of issues: the improvement of the 
existing framework for cross-border mergers and a possible framework for cross-border 
divisions224.  

151 responses were received from public authorities, academia (e.g. universities, research 
institutes, think-tanks), liberal professions (lawyers and notaries), EU-wide and national 
business  organisations  and  chambers  of  commerce,  trade  unions  and  employee  bodies, 
companies  and  individuals.  The  business  federations,  chambers  of  commerce  and  other 
organisations2  constituted  the  biggest  group  of  respondents  (25%),  followed  by 
companies (19%) and lawyers and notaries (15%). Over a half (57%) of replies submitted 
on  behalf  of  companies  or  persons  advising,  owning  or  working  for  those  companies, 
came from large businesses (with more than 250 employees) and over a quarter  – from 
micro (with up to 9 employees) and small (with between 9 and 49 employees) ones, 10% 
and  16%  respectively. Most  of  those  respondents  mentioned  that  they  were  engaged  in 
cross-border  business  activities  in  the  EU.  The  same  number  of  replies  was  linked  to 
private as to public limited liability companies (15 each). 

Replies  originated  in  27  EU  Member  States,  1  EEA  country  and  a  couple  of  third 
countries. Most replies were submitted by German respondents, followed by the Spanish 
and  the  French;  at  the  same  time,  few  replies  were  received  from  Bulgaria,  Croatia, 
Cyprus, Greece, Hungary, Ireland, Latvia, Malta, Slovakia and Slovenia, and none from 
Portugal.  

224  See  a  detailed  summary  of 
http://ec.europa.eu/internal_market/consultations/2014/cross-border-mergers-divisions/docs/summary-of-
responses_en.pdf. 

the  Feedback  statement  of  October  2015 

the  responses 

in 

117 

 
 
 
 
                                                            
In  regards  to  cross-border  mergers,  88%  of  the  respondents  were  in  favour  of 
harmonisation  of  creditor  protection  –  75%  of  which  favoured  a  full  harmonisation 
approach. The vast majority of those felt that a guarantee was the best form of protection 
and  that  the  date  determining  the  beginning  of  the  creditor  protection period  should  be 
harmonised.  Furthermore,  in  regards  to  minority  shareholder  protection,  a  majority  of 
66% were in favour of harmonisations with 71% of which in favour of harmonisation on 
a  maximum  basis.  70%  of  those  in  favour  of  full  harmonisation  felt  that  minority 
shareholders  should  be  given  an  exit  right  against  adequate  cash  compensation. 
Moreover, 62% of the respondents welcomed the introduction of a fast-track procedure. 

As regards to divisions, the introduction of a new procedure was broadly welcomed by 
the  respondents.  72%  of  respondents  who  expressed  an  opinion  thought  that 
harmonisation  of  legal  requirements  concerning  cross-border  divisions  would  help 
enterprises and facilitate cross-border activities by reducing the costs directly related with 
the  cross-border  division.  Procedural  issues  as  well  as  stakeholder  protection  were 
identified as key issues to address. 

2.3 Summary of the public consultation of 2013 

In 2013, the Commission carried out a public consultation on the cross-border transfers 
of registered offices of companies. The purpose of the consultation was to acquire more 
in-depth  information  on  the  costs  currently  faced  by  companies  transferring  their 
registered  offices  abroad  and  on  the  range  of  benefits  that  could  be  brought  by  an  EU 
action in this respect. In total 86 responses were received from public authorities, trade 
unions,  civil  society,  companies,  business  organization,  individuals  and  universities, 
allowing for a broad representation of society. Only 28 companies responded directly to 
the consultation providing a sample not entirely satisfactory when compared to the total 
amount  of  companies  in  the  EU.  Replies  have  come  from  20  EU  MS  and  also  from 
outside the EU. 

It  was  found  that  the  majority  of  respondents,  who  would  consider  the  possibility  of 
moving  their  company  cross-border,  would  broadly  welcome  the  introduction  of  a 
conversion procedure. They cited economic benefits, cost savings for the internal market 
and the broader possibilities for SMEs to transfer cross-border as reasons for answering 
in the affirmative. Moreover, it was submitted a majority of 43% of respondents that the 
CJEU jurisprudence in Vale and Cartesio did not provide enough clarity on the issue. 

2.4 Summary of the public consultation of 2012 

In  2012  the  Commission  carried  out  a  public  consultation  in  order  to  assess  the  key 
interests  of  stakeholders  in  regard  to  European  company  law  and  determine  where  the 
future priorities of EU company law should lie. 496 responses were received from public 
authorities, trade unions, civil society, business federations, liberal professions, investors, 
universities, think tanks, consultants and individuals, allowing for a broad representation 
of society. Replies originated in 26 EU MS and in a number of countries from outside the 
EU. 

Improving the business environment and fostering cross-border mobility was found to be 
a  key  focus  of  majority  of  stakeholders  who  responded  to  the  survey  with  over  2/3  of 
respondents  clicking  in  the  affirmative.  Enhancing  the  protection  of  creditors, 
shareholders and employees in cross-border situations came second with more than 50% 
of respondents in favour. Facilitating the creation of companies and fostering regulatory 

118 

 
 
 
came in 3rd and 4th respectively with a little over 40% of the respondents clicking in the 
affirmative to each. 

3. STAKEHOLDER MEETINGS  

3.1 Company Law Expert Group 

The process of the consultation on the company law package within the Company Law 
Expert Group (CLEG) began in 2012. Meetings have taken place on a regular basis. In 
2017, three meetings took place. The Commission presented to the experts its intentions 
and  ideas  in  the  relevant  areas,  asking  the  MS  experts  their  opinion  as  regards  the 
specific issues like the composition of the package, types of companies to be covered and 
possible  substantive  rules  in  the  package.  Generally  the  MS  representatives  showed 
support for the initiative, although the particular solutions, especially originating from the 
different legal traditions, appeared to remain to be discussed.  

In 2017, the Commission invited to the CLEG meetings not only Member States experts 
but  also  stakeholders'  representatives.  Stakeholders  represented  both  businesses  and 
employees,  in  particular  Business  Europe,  European  Issuers,  Association  Française  des 
Entreprises  Privées  (AFEP),  Mouvement  des  Entreprises  de  France  (MEDEF)  and 
European Trade Union Confederation (ETUC), European Trade Union Institute (ETUI). 
The  representatives  of  legal  professions  (Notaries  of  Europe  -  CNUE,  Council  of  Bars 
and  Law  Societies  of  Europe  -  CCBE)  also  shared  their  views  on  the  discussed  topics. 
The  outcome  of  these  meetings  showed  that  each  group  have  in  many  areas  similar 
expectations, while also helped to identify different expectations in other areas. Most of 
CLEG members and stakeholders' representatives highlighted the need to facilitate cross-
border  operations,  however,  interests  of  companies'  members,  employees  and  creditors 
should be protected throughout adequate safeguards.  

3.2. Informal Company Law Expert Group 

The Informal Company Law Expert Group (ICLEG) was established by the Commission 
in  May  2014  to  assist  it  with  expert  advice  on  issues  of  company  law.  The  ICLEG 
members  were  selected  from  highly  qualified  and  experienced  academics.  At  the  first 
stage  of  the  group  work,  ICLEG  members  identified  the  shortcomings  of  existing  EU 
legal framework and gathered information on the situation in the areas not covered by the 
EU  law.  ICLEG  members  gave  their  recommendation  to  the  future  development  of 
existing  framework  governing  cross-border  mergers  and  use  of  digital  tools  in  the 
company  law,  and  also  prepared  recommendations  for  the  future  initiative  on  cross-
border  divisions  and  cross-border  conversions.  ICLEG  held  15  meetings  since  its 
establishment. 

3.3 Targeted outreach to key stakeholders  

Information  from  stakeholders  were  also  gathered  though  bilateral  meetings.  In  this 
framework, meetings took place in particular with: 

 

representatives from trade unions, such as the European Trade Union Confederation 
(ETUC),  the  German  Trade  Union  Confederation  (DGB)  and  the  Czech-Moravian 
Confederation of Trade Unions. In these meetings, the representatives of trade unions 
emphasised the importance of preservation of employee participation rights and that 
companies  should  only  move  for  real  purposes,  thus  avoiding  that  letterbox 
companies are created through cross-border operations; 

119 

 
  business  representatives,  such  as  BusinessEurope,  the  Federation  of  German 
Industries and the Finnish Confederation of Businesses. These organisations showed 
interest in facilitation of companies' mobility and the increase of use of digital tools 
in registration proceedings; 

  notaries  and  their  representatives,  such  as  the  German  and  Austrian  Chamber  of 
Notaries,  and  in  the  annual  conference  of  Civil  Law  Notaries.  In  these  meetings, 
notaries mainly explained their role in notarial Member States and their role in using 
digital  tools;  they  also  shared  concerns  as  regards  the  use  of  digital  tools  without 
appropriate safeguards. 

4. CONFERENCES 

A dedicated conference was held in September 2017 in Tallinn, Estonia: 21st European 
Company Law and Corporate Governance Conference: Crossing Borders, Digitally.  

The conference covered three topics: the digital company law, cross-border mobility of 
transfer  of  registered  office 
i.e.  cross-border  merger,  division  and 
companies 
(conversion) and applicable law in company law matters. 

The  conference  was  attended  by  representatives  of  company  law  policy  makers  and 
experts of the Member States and EU institutions, entrepreneurs, legal advisers and other 
interested parties. 

In  October  2015,  the  Commission  organised  a  conference  on  "Company  Law  in  the 
Digital Age – Adapting company law and corporate governance to the digital world"225. 
The  conference  analysed  different  aspects  of  the  use  of  digital  tools  and  processes  in 
company law and corporate governance. The conference brought together Member States 
representatives,  representatives  of  EU,  international  and  national  organisations  of 
stakeholders  who  would  be  affected  by  digitalisation  of  company  law  and  corporate 
governance  (organisations  representing  businesses,  employees,  investors,  chambers  of 
commerce,  etc.)  and  representatives  of  EU  institutions  to  discuss  recent  developments, 
remaining problems and necessary changes as regards digitalisation of company law and 
corporate governance.  

5. STUDIES 

The stakeholder consultation was complemented by the following research/analyses done 
for the Commission over the last years:  

-  Bech-Bruun/Lexidale,  Study  on  the  application  of  the  cross-border  mergers 

directive (September 2013),  

-  LSE, Study on the law applicable to companies (June 2016),  

-  Everis, Study on digitalisation of company law, (2017) 

-  Optimity,  Study  assessing  the  impacts  of  using  digital  tools  in  the  context  of 

cross-border company operations. (2017) 

225 http://ec.europa.eu/justice/events/company-law-2015/index_en.htm 

120 

 
 
                                                            
-  EY,  Study  on  cross-border  transfers  of  registered  offices  and  cross-border 

divisions of companies (2017). 

121 

 
 
 
ANNEX 3: WHO IS AFFECTED AND HOW? 

The foreseen options included in this initiative would affect the following stakeholders: 

Businesses 

The simpler and faster registration and filing procedures through digital tools will reduce 
costs and administrative burdens for companies. Harmonised rules will enable companies 
to conduct cross-border operations faster and at lower costs, in particular lower costs of 
legal assistance and will limit the risks for companies caused by legal uncertainty. This 
will help businesses to adjust and reorganise their structures to their changing needs that 
will help them to be more competitive in the Single Market. The use of digital tools in 
company  law  should  stimulate  entrepreneurship  and  innovation,  as  it  would  offer  more 
chance to set up innovative start-ups. Companies will, however need to comply with the 
new  requirements  safeguarding  the  legitimate  interests  of  minority  shareholders, 
creditors  and  employees.  This  will  entail  compliance  costs  for  companies.  The  legal 
certainty  provided  for  by  the  conflict  of  law  rules  will  also  reduce  the  costs  of  legal 
advisory presently  widely used  by businesses.  All  of this will be  particularly important 
for  SMEs  who,  in  general,  have  fewer  resources  to  cover  operational  costs  and  to 
overcome  significant  administrative  burdens.  Especially  the  new  rules  on  cross-border 
conversions  will  be  helpful  for  SMEs  since  bigger  companies  can  use  the  alternative 
operations to reach the same result. 

National authorities, courts, legal professionals 

The  procedures  for  company  registration  and  for  filing  of  documents  will  be  faster 
through  the  increased  use  of  online  tools.  It  will  also  provide  savings  for  national 
authorities  in  terms  of  more  efficient  handling  of  registration  proceedings.  The  use  of 
digital tools will improve correctness and completeness of data. 

A significant number of the Member States has already introduced online registration of 
companies.  These  Member  States  will  have  to  adjust  their  national  rules  and  systems 
only to a limited extent or not at all. Other Member States will have to introduce national 
provisions and provide necessary infrastructure for online proceedings. 

Moreover,  there  would  be  impact  on  national  authorities  such  as  registration  bodies, 
courts  or  notaries.  The  initiative  aims  at  facilitating  cross-border  operations  what  will 
increase the number of cases to handle. 

Legal  professionals  (mainly  notaries  and  in  some  countries  also  lawyers  and  legal 
counsels) will need to adjust professional activities to the new rules. More legal certainty 
however  will  help  them  in  their  work  when  dealing  with  cross-border  operations  of 
companies. The proposed rules on online registration and filing might require for some 
the setting up of the necessary infrastructure (e.g. equipment for videoconference and for 
authentication  of  identification).  The  proposed rules  will  maintain the possibility  to  the 
Member States to require the involvement of notaries, lawyers and legal counsels in the 
process.  

Shareholders 

The initiative will offer shareholders enhanced ways to reorganise the structure of their 
business in the EU through cross-border operations, if needed. The impacts on companies 

122 

 
will be applicable indirectly also to shareholders. The initiative will safeguard rights of 
minority  shareholders when companies carry-out  cross-border operations. The initiative 
will  focus  on  the  protection  of  minority  shareholders  by  providing  them  with  adequate 
rights  which can  be  easily exercised, in  some cases  without engaging administrative or 
judicial  authorities.  Minority  shareholders  will  benefit  from  the  harmonised  rules  by 
enjoying the same level of safeguards in all Member States.  

Creditors 

The initiative will provide safeguards for creditors of companies in case of cross-border 
operations.  The  change  of  companies'  structure  involving  cross-border  operation  may 
affect  the  creditors'  rights  or  may  cause  difficulties  to  enact  those  rights  resulting  from 
changing  jurisdictions.  The  initiative  therefore  aims  at  helping  companies  to  exercise 
freedom of establishment while ensuring that creditors will not be negatively affected in 
case  of  such  cross-border  operations  and  they  will  be  able  to  enforce  their  claims.  The 
proposal aims to ensure legal certainty and benefits for creditors by providing the same 
level of safeguards and compatible rules in the EU.  

Employees 

Cross-border  reorganisation  of  the  company  may  result  in  changes  in  the  employees' 
rights. Such rights are mainly protected through safeguards provided by EU employment 
law. This initiative will introduce safeguards for employee board level participation - to 
protect employees' acquired rights. Existing employees' board level participation systems 
will  either  remain  unchanged  or  be  modified  according  to  the  arrangement  between 
company and employees' representatives. In addition, in cross-border divisions, mergers 
and conversions, employees will be provided transparency about the impact of the cross-
border  operation  on  jobs.  It  is  also  important  to  note  that,  as  a  result  of  cross-border 
operations  employees  may  benefit  from  the  more  favourable  employee  participation 
system and improved job situation. 

Consumers, third parties 

Consumers and the general public will have easier access to company information which 
will  thus  improve  transparency.  Simpler  rules  for  cross-border  operations  will  lead  to 
efficiency  gains  to  companies  and  increase  the  competitiveness  which  could  have  on 
impact on consumers in terms of price and offer.  

123 

 
 
 
ANNEX 4: PROBLEM DEFINITION – ADDITIONAL EVIDENCE 

This  annex  presents  further  examples  and  data  that  complement  the  information 
presented in Chapter 2 – The problem definition.  

1. Use of digital tools and processes throughout a company's lifecycle  

Section 2.1 of this Impact Assessment presents the main problems caused by the lack of 
rules or the divergence in rules between the Member States in respect to the use of digital 
tools in company law. 

Table 1 below shows how national requirements for online company registration vary 
between  the  Member  States.  While  several  Member  States  allow  for  completion  of  the 
procedure  fully  online  by  the  company  founder  or  representative  and  no  intermediaries 
need  to  be  involved  (so  called  "end-to-end"),  other  Member  States  do  not  allow  for  a 
direct  online  registration  of  companies,  as  the  involvement  of  notaries  or  legal 
professionals is still part of the process. Admittedly digital tools are used for part of the 
procedure,  which  is  why  certain  stakeholders  claim  that  online  registration  is  already 
possible; however such tools are not available to company founders who cannot complete 
the procedure by themselves fully online.  

The  situation  is  very  similar  for  the  online  filing  of  documents.  Table  2  shows  how 
Member States differ in their implementation of the current EU rules in this respect. Even 
though in principle companies are already able to file documents "by electronic means", 
de facto they cannot do this by themselves – it is only accredited intermediaries (namely 
notaries) that can submit documents online to the business register. 

For Member States that are already using digital tools in company law, table 3 presents 
an overview of the solutions for electronic identification in 14 Member States. 

Section 3.1.2 already presents examples showing how online applications for company 
registration  are  usually  cheaper  and  faster  than  paper-based  applications.  In 
addition  to  those  examples,  the  case  study  below  highlights  such  differences  by 
comparing the procedure for registering a new company in two Member States.  

  Example of Company Registration in Estonia and Germany226  

The  following  example  illustrates  the  differences  between  the  costs  of  registration  of  a 
company in two Member States: 

  Estonia, where the online registration is fully performed online, and 

  Germany,  where  the  presence  of  the  founder  or  representative  as  well  as  the 

involvement of intermediaries (notaries) is mandatory.  

In  Estonia,  completing  the  online  procedure  takes  approximately  20  minutes  and  the 
application  is  processed  within  1  to  2  days.  The  administrative  fee  is  €145  for  normal 
registration and €190 for an expedited procedure. The involvement of a notary is optional 
and costs €35.75. There is also a one-off cost of €20 for the eID and the eID reader. The 
total costs vary therefore between €202,75 and €252,75. 

226 This case study is based on the Study on digitalisation of company law, Everis 2017. 

124 

 
                                                            
In  Germany,  the  procedure  as  such  takes  1  to  2  days  but  the  physical  presence  of  the 
company founder is mandatory. Taking an appointment with a notary also adds time and 
cost  to  this,  including  traveling  time  depending  on  where  the  company  founder  or 
representative is located. The notarial fees range from €105 to  €580 and administrative 
fees  for  registration  from  €150  and  €240,  resulting  in  total  fees  to  be  assumed  by 
companies between €255 and €820.  

Comparing the two examples shows that the face-to-face procedure, including mandatory 
involvement of intermediaries, can be from €110 up to €630 more expensive than fully 
online procedure. This does not include travelling costs and the possible difference in the 
time needed to complete the procedure.  

125 

 
Table A.1: Comparative summary of the availability of digital tools for company registration 14 Member States (Optimity study) 

Member State 

Availability of digital tools 
for company registration 

Electronic platforms available for 
the registration of limited liability 
companies 

Intermediaries required 

Summary of the registration process for limited liability 
companies 

Estonia 

Digital tools are available for 
company registration. 

Companies can be registered 
directly through the Company 
Registration Portal, available online 
at: 
https://ettevotjaportaal.rik.ee/ 

No intermediaries are required. 
The electronic company 
registration process can be 
carried out in a direct, end-to-
end manner. 

For the registration of limited liability companies through the 
Company Registration Portal, the applicant needs to be in 
possession of an Estonian ID-card (Latvian, Belgian, Finnish, 
and Lithuanian ID cards or mobile IDs are also acceptable) for 
identification and digital signature authentication purposes. 

Portugal 

Digital tools are available for 
company registration. 

Poland 

Digital tools are available for 
company registration. 

In Portugal, companies can be 
created and registered through an 
online register service within the 
wider electronic platform known as 
Citizen’s Portal, at: 
https://www.portaldocidadao.pt 

No intermediaries are required. 
The electronic company 
registration process can be 
carried out in a direct, end-to-
end manner. 

Limited liability companies can be 
registered directly online through a 
web portal, i.e. S24 / ePUAP. This 
must be preceded by online 
registration on the website of the 
Ministry of Justice, i.e. eMS. 

No intermediaries are required. 
The electronic company 
registration process can be 
carried out in a direct, end-to-
end manner. 

Denmark 

Digital tools are available for 
company registration. 

A direct online solution provided by 
the Danish Business Authority is 
available for the registration of 
limited liability companies at: 
https://www.virk.dk/ 

No intermediaries are required. 
The electronic company 
registration process can be 
carried out in a direct, end-to-
end manner. 

In order to create and register a limited liability company 
through the Citizen’s Portal, the applicant(s) must have a 
Citizen’s Card (i.e. Portuguese national ID card). For 
applicants of a nationality other than Portuguese, a prior step 
is required: obtaining a Fiscal Identification Number from the 
Portuguese Financial Services Authority. Estonian and 
Spanish nationals can use their corresponding ID cards and are 
exempted of this pre-requirement. 

The Polish Commercial Companies Code provides for the 
possibility to register limited liability companies in a 
simplified manner (i.e. S24), without the need of intervention 
by a notary. However, there is one exception to this provision: 
if the share capital contribution to a company is to be made as 
a non-cash contribution, the company registration process 
must be carried out in the traditional manner, i.e. signing a 
notary act. 

The online solution provided by the Danish Business 
Authority for the registration of companies (including limited 
liability companies) can only be accessed through a digital key 
known as NemID, which can be obtained by creating a login at 
www.virk.dk. The process is “self-service”-oriented, with 
clear guidance at every step of the company registration 
process.  

United 
Kingdom 

Digital tools are available for 
company registration. 

In the UK, limited liability 
companies can be registered using 
the Companies House online tool 

No intermediaries are required. 
The electronic company 
registration process can be 

It is worth noting that limited liability companies can only be 
registered using the Companies House online tool for 
companies limited by shares and if they are to use standard 

126 

 
Member State 

Availability of digital tools 
for company registration 

Electronic platforms available for 
the registration of limited liability 
companies 
(i.e. Web Incorporation). 

Intermediaries required 

Summary of the registration process for limited liability 
companies 

carried out in a direct, end-to-
end manner. 

articles of association. The online registration process is 
considerably cheaper and can be concluded in up to 24 hours. 

France 

Digital tools are available for 
company registration. 

In France, limited liability 
companies can be registered using a 
“one-stop shop”-like online tool: 
CFE – Centres des Formalités des 
Entreprises. 

No intermediaries are required. 
The electronic company 
registration process can be 
carried out in a direct, end-to-
end manner. 

Italy 

Digital tools are available for 
company registration but not 
for company formation227. 

Company registration can be made 
through the filing of a single 
communication through the 
ComUnica system, i.e. an electronic 
procedure developed by the Italian 
Chambers of Commerce. 

Intermediaries are required 
for the creation of limited 
liability companies, i.e. articles 
of association must be signed as 
a public deed before a notary. 
However, company registration 
can be done electronically in an 
end-to-end manner through the 
ComUnica system. 

In France, a person wishing to register a company shall 
provide the same information through the CFE online portal, 
which shall then transmit the full file to the registry of the 
concerned commercial court or chamber of handicraft. The 
verification of the files is then performed either by the online 
portal (i.e. the CFE) or by the registry of the commercial court 
or chamber of handicraft. The CFE shall also transmit the file 
to the concerned authorities, in particular the tax and social 
contributions authorities.  

