Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on single-member private limited liability companies

Scrutiny details

Subsidiarity deadline: 10/06/2014
Scrutiny Information

Scrutiny date: 11/07/2014

Subsidiarity Concern:

No Important information to exchange

No Veto

Information on parliamentary scrutiny

Referred to Committees on:

European Union Questions
Legal Affairs

Economic Affairs

The Committee on Legal Affairs has recommended a reasoned opinion.

It considers that the given legal basis of the proposal is insufficient.

The plenary did not adopt the recommended reasoned opinion on 23 May 2014.

Lisbon Treaty procedures
  Political Dialogue

11/07/2014 | Scrutiny results - COM20140212
On its 924th plenary session on Friday 11 Juliy 2014 the German Federal Council (Bundesrat) adopted the following contribution, addressed to the European Commission, in the context of the political dialogue.

After having rejected the by its legal Committee proposed Reasoned Opinion in May on the proposal for a directive on single-member private limited liability companies, the Bundesrat now adopted on it a critical and large opinion in the context of the political dialogue with the Commission. In it, the Bundesrat stresses several points of critics:

Firstly, the Bundesrat is strongly concerned about the legal basis of the proposal, as it obliges member states to offer this so-called "Societa Unius Personae" (SUP) also for formations of companies acting only national-wide and without cross-border reference. As the minimum requirements for the formation of a SUP and the formation procedure are sustainably dissenting from existing national provisions for single-member companies, this would illustrate a considerable and illegal interference in the decisions of the national legislator on the requirements set out for the foundation of limited corporations.

Secondly, the Bundesrat has serious concerns about the formation procedure itself. Even if the Bundesrat agrees that cross-border formations for companies should be facilitated and administrative burden reduced as much as possible within the European Union, however minimum requirements set in order to protect public and individual interest must apply in every stage of the procedure. In this context, the online formation procedure foreseen in the proposal faces objections: Article 13 para. 1 of the proposal only sets the maximum requirements member states are allowed to request upon the online registration - however, they can leave behind this requirements on the prove of information required set out by articles 13 and 14 of the proposal. Thus would have consequences for the verification of the identity of the founder, as article 14 para. 3 of the proposal obliges the member states to offer an online formation procedure, allowing a complete online accomplishment of the formation procedure. Physical presence of the founder in front of a verification centre is explicitly not necessary. Furthermore, the identity check of the founder shall be optional for member states, pursuant to article 14 para. 5 of the proposal. This concept follows the Anglo-American practice of registration, which is limited on the receipt of registration forms without further check. In practical, the registration has to be done, even though the verification of the identity of the founder applying from a foreign European country will not be assured. In the view of the Bundesrat, such procedure could easily be the gateway of misuse and fraud. As identity can be hidden, the SUP risks to become an ideal platform for all kind of criminal intrigue, such as defalcation, money laundering, fiscal fraud or fraudulent insolvency - as an effective criminal prosecution will not be possible.

In consequence, the Bundesrat argues for a review of the provisions concerning the online formation procedure and the herewith applicable rules of identity check. In its view, such control is indispensable as far as it concerns at least the founder and the manager. Otherwise, the high value of the commercial register and the land title register would be devaluated. However, the necessary identity control must keep the formation procedure easy and not complicate it.

Thirdly, the Bundesrat considers the provisions of the proposal as they concern the endowment with capital of the SUP being absolutely insufficient and in contradiction with legitimate interests of consumer and debt holder protection: SUPs can be formatted with a minimum capital of only one euro (or unit of the home currency). At the same time, there is no obligation for the SUP to save a greater liability capital. In consequence, the provisions foreseen in the Commission's proposal are a durable renunciation of liability capital. This lack of liability capital cannot be conciliated by the distribution lock foreseen in the proposal. Especially consumer risk to even not being aware of this risk, as they will probably not know anything about the little liability capital.

Fourthly, the Bundesrat declines firmly the possibility, given by the proposal, to separate the centre of administration from the centre of rules of a company. The possibility to maintain a centre of rules in a member state where the company does not maintain any economic activities would be the gateway to become the SUP a model of a letterbox company and to avoid national protection standards. In the Bundesrat's view, such possibility would be in contradiction with the freedom of establishment. For these reasons, it considers it being necessary to register a SUP in that member state, where it has or plans to have its main economic activities.

Finally, the Bundesrat is sceptic whether the SUP is appropriate to achieve the aims, focused by the Commission. Explicitly, the Commission counts in its goals to facilitate the cross-border exercise of SME, which are harmed, in Commission's view, by two main obstacles, namely administrative and legal barriers in the formation of foreign sub companies and the lack of confidence of business partners in companies running under a foreign legal form. SUP shall solve this problem, as it will be possible to operate European-wide under the common firm name of the SUP. However, as details of the functioning of the SUP will be reigned by national commercial or company law, in the end, 28 different SUPs will be operating within the European Union. In Bundesrat's view, this multiplication of SUPs is inappropriate to solve the pre-mentioned problem.

After this general critics, the Bundesrat enumerates several detailed and critical points, calling for more precise provisions in the proposal. They start by criticizing the definitions given in Article 2 of the proposal, going over details concerning Articles 7, 9, 11, 12, 13, 14 16, 17, 18, 21, 22 and 24 of the proposal.

In conclusion, the Bundesrat invites the Commission to rethink the entire proposal.

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