The Single-Member Limited Liability Company (SUP): A Necessary Reform of EU Law on Business Organizations? 9781509916931, 9781509907199

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Preface European legal policy in the area of the law relating to groups of companies is in flux once again. Prompted by the “Reflection Group on the Future of EU Company Law”, the EU Commission on 9 April 2014 proposed rules for a single-member limited liability company meant to be used both as a flexible tool for corporate groups and also as a vehicle for new entrepreneurs who are low on capital. On 28 May 2015, the Council agreed on a General Approach for a Proposal of a Directive in this field. The Council’s General Approach is based on a compromise text tabled by the presidency. Core elements of the proposal are the electronic registration of the SUP, the inexistence of legal minimum capital requirements and the use of the company registration as connecting factor under conflict-of-laws rules. The Commission’s initial proposal was received largely with scepticism, prompting the Italian EU Presidency to put forward a compromise proposal on 14 November 2014 on which the Council’s General Approach is largely based. The agreement is based on a compromise text tabled by the Latvian presidency on 21 May 2015. The Council’s General Approach will serve as the basis for forthcoming negotiations with the European Parliament. In its key provisions, the compromise text: – aims at providing for a whole set of guarantees related to online registration (including the role of intermediaries at that stage), – seeks to improve anti-money laundering rules, – leaves the question of seat of companies to national laws, and – allows Member States to control distributions and to oblige companies to build up legal reserves. The European Parliament’s Legal Affairs Committee (JURI) is due to vote its report in the near future. This study contains an evaluation of the planned single-member company on the basis of the General Approach of 28 May 2015, with the main focus on aspects of group law. It is based on the author’s article published in Zeitschrift fu¨r das gesamte Handels- und Wirtschaftsrecht (ZHR) 179 (2015), 330–384. Munich, November 2015

Peter Kindler

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Selected Abbreviations AcP ................................................. AG ................................................... AG ................................................... AktG ............................................... AnwBl. ........................................... Art. .................................................. BAG ................................................ BB .................................................... BDA ................................................ BDI ................................................. BeckRS ........................................... BetrVG ........................................... BeurkG ........................................... BGB ................................................ BGBl. .............................................. BGH ................................................ BGHZ ............................................. BR-Dr. ............................................ BT-Dr. ............................................ BT-PlPr. ......................................... BVerfG ........................................... BVerfGE ........................................ c.c. ................................................... c.d.a ................................................. Cass Crim ...................................... CCom ............................................. cf ...................................................... Ch .................................................... CJEU ............................................... COMI ............................................. Common Market L. Rev ............ Cornell L. Rev. ............................. CP ................................................... DAV ............................................... DB ................................................... DNotZ ............................................ DStR ............................................... EBLR .............................................. EBOR .............................................. ECFR .............................................. ECJ .................................................. ECL ................................................. ECR ................................................. EEC ................................................. e. g. .................................................. EIR .................................................. EP ....................................................

Archiv fu¨r civilistische Praxis (German law journal) Aktiengesellschaft, Public Limited Company (Germany, Austria, Switzerland) Die Aktiengesellschaft (German law journal) Aktiengesetz (public limited-liability company Act) Anwaltsblatt (German law journal) Article Bundesarbeitsgericht (German Federal Labour Court) Betriebs-Berater (German law journal) Bundesvereinigung der Deutschen Arbeitgeberverba¨nde (Confederation of German Employers’ Associations) Bundesverband der Deutschen Industrie (German Industry Assocation) Beck-Rechtsprechung Betriebsverfassungsgesetz (Works Constitution Act) Beurkundungsgesetz (German Authentication Act) Bu¨rgerliches Gesetzbuch (German Civil Code) Bundesgesetzblatt (Federal Law Gazette in Germany) Bundesgerichtshof (German Federal Court of Justice) Entscheidungen des Bundesgerichtshofes in Zivilsachen (German Federal Court of Justice, Decisions in civil cases) Bundesratsdrucksache (Official documents of the German Federal Council) Bundestagsdrucksache (Official documents of the Parliament of the Federal Republic of Germany) Bundestagsplenarprotokoll (Plenary protocoll of the Parliament of the Federal Republic of Germany) Bundesverfassungsgericht (German Federal Constitutional Court) Entscheidungen des Bundesverfassungsgerichts (Decisions of the Federal Constitutional Court) Codice civile (Italian Civil Code) consiglio di amministrazione, Administrative Board Cour de cassation (Chambre criminelle) Code de Commerce (French Commercial Code) confer Chapter Court of Justice of the European Union1 Centre of main interest Common Market Law Review Cornell Law Review Codice Penale (Italian Criminal Code) Deutscher Anwaltverein (German Lawyers Association) Der Betrieb (German law journal) Deutsche Notar-Zeitschrift (German law journal) Das deutsche Steuerrecht (German law journal) European Business Law Review European Business Organization Law Review European Company and Financial Law Review European Court of Justice European Company Law (Law journal) European Court Reports European Economic Community exempli gratia (for example) European Insolvency Regulation European Parliament

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Selected Abbreviations EPC ................................................. et al. ................................................ et seq. ............................................. etc. ................................................... EU ................................................... Eur. J. Law & Econ. .................... EuZW ............................................. EWiR .............................................. fn. .................................................... FS .................................................... GG .................................................. GLJ .................................................. GmbH ............................................ GmbHG ......................................... GmbHR ......................................... GPR ................................................ GWR .............................................. HGB ................................................ ibid., id. .......................................... i. e. ................................................... InsO ................................................ IntGesR .......................................... IPRax .............................................. JBl. ................................................... JCP/E .............................................. JZ ..................................................... KG ................................................... MitbestErgG ..................................

Modern Law Rev. ........................ MoMiG .......................................... MontanmitbestG ..........................

Mu¨nchKommBGB ...................... NJW ................................................ NJW-RR ........................................ NZG ................................................ OJEU .............................................. OLG ................................................ RabelsZ .......................................... Riv. Soc. ......................................... RIW ................................................ SCE ................................................. SE .................................................... SME ................................................ SPE .................................................. S.r.l. ................................................. StGB ................................................ TEU ................................................ TFEU .............................................. UG ..................................................

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European Private Company et alii (and others) et sequens (and the following) et cetera (and so on) European Union European Journal of Law and Economics Europa¨ische Zeitschrift fu€r Wirtschaftsrecht (German law journal) Entscheidungen zum Wirtschaftsrecht (German law journal) footnote Festschrift (liber amicorum) Grundgesetz (Basic Law for the Federal Republic of Germany) The German Law Journal Gesellschaft mit beschra¨nkter Haftung, Private Limited Company (Germany, Austria, Switzerland) Gesetz betreffend die Gesellschaften mit beschra¨nkter Haftung (Private Limited Companies Act) GmbH-Rundschau (German law journal) Zeitschrift fu¨r Gemeinschaftsprivatrecht (Law Review) Gesellschafts- und Wirtschaftsrecht (German law journal) Handelsgesetzbuch (German Commercial Code) ibidem, idem (at the same place, the same) id est (that is) Insolvenzordnung (German Insolvency Statute) Internationales Gesellschaftsrecht (international company law) Praxis des Internationalen Privat- und Verfahrensrechts (German law journal) Juristische Bla¨tter (Austrian law journal) La Semaine juridique – Entreprise et affaires (French law journal) Juristenzeitung (German law journal) Kommanditgesellschaft (limited partnership) Gesetz zur Erga¨nzung des Gesetzes u¨ber die Mitbestimmung der Arbeitnehmer in den Aufsichtsra¨ten und Vorsta¨nden der Unternehmen des Bergbaus und der Eisen und Stahl erzeugenden Industrie (one of the German Codetermination Acts) Modern Law Review Gesetz zur Modernisierung des GmbH-Rechts und zur Beka¨mpfung von Missbra¨uchen (German Act to modernise the Law on Private Limited Companies and to Combat Abuses) Gesetz u¨ber die Mitbestimmung der Arbeitnehmer in den Aufsichtsra¨ten und Vorsta¨nden der Unternehmen des Bergbaus und der Eisen und Stahl erzeugenden Industrie (one of the German Codetermination Acts) Mu¨nchener Kommentar zum BGB Neue Juristische Wochenschrift (German law journal) Neue Juristische Wochenschrift-Rechtsprechungsreport (German law journal) Neue Zeitschrift fu¨r Gesellschaftsrecht (German law journal) Official Journal of the European Union Oberlandesgericht (German Higher Regional Court) Rabels Zeitschrift fu¨r ausla¨ndisches und internationales Privatrecht (The Rabel Journal of Comparative and International Private Law) Rivista delle Societa’ (Italian law journal) Recht der Internationalen Wirtschaft (German law journal) Societas Cooperativa Europaea, European Cooperative Society Societas Europaea, European Corporation Small and medium-sized enterprises Societas Privata Europaea, European Private (Limited) Company Societa` a responsibilita` limitata (limited liability company, Italy) Strafgesetzbuch, German Criminal Code Treaty on European Union Treaty on the Functioning of the European Union Unternehmergesellschaft, Entrepreneurial Company (Germany)

Selected Abbreviations ZEuP ............................................... ZGR ................................................ ZHR ................................................ ZIP .................................................. ZRP ................................................. ZVglRW .........................................