In Italy, company registration must be preceded by company 
creation. For limited liability companies, the company creation 
process cannot be carried out electronically, and requires 
signing the articles of association as a public deed before a 
notary. Conversely, the company registration process can be 
carried out electronically in a direct, end-to-end fashion using 
the ComUnica system, as long as applicants are in possession 
of a (i) certified email address (i.e. posta elettronica 
certificate), (ii) a username and password from the Business 
Registry, (iii) a smart-card or USB key for authenticated 
digital signatures. 
In the case of “innovative start-ups”. Such start-ups are not 
required to sign their articles of association before a notary but 
using their digital signature. 

Germany 

Digital tools are available for 
company registration, but 
have to be used by notaries 

In Germany, company registration 
through digital tools takes place 
through the Elektronisches 

Intermediaries are required 
for the registration of limited 
liability companies, i.e. notaries 

Registration of limited liability companies in Germany imply 
the intervention of a notary for filing the necessary 
documentation through the EGVP platform. In addition, 

227   In  Italy,  company  registration  must  be  preceded  by  company  creation,  a  process  through  which  the  applicant(s)  / shareholder(s)  produce  articles  of  association,  which  must  be 

signed as a public deed before a notary. This is directly applicable to limited liability companies. 

127 

 
                                                            
Member State 

Availability of digital tools 
for company registration 

rather than applicants. 

Netherlands 

Digital tools are available for 
company registration, but 
have to be used by notaries 
rather than applicants. 

Electronic platforms available for 
the registration of limited liability 
companies 
Gerichts-und Verwaltungspostfach 
(i.e. EGVP), and can only be 
handled by notaries. The EGVP is 
an electronic communication 
platform for court communication. 

The registration of limited liability 
companies can only be filed 
electronically by a notary. This 
electronic registration takes place 
through the use of an online 
platform hosted by the KvK (Kamer 
van Koophandel, i.e. Chamber of 
Commerce). 

Bulgaria 

Digital tools are available for 
some aspects of registration 
of limited liability 
companies, namely the 
electronic submission of 
documentation after 
acceptance of a request form 
for registering a new business 

In Bulgaria, limited liability 
companies can be registered using 
the electronic system of the 
Commercial Register, which is 
maintained by the Registry Agency, 
upon acceptance of the request form 
for starting a new business. 

Luxembourg 

Digital tools are available for 
some aspects of company 
registration, but have to be 
used by notaries rather than 
applicants 

The registration of limited liability 
companies can only be filed 
electronically by a notary. This 
electronic registration takes place 
through the use of an online 
platform hosted by the Trade and 
Companies Register (RCS) using a 
digital tool called LuxTrust 
certificate. 

Intermediaries required 

Summary of the registration process for limited liability 
companies 

applicants must provide further official certified copies of 
specific documentation in order to initiate the process, e.g. the 
list of directors, the company contract. 

In order to proceed with the electronic company registration 
process, notary offices must request a certification key from 
the notary chamber and a PKI certificate from the KvK, i.e. a 
digital certificate providing proof of a person’s or institution’s 
online identity. Additionally, no electronic registration is 
possible for cross-border company registration, and the whole 
process must be carried out through paper forms. Applicants 
must also provide further official certified copies of specific 
documentation in order to initiate the process, e.g. the list of 
directors, the company contract. 

The entire process of online company registration is carried 
out before the Registry Agency, after acceptance of the initial 
request form. The electronic platform hosted and operated by 
the Commercial Register is widely used in Bulgaria, but can 
only be accessed for lodging an official registration upon 
acceptance of this form. 

The articles of association must be drawn up before a notary in 
order to register a limited liability company in Luxembourg. 
Any further lodging of documentation in the online platform 
hosted by the RCS has to be handled by the notaries directly. 
Additionally, notarised acts must be first submitted for 
registration by the notary in its original paper format. The 
notary is then required to electronically submit the deed to the 
RCS for publication at the latest one month after the signature 
of the articles of association. 

have to file all the required 
documentation for registering a 
company in the EGVP platform. 
Therefore, the process cannot be 
considered to be direct nor end-
to-end. 

Intermediaries are required 
for the registration of limited 
liability companies, i.e. notaries 
have to file all the required 
documentation for registering a 
company in the electronic 
platform hosted by the KvK. 
Therefore, the process cannot be 
considered to be direct nor end-
to-end. 

Intermediaries are required 
for the registration of limited 
liability companies. Applicants 
must appear before a Registry 
Agency and submit a request 
form for registering a new 
company. The process cannot be 
considered direct not end-to-end. 

Intermediaries are required 
for the registration of limited 
liability companies, i.e. notaries 
have to file all the required 
documentation for registering a 
company in the electronic 
platform hosted by the RCS. 
Therefore, the process cannot be 
considered to be direct nor end-

128 

 
Member State 

Availability of digital tools 
for company registration 

Electronic platforms available for 
the registration of limited liability 
companies 

Intermediaries required 

Summary of the registration process for limited liability 
companies 

Hungary 

Digital tools are available for 
some aspects of company 
registration, but have to be 
used by notaries or lawyers 
representing the applicant(s). 

Belgium 

Romania 

Digital tools are not available 
for registration of limited 
liability companies, as 
applicants seeking to register 
a new company are required 
to physically appear before a 
notary and a registry court. 

Digital tools are mostly not 
available for registration of 
limited liability companies, 
as applicants seeking to 
register a new company are 
required to physically appear 
before a notary and a registry 
court. 

In Hungary, all the required 
documentation necessary for 
registering a company can be 
pooled together in an E-acta. 
Electronic documents must be 
authenticated by means of qualified 
electronic signatures and time 
stamping (e.g. E-Szignó). However, 
legal representation is necessary to 
carry out these processes. 

Digital tools are not available for 
registration of limited liability 
companies, as applicants seeking to 
register a new company are required 
to physically appear before a notary 
and a registry court. 

Digital tools are mostly not 
available for registration of limited 
liability companies, as applicants 
seeking to register a new company 
are required to physically appear 
before a notary and a registry court. 

to-end. 

Intermediaries are required 
for the registration of limited 
liability companies, i.e. legal 
representatives of the applicant 
have to file all the required 
documentation for registering a 
company in the court of registry 
of the appropriate jurisdiction. 

Intermediaries are required 
for the registration of limited 
liability companies, i.e. 
applicants are required to appear 
in-person at the registry and 
before a notary. Therefore, the 
process cannot be considered to 
be direct nor end-to-end. 

Intermediaries are required 
for the registration of limited 
liability companies, i.e. 
applicants are required to appear 
in-person at the registry and 
before a notary. Therefore, the 
process cannot be considered to 
be direct nor end-to-end. 

The process of registering a company in Hungary is not direct 
nor end-to-end. All the documentation submitted to County 
Courts must be countersigned by an attorney who possesses 
the required digital signature and time-stamp platforms. Thus, 
legal representation is mandatory with obligatory technical 
safeguards. However, the process itself is entirely digitalised. 

Digital tools are not available for registration of limited 
liability companies, as applicants seeking to register a new 
company are required to physically appear before a notary and 
a registry court. 

Digital tools are mostly not available for registration of limited 
liability companies, as applicants seeking to register a new 
company are required to physically appear before a notary and 
a registry court. 

129 

 
 
 
 
Table A2: Comparative summary of the availability of digital tools for filing and disclosure of company information 14 Member States (Optimity study) 

Member State 

Availability of digital 
tools for filing and 
sharing of company 
information 

Electronic platforms available for 
filing and sharing of company 
information 

Intermediaries required 

Summary of the filing and disclosure of information 
process for limited liability companies 

Estonia 

Digital tools are available 
for filing and sharing of 
company information. 

Companies can file annual reports and 
disclose company notices directly 
through the e-reporting environment at 
the Company Registration Portal, 
available online at: 

https://ettevotjaportaal.rik.ee/ 

No intermediaries are 
required. The electronic 
process for filing and sharing 
company information can be 
carried out in a direct, end-
to-end manner. 

When filing annual reports, the e-reporting environment 
available in Estonia’s Company Registration Portal verifies 
whether the required forms and fields are adequately 
completed. Companies can input the data directly from 
accounting themselves. However, if an account submits the 
data, the shareholders or management board members who 
hold an Estonian ID-card need to sign the accounts digitally in 
order for the information to be forwarded to the Business 
Registry. 

Portugal 

Digital tools are available 
for filing and sharing of 
company information. 

Poland 

Digital tools are available 
for filing and sharing of 
company information. 

In Portugal, companies can publish 
notices in the Portuguese Official 
Gazette directly through a website, 
available at: 

http://publicacoes.mj.pt/Index.aspx 

Moreover, companies can directly file 
accounting, tax and statistical data 
directly through another dedicated 
website, available at: 

http://ies.gov.pt 

There are three electronic platforms in 
Poland that allow for filing, sharing and 
browsing of all public company 
information: (i) the electronic search 
tool and website of the National Court 
Registers, which contains information 
on legal entities; (ii) E-publications 
portal of Court and Business Gazette 
websites, which contain information on 
announcements of legal entities as 
required by Polish law (e.g. 

No intermediaries are 
required. The electronic 
process for filing and sharing 
of company information can 
be carried out in a direct, 
end-to-end manner. 

The two electronic platforms available in Portugal for filing 
and sharing of company information allow for direct, end-to-
end publication of company notices in the Portuguese Official 
Gazette and filing of tax, statistical, and accounting 
information that would otherwise have to be submitted to four 
different entities, i.e. Ministry of Justice, Ministry of Finance, 
Portuguese Central Bank, and Statistics Portugal (INE). 

No intermediaries are 
required. The electronic 
process for filing and sharing 
company information can be 
carried out in a direct, end-
to-end manner. 

In Poland, a broad scope of company information can be 
disclosed through digitals, i.e. virtually all information that 
would otherwise be submitted not through the use of digital 
tools. However, it is worth noting that according to Polish 
Law, public administrative authorities are entitled to require 
the submission of the original documents if they wish. All 
information to be filed and shared can be done so in three 
dedicated electronic platforms: (i) the electronic search tool 
and website of the National Court Registers, which contains 
information on legal entities; (ii) E-publications portal of 
Court and Business Gazette websites, which contain 

130 

 
Intermediaries required 

Summary of the filing and disclosure of information 
process for limited liability companies 

Member State 

Availability of digital 
tools for filing and 
sharing of company 
information 

Electronic platforms available for 
filing and sharing of company 
information 

announcements on liquidations and 
mergers); (iii) Central Electronic 
Register and Information on Economic 
Activity, which provides information on 
natural persons conducting business 
activities. 

Denmark 

Digital tools are available 
for filing and sharing of 
company information. 

All the required information with regard 
to company registration, dissolution, and 
mergers can be filed and disclosed in a 
direct online solution provided by the 
Danish Business Authority: 

https://www.virk.dk/ 

No intermediaries are 
required. The electronic 
process for filing and 
disclosure of company 
information can be carried 
out in a direct, end-to-end 
manner. 

United 
Kingdom 

A breakdown of 
information that can be 
filed and shared through 
digital tools in the UK is 
provided in Table 4. 

A breakdown of information that can be 
filed and shared through digital tools in 
the UK is provided in Table 4. 

A breakdown of information 
that can be filed and shared 
through digital tools in the 
UK is provided in Table 4. 

Italy 

Digital tools are available 
for filing and disclosure of 
company information. 

In Italy, a digital tool – Telemaco - 
exists for filing of the annual financial 
report, available online at: 

https://webtelemaco.infocamere.it 

Moreover, disclosure of company 
information is done directly through the 
website of the Business Registry 
(Registro imprese), which is maintained 
by the Italian Chambers of Commerce.  

No intermediaries are 
required. The electronic 
process for filing and 
disclosure of company 
information can be carried 
out in a direct, end-to-end 
manner. 

information on announcements of legal entities as required by 
Polish law (e.g. announcements on liquidations and mergers); 
(iii) Central Electronic Register and Information on Economic 
Activity, which provides information on natural persons 
conducting business activities. 

The online solution provided by the Danish Business 
Authority for the registration of companies (including limited 
liability companies) can only be accessed through a digital key 
known as NemID, which can be obtained by creating a login at 
www.virk.dk. The process is “self-service”-oriented, with 
clear guidance at every step of the company registration 
process. The same online portal can be used for filing and 
disclosure of all necessary company information in the context 
of registration, dissolution and mergers.  

A breakdown of information that can be filed and shared 
through digital tools in the UK is provided in Table 4. 

In Italy, companies can file annual reports in a direct, end-to-
end manner by using the electronic platform Telemaco. 
Company information can also be disclosed (i.e. other than 
VAT numbers and date of incorporation) in a direct, end-to-
end fashion, but through the website of the Business Registry.  

Germany 

Digital tools are available 
for filing and sharing of 

In Germany, filing and sharing of 
company information takes place 

Intermediaries are required 
for the filing and sharing of 

The filing and sharing of company information in Germany 
follows the same general procedures as those of company 

131 

 
Member State 

Availability of digital 
tools for filing and 
sharing of company 
information 

Electronic platforms available for 
filing and sharing of company 
information 

Intermediaries required 

Summary of the filing and disclosure of information 
process for limited liability companies 

company information, but 
have to be used by notaries 
rather than the companies 
themselves. 

through two channels: (i) commercial 
register; (ii) the Official Federal 
Publication Gazette (i.e. 
Bundesanzeicher). 

company information. 
Therefore, the process cannot 
be considered to be direct nor 
end-to-end. 

registration, with regard to the availability of digital tools, i.e. 
an official deed by a notary is required for certain company 
information to be filed electronically, e.g. VAT number.  

Netherlands 

Digital tools are available 
for filing and sharing of 
company information. 

Bulgaria 

Digital tools are available 
for filing and sharing of 
company information. 

France 

Digital tools are available 
for filing and sharing of 
company information. 

In the Netherlands, with the exception of 
large enterprises (i.e. micro, small and 
medium enterprises) all information 
filing of financial statements take place 
by electronic means via the website of 
the KvK, using an Eherkenning 
certificate. The KvK makes all filed 
financial statements public through 
electronic means, and displays these on 
its website. 

No intermediaries are 
required. The electronic 
process for filing and 
disclosure of company 
information can be carried 
out in a direct, end-to-end 
manner, as long as an 
Eherkenning certificate is 
used for signature 
authentication. 

Electronic filing and disclosure of 
information is possible through the 
online portal maintained by the Registry 
Agency, which is directly hosted by the 
Ministry of Justice. The scope of 
information that is allowed to be filed 
and shared using this portal 
encompasses data relating to 
registration, dissolution and mergers. 

Filing and disclosure of company 
information is made available in France 
through an online platform called 
Infogreffe, which is sources data directly 
from Commercial Registers. 

Intermediaries are required 
for the filing and sharing of 
company information, which 
must be carried out by civil 
officers within the Registry 
Agency. 

Intermediaries are required 
for the filing and sharing of 
company information. The 
available tool (i.e. Infogreffe) 
operates in an indirect way, 
sourcing information directly 
from the Commercial 
Registers. 

In the Netherlands, small, micro and medium-sized enterprises 
must file all financial statements by electronic means, through 
the website of the KvK. These have to be authenticated 
through an Eherkennin certificate. The KvK publishes all filed 
information directly on its website. 

In Bulgaria, the Commercial Register (i.e. the unified register 
which stores the whole information concerning companies) 
allows for filing and sharing of company information in an 
indirect way, i.e. data has to be entered through the Registry 
Agency portal by specialised civil officers.  

In France, the Commercial Registers collect all the relevant 
company data regarding company registration, dissolution and 
mergers. This information is then sourced by an online tool 
(i.e. Infogreffe), which publishes it. 

Luxembourg 

Digital tools are available 

Electronic filing and disclosure of 

Intermediaries are required  National-level research still ongoing  

132 

 
Member State 

Availability of digital 
tools for filing and 
sharing of company 
information 

for some aspects of filing 
and disclosure of 
information, e.g. 
amendments to 
consolidated articles of 
association. 

Electronic platforms available for 
filing and sharing of company 
information 

company information takes place 
through the use two online platforms: (i) 
one hosted by the Trade and Companies 
Register (RCS) using a digital tool 
called LuxTrust certificate; (ii) another 
dedicated specifically to filing of 
financial and accounting data - 
Plateforme électronique de Collecte des 
Données Financières – eCDF. 

Hungary 

Digital tools are available 
for some aspects of filing 
and sharing of company 
information, but have to be 
used by notaries or lawyers 
representing the 
applicant(s). 

In Hungary, all the required 
documentation about a company a 
company can be pooled together in an E-
acta. Electronic documents must be 
authenticated by means of qualified 
electronic signatures and time stamping 
(e.g. E-Szignó). However, legal 
representation is necessary to carry out 
these processes. 

Belgium 

Digital tools are available 
for filing and disclosure of 
minor information (e.g. 
company address, contact 
data). 

Digital tools are only available for filing 
and disclosure of minor information in 
Belgium (e.g. company address, contact 
data). This is done directly through the 
national business database. 

Intermediaries required 

Summary of the filing and disclosure of information 
process for limited liability companies 

for the filing and disclosure 
of some company 
information e.g. notaries have 
to file all the required 
documentation for registering 
a company in the electronic 
platform hosted by the RCS. 
Other information (e.g. 
accounting information and 
financial statements) can be 
filed directly and in an end-
to-end manner through the 
eCDF platform. 

Intermediaries are required 
for filing and sharing 
company information, e.g. 
legal representatives of the 
applicant have to file all the 
required documentation for 
registering a company, or 
making an amendment to the 
articles of association, in the 
court of registry of the 
appropriate jurisdiction. 

Intermediaries are required 
for filing and sharing of 
substantial company 
information. Therefore, the 
process cannot be considered 
to be direct nor end-to-end. 

The process of filing company information in Hungary is not 
direct nor end-to-end. For example, all the documentation 
submitted to County Courts must be countersigned by an 
attorney who possesses the required digital signature and 
time-stamp platforms. Thus, legal representation is mandatory 
with obligatory technical safeguards. However, the process 
itself is entirely digitalised. 

In Belgium, filing and disclosure of company information can 
only be carried out without the presence or interference of a 
notary for minor, non-structural information (e.g. company 
address, contact details). Conversely, for substantial filing and 
disclosure of company information, documentation must be 
submitted to the court of commerce via a notary and, in some 
cases, in paper format. 

Romania 

Digital tools are mostly not 
available for filing and 

Digital tools are mostly not available for 
filing and disclosure of company 

Intermediaries are required 
for filing and disclosing 

Digital tools are mostly not available for filing and disclosure 

133 

 
Member State 

Availability of digital 
tools for filing and 
sharing of company 
information 

Electronic platforms available for 
filing and sharing of company 
information 

disclosure of company 
information. 

information. 

Intermediaries required 

Summary of the filing and disclosure of information 
process for limited liability companies 

company information. In 
addition, the common manner 
to carry out this company law 
operation is in paper format. 

of company information.  

134 

 
 
Table 3: Overview of eID schemes used in 14 Member States (Everis study) 

eID Schemes per Member State 

Use in Company Law 

Member 
State 
Belgium 

Cyprus 

Czech 
Republic 

Denmark 

Estonia 

Belgium’s national eID scheme is based on 
the public national ID card, BELPIC. 
Nationals from other countries residing in 
Belgium also have access to a foreigner's ID 
with the same high Level of Assurance. The 
card contains three private 1024-bit RSA keys, 
one of the keys is card-specific and the two 
others are citizen-specific. The card-specific 
key (the so-called basic private key) is used to 
perform a mutual authentication between the 
ID card and the National Register. The 
National Register, is the only authority able to 
verify signatures created by this private key. 
The first citizen-specific key is used for 
signing electronic documents.The second 
citizen-specific key is used for authentication 
in eBusiness and eGovernment applications 
and is linked to a non-qualified certificate.  

Cyprus is starting to introduce implementation 
of an eID card and eSignature but does not 
have a national eID scheme at present 

Czech Republic has implemented a system, 
MojeID, which is based on online certificates 
provided by Czech accredited certification 
authorities, with a validity of 1 year. 

The NemID itself is a credit card sized card 
that provides a single use password of six 
numeric digits which is used in conjunction 
with a traditional username and password 
combination to sign onto services securely and 
electronically. It was developed as an 
improved version of a prior identification 
system and offers a simpler procedure (single 
sign in without the necessity of other hardware 
or certificates). NemID provides a uniform 
way to identify citizens, companies and 
employees to any digital service, contributing 
to significant savings. 

Besides the national ID card, another card is 
also available: the Digit-ID, giving access to 
public services online. Estonia was also one of 
the first countries to introduce a mobile eID 
scheme that is now fully operational. This 
scheme uses a certificate stored in a 
cryptographic device, to which access is 
granted to the subscriber of the certificate 
thanks to his/her username and password 
combination. An extract of the resulting 
signature is then sent to the citizen’s mobile 

-  Only by Notaries, 

along entire company 
life-cycle 
-  By company 

representatives and 
accountants when 
submitting annual 
accounts 

Cross-border 
use 
-  Belgian 

citizens can 
register a 
company in 
Estonia with 
their eiID 
-  For the rest, 

the 
requirement 
of Notaries’ 
involvement  

Non-applicable. 

Non-applicable. 

Not used in Company 
Law procedures.  

Non-applicable. 

Used by companies and 
their representatives 
(Reporter) at all stages 
of the company life-
cycle. 

eID not used for 
cross-border 
activities 

Used by companies and 
their representatives at 
all stages of the 
company life-cycle 

- The Estonian 
Company 
Registration 
Portal accepts 
Portuguese, 
Belgian, Finnish 
and Latvian ID-
cards and 
Lithuanian 
Mobile-ID; 

 
 
Member 
State 

eID Schemes per Member State 

Use in Company Law 

phone. After his/her confirmation, the 
signature is sent to the requesting application. 

Cross-border 
use 
- Additionally, 
if company 
founders do not 
have any of the 
mentioned 
national eIDs, 
Estonia offers 
the possibility to 
request e-
resident cards. 
Holders of e-
resident's card 
can sign 
documents 
digitally and log 
into every portal 
and access 
every 
information 
system that 
accepts Estonian 
ID-card. 

eID not used for 
cross-border 
activities  

Used by companies and 
their representatives at 
all stages of the 
company life-cycle 

Not used in Company 
Law procedures 

Non-applicable. 

Not used in Company 
Law procedures. 

Non-applicable. 

Finland 

France 

The Finnish Electronic Identity (FINeID) card 
is a non-mandatory electronic identity card 
that is intended to facilitate access to e-
Government services for Finnish citizens and 
permanent residents of Finland as from 18 
years. This smart card includes qualified 
certificates supporting authentication, 
encryption, and digital signature. In addition, 
health insurance information may be included 
in the ID card, replacing the KELA card. 

France does not issue eID cards. However, 
digital certificates are available through the 
French Chamber of Commerce Certification 
Authority. The duration of the authentication 
and qualified electronic signature certificates 
stored in the tokens is 3 years. 

Germany  Germany implemented a national eID system, 

nPA, based on smart cards that has been 
working from 2010. These cards are 
contactless (RFID), protected against 
unauthorised access with the PACE protocol. 
Only service providers authenticated at the 
German Federal Office for Information 
Security can have access to this card. The 
access to this eID by service providers is not 
limited by the requirement of an approval of 
BSI as the nPA. 

136 

 
 
 
eID Schemes per Member State 

Use in Company Law 

Not used in Company 
Law procedures. 

Cross-border 
use 
Non-applicable. 

Member 
State 
Greece 

Hungary 

There is no official eID card in Greece. 
However, a Digital Signature-Authentication 
Card is delivered for services based on ID card 
information. Two other eID tokens are also 
available, all being valid for a period of 5 
years. The electronic Identity provider 
"ERMIS" is connected, in preproduction, to 
eIDAS. TAXIS is the other widely used card, 
mostly used in G2G services. 

