CELEX: 51988PC0101
Language: en
Date: 1988-05-18
Title: Proposal for a TWELFTH COUNCIL DIRECTIVE ON COMPANY LAW CONCERNING SINGLE-MEMBER PRIVATE LIMITED COMPANIES (presented by the Commission)

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COM (88) 101
Vol. 1988/0029
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                          COM(88 ) 101 final - SYN 135
                                          Brussels , 18 May 1988
                            Proposai for a
                      TWELFTH COUNCIL DIRECTIVE
      ON COMPANY LAW CONCERNING SlNGLE-MEMBER PRIVATE LIMITED
                               COMPANIES
                   ( presented by the Commission )
 ---pagebreak---                                              - 2 -
Explanatory memorandum
Background                                                              CiTT
The programme to coordinate company law through directives based on Article 54
of the Treaty of Rome aims to achieve safeguards which ,           for the protection of
the interests of associates and third parties ,           are required of companies and
firms .      To date harmonization has been reached in the disclosure ,            annual
            2         . • . .    _____ .   3  _____, ., _____  .  ,     ...    4
accounts ,     consolidated accounts ,       and the approval    of auditors ,   for all
companies ,     and in addition ,     in the case of public limited companies only , in
requirements relating to information and capital ,                and to mergers0 and
divisions^ of companies .          The directive now submitted concerns only one very
spécifie aspect of private Limited companies ,           namely the introduction of the
single person company .
^Directive 68/ 151 / EEC, OJ L 65, 14.3.1968 .
^Directive     78/660/ EEC , OJ L 222, 14.8.1978 .
^Directive     83/349/ EEC , OJ L 193, 18.7.1983 .
 «[ Directive  84/ 253 / EEC , OJ L 126, 12.5.1984 .
^Directive     77/91 / EEC , OJ L 26, 31.1.1977 .
^ Directive 78 / 855 / EEC , OJ L 295 , 20.10.1978 .
 ^ Directive 82 / 891 / EEC , OJ L 378, 31.12.1982 .
 ---pagebreak---                                           - 3 -
The Community Action Programme for SMEs , approved by the Council on 3 November
1986 implies the development of proposals in the area of company law , in order
to encourage the creation and development of SMEs .           The European Council has
also insisted ,    on several occasions ,     on the need to promote the spirit of
enterprise in the Community .      Promoting the access of individual entrepreneurs
to the status of company ,      which represents the best framework for business
development    in the internal market ,     falls within this policy .       The Council
resolution of 22 December 1986 on the Action Programme on Employment Growth
also underlines the need to encourage single-person businesses .
With respect to single member companies the present            legal position is that
certain    Member States  allow    such  companies     to   be  formed ,   while    others
maintain the requirement that there be more than one associate , and if all the
shares come to be held by a single shareholder require either the winding up
of the company or the joint liability of the sole member .
The Member States which allow single member companies to be formed are Denmark
( since 1973 ),   Germany  ( 1980 ),   France  ( 1985 ),  the Netherlands     ( 1986 ) and
Belgium ( 1987 ).   In Luxembourg ,   draft legislation has been before Parliament
since 1985 .
Provisions for single member companies do not exist in Spain ,           Greece ,   Italy ,
Ireland or the United Kingdom . Single-member companies are also not allowed in
Portugal ,   but legislation for single-person businesses with limited liability
was introduced in 1986 .
Amongst those Member States which recognise single-member companies ,             Denmark ,
Germany and the Netherlands allow such companies to be formed not                 only by
natural persons but also by artificial persons , while Belgium does not allow
 ---pagebreak---                                        - 4 -
an  artificial   person  to  be  the  sole member .   France  has  an  intermediate
position ,  allowing single-member companies to be formed by artificial persons
but prohibiting the creation of one single-member company by another ( this is
also envisaged in the Luxembourg proposal ).
In order to harmonize this national legislation ,      the directive would require
that provision be made for single member companies throughout the Community .