Zeitschrift fu¨r Europa¨isches Privatrecht (German law journal) Zeitschrift fu¨r Unternehmens- und Gesellschaftsrecht (German law journal) Zeitschrift fu¨r das gesamte Handelsrecht und Wirtschaftsrecht (German law journal) Zeitschrift fu¨r Wirtschaftsrecht (German law journal) Zeitschrift fu¨r Rechtspolitik (German law journal) Zeitschrift fu¨r vergleichende Rechtswissenschaft (German law journal)

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Bibliography Lutter (ed.), Europa¨ische Auslandsgesellschaften in Deutschland, 2005 Lutter, FS Kellermann, 1991, p. 257 Lutter, Stand und Entwicklung des Konzernrechts in Europa, ZGR 1987, 324–369 Lutter/Bayer/Schmidt, Europa¨isches Unternehmens- und Kapitalmarktrecht, 5th ed. 2012 Madaus, Die Bruchteilsgemeinschaft als Unternehmenstra¨ger, ZHR 178 (2014), 98–114 Maffei/Alberti (eds.), Commentario breve al diritto delle societa`, 2nd ed. 2011 Malberti, La proposta di direttiva sulla Societas Unius Personae: Una nuova strategia per l’armonizzazione del diritto societario europeo?, Rivista delle societa` 2014, 848–860 Mankowski, Anmerkung zum Urteil des EuGH vom 4.12.2014, Az. C-295/13 – Zur internationalen Zusta¨ndigkeit bei der auf § 64 GmbHG gestu¨tzten Klage des Insolvenzverwalters gegen den Gescha¨ftsfu¨hrer, EWiR 2015, 93–94 Mansel/Thorn/Wagner, Europa¨isches Kollisionsrecht 2012: Voranschreiten des Kodifikationsprozesses – Flickenteppich des Einheitsrechts, IPrax 2013, 1–36 Maul, Haftungsprobleme im Rahmen von deutsch-franzo¨ sischen Unternehmensverbindungen, NZG 1998, 965–973 Merkt, Einheit und Vielfalt im Europa¨ischen Unternehmensrecht: Die Perspektive des Gesellschaftsrechts, in: Jung/Lamprecht/Blasek/Schmidt-Kessel (eds.), Einheit und Vielfalt im Unternhemensrecht, Festschrift fu¨r Uwe Blaurock zum 70. Geburtstag, 2013, pp. 311–335 Merle, Les socie´te´s commerciales, 16th ed. 2013 Mock, Anmerkung zum Vorlagebeschluss des BGH vom 2.12.2014 (II ZR 119/14) – Zum anwendbaren Recht in internationalen Insolvenzverfahren, NZI 2015, 87–88 Mo¨ller, Rechtsfragen im Zusammenhang mit dem Postident-Verfahren, NJW 2005, 1605–1609 Morgenroth/Salzmann, Grenzu¨berschreitende Umwandlungen in der EU und unternehmerische Mitbestimmung, NZA-RR 2013, 449–456 Mo¨slein, Europa¨ische Zertifizierung mitgliedstaatlichen GmbH-Rechts, ZHR 176 (2012), 470–513 Mucciarelli, Societa` di capitali, trasferimento della sede sociale all’estero e arbitraggi normativi, 2010 Mu¨ller-Eising, Aktienrechtsnovelle 2014 – Ein neuer Anlauf zur Novellierung des Aktienrechts, GWR 2014, 229–23 Mu¨ller-Glo¨ge/Preis/Schmidt, Erfurter Kommentar zum Arbeitsrecht, 15th ed. 2015 Mu¨ller-Graff, Europa¨ische Gesellschaftsrechtspolitik auf hoher See des Wettbewerbs, ZHR 177 (2013), 563–576 Mu¨ller-Graff, Der Begriff der Rechtsvergleichung in Art. 114 AEUV im Licht eines gemeinsamen europa¨ischen Kaufrechts, in: Becker/Hatje/Potacs/Wunderlich (eds.), Verfassung und Verwaltung in Europa, Festschrift fu¨r Ju¨rgen Schwarze zum 70. Geburtstag, 2014, pp. 617–640 Niemeier, “Triumph” und Nachhaltigkeit deutscher Ein-Euro-Gru¨ndungen – Rechtstatsachen zur Limited und ein Zwischenbericht zur Unternehmensgesellschaft, in: Altmeppen/Fitz/Honsell (eds.), Festschrift fu¨r Gu¨nther H. Roth zum 70. Geburtstag, 2011, pp. 533–552 Omlor, Die Societas Unius Personae – eine supranationale Erweiterung der deutschen GmbH-Familie, NZG 2014, 1137–1142 Osterloh-Konrad, Abkehr vom Durchgriff: Die Existenzvernichtungshaftung des GmbH-Gesellschafters nach “Trihotel”, ZHR 172 (2008), 274–306 Palandt, BGB, 74th ed. 2015 Paulus, D., Außervertragliche Gesellschafter- und Organwalterhaftung im Lichte des Unionkollisionsrechts, 2013 Portale, La parabola del capitale sociale nella s.r.l., Rivista delle societa` 2015, 815–834 Preuß, Gesellschafterliste, Legitimation gegenu¨ber der Gesellschaft und gutgla¨ubiger Erwerb von GmbHAnteilen, ZGR 2008, 676–701 Pu¨tz/Sick, Bo¨ckler Impuls, 17/2014, 7 Reich u. a., Understanding EU Internal Market Law, 2011 Reich, Eine neue Variante im Konflikt um die Vereinbarkeit staatlicher Glu¨ckspielmonopole mit EURecht, EuZW 2011, 454–455 Reimer/Waldhoff, Societas Unius Personae und deutsches Steuerrecht, DB 2015, 2106–2113 Renner, Kollisionsrecht und Konzernwirklichkeit in der transnationalen Unternehmensgruppe, ZGR 2014, 452–486 Richter/Braun, Eignung einer britischen Limited mit Gescha¨ftsleitung in Deutschland als Organgesellschaft?, GmbHR 2012, 18–24 Ries, Die SUP und das Handelsregister, in: Lutter/Koch (eds.), Die SUP in Recht und Praxis – eine ¨ bersicht, 2015 kritische U Ries, Societas Unius Persononae – cui bono? NZG 2014, 569–570 Rock, J., Leitungsmacht und Haftung im italienischen Konzernrecht, 2011 Ro¨hricht, Insolvenzrechtliche Aspekte im Gesellschaftsrecht, ZIP 2005, 505–516 Roßnagel, Neue Regeln fu¨r sichere elektronische Transaktionen, NJW 2014, 3686–3692