Described as a “one-stop card”, the eID 
combines personal identification including 
fingerprint data and an electronic signature – 
if the user opts for these – along with social 
security and tax identification information 

Poland 

Not available 

Portugal 

The Portuguese Citizen Card (“Cartao de 
Cidadao”) is mandatory and issued to any 
person in the population register at the age of 
6. The Portuguese Citizen Card is a physical 
identity document, which allows citizens to 
use a multichannel system in their interactions 
with services from the public and private 
sectors. 

Spain 

United 
Kingdom 

Spanish national ID card is fully operational. 
The system is complemented by more than 27 
authorised entities that issue soft certificates 
and certificates in crypto devices. In 2015 a 
new eID system called Cl@ve has been 
introduced. This system is based on username 
and password, sometimes reinforced with an 
SMS. The most used eID is the certificate 
issued by the FNMT (Royal Mint). 

The gov.uk verify service is a gateway to 
identity services offered by specialised 
companies like CitizenSafe, Digidentity and 
SecureIdentity, as well as such services 
offered as an additional product of other 
public or private entities like Barclays, Post 

137 

Not used in Company 
Law procedures. 

Non-applicable. 

eID not used for 
cross-border 
activities 

eID not used for 
cross-border 
activities 

Under the Empresa 
Online method, the 
company founders or 
their legal 
representatives need to 
authenticate their 
identity through the 
existing e-ID system 
implemented in 
Portugal. In order to 
proceed with this 
authentication, 
company founders or 
their legal 
representatives need to 
have access to an e-
reader for their citizen 
cards 

Partially used by 
company founders 
through the CIRCE 
platform; however 
notarial deeds and 
notaries’ involvement is 
required in any case.  

Not used in Company 
Law procedures. 

Non-applicable. 

 
 
 
 
 
 
 
Member 
State 

eID Schemes per Member State 

Use in Company Law 

Cross-border 
use 

Office and Royal Mail. 

138 

 
 
 
 
 
 
2. Cross-border operations (mergers, divisions and conversions) 

Section  3  of  this  Impact  Assessment  presents  the  main  problems  caused  by  the  lack  of 
rules  or  the  divergence  in  rules  between  the  Member  States  in  respect  to  cross-border 
operations  (mergers,  divisions  and  conversions).  Below  are  several  examples  and  case 
studies that provide more detailed insight into the problems concerning these operations 
and their impact on stakeholders (creditors, minority shareholders and employees). 

2.1. Cross-border mergers  

  Example: a cross-border merger between Dutch and Italian companies 

In a potential case of a merger between a Dutch and an Italian company, creditors in the 
Netherlands  can  file  an  opposition  to  the  merger  at  the  competent  court,  ask  for  a 
guarantee during one month after the announcement in the national official gazette and 
may  block  the  merger  (as  the  merger  cannot  be  executed  until  the  opposition  is 
withdrawn or the court dismisses it). In Italy, the merger is suspended for 60 days after 
the filing with the registry of the merger deed unless creditors consented to the merger, 
all non-consenting ones have been paid in full or the necessary sum was deposited in a 
bank (i.e. during that time the creditors can block the merger).  

In practice, the two different periods for creditor protection would need to be added up; 
this could lead to high delays and uncertainty. This might lead, as legal advisors 
mentioned, to companies deciding not to carry out the merger at all. 

  Examples of divergences in national creditor and minority shareholder protection 

regimes 

Creditor protection: Member States' rules diverge on the time limit for the protection of 
creditors'  claims228.  The  period  of  time  during  which  creditors  can  exercise  their  rights 
also differs229. The rules also vary on the nature of protection, e.g. in all Member States 
with  rules  creditors  can  demand  a  guarantee/security  to  guarantee  that  the  company 
resulting from a merger will meet their claims but in many countries creditors even have 
a veto right over the merger230.  

Minority  shareholder  protection:  The  duration  of  the  period  when  minority 
shareholders  can  request  protection  varies  (from  10  days  to  3  months)  and  so  does  the 
substance of the protection. In most Member States minority shareholders have a right to 
sell  their  shares  against  adequate  cash  compensation  (so-called  "exit  rights"),  e.g.  in 
Germany,  Ireland,  the  Netherlands,  but  some  countries  offer  also  a  right  to  additional 
cash compensation if the share exchange ratio is not adequate (e.g. Germany) or a right 
of investigation (e.g. in the Netherlands), and/or additional procedural safeguards (e.g. a 
75% majority is required in the general meeting to approve a cross-border merger, e.g. in 
the UK, Ireland, Germany).  

228 Member States are evenly divided between those setting a date before a certain point of time, "ex ante" 
and those setting the date after, "ex post". 
229 ranging from one month (e.g., DK, FR, EE, HU), six months (CZ) to no specific date (Lithuania or the 
UK) 
230 14 EU/EEA countries offer veto rights to creditors and 15 – not. Bech-Bruun/Lexidale, p. 54-57. 

139 

 
 
                                                            
At least five Member States have not opted to introduce minority shareholder protection 
in national law231.  

2.2. Cross-border divisions  

  Example: Direct cross-border division  

The division was carried out in order to reorganise the business of the Italian company to 
create  synergies  and  uniform  management  at  EU  level  for  part  of  the  business  of  the 
group  of  companies.  The  Italian  company  transferred  a  part  of  its  business  to  the  UK 
company (both of them being wholly owned by the same company).  

Both Italy and UK allow for cross-border divisions but do not have specific national rules 
setting out the procedure. The division was carried out by applying Italian and UK rules 
for domestic divisions and, in addition, some provisions of the CBMD, e.g. by publishing 
an excerpt of the draft terms of the cross-border division in the Italian national gazette. 
The  operation  lasted  about  five  months  and  its  cost  was  estimated  at  between  EUR 
30,000 and 100,000. The interviews undertaken for this case study showed that the lack 
of specific rules created fiscal, legal and administrative uncertainties and that the need for 
coordination  between  the  Italian  and  the  UK  formalities  was  seen  as  one  of  the  most 
difficult  aspects  of  this  operation.  Those  resulted  in  high  costs  for  specialised 
international  professional  legal  advice  and  assistance  in  addition  to  the  ordinary  fixed 
(stamp duty, Registrar of Companies fees) and notarial ones (in Italy)232. 

  Example: Indirect cross-border division through a transfer of assets and 

liabilities  

A  multinational  group  with  5,000  employees  with  activities  across  the  EU  (e.g.  in  the 
UK,  Germany,  Portugal),  Asia  and  North  America  wanted  to  restructure  its  UK  and 
German businesses to consolidate the European sales and R&D activities of the company 
in  one  European  entity  to  create  synergies  and  reduce  costs.  In  order  to  undertake  this 
restructuring,  the  company  considered  a  number  of  different  solutions  including  the 
creation of a new company in Germany and merging into it cross-border, and the transfer 
of the relevant assets and liabilities to that company. At the time of writing this impact 
assessment, the division was to be carried out through the transfer of business and assets 
and the company was still deciding whether to go ahead with this operation and was also 
considering a division involving Portugal and Germany. 

This operation was expected to take about 6 months and the typical costs were estimated 
to be:  

  between €25,000 and €100,000 for the legal fees for a business and asset transfer 
in the UK, depending on the size and complexity of the business and the role of 
legal advisers; 

231 Belgium, Hungary, Lithuania, Luxembourg and Sweden, see Bech-Bruun/Lexidale, p. 118. 
232 EY study on cross-border operations of companies,  

140 

 
 
 
                                                            
  between €40,000 and €50,000 for the costs of a cross-border division via a cross-
border merger, plus €10,000 for the cost of a UK barrister required to represent 
the UK entity in front of the UK court.233 

  Examples of divergences in national provisions to protect creditors and minority 

shareholders 

Creditor protection:  In case of domestic divisions,  in  Austria, France, Ireland, Poland 
and  the  UK  creditors  have  a  right  to  petition  the  court  for  protection.  In  Denmark,  an 
independent expert evaluates if creditors' claims would be endangered and in Italy, this 
can  be  assessed  either  in  an  expert  report  or  by  a  court.  For  cross-border  divisions,  in 
Czech Republic creditors of legal entities participating in the cross-border division who 
submitted  their  undue  claims  within  the  prescribed  timeline  are  entitled  to  seek  a 
guarantee  provided  that  it  will  be  more  difficult  to  recover  their  claims  after  division 
whereas in Denmark creditors can claim protection if the valuation expert concludes that 
the creditors would not be sufficiently protected after the division or if no such valuation 
declaration  was  made  and  creditors  of  a  Finnish  dividing  company  have  the  right  to 
object to the division if their receivables have arisen before the registration of the draft 
terms  of  division  without  any  pre-conditions  needing  to  be  met.  The  timing  to  provide 
creditor  protection  also  varies:  e.g.  according  to  the  Danish  law  on  cross-border 
divisions, creditors can claim protection up to four weeks after the general meeting and 
according to Finnish rules – within three months from the issuance of the public notice 
by  the  registration  authority  (so  before  the  division  takes  effect)  and  in  line  with  the 
Czech  cross-border  division  law  -  within  six  months  after  the  cross-border  divisions 
becomes effective. (or 3 months – in case the resulting company has its seat abroad). In 
Italy  and  Sweden,  cross-border  merger  rules  are  usually  applied  by  analogy,  and  in 
Belgium (a right to claim a security) and France – domestic division ones. 

Minority shareholder protection: There are different ways in which national rules for 
domestic  divisions  protect  shareholders  against  the  risk  when  shares  in  the  resulting 
companies  are  allocated  non-proportionately  to  the  dividing  company's  shareholders. 
Some  Member  States  (e.g.  Denmark,  Ireland,  Italy,  Poland)  allow  shareholders  to  sell 
their shares for adequate compensation, some require high majorities when voting in the 
shareholders' meeting (e.g. 90% in Austria as compared to 75% in case of proportionate 
divisions, 75% in Denmark as compared to 66% for the proportionate ones), some others 
provide for an ex-ante court scrutiny of the fairness of the terms of division (UK) or the 
possibility  to  set  aside  a  resolution  tainted  by  abuse  of  majority  power  (France).  As 
regards  cross-border  division  rules,  there  are  exit  rights  for  minority  shareholders  in 
Denmark, Czech and Finnish laws; in Italy and Sweden the rules on cross-border mergers 
(with exit rights) would be likely to be applied by analogy for cross-border divisions, and 
in  Belgium  –  the  ones  for  domestic  divisions  (where  a  special  majority  of  75%  of  the 
votes  while  half  of  the  share  capital  is  represented  will  be  required  to  decide  on  the 
division). 

Employee  protection:  In  case  of  domestic  divisions,  some  Member  States  provide  for 
protection,  e.g.  in  Belgium,  where  in  principle,  the  employment  contracts  of  the 
employees  are  transferred  automatically  to  the  receiving  company  while  maintaining 

233 EY study on cross-border operations of companies 

141 

 
 
                                                            
acquired  rights,  or  Denmark  (considerable  protection  where  a  business  changes 
ownership) or the Netherlands (a works council – if at least 50 employees – has the right 
to provide formal advice on all reorganisations of a company and could bring a dispute 
before a court if the company board goes against their advice), whereas in a number of 
others (e.g. in France, Ireland, Italy, Lithuania, Spain or the United Kingdom) there are 
no  specific  provisions  in  place.  As  regards  cross-border  divisions,  the  provisions  differ 
between  protection  based  on  information  and  procedure  in  Denmark  and  based  on 
information rights in Czech Republic and no specific rights in Finland; in Member States 
where  other  national  rules  are  applied  by  analogy,  e.g.  in  Belgium  safeguards  from 
domestic divisions would apply whereas in Sweden – the ones from cross-border merger 
rules . 

2.3. Cross-border conversions 

  Case study 1 

A company based in Luxembourg wished to transfer its registered office to Germany and 
convert into a GmbH (German private limited liability company) on foot of the Court's 
jurisprudence. In the first decision of 13th February 2012, the national court held that a 
cross-border conversion was not possible. In the second decision on the 19th June 2013, 
the  higher  court  said  that  on  the  basis  of  VALE,  a  cross-border  conversion  was  in 
principle possible but referred the case back to the lower court for further deliberations 
(Moor park I & Moor park II) 

  Case study 2 

A  French  private  limited  liability  company  (S.a.r.l.)  wanted  to  convert  into  a  German 
equivalent legal form (GmbH). The national court decided that, on the basis of the VALE 
principles, a cross-border conversion was, on principle, possible. However, similar to the 
Moorpark, it referred the case back to the lower court because it found that the statutes 
were  currently  insufficient  and  that  there  was  a  number  of  further  (though  remediable) 
obstacles. 

2.4. Conflict of laws 

The example below is linked to section 5.3 of this Impact Assessment which looks into 
the problems caused by the lack of uniform rules on conflict of laws. 

 

Illustration of the relevance of conflict of laws for corporate mobility 

An  online  retail  company234  with  a  registered  office  and  operations  in  Italy  undergoes 
financial difficulties and needs to restructure to avoid insolvency. An investor is willing 
to bring new financing needed to modernise the business, on condition that, as part of the 
restructuring plan, the company relocates its registered seat to a MS where the investor's 
rights  are  better  protected  in  the  future,  e.g.  Finland.  Main  operations  and  head  office 
remain in  Italy.  The  financing could be  jeopardised  or  become  more expensive if there 
are remaining doubts as to whether Finnish law will really be applicable to that company. 

234  27%  of  EU  companies  are  active  in  the  retail  and  wholesale  sector.  Italy  is  the  country  with  most 
registered companies, i.e. 16% of the total 23 million EU companies. 

142 

 
 
 
                                                            
ANNEX 5: EVALUATION OF THE FUNCTIONING OF RULES ON CROSS-BORDER MERGERS 

Summary  
This  evaluation  measures  the  existing  Cross  Border  Mergers  Directive235  against  the 
evaluation criteria in line with 'Better regulation' requirements. 

Main  inputs  to  the  evaluation  are  the  study  on  "The  Application  of  the  Cross-Border 
Mergers  Directive"  carried  out  by  an  external  contractor  for  the  Commission236, 
additional studies237 and two public consultations (2015 and 2017) to collect stakeholders 
views about the functioning of the cross-border mergers. 

The  analysis  results  in  an  overall  positive  evaluation  of  the  CBMD  in  terms  of 
effectiveness, efficiency, relevance, coherence and EU added value. Overall the CBMD 
has led to a significant increase in cross-border merger activity, in line with its objective 
to  facilitate  cross-border  mergers  and  increase  the  opportunities  offered  by  the  internal 
market. 

However,  despite  the  overall  positive  assessment,  the  evaluation  identifies  certain 
problems which impede the full effectiveness and efficiency of the Directive.  The main 
obstacles concern the lack of harmonisation of substantive rules in particular for creditor 
protection and minority shareholder protection as well as the lack of fast track procedures 
in  the  Directive.  Making  more  use  of  the  interconnection  of  business  registers  could 
increase synergies and thus coherence with other company law legislation. 

1. Introduction 

In  line  with  the  'Better  Regulation'  requirements,  the  purpose  of  this  evaluation  is  to 
assess  the  existing  rules  for  cross-border  mergers  under  the  CBMD  in  terms  of 
effectiveness, efficiency, relevance, coherence and EU added-value. 

This  evaluation  has  been  carried  out  in  parallel  to  the  Impact  Assessment  on  policy 
options  for  cross-border  operations  of  companies  which  includes  cross-border  mergers. 
The  conclusions  of  the  evaluation  will,  where  relevant,  feed  into  the  Impact 
Assessment.238  

235  Directive  2005/56/EC  of  the  European  Parliament  and  of  the  Council  of  26  October  2005  on  cross-
border  mergers  of  limited  liability  companies  (OJ  L  310,  25.11.2005,  p.  1);  the  directive  has  now  been 
replaced  by  Directive  (EU)  2017/1132  of  the  European  Parliament  and  of  the  Council  of  14  June  2017 
relating to certain aspects of company law (codification) (OJ L 169, 30.6.2017, p. 46). 
236 Bech-Bruun/Lexidale, Study on the application of the cross-border mergers directive (September 2013) 
http://ec.europa.eu/internal_market/company/docs/mergers/131007_study-cross-border-merger-
directive_en.pdf. 
237 Schmidt, Cross-border mergers and divisions, transfers of seat: Is there a need to legislate? Study for 
the  JURI  Committee,  June  2016.  Reynolds/Scherrer/Truli,  Ex-post  analysis  of  the  EU  framework  in  the 
area of cross-border mergers and divisions, Study for the European Parliament, December 2016. 
238  As  the  initiative  will  –  beyond  cross-border  mergers  –  not  principally  aim  at  revising  the  existing 
provisions but at introducing new provisions or complementing the existing ones, no additional evaluation 
seems warranted.  

143 

 
 
                                                            
1.1. Background 

This  section  explains  the  objectives  behind  the  introduction  of  the  cross-border  merger 
provisions and describes the regulatory situation before its introduction (i.e. the baseline 
scenario); it also presents the main building blocks of the directive. 

1.1.1. Objectives of the Cross-Border Merger Directive 

The objective of the CBMD was to facilitate mergers between limited liability companies 
incorporated  in  different  MS  and  therefore  increase  the  opportunities  offered  by  the 
Single Market (as reflected in recital 1 of the CBMD). 
The  explanatory  memorandum  of  the  2003  Commission  proposal239  identifies  "a 
significant  gap  in  company  law".  It  further  refers  to  an  "increasing  need  […]  for 
cooperation between companies from different MS" and to the fact that "companies have 
been calling for the adoption of a Community legal instrument that meets their needs for 
cooperation  and  consolidation  between  companies  from  different  MS  and  that  enables 
them  to  carry  out  cross-border  mergers".  It  also  specifies  that  "the  costs  of  such  an 
operation [cross-border merger] must be reduced, while guaranteeing the requisite legal 
certainty and enabling as many companies as possible to benefit." 

1.1.2. Baseline scenario 

Before the introduction of the CBMD, the situation among MS was diverse: a first step 
within  the  development  of  EU  rules  for  mergers  was  the  Third  Council  Directive  of 
1978240 which led to a harmonisation of the national merger provisions, i.e. for mergers 
within one Member State. 

However, cross-border mergers were possible only if the companies wishing to merge are 
established in certain MS. The explanatory memorandum of the 2003 proposal explains: 
"In  other  MS,  the  differences  between  the  national  laws  applicable  to  each  of  the 
companies which intend to merge are such that the companies have to resort to complex 
and  costly  legal  arrangements.  These  arrangements  often  complicate  the  operation  and 
are not always implemented with all the requisite transparency and legal certainty. They 
result, moreover, as a rule in the acquired companies being wound up - a very expensive 
operation".241 In more detail, according to the 2013 Study242, prior to the introduction of 
the  CBMD,  companies  had  to  have  recourse  alternative  methods:  forming  a  European 
Company  (SE)  by  merger  (which  implies  a  cumbersome  procedure);  cross-border 
conversion  and  subsequent  merger  under  domestic  merger  laws  (only  possible  when 
cross-border  conversions  are  allowed);  "non-harmonised"  merger  on  the  basis  of  the 

239 COM(2003)703. 
240Third  Council  Directive  78/855/EEC  of  9  October  1978  based  on  Article  54  (3)  (g)  of  the  Treaty 
concerning  mergers  of  public  limited  liability  companies,  OJ  L  295,  20.10.1978,  codified  by  Directive 
2011/35/EU. 
241  The  Bech-Bruun/Lexidale  study  mentions,  for  instance,  that  companies  could  set  of  a  European 
Company that would incorporate both companies, or carry out a cross-border seat transfer followed by a 
domestic merger. Such a process, however, was not clearly regulated, was costly in terms of setting up an 
SE, and added an artificial construct—the SE—which might not have been oriented with the business goals 
of the companies 
242 Bech-Bruun/Lexidale, 2013, p. 35 et seq. 

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jurisprudence  of  the  Court  of  Justice  (Case  C-411/03243).  At  the  time,  according  to  the 
2013 Study, only AT, F, IT, LT, LUX, PT and ES allowed procedures for cross-border 
mergers without using methods such as setting up an SE.  

Overall,  the  2013  study  found  that  cross-border  mergers  were  only  possible  in  17 
Member  States244.  Also,  as  identified  by  the  2013  Study,  pre-existing  arrangements  for 
cross-border  mergers  did  not  provide  comprehensive  protection  for  creditors  and 
minority shareholders. The study names LUX as an example for such a situation245. 

The  decision  of  the  European  Court  of  Justice  in  the  above-mentioned  case  C-411/03, 
which  stated  that  national  authorities  could  not  refuse  a  merger  between  a  company 
registered  in  one  Member  State  and  a  company  registered  in  another  Member  State 
because this would be incompatible with the freedom of establishment, lead to increasing 
demand for the harmonisation of cross-border mergers at EU level.  

1.1.3. Main provisions of the directive 

The  Commission  proposal  was  presented in  2003  and the directive  was  adopted  by the 
co-legislators  in  2005.  The  CBMD  provides  for  rules  enabling  cross-border  mergers  of 
limited liability companies incorporated in different MS. 

The CMBD applies to mergers of limited liability companies provided that at least two of 
them are governed by the laws of different MS (Article 1). 

The CMBD specifies certain conditions for carrying out a merger (Article 4), for instance 
that cross-border mergers shall only be possible between types of companies which may 
merge under the national law of the relevant Member States, and that a company taking 
part  in  a  cross-border  merger  shall  comply  with  the  provisions  and  formalities  of  the 
national law to which it is subject. 

The directive also sets out the precise procedure to be followed to carry out cross-border 
mergers, including: 
  drawing  up  of  the  common  draft  terms  of  the  merger  by  the  management  or 
administrative organ of each of the merging companies (Article 5) which contain, for 
example: names and registered offices of the merging companies and those proposed 
for  the  resulting  company;  information  on  the  impact  of  the  merger  on  shares  and 
securities  (ratio  applicable  to  the  exchange  of  securities  or  shares;  terms  for  the 
allotment of securities or shares); likely repercussions of the cross-border merger on 
employment; statutes of the company resulting from the merger; information on the 
procedure by which arrangements for the involvement of employees are determined. 
The CMBD also requires the publication of the common draft terms (Article 6); 
  preparation  of  a  report  by  the  management  of  the  merging  companies  (Article  7) 
explaining the economic and legal aspects and impact of the proposed mergers for the 
benefit  of  both  members  and  employees;  this  report  is  to  be  made  available  to  the 
members and employees/their representatives of the merging companies; 

243 Case C-411/03 SEVIC [2005] ECR I-10825. 
244 LUX, BE, NL, DK, DE, UK, SE, FI, EE, LV, PL, CZ, SK, HU, RO, BG and EL. 
245 Bech-Bruun/Lexidale, 2013, p. 39. 

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  preparation  of  an  independent  expert  report  (Article  8)  on  the  implications  of  the 

merger, stating at least whether the share exchange ratio is fair and reasonable; 

  approval  by  the  general  meeting  of  each  of  the  merging  companies  of  the  common 

draft terms, after taking note of the respective reports (Article 9). 

The  directive  allows  a  simplified  procedure  (Article  15)  in  two  instances:  i)  where  a 
merger with a whole owned subsidiary is carried out or ii) where a cross-border merger 
by acquisition is carried out by a company which holds 90% or more but not all of the 
shares  and  other  securities  conferring  the  right  to  vote  at  general  meetings  of  the 
company or companies being acquired. 