This arrangement is useful particularly in order to facilitate the formation
or continuation in business of the companies ,      often small companies ,    which
have only one owner .   On the one hand , the requirement that there be more than
one member means that an individual businessman must secure the cooperation of
a second member ,   often nothing more than a front man ,    which adds to the cost
and complication of running the company .    On the other hand , the company form ,
leaving aside the number of members ,     provides a legal framework which under
existing Community measures and the present directive provides a series of
equivalent safeguards ,    particularly regarding disclosure and the drawing up
and auditing of accounts ,   which allow the company 's funds to be kept separate
from the sole member 's private assets and liabilities .
The sole trader is encouraged to take the risk of setting up a business in
company form .  This allows him to limit his liability to the funds       devoted to
a specific activity ,    not neglecting the need for      the protection of third
parties with regard to such single member companies .          The directive would
therefore   lay down rules specifically for single member companies .        For the
rest the ordinary law on limited liability companies would apply .
 ---pagebreak---                                           - 5 -
II .  Commentary on the articles
Article 1
The directive applies only to private limited companies .            This does not rule
out the possibility of introducing the single member companies equally as for
public limited companies on the condition that the rules of the directive are
followed ( see art . 6 ).
Article 2
The purpose of this article is to ensure that all Member States make provision
in their legislation for private limited companies with one member only .             Such
a company may be set up as a one member company ,       but it may also arise later ,
as the result of a concentration of all the shares in the hands of a single
shareholder .      The legal    provisions which derive from the requirement that
there    be   more    than   one   member   could   not   be  maintained     in     force .
Article 11(2Mf ) of Directive 68 / 151 / EEC , which allows the courts to order the
nullity    of a company where contrary to the national law governing the company
the number of members is less than two ,        no longer serves any purpose in the
case of private limited companies .
To facilitate verification of the fact that a company has only one member and
to safeguard transparence when shares are transferred ,        the directive requires
that the shares of the single member company be nominative .
The   purpose   of   introducing   the  single   member  company    is   to supply     the
individual entrepreneur with a structure of organization which allows him to
limit his liability .
For this reason ,      it is necessary to limit single member companies as far as
possible to natural persons and to small and medium-sized companies .            In this
way ,   with the aim of avoiding the creation of          chains of     companies ,    the
directive prohibits single member companies whose                single member is an
                     artificial person from being the sole
 ---pagebreak---                                             - 6 -
member  of another     company .     On   the other    hand ,  certain    limitations are
established about artificial persons who are sole members of a company .                 The
directive permits Member States to choose between two options .
The first option     is to provide for full          responsibi lity of     the artificial
person for the obligations of the company which were entered into during their
sole membership .   However , in the case of an artificial person who becomes the
sole member of an existing company ,            the Member States can provide a more
flexible solution .    If the situation is regularised within a year ,              the fact
that in this period of time the company had a single member should be of no
conséquence .
On the other hand ,     if ,    after one year the artificial person has not found
another  member ,    the     sole   member   is   responsible   for   all    the   company 's
obligations entered into from the moment of becoming the sole member .
The  second   option   is     to  fix   a  minimum   capital  for   these     single  member
companies and to require that the companies and the artificial persons who are
the sole members ,    are at their balance-sheet dates ,          small or medium sized
companies in the sense of article 27 of directive 78 / 660 / CEE with regard to
annual accounts .   When the single member company or the artificial person who
is the single shareholder exceeds the size of a medium sized company in the
sense of the directive and if the situation is not regularised within a year
following the balance-sheet date , the sole member is fully responsible for the
obligations of the company arising after that date .
 ---pagebreak---                                             - 7 -
The directive does not repeat the Laws of some countries ( France ,           Belgium and
Luxembourg )   which    forbid   natural persons    being the   sole associate    of many
companies ,    which could be an obstacle to carrying out different activities of
an individual entrepreneur .