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Roth, G. H./Altmeppen, GmbHG, ed. 2012 Roth, G. H./Kindler, The Spirit of Corporate Law – Core Principles of Corporate Law in Continental Europe, 2013 Roth, W.-H., Grenzu¨berschreitender Rechtsformwechsel nach VALE, in: Krieger/Lutter/Schmidt (eds.), Festschrift fu¨r Michael Hoffmann-Becking, 2013, pp. 965–996 ¨ berseering, IPRax 2003, 117–127 Roth, W.-H., Internationales Gesellschaftsrecht nach U Sa¨cker/Rixecker (eds.), Mu¨nchener Kommentar zum BGB, vol. 10, 6th ed. 2015 Sa¨cker/Rixecker (eds.), Mu¨nchener Kommentar zum BGB, vol. 11, 6th ed. 2015 ¨ berlagerungstheorie, ZVglRWiss 102 (2003), 447–504 Sandrock, Die Schrumpfung der U Schall (ed.), Companies Act. Kommentar, 2014 Schmidt, J., Neue Phase der Modernisierung des europa¨ischen Gesellschaftsrecht, www.gmbhr.de, blickpunkt 12/2011 Schmidt/Lutter (eds.), Aktiengesetz, 3rd ed. 2015 Scholz, GmbH-Gesetz, 11th ed. 2014 Scho¨n, Das Bild des Gesellschafters im Europa¨ischen Gesellschaftsrecht, RabelsZ 64 (2000), 1–37 Scho¨n, Das System der gesellschaftlichen Niederlassungsfreiheit nach VALE, ZGR 2013, 333–365 Scho¨n, Die Zukunft der Kapitalaufbringung/-erhaltung, Der Konzern 2004, 162–170 Schumann, Die englische Limited mit Verwaltungssitz in Deutschland: Kapitalaufbringung, Kapitalerhaltung und Haftung bei Insolvenz, DB 2004, 743–749 Schu¨rrle, Schweigerecht vs. Meldepflicht: Rechtsanwa¨lte und Attorneys-at-law als Gatekeeper des Staates, ZGR 2014, 627–648 Seibert, SUP – Der Vorschlag der EU-Kommission zur Harmonisierung der Einpersonen- Gesellschaft, GmbHR 2014, R209-R210 Sieder, Cash-Pooling im GmbH-Konzern, 2011 Sonnenberger/Dammann, Franzo¨sisches Handels- und Wirtschaftsrecht, 3rd ed. 2008 Spindler/Rockenbauch, Die elektronische Identifizierung, MMR 2013, 139–148 Spindler/Stilz (eds.), Aktiengesetz, 2nd ed. 2010 Staub (Bgr.), Handelsgesetzbuch, 5th ed. 2011 Steering Committee Forum Europaeum Konzernrecht (ed.), Konzernrecht fu¨r Europa, ZGR 1998, 672–772 Stein, Das italienische Konzernrecht: Ein Leerstu¨ck der Gesetzgebung, in: Erle/Goette/Kleindick/Krieger/ Priester/Schuster/Schwab/Teichmann/Witt (eds.), Festschrift fu¨r Hommelhoff zum 70. Geburtstag, 2012, pp. 1149–1164 Sto¨ber, Die Haftung fu¨r existenzvernichtende Eingriffe, ZIP 2013, 2295–2303 Teichmann, Europa¨ische GmbH am Scheideweg: Supranationale Rechtsform oder harmonisierte Einpersonengesellschaft?, ZRP 2013, 169–172 Teichmann, Europa¨ische Harmonisierung des GmbH-Rechts, NJW 2014, 3561–3565 Teichmann, Europa¨isches Konzernrecht: Vom Schutzrecht zum Enabling Law, AG 2013, 184–197 Teichmann, Konzernrecht und Niederlassungsfreiheit, ZGR 2014, 45–75 Teichmann/Fro¨hlich, Societas Unius Personae (SUP): Facilitating Cross-Border Establishment, Maastricht Journal of European und Comparative Law 21 (2014), 536–544 Thole, Das neue Konzerninsolvenzrecht in Deutschland und Europa, KTS 2014, 351–379 Thole, Die Reform der Europa¨ischen Insolvenzverordnung – Zentrale Aspekte des Kommissionsvorschlags und offene Fragen, ZEuP 2014, 39–76 Thole, Rezension zu David Paulus, Außervertragliche Gesellschafter- und Organwalterhaftung im Lichte des Unionskollisionsrechts, ZHR 178 (2014), 763–768 Thu¨sing, Deutsche Unternehmensmitbestimmung und europa¨ische Niederlassungsfreiheit, ZIP 2004, 381–388 Tombari, Il gruppo di societa`, 2010 Tombari, Riforma del diritto societario e gruppo di imprese, Giur. comm. 2004, I, 61–79 Ulmer, Der Gla¨ubigerschutz im faktischen GmbH-Konzern beim Fehlen von Minderheitsgesellschaftern, ZHR 148 (1984), 391–427 Ulmer/Habersack/Henssler, Mitbestimmungsrecht, 3rd ed. 2013 Ulmer/Habersack/Lo¨bbe (eds.), GmbHG, 2nd ed. 2014 Vallender, Aufgaben und Befugnisse des deutschen Insolvenzrichters in Verfahren nach der EuInsVO, KTS 2005, 283–329 Veil, Krisenbewa¨ltigung durch Gesellschaftsrecht, ZGR 2006, 374–397 Vetter, Die neue dogmatische Grundlage des BGH zur Existenzvernichtungshaftung, BB 2007, 1965–1970 Wackerbarth, Grenzen der Leitungsmacht in der internationalen Unternehmensgruppe, 2001 Weiss/Seifert, Der europarechtliche Rahmen fu¨r ein “Mitbestimmungserstreckungsgesetz”, ZGR 2009, 542–580 Weller, Die Verlegung des Center of Main Interest von Deutschland nach England, ZGR 2008, 835–866 Weller, GmbH-Anteilsabtretungen in Basel, ZGR 2014, 865–880

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Bibliography Weller, Unternehmensmitbestimmung fu¨r Auslandsgesellschaften, in: Erle/Kleindiek/Krieger/Priester/ Schubel/Schwab/Teichmann/Witt/Goette (eds.), Festschrift fu¨r Peter Hommelhoff zum 70. Geburtstag, 2012, pp. 1275–1298 Weller, Unternehmensmobilita¨t im Binnenmarkt, in: Jung/Lamprecht/Blasek/Schmidt-Kessel (eds.), Einheit und Vielfalt im Unternehmensrecht, Festschrift fu¨r Uwe Blaurock zum 70. Geburtstag, 2013, pp. 497–526 Weller/Bauer, Europa¨isches Konzernrecht: vom Gla¨ubigerschutz zur Konzernleistungsbefugnis via Societas Unius Personae, ZEuP 2015, 6–31 Wicke, GmbHG, 2nd ed. 2011 Wicke, Kontinuita¨t und Wandel im Recht der GmbH, MittBayNot 2011, 23–32 Wicke, Societas Unius Personae – SUP: eine a¨ußerst wackelige Angelegenheit, ZIP 2014, 1414–1417 Wietz, Vermo¨gensbetreuerpflichtverletzung gegenu¨ber einer im Inland ansa¨ssigen Auslandsgesellschaft, 2009 Zaman, Die niederla¨ndische Flex-BV, GmbHR 2012, 1062–1066 Ziemons, Mehr Transaktionssicherheit durch das MoMiG?, BB 2006, Special 7/2006, 9–16 Zimmer, Internationales Gesellschaftsrecht, 1996

XVIII

I. Introduction 1. Lines of development of European group law up to 2014 1. The first comprehensive proposal for a European law relating to groups of companies (“group law”) can be found in the Commission’s proposals for a statute for the European company from 19701 and 19752. Despite multiple revisions, that project failed, because of the issue of employee co-determination 3 and probably also because of its excessive complexity.4 However, key elements such as the existence of controlling interests and the instruments for the protection of third-parties and creditors 5 found their way into subsequent legislative projects. Among these is the draft proposal by the Commission, adopted in 1984, for a ninth directive on company law (there Art. 2).6 This draft at least was widely discussed in the relevant literature, 7 and the elements of control codified there found entry into European corporate accounting law (Art. 22 (1) EU accounting directive 2013/34/EU)8 and capital markets law (Art. 2 (1)(f) transparency directive 2004/109/EC)9.10 They were also adopted by the EU legislators for the area of international insolvency law (Art. 2(13) of the recast of the EU regulation on insolvency procedures).11 Otherwise the EU lawmakers showed restraint in the area of group law: this is true in particular in respect to the single-member company that already in 1989 was subject of a directive on company law which however gave member-state parliaments free hand regarding the key liability questions within a group of companies (today, Art. 2(2) directive 2009/102/EC).12 1 OJ EEC C 124/1, 10.10.1970; Art. 223–240 of the proposal; see W. F. Bayer, RabelsZ 35 (1971), 201 et seqq.; Hood, ICLQ 22 (1973), 434 et seqq. 2 COM(75) 150 = Suppl. Bull. EC 4/75 = German Bundestag publication 7/3713; see Blaurock, ZHR 141, 18 et seqq. 3 Habersack/Verse, Europa ¨isches Gesellschaftsrecht, 4th ed. 2011, § 13 marginal no. 1 with reference to later text versions from 1989 and 1991. 4 Merkt, Festschrift Blaurock, 2013, pp. 311, 313; on the legal-political history of the SE also Lutter/ Bayer/Schmidt, Europa¨isches Unternehmens- und Kapitalmarktrecht, 5th ed. 2012, § 41 marginal nos. 1 et seqq. (pp. 1457 et seqq.). 5 In more detail Forum Europaeum Konzernrecht (ed.), ZGR 1998, 672, 682; Hopt, ZHR 171 (2007), 199, 202. 6 Draft for a ninth directive from 1984 (company law directive), DOC no. III/1639/84; text reprinted in: ZGR 1985, 446 et seqq., and in: Lutter (ed.), Europa¨isches Unternehmensrecht, 4th ed. 1996, pp. 244 et seqq.; English version in Bo¨hlhoff/Budde, Journal of Comparative Business and Capital Market Law 6 (1984), 163 et seqq., 181 et seqq. 7 Most recently for instance in Weller/Bauer, ZEuP 2015, 6, 19 et seq.; Teichmann, AG 2013, 191, 186; more detailed Lutter/Bayer/Schmidt (fn. 4), § 9 marginal no. 5 (p. 143); contemporarily Gleichmann, AG 1988, 159 et seqq.; Hommelhoff, Festschrift Fleck, 1988, pp. 125 et seqq.; Immenga, RabelsZ 48 (1984), 48 et seqq.; Lutter, ZGR 1987, 324 et seqq.; Maul, BB 1985, 987 et seqq. 8 Originally directive 83/349/EEC of 13.6.1983; see Kindler, in: Staub, HGB, 5 th ed. 2011, preliminary note § 290 marginal nos. 16 et seq. 9 Directive 2004/109/EC of 15.12.2004; on the special significance of the transparency directive see Emmerich/Habersack, Konzernrecht, 10th ed. 2013, § 1 marginal no. 46. 10 On further legal-form and sector specific regulations of European group law, see Hopt, ZHR 171 (2007), 199, 204 et seqq. 11 Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast); see Kindler/Sakka, EuZW 2015, 460 et seqq. 12 Directive 2009/102/EC of 16.9.2009; on the previous scheme see Kindler, ZHR 1993 (157), 1 et seqq.; Bayer/Lutter/Schmidt (fn. 4), § 29 marginal nos. 16 et seqq. (pp. 945 et seqq.); Habersack/Verse (fn. 3), § 10 marginal nos. 11.