The  CBMD  lays  down  a  two-step model  of  legal  scrutiny:  each  MS must  designate  an 
authority  competent  to  issue  a  pre-merger  certificate  confirming  that  the  pre-merger 
formalities  have  been  properly  completed  (Article  10)  and  an  authority  to  check  the 
legality of the resulting merger (Article 11). The law of the MS governing the company 
resulting  from  the  merger  shall  determine  the  date  of  entry  into  effect  of  the  merger 
(Article 12).  

The  CBMD  also  determines  the  consequences  of  the  cross-border  merger  (Article  14) 
which include: 
 
 

the companies being merged ceasing to exist,  
the  transfer  to  the  newly  merged  company  of  all  the  assets  and  liabilities  of  the 
merging companies,  
the  members  of  the  merging  companies  becoming  members  of  the  new  merged 
company.  

 

Provisions  on  the  protection  of  stakeholders  involved  (employees,  creditors,  minority 
shareholders)  are  also  included,  however  with  a  varying  degree  of  harmonisation:  as 
regards  creditor  and  minority  shareholder  protection,  the  directive  only  contains 
minimum standards. In detail: 

  Employee participation: Not all MS have the system of employee participation and 
among  those  MS  which  have  such  a  system,  the  rules  vary  to  a  large  extent  (for 
details  see  Annex  10).  Therefore  it  was  very  difficult  to  agree  which  employee 
participation rules, if any, should apply after the cross-border merger. As a result of 
the  legislative  negotiations,  the  CBMD  followed  the  solution  on  employee 
participation in the Directive on the European Company (SE)246, but not entirely: the 
general  principle is  that  the  national  law  governing  the company  resulting  from  the 
cross-border  merger  applies  and  that  a  negotiation  procedure  applies  under  certain 
conditions.  These  conditions  include,  for  example,  at  least  one  of  the  merging 
companies has an average number of employees exceeding 500 and operating under 
an employee participation system.  

Contrary to the employees' participation rules in the SE, the CBMD provides that the 
rules on employee participation shall follow the laws of the MS where the registered 

246 Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a European company 
with regard to the involvement of employees. 

146 

 
 
                                                            
office  of  the  successor  company  is  situated.  Since  this  could  invite  for  forum 
shopping,  the  Directive  includes  three  exceptions  to  this  general  rule  in  order  to 
guarantee  the  status  quo  in  terms  of  employee  participation.  If  any  of  these 
exceptions  apply  (basically  there  must  some  form  of  employee  participation  before 
the merger; one example is that at least one of the merging companies has an average 
number of employees exceeding 500 in the six months before the publication of the 
draft terms of merger, and is operating under an employee participation system), the 
management  can  either  negotiate  with  employees  a  bespoke  solution  on  the 
participation  or  apply  standard  rules  (relating  the  composition  of  the  body 
representative  to  employees,  its  competence  and  powers,  and  the  functioning  of 
employee  participation)  provided  by  Directive  2001/86/EC247.  The  percentage  of 
employees  required  to  have  been  previously  covered  by  an  employee  participation 
system is one third (compared to one quarter in the SE rules). 

  Creditor protection: Creditor protection is relevant in order to diminish the risk that 
creditors will be in a worse financial situation than they were before the merger. Such 
a risk can materialise because the liabilities of the successor company would exceed 
its assets or because the new applicable law could negatively impact creditors.248 The 
general rule of the CBMD (Article 4) provides that a company taking part in a cross-
border merger shall comply with the provisions and formalities of the national law to 
which it is subject. In accordance with the Directive on domestic mergers249 national 
laws have to provide "adequate protection" for the interests of creditors.  

  Minority shareholder protection: The CBMD requires that a company, which is part 
of a cross-border merger, has to inform the minority shareholders about the intended 
merger process. In order to make sure that they can make an informed decision in the 
general  meeting,  the  CBMD  sets  out  that  the  minority  shareholders  have  to  be 
provided with the draft terms of the merger, the merger report and the experts' report. 
However, those information requirements do not provide substantive protection to the 
minority  shareholders.  The  CBMD  does  not  require  MS  to  provide  measures  to 
provide  substantive  protection  rights  for  minority  shareholders,  but  it  allows  MS  to 
adopt provisions designed to ensure appropriate protection for minority shareholders. 

2. Evaluation questions 

In line with the Commission Better Regulation framework, the evaluation of the existing 
regime for cross-border mergers under the CBMD addresses the following questions: 

Effectiveness: 

To what extent have the objectives of the CBMD been achieved? If not achieved, what 
factors hindered their achievement? 

247 Annex to Directive 2001/86/EC. 

248 One example of such an effect is in insolvency laws, where, under the European Insolvency Regulation, 
the  jurisdiction  of  insolvency  proceedings  is  determined  by  the  location  of  the  registered  office  and  the 
center of main interest.  
249  Directive  2011/35/EU  of  the  European  Parliament  and  of  the  Council  of  5 April  2011  concerning 
mergers  of  public  limited  liability  companies,  OJ  L  110,  29.4.2011;  the  directive  has  been  repealed  and 
replaced by Directive (EU) 2017/1132. 

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Efficiency: 

To  what  extent  have  the  rules  of  the  existing  CMBD  been  cost  effective?  To  what 
extent are the costs of implementing the rules proportionate to the benefits achieved? 

Relevance: 

To what extent are the CBMD rules still relevant for meeting their underlying policy 
objectives, and do these objectives still correspond to policy needs? 

Coherence: 

To what extent are the CBMD rules internally coherent? To what extent are the CBMD 
rules coherent with other EU acts with similar objectives? To what extent is the CBMD 
coherent with wider EU policy?  

EU added value: 

What is the additional value resulting from the CBMD, compared to what could be 
achieved by MS at national level? 

2.1. Method of evaluation 

2.1.1. Sources 

The evaluation has been carried out on the basis of information and data collected from 
several sources, in particular the study on "The Application of the Cross-Border Mergers 
Directive" carried out by an external contractor for the Commission in 2013250, feedback 
from  public  consultations  carried  out  in  2015  and  2017  to  collect  stakeholders’  views 
about the functioning of the cross-border merger as well as studies carried out for other 
EU institutions251. In detail: 

  The study on "The Application of the Cross-Border Mergers Directive" was carried 
out by an external contractor for the Commission in 2013252. Article 18 of the CBMD 
provided for a review of the Directive five years after the final date of transposition 
"in light of the experience acquired in applying it". The contractor consulted (both by 
distribution  of  questionnaires  and  in  one-on-one  interviews)  M&A  lawyers  and 
academics from every EU and EEA MS,  hundreds of legal advisors who have been 
involved  in  cross-border  mergers,  as  well  as  other  stakeholders,  such  as  executives 
and  employees.  The  contractor  also  conducted  interviews  with  public  agencies  and 
private  entities  involved  in  the  cross-border  mergers  procedure,  such  as  national 
registries,  courts,  governmental  departments  responsible  for  the  transposition  of  the 
Directive, accountants, and tax advisors.  

  The  2015  public  consultation  concerned  cross-border  mergers  and  divisions  and  its 
objective  was  to  gather more in-depth  information  on the existing barriers in cross-
border operations, on changes that stakeholders believed were needed in the existing 

250 Bech-Bruun/Lexidale, 2013. 
251 Schmidt, Cross-border mergers and divisions, transfers of seat: Is there a need to legislate? Study for 
the  JURI  Committee,  June  2016.  Reynolds/Scherrer/Truli,  Ex-post  analysis  of  the  EU  framework  in  the 
area of cross-border mergers and divisions, Study for the European Parliament, December 2016. 
252 Bech-Bruun/Lexidale, 2013. 

148 

 
 
                                                            
rules and on costs that could be saved thanks to EU level action. 151 responses were 
received  from  27  MS,  1  EEA  country  and  a  couple  of  third  countries.  Most  replies 
came from Germany followed by Spain and France. The respondents were i.e. public 
authorities,  academia,  EU-wide  and  national  business  organisations,  companies  and 
employee representatives.  

The overall results showed that the respondents asked for an expansion of the scope 
of the CBMD, a harmonisation of  creditor  protection (88% of the respondents)  and 
minority shareholder protection (66% of the respondents) and for an implementation 
of a "fast track" cross-border merger procedure (62% of the respondents). As to the 
employee participation, the respondents had diverging views.  

  The 2017 public consultation, entitled "EU Company law upgraded: Rules on digital 
solutions and efficient cross-border operation", was launched on 10th May 2017 and 
ended on 6 August 2017. Its aim was to collect input from stakeholders on problems 
in  company  law,  gather  what  evidence  they  have  on  such  problems  and  hear  their 
possible solutions on how to address the problems at EU level.  

There  were  207  responses  submitted  online  through  the  EU  Survey  portal  and  2 
responses  submitted via  email.  The MS with  the  most  number of contributions was 
Germany  followed  by  Austria  and  Belgium.  Annex  2  contains  a  summary  of 
stakeholder responses to 2017 public consultation (see point specifically dealing with 
cross-border mergers). 

  The  evaluation  further takes  into  account  the  study  carried out  by  Professor  Jessica 
Schmidt  for  the  European  Parliament  in  2016  "Cross-border  mergers  and  divisions, 
transfers of seat: Is there a need to legislate?". The study aims analyses this question 
mainly  on  the  basis  of  existing  literature  and  commentary,  including  by  legal 
practitioners and academics. 

  The study "Ex-post analysis of the EU framework in the area of cross-border mergers 
and divisions" by Reynolds/Scherrer/Truli was carried out in 2016 to accompany the 
Legal Affairs Committee's implementation report on cross-border mergers. It is based 
on existing information and data. 

2.1.2. Data limitations 

The  data  collection  and  analysis  performed  revealed  a  number  of  intrinsic  limitations, 
stemming from, for example: 

  Given  the  limited  number  of  cross-border  mergers  per  year,  interviews  with 
stakeholders who explained in a more qualitative way the benefits and drawbacks 
of  the  CBMD  are  crucial  for  the  evaluation.  This  applies  all  the  more  where  it 
comes to needs going beyond the current directive. The 2013 study is built on in-
depth  interviews  from  a  broad  range  of  interested  stakeholders,  which  gives 
assurances that input from different background has been taken into account. The 
2015  and  2017  public  consultations  were  open  to  the  general  public.  Still,  the 
answers received reflect – as in all public consultations –the views of a sample of 
stakeholders  that  usually  have  a  stake  in  the  issue,  and  not  those  of  the  entire 
population or a representative sample.  

149 

 
 
 

It  has  been  extremely  difficult  to  collect  information  on  the  costs  associated  to 
carrying  out  cross-border  mergers.  One  of  the  contractors253  mentioned  factors 
such as involvement of the merging companies in the regulated financial market, 
shareholding  structure,  participation  of  an  auditor,  employee  participation 
procedures,  difficulty  to  distinguish  direct  costs  (notary  fees,  state  duties, 
translation  costs)  as  making  data  collection  difficult.  Also  many  of  the  relevant 
company internal data are confidential. Where possible, available anecdotal data 
has been used to illustrate the costs of cross-border merger. 

  As regards the time period of the evidence collection, the 2013 study is based on 
interviews  held  before  2013.  Where  possible,  the  study  results  have  been 
supplemented by more recent data from the additional sources available. Next to 
the  consultations  carried  out  in  2015  and  2017,  also  policy  discussions  with 
Member States and stakeholders were carried out in 2017. 

The  evaluation  has  been  carried  out  on  the  basis  of  the  best  available  data.  Lack  of 
quantitative  data  has  been,  to  the  extent  possible,  counter-balanced  with  qualitative 
assessment and considerations. 

2.2. Implementation 

MS had to transpose the directive into their national laws by 2007. However, certain MS 
only  finished  the  transposition  process  as  late  as  2009.  Furthermore,  due  to  technical 
difficulties  encountered  by  certain  national  authorities  the  first  cross-border  mergers  in 
these MS were not possible before 2012254. 

In  order  to  be  able  to  assess  the  functioning  of  the  Directive,  in  particular  in  terms  of 
effectiveness  and  efficiency,  this  section  explains  how  MS  have  transposed  those 
provisions  of  the  directive  into  their  national  legislation  which  are  relevant  for  this 
evaluation  as  they  raise  questions  are  regards  the  compliance  of  the  directive  with  the 
evaluation criteria (see below under point 2.3.).  

  Scope  of  application:  Although  the  Directive  applies  only  to  limited  liability 
companies,  certain  MS  have  expanded  the  scope  to  cover  other  company  law 
forms.255  One  quarter  of  MS  has  expanded  the  scope  to  additional  company  forms 
(i.e.  partnerships),  such  as  Belgium,  Italy  and  the  UK.256  The  UK  included  general 
unlimited  companies  and  unregistered  companies  into  the  scope  of  cross-border 
mergers.  There  have  also  been  extensions  of  scope  by  some  MS  to  cross-border 
divisions.257 Although the CBMD258 states that a merger involves the transfer of all 
assets  and  liabilities  of  companies  "being  dissolved  without  going  into  liquidation", 

253 EY Study on cross-border operations of companies, p. 55. 
254 For a summary of the transposition in Member States and its timing see Bech-Bruun/Lexidale, 2013, p. 
89 et seq.  
255 Bech-Bruun/Lexidale, 2013, p. 27. 
256 Idem p. 27, 98. 
257  e.  g.  Belgium,  France,  Romania,  Spain,  and  Finland,  see:  Bech-Bruun/Lexidale,  Study  on  the 
Application of the Cross-border Mergers Directive, September 2013, 102. 
258 Article 2(2) CBMD.  

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most  MS  have  decided  also  to  include  companies  in  liquidation.  Only  5  MS  have 
excluded companies in liquidation from carrying out cross-border mergers259.  

  Employee  participation:  Regarding the transposition of this procedure into  national 
law,  although  MS  have  transposed  the  general  concept  including  the  special 
negotiating  body  and  the  standard  rules,  a  considerable  number  of  them  have 
modified the procedure (i.e. not transposing certain provisions or by transposing them 
differently). 

  Creditor protection: MS have adopted divergent measures leading to different level 
of  "adequate  protection"  guaranteed  by  the  MS.  The  main  differences  between  MS' 
rules  concern  the  date  when  the  protection  commences,  its  duration  and  its 
consequence  as  well  as  the  procedure  itself.  MS  have  adopted  two  different 
approaches  based  on  ex-ante  and  ex-post  models.  The  former  model  (ex-ante) 
provides for protection during the period starting with the publication of the common 
draft terms prior to the general shareholders meeting and ending at the point at which 
the  cross-border  merger  becomes  legally  effective.  The  latter  model  (ex-post) 
comprises mechanisms available after the cross-border merger has taken effect. There 
are  also  differences  regarding  the  substance  of  the  protection  offered  to  creditors. 
While in certain MS creditors are entitled to veto the merger, others simply guarantee 
a  payment  to  them.  In  practice,  the  ex  ante  model  is  often  coupled  with  a  veto  for 
creditors  whereas  the  ex  post  approach  is  not.  More  examples  of  divergences  in 
national creditor protection regimes are laid out in detail in Annex 4, point 2.1. 

  Minority shareholders' protection: Most of the MS have made use of this provision, 
but the rules and procedures differ. Depending on the MS, the procedure is initiated 
either  at  the  general  meeting  or  on the  date  of  the  registration  or  publication  of  the 
registration of the merger with the national registry.260 Furthermore, the substance of 
the  protection  in  the  MS  is  very  diverse  ranging  from  no  special  rules  to  rather 
elaborate protection. There are MS that provide minority shareholders with exit rights 
against  cash  compensation.  More  examples  of  divergences  in  national  minority 
shareholder protection regimes are laid out in detail in Annex 4, point 2.1. 

2.3. Answers to the evaluation questions 

2.3.1. Effectiveness 

This  subsection  assesses  to  what  extent  the  objectives  of  the  CBMD  –  facilitating 
mergers  of  limited  liability  companies  incorporated  in  different  MS  through  cost-
reduction  and  increased  legal  certainty  and  thus  increasing  the  opportunities  offered  to 
companies by the Single Market – have been achieved and if not, what were the factors 
that hindered their achievement. 
It has been found in the 2013 study261 that following the introduction of the cross-border 
merger rules in all MS on the basis of the CBMD, the number of cross-border mergers in 
the  EU  has  increased,  counteracting  a  general  trend  of  decreasing  merger  activity. 

259 Cyprus, Hungary, Romania, Slovakia, and the UK, see: Bech-Bruun/Lexidale 2013, p. 108 . 
260 Bech-Bruun/Lexidale, 2013, p. 48. 
261 Bech-Bruun/Lexidale, 2013, p. 4 

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Between 2008 and 2012, merger activity has increased by 173 percent, from 132 CBMs 
in 2008 to 361 in 2012, indicating that the new procedure has opened up a bottleneck in 
economic  activity  within  the  EU  and  EEA  by  improving  cross-border  mobility.  Recent 
data  collected  through  the  business  register  interconnection  results  in  estimations  of 
around  500  cross-border  mergers  carried  out  in  2017262  which  confirms  the  positive 
trend. 

Stakeholders (such as law firms, business registers and trade unions) interviewed for the 
2013  study  welcomed  the  new  procedures,  the  procedural  simplification  and  reported 
lower costs and shorter timeframes due to the harmonised framework263.  

In particular, it was found that the CBMD contributed to the cost savings for companies 
by264:  providing  for  procedural  simplification  (i.e.  savings  of  unnecessary  procedural 
costs linked to the alternative procedures that had been chosen by companies before the 
introduction  of  the  CBMD);  allowing  that  more  rational  business  decisions  were  taken 
(seizing business opportunities cross-border); lower agency costs (i.e. costs incurred from 
asymmetric  information  within  the  merging  companies,  savings  would  here  be  due  to 
standardized information requirements in the draft terms of merger and the management 
report). The introduced rules  were considered to provide sufficient  clarity, in  particular 
on procedural aspects, which enabled to cut costs of legal advice and the costs of lengthy 
court  proceedings  or  other  unnecessary  operations  (especially  issuing  pre-merger 
certificates by relevant authorities and publishing common draft terms of the cross-border 
mergers on companies' web-site).  

Based  on  the  findings  of  the  evaluation  study  and  the  stakeholder  consultations,  it  can 
therefore  be  concluded  that  the  Directive  has  overall  met  its  objective  in  facilitating 
cross-border mergers across the EU. The Directive did not lay down, at the time when it 
was adopted, other objectives than cutting costs and facilitating the cross-border mergers 
(it just referred to the protection of members and others).  

However,  findings  from  the  implementation  in  MS,  the  2013  application  study  and  the 
various  consultations  undertaken  raise  questions  as  regards  the  effectiveness  of  some 
provisions of the directive: 

  Scope:  Taking  into  that  some  MS  have  implemented  the  CBMD  for  a  larger  scope 
than the one foreseen in the directive, and that some of the respondents to the 2015 
and 2017 consultations, some researchers265 and the European Parliament in its June 
2017  resolution266  asked  for  the  scope  of  the  CBMD  to  be  broadened  to  cover 
partnerships and cooperatives, it could be questioned whether the effectiveness of the 

262  Current  statistics  for  BRIS  have  collected  from  11  countries  the  information  that  there  have  been  55 
cross-border mergers in the past 4 months. This leads to an estimation of 55 x 3 = 165 mergers/year. 11 
countries from which information is available equal about 1/3 of all countries using BRIS (EU+EEA). This 
leads to an estimation of 165 x 3 = 495 mergers/year. 
263 Bech-Bruun/Lexidale, 2013, p. 5-8, 47. 
264 Bech-Bruun/Lexidale, 2013, p. 46-48. 
265 J. Schmidt, EP Study 2016, p. 17. 
266 http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P8-TA-2017-
0248&language=EN&ring=A8-2017-0190  

152 

 
 
 
 
                                                            
directive  could  be  increased  by  further  enlarging  the  scope,  e.g.  to  all  companies 
within the meaning of Article 54 TFEU267. 

However, in practice, such alternative forms are rarely involved in mergers. The data 
on  mergers  which  have  taken  place  reveals  that  66  percent  of  the  acquiring 
companies  and  70  percent  of  the  merging  companies  involved  in  cross-border 
mergers  were  private  limited  liability  companies,  whereas  32  percent  of  acquiring 
companies  and  28  percent  of  the  merging  companies  involved  in  cross-border 
mergers were public limited liability companies268. Also, the 2013 study found that, 
based on the feedback from stakeholders, there does not seem to be a demand for a 
revision  of  the  directive  in  that  regard269.  Recent  informal  consultations  in  2017  in 
policy discussions with stakeholders and Member States confirmed this. 

It can therefore be concluded that an extension of the scope of the directive would not 
add to its effectiveness with a view to reaching its policy objective. 

  Creditor  protection:  As  described  in  subsection  2.2.  ("Implementation"),  MS  have 
adopted  very  divergent  approaches  on  the  basis  of  the  existing  CBMD  as  regards 
creditor  protection.  The  divergence  between  national  rules  can  make  it  difficult  or 
impossible to meet certain steps of the procedure. For instance, problems arise when 
a  company  situated  in  a  Member  State  where  the  creditor  protection  period  starts 
prior to the general meeting which is due to approve the draft merger terms intends to 
merge  with  a  company  in  another  Member  State  where  the  date  starts  after  the 
general meeting. Also, it might be impossible for the merging companies to meet the 
6-month deadline laid down in the CMBD for submission of pre-merger certificates if 
due to different creditor protection periods such a certificate has not been yet issued 
in one of the MS concerned270. 

Against this background, the 2013 application study found a number of complexities 
in the current regime on creditor protection which were reported by stakeholders as 
obstacles271,  such  as  the  starting  date,  duration,  consequences  and  procedures  as 
regards creditor protection. Also in the 2015 public consultation, 80% of respondents 
were in favour of harmonising the rules on creditors' rights including a preference for 
granting  guarantees/securities  to  creditors  and  for  having  the  creditor  protection 
period  start  before  the  cross-border  merger  becomes  effective  (‘ex-ante’).  This  is 
confirmed  by  the  results  of  the  2017  public  consultation.  All  national  public 
authorities who replied were of the opinion that creditor protection measures should 
be  addressed.  80  %  felt  it  important  to  harmonise  procedural  as  well  as  material 
aspects  of  creditor  protection.  Also businesses  raised  the  need  for  harmonised rules 
for creditor protection, while other stakeholders, such as trade unions preferred other 
measures  which  related  more  directly  to  rights  of  employees.  Also  researchers272 
confirm that the resulting diverging national regimes and timeframes have proved to 

267  See  also  the  2003  Commission  proposal  which  aims  at  "enabling  as  many  companies  as  possible  to 
benefit". 
268 Bech-Bruun/Lexidale, 2013, p. 101.  
269 Bech-Bruun/Lexidale, 2013, p. 98. 
270 Examples from Bech-Bruun/Lexidale, 2013, p. 54. 
271 Bech-Bruun/Lexidale, 2013, p. 52 et seq. 
272 J. Schmidt, EP Study 2016, p. 18,. 

153 

 
 
 
 
                                                            
be a major obstacle in practice and that a higher degree of convergence would likely 
resolve most of the difficulties273. 

Overall,  the  conclusion  can  be  drawn  that  the  lack  of  substantive  harmonisation  as 
regards creditor protection in the current CBMD hampers the full achievement of the 
policy objective of facilitating cross-border mergers. 