Article 3
The fact    that a     company has    only one member may     be of   interest to     those
dealing with it .       It must therefore be disclosed .       Where a company has only
one member at the time of its formation this will be ensured by the disclosure
of  the  statutes      or   act   of  incorporation   pursuant   to  Article 2(1 ) ( a ) of
Directive 68 / 151 / EEC .      However ,  where  a  company  becomes   a  single   member
company after its formation , this directive would require that the information
be entered in the register ,         but does not require that it be published in a
national gazette .
Article 4
In a single member company it is the sole member who exercises the powers of
the general meeting .        Those powers have not yet been harmonized at Community
level .     It  is   thus for     the Member States    to determine the powers of the
general meeting .        As a rule those powers can be delegated to other persons .
Delegation of that       kind does not    seem appropriate in the case of a single
member company , and the directive would prohibit it .
 ---pagebreak---                                           - 8 -
To date there has been no harmonization either of the form to be taken by
decisions adopted by a general meeting .             But for single member companies ,
where there is no control in the form of another member , this gap has to be
filled . Under the directive therefore , the decisions taken by the sole member
in his capacity as general meeting must be recorded in minutes .         The directive
avoids laying down the effects of failure to comply with this rule .            It will
be to Member States to make provision for the penalties which seem to them
appropriate , for example the nullity or the possibility of cancelling the sole
member 's decisions .
Article 5
Any agreement between any company ,       single member or multimember ,    and one of
the members of the company carries the risk of a conflict of interest ,             and
legislation has been enacted on the subject in all Member States .             But the
danger is clearly much greater in the case of the single member company .            As
with decisions taken by the sole member in his capacity as general meeting
there is a need for a measure of clarity with regard to these agreements too .
The directive therefore requires that these agreements must also be drawn up
in writing .
But  there   are  circumstances   in  which   the   interests  involved are  even more
difficult to distinguish .       This is the case where for the conclusion of such
an agreement the company is represented by the sole member acting as manager .
In that case the directive requires that such an agreement be authorized by
the statutes or instruments of incorporation ,          documents which are accessible
to    any    interested    party     at   the     companies   register   pursuant    to
Directive 68 / 151 / EEC .
 ---pagebreak---                                              - 9 -
Artide 6
The directive must      take account of the fact that         certain Member States accept
the one member company not only for private               limited companies but           also for
public    limited    companies .     To  avoid   different      degrees      of   protection    for
associates and third parties across the Community ,               it   is necessary to impose
legislation     for   single    member   companies    on   Member    States      to   satisfy   the
demands of this directive .
Artide 7
The directive     cannot   afford   to overlook    the fact   that   for    theoretical     reasons
certain    Member States      are  reluctant   to    accept    the   idea     of    a  one   member
company .      Such Member States may nevertheless provide for                limited liability
for sole     traders ;    this   has already    been done      in one     Member State .        But
Member States choosing this arrangement must provide safeguards covering such
traders which are equivalent to those required by Community law in particular
the  directives      concerning     advertising ,     annual    accounts       and    consolidated
accounts    of   private    limited    companies .       Otherwise      different      theoretical
approaches which in practice have the same results in terms of the risks run
by a sole trader and by the sole member of a company would ultimately provide
varying measures of protection for similar interests throughout the Community .