1

I. Introduction

2. In its action plan of 21 May 2003 concerning the modernisation of company law and the improvement of corporate governance in the European Union13 the Commission had distanced itself from the project of a comprehensive harmonisation of group law. Instead, it announced individual measures, including beside rules regarding the transparency of intra-group relations and group structure in particular a framework rule “that allows those concerned with the management of a company belonging to a group to adopt and implement a coordinated group policy, provided that the interests of that company’s creditors are effectively protected”.14 With regard to de-facto groups, these plans came close to the proposals of the German “Forum Europaeum Konzernrecht”. 15 Modelled on the “Rozenblum” concept developed by the Cour de Cassation16, they provide that, under certain preconditions, a pre-eminence of the group interest should be recognised which would allow the use of the assets of subsidiaries for the group even if this is against the subsidiaries’ interest.17 3. After a fairly long break, the development of a European group law only gained momentum again in 2011 with the report of the “Reflection Group on the Future of EU Company Law”18. This, too, dealt with possible EU measures for the recognition of a “group interest”; however, the “Reflection Group” was only able to reach agreement on the Commission examining whether a EU recommendation to this effect would offer any advantages. The same applies to a further suggestion of the Reflection Group of interest here, namely that all member states per directive should be required to establish a simplified single-member company as a vehicle for new entrepreneurs and groups and to regulate the recognition of a “group interest” for it. On this basis, the Commission in its further action plan of 12 December 2012 was able to announce the development of “smart legal forms” as a replacement for the politically failed SPE. 19 Moreover, the 13 COM (2003) 284 final; reprinted in NZG 2003, special supplement to issue no. 13; see on this Roth/ Kindler, The Spirit of Corporate Law – Core Principles of Corporate Law in Continental Europe, 2013, pp. 20 et seqq.; Habersack, NZG 2004, 1 et seqq.; in more detail Lutter/Bayer/Schmidt (fn. 4), § 18 (pp. 355 et seqq.). 14 Generally critical here however Habersack, NZG 2004, 1, 7 et seq.; also Altmeppen, in: Mu ¨ nchKommAktG, 3rd ed. 2010, preliminary note, § 311 marginal no. 31. – For a harmonisation of core areas already Forum Europaeum Konzernrecht ZGR 1998, 672 et seqq. (with concrete suggestions for future harmonisation measures); on this as well as the future outlook for instance Hopt, ZHR 171 (2007), 199, 213 et seqq. 15 Forum Europaeum Konzernrecht, ZGR 1998, 672, 710 et seqq.; summary in Hopt, ZHR 171 (2007), 199, 222 et seq. 16 More on this below under V. 2 b, at paras. 93–94. 17 For significant criticism of the suggestions of the Forum Europaeum Konzernrecht see H.-F. Mu ¨ ller, in: Spindler/Stilz (eds.), AktG, 2nd ed. 2010, preliminary note, § 311–318 marginal no. 18: “Verlust an Rechtssicherheit”; critical also Blaurock, Festschrift Sandrock, 2000, pp. 79, 85 et seqq.; Wackerbarth, Grenzen der Leitungsmacht in der internationalen Unternehmensgruppe, 2001, pp. 340 et seqq.; Habersack, NZG 2004, 1, 7 et seq. 18 European Commission. Internal Market and Services, Report of the Reflection Group on the Future of EU Company Law, 5.4.2011, pp. 59 et seqq.; available at http://ec.europa.eu/internal_market/company/ docs/modern/reflectiongroup_report_en.pdf; see Roth/Kindler (fn. 13), pp. 22 et seqq.; on this and on the following J. Schmidt, Neue Phase der Modernisierung des europa¨ischen Gesellschaftsrechts, www.gmbhr.de, Blickpunkt 12/2011; furthermore Bayer/Schmidt, BB 2012, 3, 13 et seq.; Lutter/Bayer/ Schmidt (fn. 4), § 18 marginal nos. 5, 100 et seqq. (pp. 405 et seqq.); in more detail on the status, development and outlook of European group law Hopt, ZHR 171 (2007), 199 et seqq.; on alternative models see also Kalss, ZHR 171 (2007), 146 et seqq.; on the future of group law also Druey, Festschrift Hommelhoff, 2012, pp. 135 et seqq. 19 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. Action Plan: European company law and corporate governance – a modern legal framework for more engaged shareholders and sustainable companies, COM (2012) 740 (“Action Plan 2012”); see Mu¨ller-Graff, ZHR 177 (2013), 563, 569 et seq.; Hopt, ZGR 2013, 165, 198 et seq., 210 et seqq. (on group law); Teichmann, ZRP 2013, 169; Bayer/ Schmidt, BB 2013, 3, 15; see also the response of the members of the former “Reflection Group”:

2

I. Introduction

Commission announced in this action plan, among other things, targeted measures for groups of companies.20

2. Main features and effect of the planned SUP directive 4. The measures include the proposal for a directive on a “Societas Unius Personae (SUP)” published on 9 April 2014 (“Commission Proposal”; Appendix I, p. 57 et seq.).21 This, at its core, is a simplified single-member company on the basis of the Reflection Group’s proposal.22 After strong and occasionally bitter criticism on the part of academics, practitioners and professional associations – above all in Germany – 23 the Italian EU Presidency presented a compromise proposal on the SUP directive at the Council meeting on 14 November 2014 (“Italian Compromise Proposal”).24 Following further compromise texts,25 finally on 28 May 2015 the Council adopted a General Approach of the SUP proposal (“General Approach”; Appendix II, p. 83 et seq.). 26 The study mainly refers to this General Approach; articles without mention of the relevant law are those of the SUP compromise proposal as adopted in the General Approach by the Competitiveness Council (Appendix III, p. 135 et seq.). 5. Initially, the declared aim of the proposed rules was to develop the SUP into an “attractive model” also for groups of companies, above all through the right of the single-member to issue instructions to the management body (Art. 23 of the Commis-

Response to the European Commission’s Action Plan on Company Law and Corporate Governance, ECFR 2013, 304 et seqq. 20 Action Plan 2012 (fn. 19) from 4.6 and appendix; Hommelhoff, Festschrift Stilz, 2014, pp. 287, 288; on group interest in particular see Drygala, AG 2013, 198 et seqq.; Teichmann, AG 2013, 184, 189 et seqq.; Conac, ECFR 2013, 194 et seqq.; on the new plans of the European Commission for an European group law also Ekkenga, AG 2013, 181 et seqq.; for the whole topic also Weller/Bauer, ZEuP 2015, 6, 26 et seq.; a detailed proposal for an European group law has been presented by Forum Europaeum on Company Groups, ECFR 2015, 299–306; Bayer/Schmidt, BB 2013, 3, 15; BB 2015, 1731, 1735. 21 European Commission, 9.4.2014, Proposal for a Directive of the European Parliament and of the Council on single-member private limited liability companies, COM(2014) 212 final = German Bundestag document 165/14 of 10.4.2014; see response of the European Economic and Social Committee (EESC) of 10. 9. 2014, INT/70044, the response of the Federal Government of Germany from November 2014 as well as the Bundesrat of 11.7.2014 (German Bundesrat document 165/14) with the EU Commission’s reply of 25.9.2014, C (2014) 6855 final; see also Bundesrechtsanwaltskammer (German Federal Chamber of Lawyers), opinion no. 31/2014 from July 2014; Deutscher Notarverein (German Association of Notaries), opinion of 30.4.2014; joint response by BDA/BDI/DIHK on the Proposal for a Directive on single-member private limited liability companies of 18.7.2014 (DIHK 2240 0601 191-42); opinion no. 58/ 2014 of the commercial law committee of the DAV (German Lawyers’ Association) on the Proposal for a Directive of the European Parliament and of the Council on single-member private limited liability companies in NZG 2014, 1372; see also Pu¨tz/Sick, Bo¨ckler Impuls 17/2014, 7 (on the categorical rejection by German trade unions). 22 Explanatory memorandum of the proposal for an SUP directive (Fn. 21), p. 4; on the proposals of the Reflection Group, generally critical, Hommelhoff, AG 2013, 211 et seqq. 23 Cf. Hommelhoff, in Lutter/Koch (eds.), Die SUP in Recht und Praxis – eine kritische U ¨ bersicht, 2015, pp. 69 et seqq.; Bormann, in: Lutter/Koch ibid, pp. 23 et seqq.; in summary Beurskens, GmbHR 2014, 738, 744 et seqq.; the Deutsche Notarverein views the SUP as a “substantial contribution to a multicriminal internal market”, opinion of 30.4.2014, p. 12, available under www.dnotv.de. 24 Presidency compromise text, Doc. 14648/14; text available under www.consilium.europa.eu; the author dealt with this text in his article “Die Einpersonen-Kapitalgesellschaft als Konzernbaustein – Bemerkungen zum Kompromissvorschlag der italienischen Ratspra¨sidentschaft fu¨r eine Societas Unius Personae (SUP)”, published in ZHR 179 (2015), pp. 330–384. 25 Doc. 16010/14 of 1 December 2014; doc. 17018/14 of 18 december 2014; doc. 7626/15 of 7 April 2015. 26 Doc. 8811/15 of 21 May 2015, with Agreed amendments adopted by the Competitiveness Council of 28 May 2015 (doc. 9050/15).