  Minority  shareholder  protection:  In  view  of  divergent  transposition  of  minority 
shareholder protection  as  described in  subsection  2.2.  ("Implementation"),  it  can  be 
the  existing  CBMD  (no  substantive 
questioned  whether 
harmonisation) hampers the effectiveness of the existing regime. Taking into account 
that a minority shareholder can own up to nearly half of the shares of the company, 
the protection regime can be very costly and requires capital reserves if compensation 
has  to  be  paid,  which  illustrates  the  importance  of  this  element  for  carrying  out  a 
cross-border merger.  

the  approach 

in 

In  interviews  for  the  2013  application  study,  business-related  stakeholders  regard 
minority shareholder protection as a concern in cross-border mergers. In this context, 
stakeholders  also  stated  that  if  issues  such  as  potential  minority  shareholders 
invoking protections are not rectified in advance, the merger will not be carried out 
because it would involve too many uncertainties.274 In the 2015 consultation, 65% of 
respondents  who  expressed  an  opinion  were  in  favour  of  harmonising  the  rights  of 
minority  shareholders.  Also  in  the  most  recent  2017  public  consultation,  MS  and 
businesses  considered  the  issue  of  the  protection  of  minority  shareholders  as 
important. Researchers275 also confirm deficiencies in the current regime.  

It  can  therefore  be  concluded  that  the  lack  of  current  substantive  harmonisation  of 
minority shareholder protection rules creates an obstacle to the current CBMD fully 
reaching its potential with a view to facilitating cross-border mergers. 

The conclusion can therefore be drawn that while the objective of the CBMD has been 
overall achieved, remedying the current lack of substantial harmonisation in particular as 
regards  creditor  protection  and  minority  shareholder  protection  could  increase  the 
effectiveness of the instrument. 

2.3.2. Efficiency 

This  subsection  addresses  the  question  to  what  extent  the  rules  of  the  existing  CMBD 
have  been  cost  effective  and  to  what  extent  the  costs  of  implementing  the  rules  are 
proportionate to the benefits achieved.  

The  benefits  of  cross-border  merger  rules  consist  in  more  legal  certainty,  more 
predictability, less unnecessary cost for companies (see also above in subsection 2.3.1.). 
More legal certainty means faster work for public authorities involved in such operations 
(courts,  notaries,  business  registers),  especially  as  the  law  applicable  in  most  cases  is 

273 Reynolds/Scherrer/Truli, Ex-post Analysis 2016, p. 41. 
274 Bech-Bruun/Lexidale, 2013, p. 69. 
275 J. Schmidt, EP Study 2016, p. 20; Reynolds/Scherrer/Truli, Ex-post Analysis 2016, p. 42. 

154 

 
 
                                                            
clear-cut. As stated above, since the implementation of the rules, there has been a 173% 
increase of cross-border mergers showing clearly the benefit of the new rules. 

Cost  savings  identified  in  stakeholder  interviews  for  the  2013  study276  relate  to 
procedural  simplification,  lower  agency  costs,  lower  costs  of  legal  advice  and  business 
efficiency  gains  (for  more  details  of  the  description  of  cost  savings  see  above  under 
2.3.1).  

The procedures set up under the CBMD also create compliance costs for companies (e.g. 
for  drawing  up  the  draft  terms  of  cross-border  mergers,  the  report,  costs  for  the 
independent  expert,  for  arrangements  relating  to  employee,  creditor  and  minority 
shareholder  protection).  While,  as  explained  under  point  2.1.2,  it  is  difficult  to  obtain 
data as regards the concrete costs for carrying out a cross-border merger procedure, it is 
important to note that compliance costs only arise for those companies which carry out a 
cross-border merger procedure. 

At  the  same  time,  the  described  increase  in  cross-border  merger  activity  and  the  clear 
stakeholder  feedback  that  the  CBMD  has  generated  cost  savings  demonstrates  that  any 
compliance costs are not a deterrent to cross-border activity, but stay below the above-
described cost savings. 

However, sources used for the evaluation suggest that the disproportionality of such costs 
with a view to the benefits achieved requires closer examination as regards the following 
issues: 

  Creditor  and  minority  shareholder  protection:  It  has  been  found  that,  due  to  the 
divergent  national  rules,  companies  often  face  costly  legal  advice  and  a  very  long 
delay to complete a merger due to the divergent national rules. For instance, while a 
simple cross-border merger takes between 2 and 4 months, some mergers can take up 
to 7 months depending on the MS involved277. This can be due to different protection 
periods  for  stakeholders  in  different  MS  (as  described  above  in  subsection  2.2. 
"Implementation"). The stakeholder views on the effectiveness of the current regime 
on  creditor  and  minority  shareholder  protection  quoted  under  3.2.1.  as  regards 
effectiveness  of  these  provisions  are  also  relevant  with  a  view  to  its  efficiency.  As 
regards creditor and minority shareholder protection, the current regime is therefore 
not efficient. 

  Only limited possibilities for simplified procedure: Some stakeholders and research 
argue278 that – beyond the existing Article 15 CBMD – there are other circumstances 
where meeting the requirements of the Directive is timely and costly and therefore a 
"fast-track"  procedure  would  be  needed.  For  instance,  drawing  up  a  management 
report  is  considered  an  unnecessary  burden  in  cases  where  the  merging  companies 
have  no  employees  or  the  shareholders  agree  not  to  require  that  such  a  report.  It  is 
estimated  that  drawing  up  such  a  report  can  amount  to  up  to  between  €5,000  and 
8,000  in  Italy  and  that  that  legal  advice  for  drawing  up  the  necessary  reports  for  a 

276 Bech-Bruun/Lexidale, 2013, p. 46. 
277 Bech-Bruun/Lexidale, 2013, p. 133. 
278 Bech-Bruun/Lexidale, 2013, p. 85-86. 

155 

 
 
                                                            
cross-border  operation  can  sum  up  to  €  8.000-12.000  in  Belgium.279  In  the  2015 
consultation,  62%  of  respondents  who  expressed  an  opinion  were  in  favour  of 
introducing  a  “fast  track”  cross-border  merger  procedure.  In  the  2017  consultation, 
business organisations raised the simplification of rules (fast-track procedure) as one 
of  the  points  to  be  addressed  in  the  existing  CBMD.  Also  organisations  of  legal 
professions raised this point. 

Data  and  stakeholder  input  therefore  lead  to  the  conclusion  that  in  certain 
circumstances  –  where  it  would  not  be  necessary  to  protect  stakeholders  through  a 
fully-fledged  cross-border  merger  procedure  –  the  described  costs  and  burdens  are 
unnecessary where it would not be required for protecting the stakeholders concerned 
to carry out a fully-fledged cross-border mergers procedure. 

  Employee  participation  rules:  Companies  also  consider  the  employee  participation 
procedure  in  the  CBMD  too  complex  and  leading  to  unnecessary  costs  and  delays 
within  the  merger.280  In  particular,  the  negotiations  on  the  employee  participation 
system may take more than 6 months. On the other hand, trade unions consider that 
the  existing  rules  on  employee  participation  do  not  give  enough  protection  for 
employees,  i.e.  the  procedural  requirements  should  be  increased.  Also,  a  lack  of 
information to employees has been observed281. 

Diverging  perceptions  on  the  functioning  of  the  employee  participation  rules  have 
been  confirmed  by  the  2017  consultation  where  business  organisations  raised  the 
need for simplified employee protection rules whereas trade unions were concerned 
with  strengthening  employee  participation.  Stakeholder  views  are  therefore  not 
conclusive  as  regards  the  cost-benefit  proportionality  of  the  existing  employee 
participation  rules.  In  the  absence  of  further  data  it  can  therefore  not  be  concluded 
that these are inefficient. 

After  all,  the  overall  efficiency  of  the  cross-border  merger  rules  is  positively  assessed. 
However,  as  regards  creditor  and  minority  protection,  and  the  limited  possibilities  for 
simplified  procedures,  it  can  be  argued  that  the  compliance  costs  exceed  the  benefits 
achieved. 

2.3.3. Relevance 

This section assesses how well the objectives of the CBMD still match the current needs 
and problems. 

Companies that want to keep pace with the further increased globalisation and intensified 
competition  are  required  to  expand  cross-border.  Cross-border  mergers  are  one  of  the 

279 EY study on cross-border operations of companies 
280  E.g.  Romanian  and  Lithuanian  companies  and  legal  advisors  considered  the  rules  on  employee 
participation as being very cumbersome or complex, Polish and Italian ones saw the employee participation 
procedure as major obstacle for the completion of a cross-border merger, Bech-Bruun/Lexidale, 2013, p. 
207, 213, 221, 226. 
281  T.  Biermeyer/M.  Meyer,  Identification  of  Cross-Border  Mergers  where  the  Issue  of  Employee 
Participation has arisen (2008-2012), European Trade Union Institute, 2015. 

156 

 
 
 
                                                            
most  important  ways  to  do  that  and  the  number  of  cross-border  mergers  is  constantly 
increasing.  Mergers  are  used  by  companies  for  different  purposes  such  as  group 
reorganisations282,  cutting  organisational  costs  as  well  as  business-oriented 
considerations in order to enjoy greater returns to scale, consolidated branding, or other 
synergies between different business activities.  

Enhanced cross-border activity, such as mergers, also increases the attractiveness of the 
Single Market as an investment destination, not only for intra-EU investment but also for 
investment from third countries. Clear and predictable EU rules and procedures provided 
by the CBMD are essential in this respect. 

Therefore, facilitating cross-border merger activity with a view to allowing companies to 
better benefit from the opportunities the Single Market offers remains a valid objective. 

At the same time, the protection of stakeholders involved in cross-border operations has 
become more important as compared to the 2003 proposal. The 2005 directive – by also 
referring  to  the  protection  of  the  interests  of  members  and  others283,  as  well  as  to 
employee  participation284  –  acknowledged  that  the  interests  of  stakeholders  affected  by 
the cross-border mergers would need to be protected. 

Today,  it  is  among  the  Commission's  priorities  to  not  only  create  a  fairer,  but  also  a 
deeper  internal  market.  The  initiative  to  revise  substantive  company  law,  which  this 
evaluation  is  accompanying,  therefore  includes  in  its  general  objective  the  aspect  of 
responsible use by companies of the opportunities offered by the Single Market and set 
as  one  of  its  specific  objectives  the  protection  of  stakeholders  (employees,  creditors, 
minority shareholders and third parties).  

2.3.4. Coherence 

The rules enshrined in the CBMD create a logical procedure to be met in case of a cross-
border  merger.  The  directives  provides  for  necessary  steps  in  the  procedure  and  the 
consequences of the cross-border merger. No rules have been identified which would be 
contradictory; the rules are thus deemed to be internally coherent.  

The  rules  are  also  considered  to  be  coherent  with  other  EU  rules  in  company  law. 
Concerning the scope of application, the EU company law acquis generally applies to the 
limited  liability  companies  (public  and/or  private)  as  the  CBMD.  This  is  particular 
matches  with  the  existing  disclosure  requirements  for  companies,  including  for 
accounting documents285. 

As  regards  digital  solutions  in  EU  company  law,  the  interconnection  of  business 
registers286  which  provides  for  electronic  communication  between  all  MS'  business 

282 The EU cross-border merger rules (see below) are seen as an effective tool for internal reorganisation of 
groups  of  companies  and  over  a  third  of  cross-border  mergers  appear  to  have  been  carried  out  within 
groups,  Bech-Bruun/Lexidale,  http://ec.europa.eu/internal_market/company/docs/mergers/131007_study-
cross-border-merger-directive_en.pdf , p. 973. 
283 Recitals 5, 8, 12 and 13 of the CBMD. 
284 Article 16. 
285 Directive (EU) 2017/1132, Chapter III. 
286 Directive 2012/17/EU of the European Parliament and the Council of 13 June 2012 amending Council 
Directive 89/666/EEC and Directives 2005/56/EC and 2009/101/EC of the European Parliament and of the 

157 

 
 
                                                            
 
registers via a European central platform and  went live on 8 June 2017 includes a use-
case concerning cross-border mergers: the register responsible for the registration of the 
company  resulting  from  the  cross-border  merger  notifies  without  delay  via  the  central 
European  platform  the  register  of  each  of  the  merging  companies  that  the  cross-border 
merger  has  taken  effect.  Stakeholders  have  raised  the  question  whether  additional 
solutions  could  be  provided  by  the  business  register  interconnection,  for  instance 
concerning  the  transmission  of  documents  in  the  cross-border  merger  procedure.  It 
therefore appears that synergies between the cross-border merger rules and the rules on 
the interconnection of business registers could be increased. 

Finally, the cross-border merger rules are generally coherent with EU wider policies. The 
Directive  contributes  to  making  the  Internal  Market  deeper  and  fairer  in  line  with  the 
Commission's  priorities,  including  as  spelled  out  in  the  Single  Market  Strategy.  It  also 
contributes  to  increase  the  attractiveness  of  the  Internal  Market  as  an  investment 
destination by enhancing corporate mobility and investment opportunities and is thus in 
line with the Investment Plan for Europe287.  

2.3.5. EU added value 

In the area of cross-border operations, the value of EU intervention is clearly additional 
to the value that could be achieved by interventions initiated at national level. 

If  MS  were  to  adopt  rules  on  cross-border  merger  individually,  these  could  not  be 
expected to be compatible. This was clearly observed at the time of the presentation of 
the 2003 Commission proposal (see above under section 1.1.2. "Baseline scenario"). That 
is why the cross-border merger activity only increased after the adoption of the common 
rules  (as  described  above  by  173%).  The  rules  on  cross-border  mergers  have  therefore 
proven  their  EU  added  value  by  opening  a  procedural  bottle-neck  companies  were 
confronted with. The EU added value also lies in ensuring an equal treatment of limited 
liability companies wishing to merge cross-border, and in ensuring legal certainty. 

Also,  the  analysis  of  areas  where  the  Directive  does  not  provide  for  substantive 
harmonisation  (i.e.  creditor  protection  and  minority  shareholder  protection)  in  this 
evaluation  shows  that  MS'  interventions  in  these  areas  are  divergent,  and  this  has 
triggered  a demand  for  harmonisation of those  rules  as  explained above. This  confirms 
the additional value of intervention at EU level in this area of cross-border operations of 
companies. 

3. Conclusions 

Overall,  the  current  cross-border  merger  rules  are  evaluated  positively  as  they  are 
generally effective, efficient, relevant, coherent and bring added value at EU level. 

However,  the  analysis  has  identified  that,  based  on  the  available  evidence,  the  CBMD 
does  not  reach  its  full  potential  in  delivering  on  these  objectives.  Some  of  its  rules  are 

Council  as  regards  the  interconnection  of  central,  commercial  and  companies  registers,  OJ  L  156, 
16.6.2012, p.1; Directive 2012/17/EU has been repealed and replaced by Directive (EU) 2017/1132. 
287 COM(2014) 903 final. 

158 

 
 
                                                                                                                                                                                 
ineffective and inefficient in achieving the objectives, mainly as (i) the directive does not 
provide for substantive harmonisation in all relevant areas such as creditor and minority 
shareholder  protection  and  (ii)  it  does  not  fully  explore  the  possibilities  for  simplified 
procedures. 

The  evaluation  indicated  that  the  provisions  of  the  CMBD  have  been  less  effective  as 
regards  creditors  and  minority  shareholder  protection.  The  lack  of  substantive 
harmonisation  as  regards  creditors  and  minority  shareholder  protection  creates 
uncertainties  and  obstacles  to  cross-border  merger  procedures  and  thus  hampers  the 
effectiveness  of  the  CBMD  with  a  view  to  the  policy  objective  of  facilitating  cross-
border mergers. 

Also,  while  the  CBMD  has  largely  been  found  to  provide  an  efficient  framework  for 
cross-border  mergers,  the  evaluation  shows  that  divergent  procedures  for  creditors  and 
minority shareholders protection at national level create compliance costs and burden for 
companies  disproportionate  to  the  benefits  achieved  for  stakeholder  protection.  The 
findings also suggest that there is a need to better align the requirements for carrying out 
a cross-border merger procedure to the actual protection needs, i.e. to assess possibilities 
for a simplified procedure where it would not be required for protecting the stakeholders 
concerned to carry out a fully-fledged cross-border mergers procedure.  

In  addition,  the  coherence  of  the  rules,  in  particular  their  synergies  with  neighbouring 
legislation of the business register interconnection, would increase if cross-border merger 
rules benefited more from the opportunities offered by digitalisation, in particular by the 
interconnection of business registers. 

As  regards  relevance, the  objectives  of  the  cross-border  merger rules  are  still  relevant, 
but it appears useful, against the background of the overall Commission priorities, to pay 
more attention to the protection of stakeholders' interests than in the 2005 directive. 

In terms of EU added value, the experience with the CBMD shows that introducing 
cross-border mergers rules at EU level considerably boosted cross-border merger activity 
which demonstrates the clear added value of EU rules as opposed to individual national 
solutions. 

159 

 
 
 
 
 
 
 
 
ANNEX 6: OVERVIEW OF ECJ CASE-LAW ON CROSS-BORDER MOBILITY OF COMPANIES  

Case Number 

C-81/87 

Case Name 

The Queen v Treasury and Commissioners of Inland Revenue, ex parte Daily Mail 
and General Trust PLC 

Date 

Facts 

Issues 

Judgment  

27 September 1988 

The Daily Mail, a company resident in the UK wished to transfer its residence from 
the  UK  to  the  Netherlands.  By  doing  so,  it  wanted  to  avoid  regular  tax  payments 
foreseen in the UK when selling part of its assets and buying its own shares. 

In 1984, the Daily Mail applied for consent to transfer its central management and 
control to the Netherlands. 

Different  legislation  existed  between  the  two  Member  States.  While  in  the 
Netherlands  no  previous  consent  was  needed,  the  UK  1970  Income  and 
Corporation  Taxes  Act  required  the  Treasury’s  consent  to  allow  the  transfer  into 
another Member State.  

Following  the  Treasury’s  dissenting  opinion,  the  applicant  initiated  proceedings 
before  the  High  Court  of  Justice  and  claimed  its  right  to  transfer  its  central 
management  and  control  to  another  Member  State  without  prior  consent  of  the 
Treasury, for the sake of Articles 52 and 58 of the EEC Treaty. 

1)  Do  Articles  52  and  58  of  the  EEC  Treaty  preclude  a  Member  State  from 
obstructing  the  transfer  of  residence  from  a  Member  State  to  another  in  the 
following cases: 
  where payment of tax upon profits or gains which have already arisen may 

be avoided? 

  where  payment  of  taw  normally  chargeable  would  be  avoided  if  the 

transfer occurred? 

2)  Does  the  Council  Directive  73/148/EEC  (on  the  abolition  of  restrictions  on 
movement and residence within the Community for nationals of Member States 
with  regard  to  establishment  and  the  provision  of  services)  give  the  right  of 
transfer to the companies? 

1. In the present state of Community law, Articles 52 and 58 of the Treaty, properly 
construed,  confer  no  right  on  a  company  incorporated  under  the  legislation  of  a 
Member  State  and  having  its  registered  office  there  to  transfer  its  central 
management and control to another Member State. 

2.  Council  Directive  73/148  of  21  May  1973  on  the  abolition  of  restrictions  on 
movement and residence within the Community for nationals of Member States with 
regard to establishment  and the  provision of  services,  properly construed, confers 
no  right  on  a  company  to  transfer  its  central  management  and  control  to  another 
Member State. 

Case Number 

C-212/97 

Case Name 

Centros Ltd v Erhvervs- og Selskabsstyrelsen 

Date 

9 March 1999 

160 

 
 
 
 
Facts 

Centros,  a  company  incorporated  in  the  UK,  applied  to  register  a  branch  in 
Denmark. 

Issues 

Judgment  

Centros’  application  was  refused  and  considered  by  the  Danish  Trade  and 
Companies Board as an attempt to circumvent Danish rules and avoid payments on 
minimum share capital. Moreover, the Board argued that the company did not carry 
out any activity in the Member State of formation. 

Centros  started  proceedings  before  the  Østre  Landsret  and  then  the  Højesteret, 
which referred the question to the CJEU for a preliminary ruling. 

The  CJEU  was  asked  to  establish  whether  Articles  52,  56  and  58  of  the  Treaty 
prohibit  the  refusal  of  registration  of  a  branch  of  a  company  registered  in  another 
Member State and wanting to carry on the entire business in the Member State of 
new  registration,  considering  that  the  purpose  of  this  registration  is  to  avoid 
domestic  legislation  and  that  the  company  did  not  carry  out  any  activity  in  the 
Member State of first incorporation? 

It is contrary to Articles 52 and 58 of the EC Treaty for a Member State to refuse to 
register  a  branch  of  a  company  formed  in  accordance  with  the  law  of  another 
Member  State  in  which  it  has  its  registered  office  but  in  which  it  conducts  no 
business where the branch is intended to enable the company in question to carry 
on  its  entire  business  in  the  State  in  which  that  branch  is  to  be  created,  while 
avoiding  the  need  to  form  a  company  there,  thus  evading  application  of  the  rules 
governing the formation of companies which, in that State, are  more restrictive as 
regards  the  paying  up  of  a  minimum  share  capital.  That  interpretation  does  not, 
however, prevent the authorities of the Member State concerned from adopting any 
appropriate  measure  for  preventing  or  penalising  fraud,  either  in  relation  to  the 
company  itself,  if  need  be  in  cooperation  with  the  Member  State  in  which  it  was 
formed, or in relation to its members, where it has been established that they are in 
fact attempting, by means of the formation of a company, to evade their obligations 
towards private or public creditors established in the territory of the Member State 
concerned. 

Case Number 

C-208/00 

Case Name 

Überseering 

Date 

Facts 

5 November 2002 

Überseering  BV  was  a  company  incorporated  in  the  Netherlands,  registered  in 
1990 in the register of companies of Amsterdam and Haarlem and acquired in 1994 
by two German nationals residing in Düsseldorf. 

In 1996, the company requested compensation for defective work from a company 
established in Germany, the Nordic Construction Company Baumanagement GmbH 
(NCC).  

Überseering started proceedings before the Regional Court in Germany, the action 
was  dismissed.  The  Court  found  that  the  company,  acquired  by  German  citizens, 
had transferred its actual center of administration to Germany. It stated that, since it 
was  incorporated  under  Dutch  law,  it  did  not  have  legal  capacity  in  Germany  and 
therefore could not bring legal proceedings before German courts.  

161 

 
 
 
 
Issues 

Judgment  

The  dispute  resulted  from  the  two  contradictory  theories  followed  by  Member 
States: the incorporation theory and the real seat theory, whether the incorporation 
seat or the center of administration determines the legal capacity of the company. 

The German Federal Court of Justice referred to the CJEU for a preliminary ruling. 

1. Are Articles 43 EC and 48 EC to be interpreted as meaning that the freedom of 
establishment of companies precludes the legal capacity, and capacity to be a party 
to  legal  proceedings,  of  a  company  validly  incorporated  under  the  law  of  one 
Member  State  from  being  determined  according  to  the  law  of  another  State  to 
which the company has moved its actual centre of administration, where, under the 
law of that second State, the company may no longer bring legal proceedings there 
in respect of claims under a contract? 

2. If the Court's answer to that question is affirmative: 

Does  the  freedom  of  establishment  of  companies  (Articles  43  EC  and  48  EC) 
require  that  a  company's  legal  capacity  and  capacity  to  be  a  party  to  legal 
proceedings  is  to  be  determined  according  to  the  law  of  the  State  where  the 
company is incorporated?’ 

1. Where a company formed in accordance with the law of a Member State (‘A’) in 
which it has its registered office is deemed, under the law of another Member State 
(‘B’), to have moved its actual centre of administration to Member State B, Articles 
43  EC  and  48  EC  preclude  Member  State  B  from  denying  the  company  legal 
capacity  and,  consequently,  the  capacity  to  bring  legal  proceedings  before  its 
national courts for the purpose of enforcing rights under a contract with a company 
established in Member State B. 