 ---pagebreak---                                           - 10 -
                                        Proposai for a
 TWELFTH COUNCIL DIRECTIVE ON COMPANY LAW CONCERNING SINGLE-MEMBER PRIVATE LIMITED COMPANIES
  THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
 Having regard to the Treaty establishing the European Economic Community ,                  and
 in particular Article 54 thereof ,
 Having regard to the proposal from the Commission ,
 In coopération with the European Parliament ,
 Having regard to the opinion of the Economic and Social Committee ,
 Whereas     certain safeguards        which ,   for   the protection    of the    interests of
 members and others , are required by Member States of companies or firms within
 the meaning of the second paragraph of Article 58 of the Treaty should be
  coordinated with a view to making such safeguards equivalent throughout the
  Community ;
 Whereas in this field Council Directives 68/151 /EEC1, 78/660/EEC2 and 83/349/EEC3
 concerning disclosure ,         the validity of commitments ,      nullity , annual accounts
 and consolidated accounts apply to all companies , while Cotncil Directives 79/91 /EEC^,
 78 / 855 / EEC^and 82 / 891 / EEC^ on formation and capital , mergers and divisions
 apply only to public limited companies ;
 Whereas the SME Action Programme was approved jby the Council on 3 November 1986 ;
 Whereas reforms in the legislation of certain Member States in the last few
 years ,     permitting      single - member private      limited companies ,     have   created
 divergences between the laws of the Member States ;
 Whereas it is important to provide a legal instrument allowing the limitation
 of     liability      • of the individual entrepreneur throughout the Community ;
 Whereas a private limited company may be a singlemember company from the time
 it is formed ,      or may become so because its shares have come to be held by a
 single shareholder ; the shares of a single _member company should be nominative
 and certain conditions should be established for companies with a . legal
 person as their sole member ;
directive      68/ 151 / EEC, 0J L 65, 14.3.1968 .
directive      78/660/ EEC, 0J L 222, 14.8.1978.
directive      83/349/ EEC, OJ L 193, 18.7.1983 .
^Directive     84/ 253/ EEC , OJ L 126, 12.5.1984 .
directive      77/91 / EEC, OJ L 26, 31.1.1977.
directive      78/ 855 / EEC , OJ L 295 , 20.10.1978 .
 ---pagebreak---                                         11
Whereas  the  fact   that  all the shares  have come to be held  by  a single
shareholder should be disclosed ;
Whereas decisions taken by the sole member in his capacity as general meeting
should be recorded in writing ;
Whereas agreements between the sole member and the company should likewise be
recorded in writing .
HAS ADOPTED THIS   DIRECTIVE :
 ---pagebreak---                                                  - 12 -
Article 1
The coordination measures prescribed by this Directive shall apply to the
laws ,         regulations and administrative provisions of the Member States relating
to the following types of company :
  -    in Belgium :
       la société privée é responsabi lité limitée / de personenvennootschap met
      beperkte aansprakelijkheid ;
  -    in Denmark :
       anpartsselskaber ;
  -   in Germany :
     die Gesellschaft mit besch-ankter Haftung ;
-   in Spain :
    la sociedad de responsabi lidad limitada ;
 -  in France :
    la société à responsabilité limitée ;
 -  in Greece :
        JJ_____cta\p(a ncRiopiopiv^c tu®uV^'<y .
 -   in Ireland :
    the private company Limited by shares or by guarantee ;
 -   in Italy :
     la société a responsabilité limitata ;
 ---pagebreak---                                     13 -
in Luxembourg :
La société à responsabilité Limitée ;
in the Netherlands :
de besLoten vennootschap met beperkte aansprakeli jkheid ;
in Portugal :
a sociedade por quotas ;
in the United Kingdom :
the private company Limited by shares or by guarantee .
 ---pagebreak---                                                 - 14 -
                                               Artide 2
  A conpany may hâve a sole menber, either Oien it is formed or when ail the shares corne to be held
  by a single person (single lutniLer conpany). Shares in such a conpany shall be nominative,
  2. A single-member company whose sole member is a legal person may not be the
  sole member of another company .
  3. Where     the   sole    member is a         . legal       person ,    Member States shall
 provide that either :
(a ) the       legal person has unlimited liability for the company 's obligations
 arising during the period of the person 's sole membership . However , Member
 States may provide that          where a       legal        person becomes a sole member ,
 because all the shares come to be held by a single person, that liability
 is not incurred unless another member has not been found within one year
 or
(b )  a minimum capital        is fixed      for the    single -member company and both the
 company and the sole member are companieswhich at their balance-sheet dates do
 not exceed the limits of two of the three criteria in Article 27 of Directive
 78 / 660 / CEE . If one of the companiesexceeds the limits and the situation is not
 regularised in the year following the balance-sheet date ,                   the sole member shall
 have unlimited liability for the obligations of the single-member company arising
 after the balance-sheet date .