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sion’s Proposal and the Italian Compromise Proposal).27 Surprisingly, the General Approach does no longer expressly refer to groups of companies; art. 23 was deleted. This is disappointing28 insofar as the Commission had announced, amongst other things, targeted measures for groups of companies in its action plan from 12 December 2012, namely the recognition of the concept of group interest and more transparency regarding the group structure.29 In the Commission’s SUP proposal, however, the group interest was indeed not recognised as a guiding factor for management decisions in affiliated group SUPs (recital 23 sentence 4 of the Commission’s Proposal and the Italian Compromise Proposal, see below V. 1, paras. 82 et seq.). 6. Additional key points of the proposal are the electronic registration of the SUP (Art. 13(2), 14(2) and (3), 14b), the inexistence of legal minimum capital requirements (Art. 16 provides for a symbolic minimum capital of 1 E), the complete lack of European co-determination rules and the use of the registration as a connecting factor under conflict-of-laws rules (Art. 7(4)). 7. Whether the directive is meant to function as minimum or full harmonisation is unclear from the wording of the proposal.30 A fully harmonising effect of the directive within its scope of application is partly derived out of the aim to facilitate market access for those active in the internal market (recital 6).31 The principle of subsidiarity and proportionality (Art. 5(3) TEU), the respect for the member states’ company law traditions emphasised in recital 10 and – above all – the maximum regulation character of single provisions only, which is explicitly stressed in the proposal32, tend however to speak against full harmonisation. Additional norm setting by member states within the scope of the directive is therefore permitted unless clearly excluded. 33 This applies regardless of whether the national parliament of the member state applies the SUP rules to all single-member private limited liability companies under national law or introduces the SUP as a new national legal form to coexist with existing national singlemember private limited liability companies.34

3. The legal-policy environment a) International insolvency law 8. Any legal-policy stock-taking of European group law would be incomplete without a sideways glance at the recent developments in European international insolvency law. On 20 May 2015, the European Parliament and the Council adopted the recast of the 27 Explanatory memorandum of the Commission’s proposal for an SUP directive (Fn. 21), p. 9; recital 23 of the Commission’s Proposal and the Italian Compromise Proposal. 28 Bayer/Schmidt, BB 2015, 1731, 1734. 29 Action Plan 2012 (fn. 19) from 4.6 and appendix; Hommelhoff, Festschrift Stilz, 2014, pp. 287, 288; on group interest in particular see Drygala, AG 2013, 198 et seqq.; Teichmann, AG 2013, 184, 188 et seq.; Conac, ECFR 2013, 194 et seqq.; on the new plans of the European Commission for a European group law also Ekkenga, AG 2013, 181 et seqq. 30 Newer civil-law directives mostly specify this explicitly, cf. Art. 12(3) of directive 2011/7/EU of 16.2.2011 (late payments directive): minimum harmonisation, Art. 4 directive 2011/83/EU of 25.10.2011 (consumer rights directive): full harmonisation. 31 Omlor, NZG 2014, 1137, 1139. 32 Art. 6(2), 9(2), 13(1), 14b(3), 16(3). 33 As in Jung, GmbHR 2014, 579, 583; Jung, EBLR 2015, 689; Teichmann, NJW 2014, 3561, 3562 et seq. sees no contravention of the SUP proposal as a whole against the subsidiarity principle; on the minimum standard character of company-law directives see Kindler, ZGR 1998, 35 et seqq. 34 For a clear description of the implementation options see Jung, GmbHR 2014, 579, 580 et seq.; on the SUP as a subtype of the GmbH (comparable to the UG) Seibert, GmbHR 2014, R209.

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European insolvency regulation35. The recast on the one hand sets detailed rules for the co-ordination of insolvency procedures for entities belonging to the same group of companies (Chapter V, Art. 56–77), which applies to the SUP and its single-member (Art. 2(14) European insolvency regulation 2015/84836). 9. In comparison with the proposed SUP directive it is noticeable that in cases where the registered office and the central administration of the company are in different countries, contrary to suggestions from academics 37, not the insolvency law of the state in which the company is registered applies but – for creditor protection reasons – the law of the state where the debtor company has its actual centre of main interests (“COMI”, Art. 3(1) and 7 (1) of the new European insolvency regulation read with recital 29), the reason being that this is the state where, usually, most of the creditors and assets of the company will be located.38 b) Fight on money laundering 10. The legal-policy context of the SUP proposal also includes the efforts by the European and German legislators to combat money laundering. The planned online formation of the SUP does not necessarily further these efforts. 39 11. According to § 10(1) of the BeurkG (German Notarisation Act), the notary when notarising declarations of intent has to denote the person involved so clearly that any doubts and cases of mistaken identity are precluded. Within the scope of the GWG (German Money-Laundering Act), this identification obligation applies without exception, for instance to the formation of companies (§ 2(1) no. 7, § 4 GWG); it is based on the EU money laundering directive (2005/60/EC) which recently was replaced by the even stricter Money Laundering Directive 2015/849/EU.40 The compromise proposal on the SUP directive (General Approach) in recital 10 a at least pays lip-service to the EU rules for combating money laundering, stating that these would not be affected by the SUP directive. Considering the weak identification and verification standards of the proposed SUP directive (see below, paras. 23, 24, 32 et seq., 37), the goal expressed in recital 14 of the 2015 money laundering directive is, however, clearly missed. There we read: “The need for accurate and up-to-date information on the beneficial owner is a key factor in tracing criminals who might otherwise hide their identity behind a corporate structure.”41 35

Above fn. 11. For the term “parent company”, the provision points among others to the prerequisites for consolidation in Art. 22 (1)(a) of EU accounting directive 2013/34/EU (majority of voting rights); in more detail on the new group insolvency law in Germany and in EU legislation Thole, KTS 2014, 351 et seqq. 37 Specifically Eidenmu ¨ ller, 20 Maastricht Journal of European and Comparative Law 1 (2013), 133, 143, 145, 150 and previously in ZGR 2006, 467, 480 et seqq.; see rejection of this by Kindler, KTS 2014, 25, 32 et seq. 38 Kindler, in: Mu ¨ nchKommBGB, vol. 11, 6th ed. 2015, Internationales Insolvenzrecht, Art. 3 European insolvency regulation, marginal no. 33; this is also the assessment of the German legislators in §§ 335 et seqq. InsO (2003): German Bundestag publication 15/16, p. 14 = ZIP 2002, 2331. 39 According to Malberti, Rivista delle societa ` 2014, 848, 859, the EU with the SUP provides money launderers with the “opaque tools” (strumenti opachi) they want; this is echoed by Portale, Rivista delle societa` 2015, 814, 824; for a different assessment see Teichmann, NJW 2014, 3561, 3562. 40 Directive (EU) 2015/849 of the European Parliament and of the Council on the prevention of the use of the financial system for the purpose of money laundering or terrorist financing of 20 May 2015, OJ L 141, 5 June 2015, p. 73; for more detail on the regulatory impact of the 4 th EU money laundering directive see Glaab/Zentes, BB 2013, 707 et seqq.; on potential conflicts of duties for advisors Schu¨rrle, ZGR 2014, 627, 642 et seqq. 41 See also recitals 7, 12, 13, 16, 17, 43, 51 of the Directive (EU) 2015/849 and art. 30. 36

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12. Furthermore, recital 18 of the Italian Compromise Proposal referred to the money laundering directive for the identification of abettors (the “beneficial owners” according to the language of Art. 14 (5) sentence 2 of the Italian Compromise Proposal); 42 however, the enactment of member-state rules for establishing identity was to be merely optional in this respect (Art. 14 (5) sentence 2 of the Italian Compromise Proposal; see below II.1, at paras. 24, 33). It is unclear why the General Approach has dropped completely the problem of identifying the individuals who exert control on the single shareholder. 13. At the national level, the participation of the notary in the assignment of shares in private limited companies (§ 15(3) and (4) GmbHG) (German Limited Liability Companies Act) is to provide transparency about the shareholder structures of the GmbH and thus contribute to the fight against money laundering.43 14. A public interest in transparent shareholder structures 44 exists to an even greater extent where the formation of corporations is concerned. 45 The amending statute of the German public limited liability company act 2014 adopted as a government draft bill on 7 January 2015, which amongst others has the aim of strengthening transparency in respect to the shareholder structure with the revision of § 10 of the AktG (German public limited liability company Act)46, is part of the same regulatory context.47 According to § 10(1) sentence 2 no. 2 of the draft AktG, shares in a non-listed public company can be bearer shares only if the right to issuance of individual share certificates is excluded and the global certificate is deposited. This is to enable the competent authorities to obtain information for the purpose of identifying the shareholders in the case of money laundering offences. 48 The increased transparency regarding the parties involved envisaged by § 15 GmbHG and § 10 of the draft AktG would however be undermined should the EU practically simultaneously provide money launderers with a form of company which can be formed online without any notable effort using forged or stolen means of identification. 49 c) EU directives on company law 15. Finally, Art. 11 of the EU publicity directive belongs to the legal-policy context of the SUP proposal.50 This provides that in all member states according to whose Cf. Art. 3 (6) of directive 2005/60/EC of 26.10.2005; in German law § 1 (6) GWG. See the explanatory memorandum on the MoMiG (German act for modernising GmbH law and combating abuse of 23.10.2008, BGBl. (Federal Law Gazette) I, p. 2026) in German Bundestag publication 16/6140 p. 37, right-hand column, with reference to the directive 2005/60/EC; on this Kindler, Gescha¨ftsanteilsabtretung im Ausland, 2010, pp. 26 et seq., 32 et seq. 44 On the significance of this within the framework of the MoMiG see also Reichert/Weller, in: Goette/ Habersack (eds.), Das MoMiG in Wissenschaft und Praxis, 2009, p. 79. 45 Wicke, ZIP 2014, 1414, 1415, 1417. 46 Cf. the government draft bill published on 7.1.2015 for a revision of the German public limited liability company act “Aktienrechtsnovelle 2014”, legislative proposal of the German federal government, p. 15 (communication in ZIP-aktuell 2015 no. 14, issue 2, text available at www.bmjv.de). 47 Mu ¨ ller-Eising, GWR 2014, 229 et seq.; opinion of the commercial law committee of the DAV (fn. 21), marginal no. 45; Wicke, ZIP 2014, 1414, 1415. 48 Background: The Financial Action Task Force (FATF), an intergovernmental organisation aimed at effectively combating money laundering and terrorist financing and of which Germany is a member, suspects that the German bearer share in unlisted companies is abetting money laundering and terrorist financing. Presently it is possible to keep changes in the shareholder structure hidden so that the company is not aware who its shareholders are. 49 Critical also Fechner, ZRP 2014, 225, 226. 50 The contradiction queried by Malberti (Rivista delle societa ` 2014, 848, 854) between the unlimited power of representation of the SUP managing directors and the option of the member states in favour of the spe´cialite´ statutaire in the publicity directive (Art. 10(1) subpara. 2 of directive 2009/101/EC) was resolved by the revision of Art. 24(2) SUP directive in the Italian compromise proposal; see Habersack/ Verse (fn. 3), § 5 marginal nos. 32 et seqq. on this problem. It is unclear why in the General Approach this provision was deleted. 42 43