2. Where a company formed in accordance with the law of a Member State (‘A’) in 
which it has  its registered office exercises its freedom  of establishment in another 
Member State (‘B’), Articles 43 EC and 48 EC require Member State B to recognise 
the legal capacity and, consequently, the capacity to be a party to legal proceedings 
which the company enjoys under the law of its State of incorporation (‘A’). 

Case Number 

C-167/01 

Case Name 

Inspire Art 

Date 

Facts 

30 September 2003 

Inspire Art, a Private Limited Company formed and registered in the UK, opened a 
branch  in  the  Netherlands  and  requested  registration  of  the  branch  in  the  Dutch 
registry. The Dutch registry required however that Inspire Art was recognised as a 
foreign company and fell under Dutch specific laws for foreign entities. According to 
Dutch legislation there should be a statement added to that company's registration 
in the commercial register that it is a formally foreign company. 

Its arguments were that Inspire Art exclusively traded in the Netherlands and that its 
intention apparently  was to take advantage of the most favourable and less costly 
rules amongst Member States. 

Inspire Art refused with regards to Articles 43 and 48 of the EC Treaty.  

The German Kantongerecht referred to the CJEU for a preliminary ruling. 

Issues 

Do Articles 43 and 48 of the EC Treaty preclude a Member State (in this case, the 
Netherlands) to require additional conditions to the establishment of a branch of a 

162 

 
 
 
 
Judgment  

company, given that: 

 

 

its  law  is  less  restrictive  than  the  one  of  the  MS  of  first  incorporation  (in 
this case, the UK); 
the company does all its activities in the MS where it set its branch (in this 
case,  the  Netherlands)  and  therefore  had  no  connection  with  the  MS  of 
first incorporation (in this case, the UK)? 

1.  It  is  contrary  to  Article  2  of  the  Eleventh  Council  Directive  89/666/EEC  of  21 
December 1989 concerning disclosure requirements in respect of branches opened 
in  a  Member  State  by  certain  types  of  company  governed  by  the  law  of  another 
State  for  national  legislation  such  as  the  Wet  op  de  Formeel  Buitenlandse 
Vennootschappen (Law on Formally Foreign Companies) of 17 December 1997 to 
impose on the branch of a company formed in accordance with the laws of another 
Member State disclosure obligations not provided for by that directive. 

2. It is contrary to Articles 43 EC and 48 EC for national legislation such as the Wet 
op  de  Formeel  Buitenlandse  Vennootschappen  to  impose  on  the  exercise  of 
freedom  of  secondary  establishment  in  that  State  by  a  company  formed  in 
accordance with the law of another Member State certain conditions provided for in 
domestic company law in respect of company formation relating to minimum capital 
and directors' liability. The reasons for which the company was formed in that other 
Member  State,  and  the  fact  that  it  carries  on  its  activities  exclusively  or  almost 
exclusively  in  the  Member  State  of  establishment,  do  not  deprive  it  of  the  right  to 
invoke the freedom of establishment guaranteed by the EC Treaty, save where the 
existence of an abuse is established on a case-by-case basis. 

Case Number 

C-411/03 

Case Name 

SEVIC Systems AG 

Date 

Facts 

Issues 

Judgment  

13 December 2005 

SEVIC Systems AG, a public limited company established in Germany and Security 
Vision Concept SA (‘Security Vision’), a public company established in Luxembourg 
wished to merge without liquidation of the latter company and transfer of the whole 
of its assets to SEVIC, without any change in the latter’s company name.  

The  application  was  rejected  on  the  ground  that  German  domestic  law  provided 
only for mergers between legal entities established in Germany. SEVIC brought an 
action against the decision before the Landgericht Koblenz. 

Landgericht  Koblenz  decided  to  refer  the  question  to  the  Court  of  Justice  for  a 
preliminary ruling. 

Are  Articles  43  and  48  EC  to  be  interpreted  as  meaning  that  it  is  contrary  to 
freedom of establishment for companies if a foreign European company is refused 
registration of its proposed merger with a German company in the German register 
of  companies  under  Paragraphs  16  et  seq.  of  the  Umwandlungsgesetz  (Law  on 
transformations), on the ground that Paragraph 1(1)(1) of that law provides only for 
transformation of legal entities established in Germany? 

Articles 43 EC and 48 EC preclude registration in the national commercial register 
of the merger by dissolution without liquidation of one company and transfer of the 
whole of its assets to another company from being refused in general in a Member 
State  where  one  of  the  two  companies  is  established  in  another  Member  State, 
whereas such registration is possible, on compliance with certain conditions, where 
the two companies participating in the merger are both established in the territory of 

163 

 
 
 
the first Member State.  

Case Number 

C-196/04 

Case Name 

Cadbury  Schweppes  plc  and  Cadbury  Schweppes  Overseas  Ltd  v 
Commissioners of Inland Revenue 

Date 

Facts 

Issues 

Judgment  

12 September 2006 

Cadbury  Schweppes  plc,  a  company  established  in  the  United  Kingdom,  was  the 
parent  company  of  the  Cadbury  Schweppes  group  which  consists  of  companies 
established in the United Kingdom, in other Member States and in third States, inter 
alia  two  subsidiaries  in  Ireland.  In  the  view  of  the  national  court,  the  subsidiary  in 
Ireland was incorporated in order not to fall within the application of certain United 
Kingdom tax provisions on exchange transactions. 

The  United  Kingdom  tax  authorities  according  to  the  national  legislation  on 
controlled  foreign  companies  (CFCs)  claimed  the  corporation  tax  on  the  profits 
made  by  subsidiary  in  the  financial  year  ending  28  December  1996. The  decision 
was  appealed  by  the  company  who  maintained  that  the  legislation  on  CFCs  was 
contrary to Articles 43 EC, 49 EC and 56 EC.  

Special Commissioners of Income Tax, London, decided to refer the question to the 
Court for a preliminary ruling. 

Do Articles 43 EC, 49 EC and 56 EC preclude national tax legislation such as that 
in issue in the main proceedings, which provides in specified circumstances for the 
imposition of a charge upon a company resident in that Member State in respect of 
the profits of a subsidiary company resident in another Member State and subject 
to a lower level of taxation? 

Articles 43 EC and 48 EC must be interpreted as precluding the inclusion in the tax 
base  of  a  resident  company  established  in  a  Member  State  of  profits  made  by  a 
controlled  foreign  company  in  another  Member  State,  where  those  profits  are 
subject  in  that  State  to  a  lower  level  of  taxation  than  that  applicable  in  the  first 
State, unless such inclusion relates only to wholly artificial arrangements intended 
to escape the national tax normally payable. Accordingly, such a tax measure must 
not  be  applied  where  it  is  proven,  on  the  basis  of  objective  factors  which  are 
ascertainable  by  third  parties,  that  despite  the  existence  of  tax  motives  that 
controlled company is actually established in the host Member State and carries on 
genuine economic activities there. 

Case Number 

C-210/06 

Case Name 

Cartesio 

Date 

Facts 

16 December 2008 

Cartesio,  a  limited  partnership  formed  in  Hungary,  applied  for  registration  for  the 
transfer  of  its  registered  seat  to  Italy,  (where  it  wished  to  transfer  its  head  office, 
while  maintaining  its  activity  under  Hungarian  law).  The  Hungarian  Court  of 
Registration  refused  as  this  was  not  permitted  under  Hungarian  domestic 
legislation.  Since  Hungarian  law  did  allow  the  Hungarian  company  to  transfer  its 

164 

 
 
 
 
 
seat abroad while continuing to be subject to Hungarian law as its personal law, it 
was not possible that Cartesio could be still governed by the law of its incorporation 
following the seat transfer.  

Cartesio  started  proceedings  before  the  Regional  Court  of  Appeal  (Szeged)  and 
claimed  that  the  refusal  was  contrary  to Articles  43  and  48  of  the  EC Treaty. The 
Regional Court of Appeal asked the CJEU for a preliminary ruling. 

Issues 

Do Articles  43  and  48  of the  EC Treaty  preclude one  Member  State (in  this case, 
Hungary)  from  rejecting  the  application  of  a  company  formed  under  its  legislation 
but wanting to transfer its head office to another Member State? 

Judgment  

Can a company request the transfer of seat relying directly on Community law? 

Are  national  rules  or  practices  which  prevent  a  Hungarian  company  from 
transferring its seat to another MS incompatible with Community law? 

1.  A  court  such  as  the  referring  court,  hearing  an  appeal  against  a  decision  of  a 
lower  court,  responsible  for  maintaining  the  commercial  register,  rejecting  an 
application  for  amendment  of  information  entered  in  that  register,  must  be 
classified  as  a  court  or  tribunal  which  is  entitled  to  make  a  reference  for  a 
preliminary  ruling  under  Article  234  EC,  regardless  of  the  fact  that  neither  the 
decision of the lower court nor the consideration of the appeal by the referring 
court takes place in the context of inter partes proceedings.  

2. A court such as the referring court, whose decisions in disputes such as that in 
the main proceedings may be appealed on points of law, cannot be classified as 
a  court  or  tribunal  against  whose  decisions  there  is  no  judicial  remedy  under 
national law, within the meaning of the third paragraph of Article 234 EC.  

3.  Where  rules  of  national  law  apply  which  relate  to  the  right  of  appeal  against  a 
decision making a reference for a preliminary ruling, and under those rules the 
main proceedings remain pending before the referring court in their entirety, the 
order  for  reference  alone  being  the  subject  of  a  limited  appeal,  the  second 
paragraph of Article 234 EC is to be interpreted as meaning that the jurisdiction 
conferred  on  any  national  court  or  tribunal  by  that  provision  of  the  Treaty  to 
make  a  reference  to  the  Court  for  a  preliminary  ruling  cannot  be  called  into 
question by the application of those rules, where they permit the appellate court 
to  vary  the  order  for  reference,  to  set  aside  the  reference  and  to  order  the 
referring court to resume the domestic law proceedings. 

4. As Community law now stands, Articles 43 EC and 48 EC are to be interpreted 
as  not  precluding  legislation  of  a  Member  State  under  which  a  company 
incorporated  under  the  law  of  that  Member  State  may  not  transfer  its  seat  to 
another Member State whilst retaining its status as a company governed by the 
law of the Member State of incorporation. 

Case Number 

C-378/10 

Case Name 

VALE Építési kft 

Date 

Facts 

12 July 2012 

Vale  Costruzioni  was  a  limited  liability  company  governed  by  Italian  law  and 
registered  in  the  Italian  commercial  register,  wanting  to  dissolve  in  Italy  and 
reincorporate  under  the  Hungarian  law  with  the  name  of  Vale  Építési.  In  the 
application, the representative stated that VALE Costruzioni was the predecessor in 
law to VALE Építési, and wished to have its Italian predecessor (Vale Costruzioni) 

165 

 
 
 
 
Issues 

Judgment  

recorded in the register.  

After  denial  of  the  application  from  the  commercial  court  of  first  instance,  then 
confirmed  by  the  Regional  Court  of Appeal  of  Budapest,  the  company  lodged  an 
appeal before the Supreme Court with reference to Articles 49 and 54 of the TFEU. 
The Supreme Court asked the CJEU for a preliminary ruling. 

Must Articles 49 and 54 of the TFEU be interpreted as precluding legislation of one 
Member  State  to  prohibit  a  company  established  in  another  Member  State  to 
transfer  its  seat  into  another?  Could  a  Member  State  refuse  to  register  the 
predecessor of that company which originates in another Member State? 

1.  Articles  49  TFEU  and  54  TFEU  must  be  interpreted  as  precluding  national 
legislation which enables companies established under national law to convert, 
but  does  not  allow,  in  a  general  manner,  companies  governed  by  the  law  of 
another  Member  State  to  convert  to  companies  governed  by  national  law  by 
incorporating such a company. 

2.  Articles  49  TFEU  and  54  TFEU  must  be  interpreted,  in  the  context  of  cross-
border company conversions, as meaning that the host Member State is entitled 
to  determine  the  national  law  applicable  to  such  operations  and  thus  to  apply 
the  provisions  of  its  national  law  on  the  conversion  of  national  companies 
governing  the  incorporation  and  functioning  of  companies,  such  as  the 
requirements  relating  to  the  drawing-up  of  lists  of  assets  and  liabilities  and 
property inventories. However, the principles of equivalence and effectiveness, 
respectively, preclude the host Member State from 
– refusing, in relation to cross-border conversions, to record the company which 
has applied to convert as the ‘predecessor in law’, if such a record is made of 
the predecessor company in the commercial register for domestic conversions, 
and 
–  refusing  to  take  due  account,  when  examining  a  company’s  application  for 
registration, of documents obtained from the authorities of the Member State of 
origin. 

Case Number 

C-371/10 

Case Name 

National  Grid  Indus  BV  v  Inspecteur  van  de  Belastingdienst  Rijnmond/kantoor 
Rotterdam. 

Date 

Facts 

29 November 2011 

National Grid Indus was a limited liability company incorporated under Netherlands 
law. On 15 December 2000 it decided to transfer its place of effective management 
to the  United  Kingdom. After the  transfer  of  its  place  of effective  management  the 
company was deemed to be resident in the United Kingdom. As a consequence of 
that  Inspector  of the  Rijnmond tax  service,  Rotterdam office decided that  National 
Grid  Indus  should  be  taxed  for  the  unrealised  capital  gains  at  the  time  of  the 
transfer of the company’s place of management. 

National  Grid  Indus  appealed  the  decision  to  the  Rechtbank  Haarlem  (District 
Court,  Haarlem),  which  upheld  the  Inspector's  decision.  National  Grid  Indus 
thereupon  appealed  to  the  Gerechtshof Amsterdam  which  asked  the  CJEU  for  a 
preliminary ruling. 

Issues 

1.  If  a  Member  State  imposes  on  a  company  incorporated  under  the  law  of  that 
Member State which transfers its place of effective management from that Member 
State to another Member State a final settlement tax in respect of that transfer, can 

166 

 
 
 
Judgment  

that  company,  in  the  present  state  of  Community  law,  rely  on Article  43  EC  (now 
Article 49 TFEU) against that Member State? 

2. If the first question must be answered in the affirmative: is a final settlement tax 
such  as  the  one  at  issue,  which  is  applied,  without  deferment  and  without  the 
possibility of taking subsequent decreases in value into consideration, to the capital 
gains  relating  to  the  assets  of  the  company  which  were  transferred  from  the 
Member  State  of  origin  to  the  host  Member  State,  as  assessed  at  the  time  of  the 
transfer  of  the  place  of  management,  contrary  to  Article  43  EC  (now  Article  49 
TFEU),  in  the  sense  that  such  a  final  settlement  tax  cannot  be  justified  by  the 
necessity of allocating powers of taxation between the Member States? 

3. Does the answer to the previous question also depend on the circumstance that 
the  final  settlement  tax  in  question  relates  to  a  (currency)  profit  which  accrued 
under the tax jurisdiction of the Netherlands, whereas that profit cannot be reflected 
in the host Member State under the tax system in force there?’ 

1. A company incorporated under the law of a Member State which transfers its 
place  of  effective  management  to  another  Member  State,  without  that  transfer 
affecting  its  status  of  a  company  of  the  former  Member  State,  may  rely  on 
Article 49 TFEU for the purpose of challenging the lawfulness of a tax imposed 
on it by the former Member State on the occasion of the transfer of the place of 
effective management. 
2. Article 49 TFEU must be interpreted as: 
– not precluding legislation of a Member State under which the amount of tax on 
unrealised  capital  gains  relating  to  a  company’s  assets  is  fixed  definitively, 
without  taking  account  of  decreases  or  increases  in  value  which  may  occur 
subsequently,  at  the  time  when  the  company,  because  of  the  transfer  of  its 
place  of  effective  management  to  another  Member  State,  ceases  to  obtain 
profits  taxable  in  the  former  Member  State;  it  makes  no  difference  that  the 
unrealised  capital  gains  that  are  taxed  relate  to  exchange  rate  gains  which 
cannot  be  reflected  in  the  host  Member  State  under  the  tax  system  in  force 
there; 
–  precluding  legislation  of  a  Member  State  which  prescribes  the  immediate 
recovery  of  tax  on  unrealised  capital  gains  relating  to  assets  of  a  company 
transferring its  place of  effective  management  to  another  Member State  at the 
very time of that transfer. 

Case Number 

C-106/16 

Case Name 

Polbud - Wykonawstwo 

Date 

Facts 

25 October 2017 

Polbud  –  Wykonawstwo,  a  Polish  private  limited  company  decided  to  move  its 
registered  office  to  Luxembourg.  It  applied  for  the  opening  of  the  winding-up 
procedure,  as  required  by  the  Polish  Commercial  Code  after  the  resolution  on 
moving  the  register  office  to  another  State  (in  order  to  be  struck  off  from  the 
business  register).  Subsequently,  it  successfully  applied  to  be  registered  in  the 
Luxembourg business register as a s.p.r.l. company without completing the winding 
up procedure in Poland. The Polish business register however dismissed the final 
application  to  strike  off  the  company  from  the  business  register  because  the 
company did not prove that the winding up procedure had been completed. 

Polbud  –  Wykonawstwo  appealed  to  the  Sąd  Najwyższy  (Supreme  Court)  which 
asked the CJEU for a preliminary ruling. 

167 

 
 
 
Issues 

Judgment  

1.  Do Articles  49  and  54  of  the  Treaty  on  the  functioning  of  the  European  Union 
preclude  the  application  by  a  Member  State,  in  which  a  commercial  company 
(public  limited  company)  was  initially  incorporated,  of  provisions  of  national  law 
which  make  removal  from  the  commercial  register  conditional  on  the  company 
being  wound  up  after  liquidation  has  been  carried  out,  if  the  company  has  been 
reincorporated  in  another  Member  State  pursuant  to  a  shareholders’  decision  to 
continue the legal personality acquired in the State of initial incorporation? 

2.  If  the  answer  to  that  question  is  in  the  negative:  Can Articles  49  and  54  of  the 
Treaty on the functioning of the European Union be interpreted as meaning that the 
requirement under national law that proceedings for the liquidation of the company 
be  carried  out  —  including  the  conclusion  of  current  business,  recovery  of  debts, 
fulfilment  of  obligations  and  sale  of  company  assets,  satisfaction  or  securing  of 
creditors,  submission  of  a  financial  statement  on  the  conduct  of  those  acts,  and 
indication of the person to whom the books and documents are to be entrusted — 
which  precede  the  winding-up  thereof,  which  occurs  on  removal  from  the 
commercial  register, 
is  appropriate,  necessary  and 
proportionate to a public interest deserving of protection in the form of safeguarding 
of creditors, minority shareholders, and employees of the migrant company? 

is  a  measure  which 

3. Must Articles 49 and 54 of the Treaty on the functioning of the European Union 
be interpreted as meaning that restrictions on the freedom of establishment include 
a  situation  in  which  —  for  the  purpose  of  conversion  to  a  company  of  another 
Member  State  —  a  company  transfers  its  registered  office  to  that  other  Member 
State  without  changing  its  place  of  principal  establishment,  which  remains  in  the 
State of initial incorporation? 

1.    Articles  49  and  54  TFEU  must  be  interpreted  as  meaning  that  freedom  of 
establishment is applicable to the transfer of the registered office of a company 
formed  in  accordance  with  the  law  of  one  Member  State  to  the  territory  of 
another  Member  State,  for  the  purposes  of  its  conversion,  in  accordance  with 
the  conditions  imposed  by  the  legislation  of  the  other  Member  State,  into  a 
company incorporated under the law of the latter Member State, when there is 
no change in the location of the real head office of that company. 

2.   Articles 49 and 54 TFEU must be interpreted as precluding legislation of a 
Member  State  which  provides  that  the  transfer  of  the  registered  office  of  a 
company  incorporated  under  the  law  of  one  Member  State  to  the  territory  of 
another  Member  State,  for  the  purposes  of  its  conversion  into  a  company 
incorporated  under  the  law  of  the  latter  Member  State,  in  accordance  with  the 
conditions  imposed  by  the  legislation  of  that  Member  State,  is  subject  to  the 
liquidation of the first company. 

168 

 
 
 
 
 
 
ANNEX 7: OVERVIEW OF MEMBER STATES' POSITIONS ON THE QUESTIONS OF SEAT AND 
CONNECTING FACTORS  

Member State  National approaches in 

substantive company law 
requiring only the registered 
office or both registered office 
and real seat as conditions for 
incorporation of companies288 

National laws 
allowing cross-
border transfer 
of registered 
office289 

National approaches to 
conflict of laws290 - 
connecting factor (for 
EU/EEA cases the 
incorporation theory should 
apply in line with ECJ case 
law) 

both registered office and real seat  

no 

both registered office and real seat  

yes 

'real seat' 

'real seat' 

Austria 

Belgium 

Bulgaria 

Croatia 

Cyprus 

Czech 
Republic 

only registered office  

only registered office  

only registered office  

only registered office  

Denmark 

only registered office  

Estonia 

Finland 

France 

mixed system 
(only requires registered office in 
general but some link 
between the company’s activities 
and its registered office may be 
necessary depending on the 
interpretation of EE rules))  

only registered office  

mixed system  
(traditionally required both 
registered office and real seat; but 
now this approach of requiring 
both seats is mainly applied for the 
benefit of third parties/in case of 
fraud; otherwise, the registered 
office is the main connecting 
factor) 

no 

no  

yes 

yes 

yes 

no 

no 

yes 

incorporation theory 

incorporation theory 

incorporation theory 

incorporation theory 

leaning towards 
incorporation theory, but not 
clear 

incorporation theory, but not 
clear 

incorporation theory 

incorporation theory, with 
some elements of real seat to 
protect third parties291 

Germany 

mixed system  

no 

EU/EEA: incorporation 

288 On the basis of information in the Study on the Law Applicable to Companies, LSE, 2017, the European 
Added  Value  Assessment  -  Directive  on  the  cross-border  transfer  of  a  company’s  registered  office  14th 
Company Law Directive (European Parliament) and additional research. 
289  On  the  basis  of  the  2013  Lexidale  study  on  cross-border  mergers  directive,  the  2012  the  European 
Added  Value  Assessment  -  Directive  on  the  cross-border  transfer  of  a  company’s  registered  office  14th 
Company Law Directive (European Parliament) and additional research. 
290 Study on the law applicable to companies. 
291 According to FR position taken in meeting of 24 June. 

