The Company Law package, which shall harmonise and digitize the cross-border conversion, fusion and division of a large variety of national forms of company, is currently undergoing its first reading in the European Parliament. A public hearing (21.6.) of European social partners and experts in the Committee on Legal Affairs (JURI) should provide MEPs with ideas for improving the legislative proposals.

As already reported from the last hearing on the Company Law package (25.5.), the positions of both employer and employee side are currently far apart. Whilst the European Trade Union Confederation (ETUC) called the package too business-friendly, the Confederation of European Business, BusinessEurope, criticised the prejudice of the Commission proposal against entrepreneurship, as this would generally suspect European companies of tax avoidance. However, both social partners agreed that they would cooperate constructively in improving the proposal in the European Parliament's Committee on Legal Affairs (JURI).

For Wolfgang Kowalsky, Senior Policy Advisor of ETUC, the prevention of letterbox companies, which could use transnational “Forum Shopping” to disguise their activities, as well as the co-determination of employees in case of company conversions were the most important concerns. The legislative package would only then be acceptable to employees, if in the case of the conversion under company law, a general right of co-determination would be set down - co-determination, which is still limited both in temporal and legal terms in the present dossier.

Kowalsky also criticised the lack of a “real seat principles”, which means that companies - according to the current proposal - would be able to transform their legal structure into a corporation of the more favourable law of Member States such as Malta, Estonia or Ireland, without having to prove any real economic activity in the target country. This would make it particularly easy for companies to escape the “annoying” co-determination of company types from Member States with higher standards. Hence, Kowalsky doubted that company divisions, which are particular prone to abuse, are necessary in the first place.

On the other hand, Pedro Oliveira, Director for Legal Affairs, BusinessEurope, warned against wanting to solve a far too extensive range of problems within the scope of this package. He called the dossiers - even though he rated them generally worthy of praise - too bureaucratic and cost intensive. They would for example contain protective clauses, which were too strong: measures against tax avoidance and tax fraud were already laid down into other Directives. Improving employee rights too was not an issue to be solved within the scope of the proposal but “somewhere else”.

Luc Hendrickx, Director of Enterprise Policy and External Relations at UEAPME, supported Oliveira in his views; however, he definitely saw the necessity of better checks regarding conversions - as for example, according to the current proposal, only sending a copy of a passport is sufficient for verifying someone’s identity. The forgery of corporate identities and the doubling or loss of legal persons in case of cross-border conversions would be a problem, in particular for small companies. Hence, digitisation was not be put on a level with simplification, but had to pursue a purpose. With this in mind, Marius Kohler, President of Notaries of Europe, (CNUE) also demanded legal checks during a company’s entire life cycle, including face-to-face verification of natural persons.

Pierre-Henri Conac, University of Luxembourg, who regarded the package as a clear improvement of the “chaotic” situation, represented the scientific side: due to the fact, that today’s widely non-harmonised company law would only produce losers in the case of cross-border conversions, the package could only lead to improvements. He called on the Committee on Legal Affairs to continue to take all interests into consideration, including those of employees.

Further links:

AK Europa: Cautious departure from corporate mobility at any price?

European Commission: Company Law package

ETUC Position Paper

Hans Böckler Stiftung: Co-determination withdrawn - companies with foreign legal structure