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legislation the formation of a company is not subject to any preventive administrative or court control, the instrument of incorporation and instrument(s) of constitution of the company as well as changes to these instruments have to be publicly notarised. Also because of this key requirement, the publicity directive is seen as the “Magna Carta” of European company law. The information on the SUP’s shareholders and board members in the register is however no reliable basis for the publicity effects of the companies’ register if they are not verified by a notary and/or the registration authority at any stage of the online registration process.51 16. It is no solution to simply provide for the legal fiction that the standards of the “Magna Charta” are met also in the case of an online registration. This is what Art. 11(2) of the General Approach does. Under this provision, Member States shall ensure that an SUP may be registered online with the use of the national template(s). Where the instrument(s) of constitution are drawn up and submitted online with the use of the national template(s) and have been accepted by the registration authority, the obligation under Art. 11 of Directive 2009/101/EC to have founding instruments drawn up and certified in due legal form shall be considered fulfilled. 51

Ries, NZG 2014, 569; Wicke, ZIP 2014, 1414, 1415.

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II. Remote formation via mouse click 17. Art. 13, 14, 14 a and 14 b of the General Approach set out the rules for the formation and registration of the SUP.52 In addition, art. 11 deals with online templates the member states shall make available. Here, a distinction should be drawn between three alternative options: the purely electronic registration process for companies being newly formed (Art. 13(2), 14(2) and (3), 14 b of the General Approach – “online registration”), the registration process for formation of an SUP by conversion (Art. 9 General Approach)53 and, as an option for the member states, the registration “in other ways than on-line” (Art. 14 (3) sentence 2 General Approach). 54

1. Proof of identity during online registration 18. On the Companies House website one finds the remarkable disclaimer that the content of the register is based on the unverified information provided by the registering party;55 identity theft and identity fraud are not uncommon in the context of company formations,56 which is why for instance in German land register practice the English register is classified as unreliable.57 Unfortunately, the current version (General Approach) of the proposed directive submits the SUP to similar risks. a) Purpose and dangers of the online registration 19. One central point of the planned SUP directive is the introduction of an online formation using an official electronic template (Art. 11, 13(2), 14(2) and (3), 14 b of the 52 See on this Drygala, EuZW 2014, 491, 493 et seq.; Hommelhoff, GmbHR 2014, 1065, 1067 et seqq.; Hommelhoff, in: Lutter/Koch (fn. 23), pp. 69 et seqq.; Jung, GmbHR 2014, 579, 585 et seqq.; Omlor, NZG 2014, 1137, 1139; Ries, NZG 2014, 569 et seq.; Wicke, ZIP 2014, 1414, 1415. 53 The German version of the SUP directive which is unclear in this respect speaks of “Umwandlung” (transformation); commercial law committee of the DAV (Fn. 21), marginal no. 14, 32. As already in the VALE ruling of the CJEU, (ruling of 12. 7. 2012, Case C-378/10, BB 2012, 2069) the ambiguous English term “conversion” (which English law itself does not use!) is translated as “Umwandlung” (transformation), see in more detail Kindler, EuZW 2012, 888, 889. 54 Jung, GmbHR 2014, 579, 585 et seq.; see recital 13 a. 55 “Companies House is a registry of company information. We carry out basic checks to make sure that documents have been fully completed and signed, but we do not have the statutory power or capability to verify the accuracy of the information that companies send to us. We accept all information that companies deliver to us in good faith and place it on the public record.”; see on this Roth/Kindler (fn. 13), pp. 11 et seq. 56 According to Bock (ZIP 2011, 2449), the United Kingdom has been struggling with “company hijacking” or “corporate identity fraud” for several years. This concerns the theft of the company identity through the fraudulent activities of third parties. For this purpose, the fraudsters change the personal information on the directors or the address of the registered office. According to Companies House, there are about 50 to 100 cases of “corporate identity fraud” per month. The consequences for the companies in question are disastrous: in most cases unauthorised use of money or ordering of goods. Both the financial damage and the damage to the company’s reputation are significant. Third parties entering into business relationships find it difficult to enforce their rights when they conclude agreements with alleged members of executive bodies who in fact are unauthorised representatives; see Wicke, MittBayNot 2011, 23, 25. For a striking description of a fake company formation see http://www.mirror.co.uk/news/uknews/fake-vince-cable-sets-up-2486920 (25.10.2013) (“Fake ‘Vince Cable’ sets up bogus firm to show how easy it is for fraudsters”). 57 Most recently Higher Regional Court Du ¨ sseldorf, NZG 2015, 199 with abundant references; on the questionable reliability of the information available from Companies House see also Hommelhoff, in: Lutter/Koch (fn. 23), sub V. 1.

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General Approach). The idea is to avoid putting foreign-based founders in particular at a cost disadvantage; these no longer have to appear in person before a notary or other authority of the country of registration (Art. 14 (3) SUP directive; recitals 3, 7, 13). 20. As regards the verification of the founders’ identities and the lawfulness of the registration documentation at the online formation, the original version of the proposed SUP directive – much like the English Companies House, where the registrar does not carry out a verification of the content of the information received 58 – largely placed trust in the honesty of the founders: thus the member states “may lay down rules” in this respect; they are however not required to do so (Art. 14 (5) SUP directive of 9 April 2014). The General Approach has brought no improvement in this regard: Pursuant to its art. 14a(1), the process of registration, “including possible control of legality that may consist of verification of identity and legal capacity” of the founding member and/or a representative that establishes the SUP on the member’s behalf shall be governed by national law. 21. This “Laissez-faire” concept entails risks for the domestic protection of transactions and creditors because a purely electronic SUP formation from a different member country must be accepted. Whether this formation took place using stolen or falsified IDs cannot be verified.59 22. Furthermore, the functions of the commercial register are in question. 60 Due to potential manipulation in the course of the online registration, the reliability of the commercial register is seriously jeopardised; the effects of public disclosure in accordance with art. 3(6) and (7) Directive 2009/101/EC (§ 15 HGB [German Commercial Code]) and § 16 GmbHG (bona fide acquisition of shares in a private company) are put into question. In the medium term, this also affects the safety of land register transactions. This is not only regrettable in terms of legal culture, but also with regard to the domestic and European protection of property (Art. 14 GG (Basic Law for the Federal Republic of Germany); Art. 17 Charter of Fundamental Rights 61): the loss of rights which the true beneficiary has to accept in the context of a good-faith acquisition can only be justified if the medium in which the legal presumption of correctness resides is extremely reliable.62

58 Schall/Gu ¨ nther, in: Schall (ed.), Companies Act. Kommentar, 2014, Sec. 1059A-1067 marginal no. 3, p. 1145. 59 Already German Bundesrat, Bundesrat document 165/2/14, p. 4 (7); critical also Teichmann/ Fro¨hlich, 21 Maastricht Journal of European and Comparative Law 3 (2014), 536, 543. 60 Wicke, ZIP 2014, 1414, 1415. 61 On the applicability of the Charter of Fundamental Rights in the context of the enforcement of harmonised law, see CJEU of 26. 9. 2013, Case C-418/11, BB 2014, 112 = IStR 2013, 922 (Texdata Software GmbH), paras. 75 et seq.; on this Mu¨nchKommBGB/Kindler (fn. 38), Art. 26 European insolvency regulation, marginal no. 6. 62 On the discussion relating to this in the context of MoMiG Kindler (fn. 43), p. 26; also Ziemons, BB 2006, Special 7/2006, pp. 9, 12: “Der im Interesse der Leichtigkeit des Gescha¨ftsverkehrs gesetzlich angeordnete Eingriff in das Eigentum durch ermo¨glichen eines gutgla¨ubigen Erwerbs ist nur dann mit der grundgesetzlichen Eigentumsgarantie vereinbar, wenn Vorkehrungen dafu¨r getroffen werden, dass er ein absoluter Ausnahmefall bleibt.” (The interference with property rights provided for by law to facilitate business transactions is only reconcilable with the property guarantee of the German Basic Law if arrangements are made to ensure that this interference remains an absolute exception.); in agreement Preuß, ZGR 2008, 676, 699; also, mutatis mutandis, Harbarth, ZIP 2008, 58, 61 et seq.; Reichert/Weller, in: Goette/Habersack (eds.), Das MoMiG in Wissenschaft und Praxis, 2009, pp. 79, 103; fundamental on this J. Hager, Verkehrsschutz durch redlichen Erwerb, 1990, § 4 preamble, p. 46: “Der redliche Erwerb muss sich in das System des Art. 14 GG einfu¨gen.” (Good-faith acquisition has to conform to the regime of Art. 14 Basic Law.)