169 

 
 
 
                                                            
Member State  National approaches in 

substantive company law 
requiring only the registered 
office or both registered office 
and real seat as conditions for 
incorporation of companies288 

(DE used to require both registered 
office and real seat but since 2008 
DE companies can transfer their 
real seat and carry out all business 
abroad while having their 
registered office in DE)  

mixed system (real seat relevant for 
most companies, e.g. private and 
public companies; registered office 
required for the newly introduced 
IKE-PC company form; EL 
companies can transfer real seats 
abroad) 

only registered office (previously 
both registered office and real seat) 

only registered office  

mixed system (real seat can be 
located abroad but general 
meetings normally required at the 
place of registered office – unless 
the articles of association provide 
otherwise) 

mixed system (in theory both 
registered office and real seat 
required but de facto more focus on 
registered office) 

Greece 

Hungary 

Ireland 

Italy 

Latvia 

Lithuania 

mixed system (LT company law 
based on the presumption that the 
registered office, the real seat, and 
the main business place coincide 
but in practice this is not required) 
Luxembourg  mixed system (national companies 
may have real seat outside of LUX; 
both registered office and real seat 
are required but the latter usually 
means that board meetings take 
place in 
LUX even if day-today 
management is conducted from 
abroad) 
only registered office  

Malta 

National laws 
allowing cross-
border transfer 
of registered 
office289 

National approaches to 
conflict of laws290 - 
connecting factor (for 
EU/EEA cases the 
incorporation theory should 
apply in line with ECJ case 
law) 
theory 
Non-EU/EEA: real seat 

yes 

real seat 

no 

no 

yes 

no 

no 

yes 

incorporation theory 

incorporation theory 

incorporation theory, but not 
entirely clear 

real seat, but de facto focus 
is on registered seat 

incorporation theory 

real seat, but presumption 
that real seat is at the place 
of registration 

yes 

incorporation theory 

Netherlands 

only registered office  

incorporation theory 

no but 
deliberations on a 
national draft law 
on cross-border 
conversions are 

170 

 
 
Member State  National approaches in 

substantive company law 
requiring only the registered 
office or both registered office 
and real seat as conditions for 
incorporation of companies288 

Poland 

Portugal 

Romania 

Slovakia 

Slovenia 

mixed system (traditionally both 
registered office and real seat was 
required; ‘seat’ of a company is 
required under substantive 
company law but without further 
specification. Legal scholars 
divided between whether only 
registered office or both seats are 
required but the former view has 
become dominant) 

registered office (no specific 
connection of PT companies with 
the domestic territory required; PT 
companies can transfer their real 
seat into another Member State) 

registered office (there seems to be 
no requirement of a link between 
the company’s activities and its 
registered office)  

only registered office  

both registered office and real seat 
(some commentators argue that 
private and public companies need 
to have both the registered office 
and real seat in SI and others – that 
the real seat can be located outside 
of SI) 

National laws 
allowing cross-
border transfer 
of registered 
office289 

ongoing 

no 

National approaches to 
conflict of laws290 - 
connecting factor (for 
EU/EEA cases the 
incorporation theory should 
apply in line with ECJ case 
law) 

incorporation theory292, but 
not entirely clear  

yes 

no 

yes 

no  

real seat, but not applied in 
practice for EU/EEA cases 

real seat 

incorporation theory 

incorporation theory, but not 
entirely clear 

Spain 

 both registered office and real seat 

yes 

Sweden 

United 
Kingdom 

only registered office  

only registered office  

no  

no 

leaning towards 
incorporation theory, but not 
entirely clear 

incorporation theory 

incorporation theory 

292 According to PL government expert in the meeting of 26 June. 

171 

 
 
 
 
 
 
 
                                                            
ANNEX  8:  METHODOLOGY  OF  KEY  ASSUMPTIONS  FOR  CROSS-BORDER  DIVISIONS  AND 

CROSS-BORDER CONVERSIONS 

8.1  Baseline estimations – Volume methodological assumptions 

8.1.1 

Cross-border transfers assumptions  

In order to estimate the annual volume of cross-border transfers in the EU, the following 
sources of information were gathered and utilized:293 

  Statistics on annual cross-border transfers between 2010 and 2016 were provided 

by business registers for 4 Member States (BE, CZ, DK and LT). 

  Statistics  on  annual  domestic  transfers  between  2010  and  2016,  provided  by 
business registers in 16 Member States (BE, CY, CZ, DK, EE, FI, IE, HR, HU, 
IT, LT, MT, NL, RO, SE, UK); 

  Statistics on the total number of companies in the EU, collected from Eurostat; 
  Two  qualitative  parameters:  the  attractiveness  of  Member  States  in  terms  of 
foreign direct investments and the complexity of the procedures, as estimated by 
the Study team following collection of Member State Factsheets. 

Estimation of domestic transfers for the 28 Member States 

Concerning  domestic  transfers,  business  registers  of  16  Member  States  (BE,  CY,  CZ, 
DK,  EE,  FI,  IE,  HR,  HU,  IT,  LT,  MT,  NL,  RO,  SE,  UK)  were  able to  provide  specific 
data.  In  order  to  estimate  the  number  of  national  transfers  for  the  Member  States  for 
which  statistics  were  not  available,  it  is  estimated  the  average  percentage  of  national 
transfers per year among the total number of companies in the Member States for which 
data were available. The obtained percentage was then applied to numbers of companies 
(available  for  all  member  states  thanks  to  Eurostat  database)  in  order  to  estimate  the 
missing data of national transfers per year.  

The  graph  below  shows  the  number  of  national  transfers  estimated  for  the  28  Member 
States, on the basis of the two different sources. As illustrated, the estimated number of 
national transfers varies from one Member State to another. 

293 EY study on cross-border operations of companies, p. 19. 

172 

 
 
 
 
 
 
 
                                                            
Figure 1: Estimated number of domestic transfers in 2016 in the 28 Member States 

Source: Data collected by business registers (BE, CY, CZ, DK, EE, FI, IE, HR, HU, IT, LT, MT, NL, RO, 
SE, UK) and EY estimations (AT, BG, DE, ES, EL, FR, PL, PT, SK, SI, LV, LU) 

8.1.2  Cross-border divisions assumptions  

Information on cross border divisions was available for only 7 Member States. In order to 
estimate the annual volume of cross-border divisions in the EU, the following sources of 
information were gathered and utilised:294 

  Statistics on annual cross-border divisions between 2010 and 2016, provided by 
business registers for 7 Member States (BE, CY, CZ, DK, FR, LT, LV, SE); 
  Statistics  on  annual  domestic  divisions  between  2010  and  2016,  provided  by 
business registers in 16 Member States (BE, BG, CY, CZ, DK, IE, EE, HU, FI, 
IT, LT, MT, PL, RO, SE, UK); 

  Statistics on the total number of companies in the EU, collected from Eurostat; 

Two  qualitative  parameters:  the  attractiveness  of  Member  States  in  terms  of  foreign 
direct investments and the complexity of the procedures, as estimated by the Study team 
following collection of Member State Factsheets 

Estimation of domestic divisions for the 28 Member States 
Concerning  domestic  divisions,  business  registers  of  16  Member  States  (BE,  BG,  CY, 
CZ,  DK,  IE,  EE,  HU,  FI,  IT,  LT,  MT,  PL,  RO,  SE,  UK)  were  able  to  provide  specific 
data.  In  order  to  estimate  the  number  of  national  divisions  for  the  Member  States  for 
which statistics were not available, the EY Study team estimated the average percentage 
of national divisions per year among the total number of companies in the Member States 
for which data were available. The obtained percentage was then applied to numbers of 
companies  (available  for  all  member  states  thanks  to  Eurostat  database)  in  order  to 
estimate the missing data of national divisions per year. 
The  graph  below  shows  the  number  of  national divisions estimated for the 28 Member 
States, according to the different sources. As illustrated in the graph below, the estimated 
number of domestic divisions vary from one Member State to another. 

294 EY study on cross-border operations of companies, p. 25. 

173 

5852393349881774741176237220860000440814096931757299222895318055177351566514501141191130596748520587757315610561039373420200515761499 
 
 
 
 
                                                            
8.1.3  Estimation of cross-border divisions and transfers for the 28 Member States 
Concerning cross-border transfers, business registers of 4 Member States (BE, CZ, DK, 
LT) were able to provide specific data. In regards to cross-border divisions, the business 
registers from 8 Member States provided data (BE, CY, CZ, DK, FR, LT, LV and SE). In 
order to estimate the number of cross-border transfers and cross-border divisions in the 
Member States for which statistics were not available, the EY Study team assumed that 
the number of cross-border transfers was a function of the number of domestic transfers 
according to the following equation:295 

Number of cross-border transfers = F * Avg * Number of domestic transfers 

Number of cross-border divisions = F * Avg * Number of domestic divisions 

  F, is a function of the attractiveness of the Member State and the complexity of 

the procedure: 
Two qualitative parameters built on a 3 level scale and estimated via interviews 
with  stakeholders  in  Member  States.  The  attractiveness  of  the  Member  State  is 
based on the total number of foreign direct investments –FDI- projects inside the 
Member  State296.  The  complexity  of  the  procedure  is  linked  to  the  regulatory 
requirements  of  each  country,  it  might  be  linked  to  data  communication 
requirements, legal formalization (some countries like the UK are demanding to 
go  through  the  court  –  not  only  a  notary),  dissuasive  measurement  as  a  strong 
right of entry, etc. and was estimated on the basis of the information provided by 
the 28 EY legal experts when completing the Member States Fiches. 

295 EY study on cross-border operations of companies, p. 26. 
296  EY  Attractiveness  Annual  Barometer  (http://www.ey.com/gl/en/issues/business-environment/ey-
attractiveness-surveys) 

174 

12848188811598695104914694652512382271631629594928976333225151154400 
 
 
 
 
 
 
 
 
 
                                                            
  Avg, the average number of cross border transfers and divisions as a percentage 
of  domestic  ones  with  available  data.  AVG  is  equal  to  0,04%.  for  transfers  and 
7% for divisions. 

  Number  of  domestic  transfers,  calculated  previously  or  given  by  the  business 

registers of 12 Member States.  

The table below shows for each Member State the value of F, the attractiveness ranking 
(due to foreign direct investment projects and jobs and the EY barometers measuring the 
attractiveness of Member States) and the resulting percentage in respect to cross-border 
conversions.  

Table 1 : Complexity of procedures and attractiveness per Member State 

Member State 

Process 
complexity 

(1 – simple; 3 – 
complex) 

Ranking 

(EY 
barometer) 

Bulgaria 

Germany 

Estonia 

Ireland 

Greece 

Spain 

France 

Croatia 

Italy 

Cyprus 

Latvia 

Luxembourg 

Hungary 

Malta 

Netherlands 

Austria 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

Finland 

Sweden 

United Kingdom 

1 

3 

3 

2 

2 

3 

3 

2 

3 

1 

1 

2 

3 

1 

3 

2 

2 

2 

2 

1 

2 

2 

2 

3 

>19 

2 

>19 

8 

>19 

4 

3 

>19 

14 

>19 

>19 

>19 

12 

>19 

6 

>19 

5 

18 

10 

>19 

17 

9 

13 

1 

F 

0,03% 

0,03% 

0,00% 

0,09% 

0,02% 

0,03% 

0,03% 

0,02% 

0,09% 

0,03% 

0,03% 

0,02% 

0,02% 

0,03% 

0,05% 

0,02% 

0,16% 

0,02% 

0,09% 

0,03% 

0,02% 

0,09% 

0,09% 

0,03% 

Source: Eurostat, Business registers and EY analysis. Complexity level is based in our appreciation of 
interviews and ranking is based on EY attractiveness barometer  

175 

 
 
 
 
Thus,  it  was  possible  to  estimate  the  number  of  cross-border  transfers  in  2016  in  all 
Member  States.  As  it  is  illustrated  in  the  graph  below,  the  number  of  cross-border 
transfers  occurring  annually  varies  from  one  Member  State  to  another,  ranging  to 
approximatively  186  in  the  United  Kingdom  to  0  in  Luxembourg,  Estonia  and  Czech 
Republic. The total number amounts 575 297. 

Figure 2: Estimation of the number of cross-border transfers per Member State in 

Sources: Data collected by business registers (BE, CZ, DK, LT); data collected from national expert 
estimation (NL), data collected from Case Studies (HU), EY estimations (AT, BG, CY, DE, EE, EL, ES, HR, 
FI, FR, IE, IT, LV, LU, MT, PL, PT, RO, SI, SK, SE, UK) 

2016 

EY's expert consultation agreed that, across the EU, the range of volume was between 
350 – 900 cross-border transfers per year.  

Estimation of cross-border divisions for the 28 Member States 
In  respect  of  cross-border  divisions,  the  table  below  shows  for  each  Member  State  the 
value  of  F,  the  attractiveness  ranking  (thanks  to  FDI  projects  and  jobs  and  EY 
barometers) and the resulting percentage.298 

Table 2 : Complexity of procedures and attractiveness per Member State 

Member State 

Process 
complexity 

(1 – simple; 
3 – complex) 

Ranking 

F 

Bulgaria 

2 

14 

3,5% 

297  If  we  consider  the  sensitivity  of  the  2  qualitative  parameters  of  the formula  presented  above,  a  range 
between 350 and 900 should be considered 
298 EY study on cross-border operations of companies, p. 26. 

176 

18664564237302928231715146644332211111000 
 
 
 
                                                            
Member State 

Germany 

Estonia 

Ireland 

Greece 

Spain 

France 

Croatia 

Italy 

Latvia 

Luxembourg 

Hungary 

Malta 

Netherlands 

Austria 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

Finland 

United Kingdom 

Process 
complexity 

(1 – simple; 
3 – complex) 

Ranking 

F 

3 

2 

2 

2 

3 

2 

2 

3 

2 

2 

2 

1 

2 

2 

2 

2 

2 

2 

2 

2 

3 

3 

>19 

10 

>19 

8 

5 

>19 

18 

>19 

>19 

9 

>19 

>19 

12 

2 

>19 

4 

>19 

11 

>19 

>19 

2,6% 

1,0% 

3,5% 

1,0% 

1,3% 

6,5% 

1,0% 

0,4% 

1,5% 

1,0% 

3,0% 

2,6% 

1,0% 

3,0% 

6,0% 

1,0% 

6,0% 

1,0% 

3,0% 

1,0% 

0,4% 

Source: Eurostat, Business registers and EY analysis  

Thus, it is estimated the number of cross-border divisions in 2016 in all Member States. 
The  figure  below  summarises  the  results  and  shows  that  the  estimated  number  varies 
from one Member State to another and ranging between 55 Sweden to 0 in 14 Member 
States. The total number amounts 106.299 

Figure 3: Estimation of the number of cross-border divisions per Member State in 

299  If  we  consider  the  sensitivity  of  the  2  qualitative  parameters  of  the formula  presented  above,  a  range 
between  106  and  344  cross-border  divisions  occur  annually  in  the  EU.  Following  discussions  with  the 
economic and legal experts, it was estimated that the low range better reflected the reality 

177 

55996644333111100000000000000 
 
 
                                                            
2016 

Sources: Data collected from business registers (BE, CY, CZ, DK, FR, LT, LV, SE), EY estimations (AT, 
BG, DE, EE, EL, ES, FI, HR, HU, IE, IT, LU, MT, NL, RO, PL, PT, SI, SK, UK) 

Following discussions with the experts, it was estimated that across the EU, there are 
approximatively 50 - 200 direct cross-border divisions per annum. 

8.2 

Baseline Estimation – Costs for cross-border divisions and cross-border 
transfers 

According to the information  collected  from the Member State fiches, the  procedure to 
undertake  a  cross-border  operation  is  more  expensive  for  companies,  as  expected,  than 
undertaking a national procedure. Given the complexity of the exercise, it was difficult to 
obtain a precise idea of costs per operation from the business registers. Indeed, this cost 
depends on many parameters, with this information unavailable. This cost depends on the 
type  and  the  size  of  the  company,  hosting  and  home  countries,  current  procedures, 
registration fees, etc.  
The  objective  of  this  section  is  to  estimate  an  average  range  per  Member  State  of  the 
overall cost of a transfer. This cost has been divided into three main categories:300 301 

  60%  for  legal  advisory  costs  (tax  advisory  costs  are  excluded  –  taking  into 

account direct costs of the transfer after the decision took place; 

  5% for registration costs within public administrations; 
  35%  for  costs  related  to  the  execution  of  the  transfer  (production  of 

documents, organization of general meetings, etc.) in man days. 

In terms of methodology used, a standard cost of legal advisory and registration fees was 
initially  estimated  as  well  as  the  number  of  man-days  required  to  complete  the 
transaction. These three terms were then weighted to the complexity of the procedure and 
to  the  cost  of  the  man-day  applied  in  each  member  state  (on  the  basis  of  the  average 
annual salaries obtained thanks to the Eurostat database).  

300 EY study on cross-border operations of companies, pp. 24 and 26. 
301 The assumptions made were validated by the EY's Expert Panel.  

178 

 
 
 
 
 
                                                            
Figure 4: Estimation of the cost (in k€) of a cross-border transfer of registered office per Member 
State 

Source: EY estimations 

The  average  cost  per  unit  at  EU  level  is  estimated  at  between  €20,000  and  €40,000 
depending  on  the  Member  States  involved  and  on  the  companies.  Especially,  when  a 
procedure  requires  a  validation  by  the  court,  cost  can  significantly  increase  (like  in  the 
United Kingdom).302  

Figure 5: Estimation of the cost (in k€) of a cross-border division of registered office per Member 
State: 

Source: EY estimations 

*Italian estimation is biased because of the large number of companies. The estimated figure does not 
correspond to reality, so it has been discarded from the total (according to EY's expert panel opinion) 

302 EY study on cross-border operations of companies, p. 24. 

179 

 
 
 
                                                            
The average cost per unit within the EU is estimated to be between €55,000 and €70,000 
depending  on  the  Member  States  and  type  of  company  involved.  Especially,  when  a 
procedure  requires  a  validation  by  the  court,  the  cost  can  significantly  increase,  like  in 
Germany and the United Kingdom).303  

  Cross-border conversions are estimated to cost between 130% - 180% a national 

conversion procedure304 

  Cross-border  divisions  are  estimated  to  cost  between  130%  -  200%  a  national 

division procedure305 

These  figures  are  based  on  comparisons  between  costs  a  national  and  cross-border 
procedure for Member States that have direct procedures for both of the operations. 

8.3 

Limitations of Estimations 

It  should  be  noted  that  that  the  baseline  volumes  for  both  cross-border  divisions  and 
cross-border  conversions  only  concerns  direct  procedures.  For  divisions  this  concerns 
operations  through  existing  cross-border  procedures  at  MS  level  (CZ,  DK  and  FI), 
analogous application of the national division procedures (AT, BE, BU, ES, FR, HR, LT, 
PT  and  SE)  and  the  CBMD  (AT,  BE,  IT,  LT,  NL,  PT  and  SE).  Similarly,  rationale 
applies for cross - border conversions.  

Due to the difficulties in estimating the number of cross-border mergers at EU level and 
isolating the mergers that used to achieve the result as a cross-border division or cross-
border transfer, a significant volume of indirect operations were not taken into account. 
Therefore,  in  reality  the  overall  cost  savings  will  be  significantly  higher  given  that  the 
costs of an additional merger amount to approximately €80,000 - €100,000.306  

Similar  rationale  applies  to  conversions  carried  out  through  an  SE  transfer  where  the 
procedure  for  the  transfer,  without  accounting  for  the  creation  of  the  SE,  amounts  to 
approximately €30,000.307 

8.4 

Estimation of Impacts 

The impacts of a new procedure for cross-border conversions were estimated on the basis 
of assumptions of 3 scenarios: 

  Scenario 1: Increase of volume of 20% per year 
  Scenario 2: Increase of volume of 30% per year 
  Scenario 3: Increase of volume of 40% per year 

303 EY study on cross-border operations of companies, p. 28. 
304 EY study on cross-border operations of companies, p. 102 
305 EY study on cross-border operations of companies, p. 117. 
306 EY study on cross-border operations of companies, p. 56. 
307 EY study on cross-border operations of companies, p. 66. 

180 

 
 
 
 
                                                            
The  assumption  of  a  30%  increase  as  a  mid-scenario  is  based  on  the  finding  that  the 
introduction of procedural rules for cross-border mergers led to in an increase of 173% of 
merger activity over 5 years. The following table provides an overview of the estimated 
cost savings per year for companies: 

Cross-border Conversions Cost Savings  

Year 

2016 

2017 

2018 

2019 

2020 

2021 

Total 

Scenario 1 (Baseline Volume + 20%) with €12,000 cost reductions 

Operational cost 
reductions at low 
volume (350 
operations) 
Operational cost 
reductions at low 
volume (900 
operations) 

Operational cost 
reductions at low 
volume (350 
operations) 
Operational cost 
reductions at low 
volume (900 
operations) 

Operational cost 
reductions at low 
volume (350 
operations) 
Operational cost 
reductions at low 
volume (900 
operations) 

Operational cost 
reductions at low 
volume (350 
operations) 
Operational cost 
reductions at low 
volume (900 
operations) 

Operational cost 
reductions at low 
volume (350 
operations) 
Operational cost 
reductions at low 
volume (900 
operations) 

Operational cost 
reductions at low 
volume (350 
operations) 
Operational cost 
reductions at low 
volume (900 
operations) 

€4,200,000 

€5,040,000 

€6,048,000 

€7,257,600 

€8,709,120 

€10,450,944 

€41,705,664 

€10,800,000 

€12,960,000 

€15,552,000 

€18,662,400 

€22,394,880 

€26,873,856 

€107,243,136 

Scenario 1 (Baseline Volume + 20%) with €19,000 cost reductions 

€6,650,000 

€7,980,000 

€9,576,000 

€11,491,200 

€13,789,440 

€16,547,328 

€66,033,968 

€17,100,000 

€20,520,000 

€24,624,000 

€29,548,800 

€35,458,560 

€42,550,272 

€169,801,632 

Scenario 2 (Baseline Volume + 30%) with €12,000 cost reductions 

€4,200,000 

€5,460,000 

€7,098,000 

€9,227,400 

€11,995,620 

€15,594,306 

€53,575,326 

€10,800,000 

€14,040,000 

€18,252,000 

€23,727,600 

€30,845,880 

€40,099,644 

€137,765,124 

Scenario 2 (Baseline Volume + 30%) with €19,000 cost reductions 

€6,650,000 

€8,645,000 

€11,238,500 

€14,610,050 

€18,993,065 

€24,690,985 

€84,827,600 

€17,100,000 

€22,230,000 

€28,899,000 

€37,568,700 

€48,839,310 

€63,491,103 

€218,128,113 

Scenario 3 (Baseline Volume + 40%) with €12,000 cost reductions 

€4,200,000 

€5,880,000 

€8,232,000 

€11,524,800 

€16,134,720 

€22,588,608 

€68,560,128 

€10,800,000 

€15,120,000 

€21,168,000 

€29,635,200 

€41,489,280 

€58,084,992 

€176,297,472 

Scenario 3 (Baseline Volume + 40%) with €19,000 cost reductions 

€6,650,000 

€9,310,000 

€13,034,000 

€18,247,600 

€25,546,640 

€35,765,296 

€108,553,536 

€17,100,000 

€23,940,000 

€33,516,000 

€46,922,400 

€65,691,360 

€91,967,904 

€279,137,664 

181 

 
 
 
The impacts of a new procedure for cross-border divisions were estimated on the basis of 
assumptions of 3 scenarios: 

  Scenario 1: Increase of volume of 10% per year 
  Scenario 2: Increase of volume of 20% per year 
  Scenario 3: Increase of volume of 30% per year 

The following table provides an overview of the estimated cost savings per year for 
companies: 

Year 

2016 

2017 

2018 

2019 

2020 

2021  Total 

Cross-border Divisions Cost Savings 

Volume (Low) + 
10% 
Operational cost 
reductions at 
low volume (50 
operations) 
Operational cost 
reductions at 
High volume 
(200 operations) 

Operational cost 
reductions at 
low volume (50 
operations) 
Operational cost 
reductions at 
High volume 
(200 operations) 

Operational cost 
reductions at 
low volume (50 
operations) 
Operational cost 
reductions at 
High volume 
(200 operations) 

Operational cost 
reductions at 
low volume (50 
operations) 
Operational cost 
reductions at 
High volume 
(200 operations) 

Operational cost 
reductions at 
low volume (50 
operations) 
Operational cost 
reductions at 
High volume 
(200 operations) 

Scenario 1 (Baseline Volume + 10%) with €12,000 cost reductions 

50 

55 

61 

67 

73 

81 

386 

€600,000 

€660,000 

€726,000 

€798,600 

€878,460 

€966,306 

€4,629,366 

€2,400,000 

€2,640,000 

€2,904,000 

€3,194,400 

€3,513,840 

€3,865,224 

€18,517,464 

Scenario 1 (Baseline Volume + 10%) with €37,000 cost reductions 

€1,850,000 

€2,035,000 

€2,238,500 

€2,462,350 

€2,708,585 

€2,979,444 

€14,273,879 

€7,400,000 

€8,140,000 

€8,954,000 

€9,849,400 

€10,834,340 

€11,917,774 

€57,095,514 

Scenario 2 (Baseline Volume + 20%) with €12,000 cost reductions 

€600,000 

€720,000 

€864,000 

€1,036,800 

€1,244,160 

€1,492,992 

€5,957,952 

€2,400,000 

€2,880,000 

€3,456,000 

€4,147,200 

€4,976,640 

€5,971,968 

€23,831,808 

Scenario 2 (Baseline Volume + 20%) with €37,000 cost reductions 

€1,850,000 

€2,220,000 

€2,664,000 

€3,196,800 

€3,836,160 

€4,603,392 

€18,370,352 

€7,400,000 

€8,880,000 

€10,656,000 

€12,787,200 

€15,344,640 

€18,413,568 

€73,481,408 

Scenario 3 (Baseline Volume + 30%) with €12,000 cost reductions 

€600,000 

€780,000 

€1,014,000 

€1,318,200 

€1,713,660 

€2,227,758 

€7,653,618 

€2,400,000 

€3,120,000 

€4,056,000 

€5,272,800 

€6,854,640 

€8,911,032 

€30,614,472 

Scenario 3 (Baseline Volume + 30%) with €37,000 cost reductions 

182 

 
 
Operational cost 
reductions at 
low volume (50 
operations) 
Operational cost 
reductions at 
High volume 
(200 operations) 

€1,850,000 

€2,405,000 

€3,126,500 

€4,064,450 

€5,283,785 

€6,868,921 

€23,598,656 

€7,400,000 

€9,620,000 

€12,506,000 

€16,257,800 

€21,135,140 

€27,475,682 

€94,394,622 

183 

 
 
 
 
 
ANNEX 9: CALCULATION METHOD FOR POTENTIAL SAVINGS FOR COMPANIES BROUGHT 
ABOUT  BY  THE  USE  OF  DIGITAL  TOOLS  AND  PROCESSES  THROUGHOUT  A  COMPANY'S 
LIFECYCLE  

This annex presents the data and methods used for calculating the potential savings that 
companies could make thanks to rules on: 

A) Online registration: Despite the limitations of the available data and the assumptions 
used  for  these  calculations,  the  results  clearly  indicate  that  the  more  companies  would 
chose to register online as a legal entity, the more the registration costs would decrease 
compared to the costs for paper-based registration. 