                                               Article 3
 Where a company becomes a single -member company because all its shares come to
 be held by a single person ,            • that . fact shall be recorded in the file or
 entered in the register within the meaning of Article 3(1 ) and ( 2 ) of ,
 Directive 68 / 151 / EEC .
 ---pagebreak---                                            15 -
                                       Artide 4
 1.   The sole member shall exercise the powers of the general meeting of the
 company , and may not delegate them .
2 . Decisions taken by the sole member in the field referred to in paragraph 1-
 shall be recorded in minutes .
                                       Article 5
  1 .  Agreements between the sole member and the company shall be drawn up in
writing .
  2.   The  possibility  of   any agreement    between   the   sole ,   member  and  the
company represented by      that member must be 'provided for in the statutes or
 instrument of incorporation of the company .
                                       Article 6
 Where a Member State allows the formation of a single-member company , the rules
 of this Directive shall apply .
                                       Article 7
A Member State may decide not to apply this          Directive where    its legislation
provides    that an  individual   businessman    may   set  up  an  undertaking    whose
liability is limited to a sum devoted to a stated activity ,          on condition that
safeguards are laid down for such undertakings which are equivalent to those
imposed by Community law on the companies to which this Directive applies .
 ---pagebreak---                                       - 16 -
                                     Artide 8
1.   Member  States   shall  bring   into    force    the laws ,   regulations   and
administrative provisions       necessary        to comply with this Directive by
1 January 1990 . They shall 'inform the Commission thêreof .
2.   Member States   may  provide  that   in   the  case  of  companies  already  in
existence on 1 January 1990 this Directive shall not apply until 1 January
1991 .
3.   Member States  shall    communicate      to    the    Commission   the
text of the main provisions of national law which they adopt in the field
covered by this Directive .
                                     Article 9
This Directive is addressed to the Member States .
 ---pagebreak---                                                                               SME Task    Force
                COMPET I T I VENESS AND EMPLOYMENT          IMPACT STATEMENT
I.    What    Is the main reason for Introduclng the measure ?
      To Improve access of the greatest number of small enterprises to
      Incorporation thus Improving the protection of third parties , to
      facilitate succession ,                 Improve management and promote self-
      employment In a harmonised legal framework .
II .  Features of the businesses In question . In partlcular :
      (a)     Are there many SMEs ?
              Yes , the number of individual entrepreneurs In all                         Member
              States Is very high .
      (b)     Are they concentrated In réglons whlch are :
              I.     et I g I b l e for régional ald In the Member State ?
                     not necessarlly
              il . ellgible under the ERDF ?
                     not necessarlly
III . What direct obligations does thls measure Impose on businesses ?
      The    transformation             of  an  individual    enterprise       Into   a  company
      Involves       that        it  conform to the obligations          Imposed by company
      I aw .
IV .  What     Indirect obligations are             local authorltles        likely to     impose
      on businesses ?
      The Member States hâve the option of extendlng the provisions of
      the s Ing le-member company to public llmlted companles .
      If a Member State amends Its législation on prlvate llmlted
      companles        for     matters covered by        the   first ,   fourth    and   seventh
      directives or            by    thls proposai ,    thls can concern s Ing le-member
      companles .
V.    Are there         any        spécial   measures    In   respect     of   SMEs    ?  Please
      speclfy .
              The proposai            Itself  Is speclflcally aimed at favourlng SMEs .
VI .  What is the likely effect on :
      (a)     the compet l t I veness of businesses ?
              positive         :    Incorporation    Is  the   Idéal   form    for   developlng
              activltles           In the  Internai   market .
      (b)     employment ?
              positive : thls represents a spécifie measure                       In  favour of
              se I f-emp loyment .
 ---pagebreak---                                      л$ -
VII . Hâve both 8 Ides of Industry been consulted ?
      Please Indicate their opinions .
      Ail the professlonal organisations représentative of SMEs and the
      European Trade Union Confédération hâve been consulted orally and
      In wrlting and thelr global opinion Is favourable .