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b) Limiting the risks of abuse via safe electronic identification means within the meaning of the e-IDAS regulation? 23. The General Approach of 28 May 2015 and the Italian compromise proposal of 14 November 2014 are in all probability to be seen partly against the backdrop of this criticism. In Art. 14a(1), Art. 14b(1) and (2) the General Approach 63 leaves the identification of the founding member and/or a representative that establishes the SUP on the member’s behalf to national law. 24. This is less strict than the Italian compromise proposal which also addressed the “beneficial owner” (cf. Art. 14(5) and Art. 13(1)(da) Italian Compromise Proposal). According to the Italian proposal, the member states are required – and this indicates progress to a degree compared to the original version of the proposal – to enact rules for the identification and for the verification of the identification of the founding member and any possible representative who registers the SUP on behalf of the member (Art. 14 (5) sentence 1 of the Italian Compromise Proposal). As mentioned in I 3 b (see above, para. 12), the enactment of rules for the identification and risk-related verification of the identification of the “beneficial owner” of the SUP was at least optional for the member states (Art. 14 (5) sentence 2 Italian Compromise Proposal).64 There is no trace of these legislative powers for member states in the General Approach and one wonders about how transparency can be established as to the identity of the beneficial owner considering the inherent danger of money laundering in these cases (see paras. 11, 37). 25. In substance, the General Approach does not bring final certainty on the procedure for identifying the founding member during the online registration. At least, the “electronic identification means” for the purposes of the SUP directive makes productive use of an instrument of late used within European legislation for ascertaining identity (cf. Art. 14b(1) of the General Approach). The term stems from regulation (EU) no. 910/2014 of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market65. The aim of this regulation is to strengthen confidence in the electronic legal relations in the EU,66 excluding however commercial registers and land registers (Art. 2(3); recital 21).67 The regulation was enacted after the original SUP proposal and became effective on 18 September 2014. Known in EU parlance as the e-IDAS regulation68, this set of rules contains, among others, provisions on the co-ordination of national systems for electronic identification (Art. 6–12). 69 These systems are known as identity management systems. 70

63

These provisions correspond to Art. 14 (5) and (5a) of the Italian Compromise text. Recital 18 of the Italian Compromise Proposal points to the money laundering directive for this, cf. Art. 3 (6) of directive 2005/60/EC of 26.10.2005; in German law § 1 (6) GWG. Unexplicably, the General Approach omits any reference to this directive in the new wording of recital 18. 65 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, OJ L 257 p. 73. 66 Recitals 16, 19, 28; in detail Roßnagel, NJW 2014, 3686 et seqq.; on the legislative procedure amongst others Spindler/Rockenbauch, MMR 2013, 139 et seqq.; on the eIDAS regulation as a potential starting point for identification verification during the SUP formation already Beurskens, GmbHR 2014, 738, 745; BDA/BDI/DIHK, joint opinion (fn. 21), p. 6; available under www.bda.de. 67 Hommelhoff, in: Lutter/Koch (fn. 23), sub V. 4 on Fn. 68 et seqq. 68 The abbreviation is based on the English title given to the regulation during the proposal stage: Regulation on electronic IDentification and Authentication Services; source: www.timelex.eu. 69 The second focus of regulation of the eIDAS regulation is the EU-wide uniform regulation of socalled trust services (authentication services) in Art. 13–45; on the composition of the eIDAS regulation see Roßnagel, NJW 2014, 3686, 3687. 70 Roßnagel, NJW 2014, 3686, 3687. 64

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26. As defined in Art. 3 of the e-IDAS regulation, “electronic identification” is the process of using person identification data in electronic form which uniquely represent a natural or legal person or a natural person representing a legal person (no. 1); an “electronic identification means” is a material and/or immaterial unit which contains person identification data and is used for authentication for an online service (no. 2); an “electronic identification scheme” is a system for electronic identification under which electronic identification means are issued to natural or legal persons, or natural persons representing legal persons (no. 4). 27. Art. 6 e-IDAS regulation provides that every member state that requires the use of an electronic identification scheme for domestic online services must also recognise all identification schemes from other member states notified to the Commission and published in a list in accordance with Art. 9(2) e-IDAS regulation. In addition, such identification schemes have to meet the legally defined assurance level “substantial” or “high”71 if the recognising member state requires this level for its own scheme. The Commission defined these technical specifications for the assurance levels with its Regulation (EU) 2015/1502 of 8 September 2015. But also in the light of this regulation, it is still impossible for our context to finally assess whether the European requirements on the identification of the founding member are as strict as required by the importance of, in particular, the commercial register and the land register for general legal transactions.72 28. The e-IDAS regulation does not require member states to offer or notify an electronic identification scheme in any way. If the scheme is to be on a Union-wide scale, however, notification is required. A scheme is fit for notification when the requirements listed in Art. 7 e-IDAS regulation are fulfilled. Of the existing German identification systems, this applies to the electronic identity card (§ 18 Personalausweisgesetz – Act on Identity Cards and Electronic Identification) and residence permits (§ 78 Aufenthaltsgesetz – Residence Act), the electronic health card (§ 291 a Sozialgesetzbuch – German Social Code Part V) and the identity verification service pursuant to § 6 De-Mail-Gesetz (DeMail Act).73 c) The electronic identification means in the scheme put forth in the SUP proposal 29. To get back to the General Approach for a SUP directive: in principle, Art. 14b(1)(a) requires registration authorities to recognize any electronic identification means issued under an electronic identification scheme approved for the purpose of online registration of SUPs by the Member State of registration. A German commercial register would therefore – within the context of the online registration of a German SUP – have to accept an electronic identity card issued in Germany as an “electronic identification means”. This is self-evident and in keeping with the procedure practised since 1 January 2015 pursuant to § 3 a Bundesverwaltungsverfahrensgesetz (German Administrative Procedure Act) in conjunction with § 2 (3) EGovGesetz, the German Act to Promote Electronic Government (E-Government Act).74 30. In addition, Art. 14b(1) (b) of the General Approach requires the registration authorities to recognize any electronic identification means issued in another Member 71

Cf. Art. 8 (2) eIDAS regulation. Rightly critical concerning the legal uncertainty connected with the authorisation to enact concretising legal acts in the eIDAS regulation Spindler/Rockenbauch, MMR 2013, 139, 140. 73 Roßnagel, NJW 2014, 3686, 3687 et seq. 74 Act of 25. 7. 2013, BGBl. (Federal Law Gazette) I p. 2749; see on this U. Mu ¨ ller, in: Bader/ Ronellenfitsch (eds.), Beck’scher Onlinekommentar VwVfG, 28. Ed. as of 1.7.2015, § 3 a VwVfG marginal no. 5. 72