B)  Elimination  of  multiple  submission  of  company  information  by  implementing  the 
'once-only'  principle.  Here  also  despite  limitations  of  available  data  it  is  clear  that  any 
situations  in  company  law  rules  where  companies  would  be  required  to  submit  certain 
information  only  once  would  contribute  to  savings  both  for  companies  and  public 
administrations. 

A) Online registration 

1. Data sample and assumptions 

Two sets of data have been used for these calculations: 

-  Costs of company registration in 13 Member States308 both for online registration 
and paper-based registration of a company. For some of these Member States the 
registration  costs  were  available  as  a  range  comprising  the  minimum  and  the 
maximum cost for each procedure (online vs paper-based). Where the original cost 
was in a currency other than Euro, the equivalent in Euro was considered.  

-  Eurostat  data  concerning  birth  of  new  limited  liability  companies  in  the  same  13 

Member States for the year 2014 (this being the latest data available). 

Concerning the cost  of company  registration,  this  was calculated as  the sum of all  fees 
incurred by companies in order to complete the company registration, including, where 
applicable,  fees  for  registration  with  the  business  register,  notarial  fees  and  fees  for 
publication in the national gazette. 

For 2 Member States the cost for online registration is "not applicable" (as the procedure 
is not available), however a cost has been calculated based on the average in the other 11 
Member  States.  For  this  reason  all  other  calculations  consider  two  samples:  one  of  11 
Member States and one of 13 Member States.  

Even though these samples consists of just less than half of the Member States, they are 
considered as representative given the total number of new companies registered in these 

308 Based on Annex to Everis study 

184 

 
 
 
                                                            
countries: the 11MS sample represents 65.78% of the total population of new companies, 
while the 13MS sample represents 71.26%. 

2. Scenarios 

Even  for  the  Member  States  which  allow  both  online  and  paper-based  registration  of 
companies there is very little data available about the number of company registrations 
completed  online.  It  is  therefore  even  more  difficult  to  make  projections  about  the 
number of companies that would register online should they have the option to do so. For 
this reason three scenarios are being considered: 

-  Scenario 1: Low exposure to online registration procedure. Should Member States 
allow  companies  to  register  online,  it  is  estimated  that  25%  of  new  companies 
would chose this method of registration. The other 75% would still register using 
the paper-based method.  

-  Scenario 2: Medium exposure to online registration procedure: Same as above, but 
50%  of  new  companies  would  register  online  and  the  other  50%  would  use  the 
paper-based method. 

-  Scenario  3:  High  exposure  to  online  registration  procedure:  In  this  case  it  is 
estimated that 75% of new would register online and only 25% would use the paper-
based method. 

3. Calculations 

All  calculations  are  comparing  cost  of  online  registration  vs  cost  of  paper-based 
registration. 

For each of the 3 scenarios above and for the two samples (11MS and 13MS), the total 
cost  of  company  registration  was  calculated  as  an  average  cost  of  registration,  i.e.  the 
average between the lowest and highest cost of registration 

Scenario 1: Low exposure to online registration procedure 

  Online  registration,  per  MS:  average  Cost  of  registration  x  Number  of  new 

companies x 0.25 

  Paper-based,  per  MS:  average  Cost  of  registration  x  Number  of  new  companies  x 

0.75 

Then the total (online + paper-based) was calculated for 11MS and 13 MS. 

Scenario 2: Medium exposure to online registration procedure 

  Online  registration,  per  MS:  average  Cost  of  registration  x  Number  of  new 

companies x 0.5 

  Paper-based, per MS: average Cost of registration x Number of new companies x 0.5 

Then the total (online + paper-based) was calculated for 11MS and 13 MS. 

Scenario 3: High exposure to online registration procedure  

185 

 
 
  Online  registration,  per  MS:  average  Cost  of  registration  x  Number  of  new 

companies x 0.75 

  Paper-based,  per  MS:  average  Cost  of  registration  x  Number  of  new  companies  x 

0.25 

Then the total (online + paper-based) was calculated for 11MS and 13 MS. 

The  summary  table  clearly  indicates  that  the  more  companies  would  register  online, 
the more the cost of registration would decrease. This is true for the two samples and 
for all scenarios:  

Scenario  

Average total 11MS 

Average total 13MS 

Scenario 1 

 € 219,876,126.53  

 € 238,185,013.15  

Scenario 2 

 € 180,576,788.28  

 € 196,112,517.79  

Scenario 3 

 € 141,277,450.03  

 € 154,040,022.43  

The graph below also illustrates this savings for the two samples: 

4. Data for calculations 

The following table presents that data used for the calculations: 

Country 

Online 

Paper-based 

Online 

Paper-
based 

Low 

High 

Low 

High 

Average 

New 
companies 

Belgium 

€ 2,031.91 

€ 2,114.41 

€ 2,255.97 

€ 2,338.47 

€ 2,073.16 

€ 2,297.22 

16,232 

Cyprus 
Czech 
Republic 
Denmark 

€ 415.00 

€ 515.00 

€ 395.00 

€ 495.00 

€ 465.00 

€ 445.00 

1,836 

€ 185.02 

€ 185.02 

€ 478.29 

€ 667.25 

€ 185.02 

€ 572.77 

18,236 

€ 90.06 

€ 90.06 

€ 90.06 

€ 90.06 

€ 90.06 

€ 90.06 

11,991 

186 

 
 
 
 
Estonia 

Finland 

France 

€ 390.75 

€ 415.00 

€ 390.75 

€ 390.75 

€ 390.75 

€ 415.00 

€ 480.00 

€ 480.00 

€ 46.99 

€ 206.20 

€ 46.99 

€ 206.20 

€ 390.75 

€ 415.00 

€ 126.60 

Germany 

N/A 

N/A 

€ 255.00 

€ 820.00 

- 

€390.75 

€ 480.00 

€ 126.60 

€ 537.50 

Greece 

Hungary 

Poland 

Portugal 

Spain 

UK 

€ 10.00 

€ 70.00 

N/A 

N/A 

€ 40.00 

- 

N/A 

€ 23.08 

€ 220.00 

€ 133.52 

€ 64.69 

N/A 

€ 176.89 

€ 337.70 

- 

€ 257.30 

€ 23.08 

€ 369.25 

€ 8,255.89 

€ 23.08 

€ 4,312.57 

€ 360.00 

€ 360.00 

€ 360.00 

€ 133.52 

€ 203.52 

€ 253.52 

€ 290.00 

€ 133.52 

€ 88.07 

€ 139.77 

€ 209.91 

€ 76.38 

€ 360.00 

€ 228.52 

€ 174.84 

7,423 

10,106 

141,970 

30,101 

- 

19,055 

26,052 

27,793 

72,406 

256,910 

B) Multiple submission of company information / Once-only principle 

Section  5.1.2.2  of  this  impact  assessment  provides  an  analysis  of  the  impact  that  the 
possible options for addressing the issue of multiple submission of company information 
to more than one public authority. in this context, it is mentioned that while exact savings 
of these measures are difficult to estimate, the new rules would partly contribute to the 
overall savings that the implementation of the once-only principle at EU level can bring. 
It  has  been  estimated  that  such  overall  savings  could  result  in  annual  net  savings  of  as 
much as €5 billion per year. The following provides details on how this figure has been 
calculated in the 2012 study on eGovernment and reduction of administrative burden309. 

Estimation for 3 countries  

The  Cost  benefit  analysis  (CBA)  was  based  on  the  evidence  gathered  for  the  three  so-
called  “champion”  countries  which  were  selected  for  an  in  depth  cost-benefit  analysis 
(CBA).  The  three  "countries  of  excellence"  were  Denmark,  the  Netherlands  and  the 
United Kingdom and they were selected were selected based on the following criteria: 

•  The  presence  of  effective  and  efficient  electronic  procedures  and  general 

eGovernment; 

•  Standards  and  advancement,  in  order  to  ensure  the  significance  of  the  selected 

cases; 

•  The centrality of the “once only” principle in national policies and strategies data 
availability and the presence of information and reports on initiatives, policies and 
strategies concerning the “once only” principle and other ABR initiatives; 

•  Replicability  and  reliability  potentials  in  order  for  other  countries  to  easily 

transfer and scale best practice initiatives and solutions; 

•  The extent and amount of measurements of administrative burden reduction and 
“once  only”  principle  initiatives,  for  instance  standard  cost  models,  KPI’s  and 
business case approaches; 

309 Based on Final Report: Study on eGovernment and the Reduction of Administrative Burden (SMART 
2012/0061), p. VI.  

187 

 
 
 
                                                            
•  The extent and amount of measurements are further indicating both best practice 

outcomes/effects and early indications of replicability potentials; 

•  The advancement of the countries’ data infrastructure, in particular common base 

registries and other significant databases; 

•  Multilevel  cooperation  and  cross  government  cooperation  on  the  national, 

regional and local levels of “once only” principle initiatives and solutions. 

The  CBA  assessed  the  costs  and  benefits  of  relevant  initiatives  of  the  “once  only” 
principle  and  digital  by  default  programmes  in  these  countries.  The  collection  of 
necessary data for the cost-benefit analysis also covered interviews with stakeholders in 
the selected countries. 

The analysis showed that in DK in the timeline 2012- 2020 the Basic Data Programme 
has brought potential total savings that are expected to reach EUR100 million annually in 
2020. For UK the potential savings fall inside a range of EUR 2,0 and EUR 2,1 billion of 
savings per year. 

Extension of the results to EU28 

The projection of the results gathered for 3 countries was extended to EU28 based on two 
main hypotheses: 

Hypothesis  1:  all  countries  start  from  the  same  level  of  development  in  the 
implementation  of  each  programme.  Countries  having  an  enhanced  level  eGovernment 
the  UN  e-Government  Development  Index  UN-EGDI)  are 
(evaluated 
nonetheless expected to experience reduced costs and hence higher net benefits; 

through 

Hypothesis  2:  all  countries  are  expected  to  adopt  the  same  planning/implementation 
strategy used by the three “best practices”. 

In addition, three variables were used to rescale the CBA results: 

•  The population as a proxy for the size of countries; 

•  The  UN-EGDI  as  a  proxy  for  the  level  of  progress  in  the  adoption  of  e-

technologies; 

•  The  average  cost  per  hour  of  a  Public  Official, derived  from  the  Cross-Border 

Services Study. 

The three variables considered were normalized with respect to the level observed in the 
“best  practice”  countries  to  rescale  potential  costs  and  benefits  for  their  respective 
programmes. 

Results for EU28 

According to the study: 

•  The extension of the Danish approach to implement the “once only” principle is likely 
to  generate  an  annual  net  saving  at  the  EU  28  level,  amounting  to  around  EUR  5 
billion per year by 2017. 

•  The  potential  impact  of  the  UK  Digital  Government  Strategy  at  EU  level  is  around 

EUR 10 billion of annual savings. 

188 

 
 
•  The implementation of the “once only” principle based on the Dutch RNI approach is 
expected to produce net benefits amounting to around EUR 550 million at EU level in 
a time horizon of 15 years. 

It  should  be  noted  that  a  2017  study  which  specifically  looked  into  the  possible  policy 
options at EU level for the implementation of the once-only principle310 was not able to 
make  any  new  cost  estimates  and  referred  back  to  the  figures  presented  above.  The 
authors of the study acknowledge the shortage of data in making precise estimates: 

At the present time, there are not enough data to allow precise estimates of the impacts 
of  cross-border  OOP  implementation  on  businesses  and  individuals.  While  there  is 
some evidence of cost savings to public administrations, there is a shortage of data on 
required  investment  costs;  levels  of  engagement  and  maturity  vary  greatly  across 
Member  States  and,  where  implemented,  OOP  cannot  clearly  be  separated  from  the 
services and other activities to which it applies. Nevertheless, some EU Member States 
have already embraced OOP for one or more of the following reasons: 

1- Reducing the administrative burden on citizens and businesses; 

2- More efficient (lower-cost, more effective) government administration; 

3- Fraud prevention. 

310 Study by Jonathan Cave, Maarten Botterman (GNKS Consult BV), Simona Cavallini, and Margherita 
Volpe (FORMIT):  EU-wide digital Once-Only Principle for citizens and businesses  - Policy options and 
their impacts (2017) 

189 

 
 
 
                                                            
ANNEX 10: EMPLOYEE PARTICIPATION AT BOARD LEVEL 

Board-level  employee  representation  means  that  employees  are  granted  the  right  to  be 
represented  through  their  elected  representatives  in  the  board  of  directors  or  the 
supervisory  board  of  the  company  with  decision  making  power.  Some  Member  States 
provide for an employee participation system in national legislation, some not. The issue 
of the employee participation is important for cross-border operations in cases in which 
employees already had the rights to be represented at the board before the cross-border 
operation was carried out.  

There are various forms of employee participation in Member States, ranging from little 
influence  on  the  board  to  an  equal  representation  of  employee  representatives  and 
shareholders  in  the  board.  However,  in  most  cases,  where  the  national  legislation 
provides for such system, employee representatives are in minority in companies' boards 
and therefore their influence is not decisive.  

Companies can have different management and supervisory structures, either a monistic 
("single-tier") or a dualistic ("two-tier"). The corporate management structure in force in 
the company has an impact on how the employee participation is organised. In the first 
case,  the  company  consists  of  one  board  which  exercises  both  supervisory  and 
management functions311 and employee representatives sit on that board. In the dualistic 
model the company has a management board in charge of running of the company and a 
supervisory  board  responsible  for  monitoring312,  and  employee  representatives  sit  on  a 
supervisory board. In both cases, employees are involved in decision-making processes 
of the company. There are also several legislations that allow a free choice between these 
two models.313 .  

In  17  out  of  28  Member  States,  plus  Norway,  employee  participation  is  required  in 
limited liability companies whereas the system is as follows314: 

Country 
(including EEA) 
Austria 

Belgium  
Bulgaria 
Cyprus 
Czech Republic 

Scope 

  Ltd. > 300 employees 
  Plc 

- 
- 
- 

State-owned Plcs  

Number of employees 
in the board 
1/3 of the Supervisory 
Board (SVB) 
-  
-  
-  

1/3 of SVB 

Company's board 
structure 
Dualistic  

Monistic  
Monistic and dualistic 
Monistic 
Monistic and dualistic 
(only private sector 
companies can choose 
the monistic structure)  

311 As for instance in the UK, Belgium, Ireland, Spain. Sweden and Greece.  
312 As for instance in Germany, Austria, Slovakia and Poland.  
313  As  for  instance  in  Denmark,  Finland,  France,  Italy  and  Luxembourg.  The  choice  between  the  two 
systems is also allowed for European Companies (SE).  
314 Conchon, Kluge, Stollt, Worker board-level participation in the 31 European Economic Area countries, 
ETUI  (August  2015  update)  available  at  https://www.worker-participation.eu/National-Industrial-
Relations/Across-Europe/Board-level-Representation2/TABLE-Worker-board-level-participation-in-the-
31-European-Economic-Area-countries. The table comprises information on board-level representation in 
the 28 EU Member States and Norway in 2015.  

190 

 
 
                                                            
Country 
(including EEA) 
Croatia 

Scope 

  Ltd. > 200 employees 
  Plc 

Denmark 

  Ltd. & Plc > 35 
employees 

Company's board 
structure 
Monistic and dualistic 
(only Plc can choose 
the monistic structure) 
Monistic and dualistic 

- 

  Ltd. & Plc > 150 

employees 

Dualistic 
Monistic and dualistic 

Monistic and Dualistic  <200 empl. 2 members, 

Number of employees 
in the board 
1 representative 

1/3 of board with a min. 
of  2  members  (min.  3 
members  on  the  board 
of  the  parent  company 
of  a  group  which  falls 
within  the  scope  of  the 
regulation) 

- 
1/5 (max. 4 members) 
or based on agreement, 
employer  decide  on 
which  board  they  will 
sit 

empl.: 

up to 1/3 
>200  empl.:  1/3  of  the 
board 
In subsidiaries: 
200-1,000 
members 
>1,000 empl.: 1/3 of the 
board 
1/3  or  1/2  of  SVB,  at 
least  one  being  an 
executive manager 

3 

Germany 

  Ltd. & Plc >500 

Dualistic 

Estonia 
Finland 

France 

  State-owned Plc  
  Private sector Plc 

(voluntary) 

  Private sector Plc 

(compulsory) > 500 
employees in France 
or > 5.000 employees 
worldwide. 

employees to 2000 
employees  

  Plc & Ltd > 2000 

employees 

  companies in the iron, 

coal and steel 
industry > 1000 
employees 

State-owned Ltd. and 
state-owned Plc 
  Ltd. > 200 employees 
  Plc > 200 employees 

state-owned  commercial 
companies 
state 
agencies 

and 

- 
- 
- 
Plc > 1.000 employees 
 

state-owned 
companies 

Greece 

Hungary 

Ireland  

Italy 
Latvia 
Lithuania  
Luxembourg 

Monistic 

1 representative  

Monistic and dualistic 
(only Plc can choose 
the monistic strucure) 
Monistic 

1/3 of SVB or based on 
agreement 

1/3 of the board 

Monistic and dualistic 
Dualistic 
Monistic and dualistic 
Monistic and dualistic 

-  
-  
-  

up to 1/3 of the board 

191 

 
 
 
Country 
(including EEA) 
Malta 
Netherlands 

Scope 

- 
  Ltd. > 100 employees 
  Plc. > 100 employees 

Poland 

commercialised and 
privatised companies 

Number of employees 
in the board 
-  

Company's board 
structure 
Monistic 
Monistic and Dualistic  1/3  of  SVB  (dualistic) 
the  non-
directors’ 

or  1/3  of 
executive 
seats (monistic) 
2/5 in commercialised 
and min 2-4 
representatives in 
privatised companies 
Monistic and dualistic  Based on the articles of 

Dualistic  

Portugal 

Romania 
Slovakia 

Slovenia 

Spain 

Sweden 

  State-owned Ltd.  
  State-owned Plc 

- 
  State-owned Ltd. and 

Monistic and dualistic 
Dualistic 

state-owned Plc 

  Plc > 50 

employees(or <50 
employees if 
provided for by the 
articles of 
association) 
Plc & Ltd > 50 
employees  

Monistic and dualistic 
(only Plc can choose 
the monistic structure) 

  state-owned 

companies >1000 
employees  
  state-owned 

companies in the 
metal sector> 500 
employees 

  Ltd. > 25 employees 
  Plc > 25 employees  

Monistic 

Monistic 

association  

-  
1/3 up to 1/2 of SVB (if 
provided by the articles 
of association) or 1/2 
(for state-owned 
companies) 

1/3 up to 1/2 (defined 
by the articles of 
association) (dualistic) 
1/4 with minimum 1 
representative (defined 
by the articles of 
association (monistic) 
2-3 representatives 

2  to  3  representatives 
(max. 1/2)  
(<1,000  employees:  2 
members 
>1,000  employees  + 
operating 
several 
in 
industries: 3 members) 
- 

United Kingdom 

- 

Monistic 

As  indicated  in  the  table,  the  systems  of  employee  participation  on  board  level  vary 
significantly among Member States. Especially the thresholds for the system to apply and 
the power of employee representatives are different between MS. 

192 

 
 
 
 
 
ANNEX 11: THE SME TEST – SUMMARY OF RESULTS 

(1) Preliminary assessment of businesses likely to be affected  

The  simpler  and  faster  registration  and  filing  procedures  through  digital  tools  will  reduce  costs  and 
administrative  burdens  for  companies.  Harmonised  rules  will  enable  companies  to  conduct  cross-border 
operations  faster  and  at  lower  costs,  in  particular  lower  costs  of  legal  assistance  and  will  limit  the  risks  for 
companies caused by legal uncertainty. This will help businesses to adjust and reorganise their structures to their 
changing needs that will help them to be more competitive in the Single Market. (See annex 3) 

(2) Consultation with SMEs representatives 

Consultation with SMEs took place throughout the following processes: 

  Public consultation which ran from 10 May 2017 to 6 August 2017 (See Annex 2). Responses were 

received from 25 business groups, including those representing SMEs. 

  The public consultation was presented to the SBA Follow-up Meeting with Stakeholders on 14.6.2017 
  Regular bilateral meetings with business groups. 
 

Individual complaints and submissions received from SMEs concerning the regulatory environment. 

SMEs and Business Groups were broadly supportive of proposals contained in Company Law initiative, 
particularly in regards to proposals on digitalisation and cross-border conversions. 

(3) Measurement of the impact on SMEs 

There was no specific analysis of the distribution of the potential costs and benefits of the policy options over 
the businesses' size. 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.  

(4) Assess alternative options and mitigating measures 

In  section  6.2  on  overall  impacts,  it  is  concluded  that  the  selected  options  are  highly  likely  to  have  a  very 
positive  economic  impact  on  business  stakeholders  in  general,  including  SMEs.  However,  in  relation  to  the 
proposed new procedure for cross-border conversions and divisions, the requirement of mandatory independent 
expert report under Option 1 of section 5.2.1 could represent a disproportionate burden for smaller businesses. 
Therefore, it could be considered to derogate from this requirement for small and micro companies where the 
burden would be most harshly felt. 

193