At the European Parliament in early August, Evelyn Regner (S&D, Austria) finalised her draft report on the “mobility” chapter of the legislative package on corporate law. This will no doubt keep the committee on legal affairs (JURI) busy for some time.
The long-awaited package of measures aims to modernise European corporate law, including with a proposal for a directive setting out harmonised procedures for cross-border transfers and divisions, as well as a targeted review for mergers (see EUROPE 12009).
While welcoming this legislative step, the rapporteur considers clarification and simplification are needed.
Genuine economic activity requirement
A key element of the Commission’s proposal was the obligation on the member state where the business was initially created to block the operation if it deems this is an “artificial arrangement in order to gain undue tax advantages or to impair the legal or contractual rights of employees, creditors or shareholders”.
Nonetheless, to avoid the creation of “letterbox” companies, Regner wants to go further. “The most efficient and sustainable way to avoid artificial arrangements is to require genuine economic activity at the place of registration of the company”, she explains.
She thus introduces an additional requirement whereby the company making the transfer must demonstrate, on the basis of verifiable factors, the existence of genuine economic activity in the member state of destination.
For this, for example, the company should demonstrate it has a fixed establishment in that state which “has the objective appearance of permanency”, as well as a management body, and that it is materially equipped to negotiate business directly where it is established.
Removal of obligation to consult an independent expert
During a JURI committee hearing, several parties had underlined the complexity of the process (see EUROPE 12046). It would appear their call has been heard by the European Parliament.
The rapporteur is proposing to remove one stage in the process, namely the obligation for the relevant national authority to consult an independent expert for an in-depth assessment.
The Austrian rapporteur considers that, although it is up to the relevant national authority to authorise the cross-border operation, it is also up to that same authority to request, or not, more information – a line shared by the own-initiative rapporteur of the economic and monetary affairs committee (ECON) of the EP, Olle Ludvigsson, who submitted his draft report at the end of July.
Removal of chapter on cross-border divisions
The chapter proposed on cross-border divisions apparently convinced neither Regner nor Ludvigsson, both of whom suggest it should be removed.
Regner does not see that such a chapter holds any added value. She underlines the limited range of operations covered, namely divisions in the context of which the business is divided into two or more newly created ventures.
“In the absence of rules for transferring the seat of a company cross border, companies made use of national divisions combined with a cross-border merger”, she explains, taking the view that – now that the EU is on the point of setting out clear rules for transfers – this separate chapter has no reason for being there.
Regner also sets store by strengthened participation from employees, placed at the heart of her report, with special attention paid to worker representation within management boards, existing in different forms in the national legislations of 17 member states.
Political groups have until 10 September to submit their amendments to the report, before it is put to the vote of the JURI committee. (Original version in French by Marion Fontana)