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State complying with Art. 6 of Regulation (EU) N� 910/2014. In so far, the derogation of Art. 2(3) e-IDAS regulation with respect to the commercial register – above b), para. 25 – does not apply. Whether Art. 6 e-IDAS regulation would require the German courts of registration to recognise foreign electronic identification means whose reliability has to be rated as inferior to that of a German electronic identity card cannot be answered at this stage. As the SUP proposal refers to Art. 6 e-IDAS regulation here, in order to obtain clarity in this respect the Commission announced the technical specifications regarding the “substantial” and the “high” assurance level in its Regulation (EU) 2015/1502, based on Art. 8 (3) e-IDAS regulation. It cannot for instance be ruled out that the Commission ascribes a “substantial” or even a “high” assurance level to the issuance of an identification means by the postal service – such as the German ePostbrief – even though the authenticity of any official identity document presented in the process of this is only checked by counter staff untrained for this activity.75 31. And finally, security loopholes result from the opening clause in Art. 14b(2) sentence 1 of the General Approach: under this clause, the registration authorities can also accept other electronic or non-electronic identification means (not specified in further detail) during the online registration. Although it can hardly be expected that the German legislators will go below the assurance level of the German electronic identity card for remote formations of a German SUP, German courts and state authorities will indeed be required to recognise76 a foreign EU SUP even if its formation took place using identification means which from the perspective of German law are characterised by an insufficient assurance level. Apprehensions are not far-fetched that the participation of such companies in domestic German register and land register transactions brings into question the reliability of these media in which the legal presumption of correctness resides.77 32. Pursuant to the new wording of recital no. 18 (General Approach) Member States can maintain existing rules or enact new rules concerning possible verification of the legality of the registration process, including rules on the verification of identification and legal capacity in order to provide for safeguards for the reliability and trustworthiness of registers (e.g. a legality check via a video-conference or other online means that provide a real-time audio-visual connection). The identification based on a visible contact provided by a video-conference, however, lags behind any identification on a face-to-face basis. First, much will depend on the quality of the video-conference. Bad connectivity or software as well as hardware malfunctions may thwart any reliable identification of a person unknown to the person checking the identity. Second, the inhibition threshold to fake an identity is significantly lowered: Persons are less deterred from negative consequences resulting from an attempted “identity fraud” when not physically appearing before the person checking the identity. The risk that forged identity cards will be presented via webcam, for example, will thus increase. The compromise proposal providing the “webcam identification”, therefore, cannot be welcomed as a generally adequate means of identification. The European legislator is

75 On the possibilities of abuse, see http://de.wikipedia.org/wiki/Postident. The ePostbrief procedure is not suitable for notification, cf. Roßnagel, NJW 2014, 3686, 3688; also Beurskens, GmbHR 2014, 738, 745 and comprehensively Mo¨ller, NJW 2005, 1605 et seqq. 76 According to The German Federal Court of Justice in BGHZ 198, 14 marginal no. 11 = RIW 2013, 793; in addition Kindler, in: Mu¨nchKommBGB, vol. 11, 6th ed. 2015, Internationales Handels- und Gesellschaftsrecht marginal nos. 152 et seqq. 77 Wicke, ZIP 2014, 1414, 1415; Ries, NZG 2014, 569; Ries, in: Lutter/Koch (fn. 23), p. 65, 66; critical also Teichmann/Fro¨hlich, 21 Maastricht Journal of European and Comparative Law 3 (2014), 536, 543 (according to fn. 43).

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well advised not to lower identification standards as long as the fight against money laundering and terrorism financing is taken seriously. 33. At least, the General Approach does give room for additional safeguards that still cannot overcome the general reservations associated with identifications carried out online, but let the idea of an online identification appear less hazardous. The Member States are thus strongly encouraged to provide for regulation that aims at securing video-conference based identifications by additional safeguards. Such regulation might include strict quality standards for real-time audio-visual connections as well as the requirement to not only present oneself “online”, but to additionally use further electronic identification means, e.g. electronic ID cards. Moreover, “in case of genuine suspicion of fraudulent identity” member states may take measures requiring a physical presence before an authority (Art. 14b(4) General Approach as amended by the Competitive Council). Member States should not hesitate to resort to this possibility if a reliable identification cannot be guaranteed. 34. Regrettably, a Member State may not refuse recognition of foreign SUPs founded on a merely “substantial” assurance level. In fact, pursuant to Art. 14b(3) as amended by the Competitiveness Council78 Member States may only decide to refuse the online registration of SUPs in the cross-border context in all cases where a founder uses electronic identification means that are not e-IDAS compliant. However, according to Art. 6(2) of the e-IDAS regulation electronic identification means corresponding to the assurance level “low” may still be recognized by public sector bodies for the purposes of cross-border authentication. Although Member States should in the interest of reliability of data opt for a “high” identification standard the SUP directive (General Approach) invites to circumvent “high” identification standards by setting up the SUP in another member state who has adopted lower standards. 79 A high level of security and trust, in the context of online cross-border identification, as designated in recital 18a will therefore hardly be achieved. This is not in line with the Union’s policy in the fight against money laundering and terrorism financing (see above, para. 11). d) Legal scrutiny before registration 35. The accurate identification before registration is one crucial element when assessing a register’s quality. High quality, however, is contingent on the legal quality of the information displayed in the register. The accuracy of information is safeguarded by legal scrutiny before registrations are made. According to recital no. 13a (General Approach) such legal scrutiny can either be performed by the register itself or by other persons or bodies required to assist or control the legality of registration. In Germany as well as in many other Member States, civil law notaries are entrusted with the function to legally scrutinize documents before they are submitted to the register. In doing so, they relieve the work of the registrars who must make sure that the registration sought for is compliant with law.80 The concept of an online registration could be understood to be opposed to the idea of preventative control if “online registration” is to be interpreted as a means to directly and immediately register information with the register. The General Approach has, however, clarified that the concept of preventative scrutiny can be retained. Pursuant to Article 14a(1) and recital 18 Member States can accordingly maintain rules concerning “possible verification of the legality of the 78

See fn. 26. See also the criticism on this concept of the General Approach in Bayer/Schmidt, BB 2015, 1731, 1734 fn. 67; Hommelhoff/Teichmann, Frankfurter Allgemeine Zeitung, 10 June 2015, p. 15. 80 Krafka, in: Mu ¨ nchKommHGB, 3th ed. 2010, § 12 Rn. 10; in detail Vossius, ZGR 2009, 366, 381 et seq.; Heneweer, FGPrax 2004, 259, 260; Apfelbaum/Bettendorf, RNotZ 2007, 89, 93. 79

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registration process […] in order to provide for safeguards for the reliability and trustworthiness of registers”. As a result, an online registration can require the founding member to electronically contact a person that is by national law charged with the verification of the legality of the registration. The General Approach lists the video-conference as one possibility to have the “legality check” carried out online. The video-conference, hence, is not restricted to the identification of the founding member, but also permits a comprehensive legal scrutiny by persons completing or assisting in completing registrations. In Germany, for example, the national legislator can request founding members to get in touch with German notaries via a video-conference to have their identity verified and the formation of a SUP authenticated. 36. A “webcam-based” authentication, however, should not prematurely be lauded as a modern way of authentication in the digital age. In comparison to an authentication requiring physical presence, a video-conference based procedure lacks an important element that makes an authentication an efficient tool to safeguard functions in the public and the founder’s individual interest at the same time. Advice, instruction, and identification quality (see above, para. 32) might deteriorate to the detriment of public and individual interests. The concept of video-conference based authentications therefore should rather be abandoned and replaced by an authentication that fully achieves the purposes it is meant to achieve. If a transposition of the concept is eventually required by European law, national legislators should make all efforts to set as high standards as needed to maintain the public functions associated with an authentication. A transfer of the concept to other fields should be avoided in any event – a fortiori if more than one party is involved and possibly conflicting interests are at stake. e) Analysis 37. As an interim conclusion the following can be determined: reference of the SUP directive to electronic identification as per e-IDAS regulation is logical in terms of legislative policy. It creates coherence in European civil and company law. In terms of content, however, deficiencies remain. The requirement to accept foreign (from the point of view of the registration country) EU electronic identification means (Art. 14b(1) (b) SUP directive/General Approach) should be limited to those of a “high” assurance level; these would at least be identification means whose aim lies in the prevention of misuse or alteration of the identity and not just in the mitigation of the risk of such manipulations (Art. 8(2)(c) e-IDAS regulation).81 38. Moreover, the opening clause of Art. 14b(2) sentence 1 should be deleted because it requires the member states pursuant to Art. 49 TFEU to recognise also those SUPs from other EU countries which are formed using identification means that are considered unsafe according to the assessment of the member state required to recognise them.82 39. There is one additional fundamental concern. For the purpose of achieving a time- and cost-saving registration procedure, 83 no new European legal form needs to be created. Neither the Commission nor the Italian EU Presidency has provided substantiated evidence that there is even a need for harmonisation regarding the legal systems of the member states, let alone referring to the exact costs. 84 81

See also the criticism in Bayer/Schmidt, BB 2015, 1731, 1734 (“nicht ganz unproblematisch”). Bayer/Schmidt, BB 2015, 1731, 1734 fn. 67. 83 Recitals 3, 7 and 13 SUP directive/General Approach. 84 This is a violation of Art. 5 of the EU subsidiarity protocol (in combination with Art. 5(3) TEU): “Draft legislative acts shall be justified with regard to the principles of subsidiarity and proportionality. Any draft legislative act should contain a detailed statement making it possible to appraise compliance 82

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40. There is, for example, no need for a new European legal form for the formation of a subsidiary in Germany with reasonable costs – and certainly not one that allows for remote formation via mouse-click.85 Currently, the notary and court fees for the formation of a German one-Euro “Unternehmergesellschaft” (UG) with a model protocol amount to roughly 250 Euros.86 The time expenditure for the lawful formation and advance payment of court fees is one or two days including the appointment with the notary. The founders are not required to appear before the commercial register in person. An appearance by the foreign founder before a German notary is not necessary if the founder acts via proxies which he has notarised by his regular foreign notary or a German diplomatic mission (§ 2(2) GmbHG).87 Even the notarisation of the proxy is waived if the foreign founder obtains shares in a German shelf company by means of an informal authorisation.88 The fact that the identity of the purchaser of a company share in this case cannot be reliably ascertained under German law either by the notary (§ 15(3) GmbHG) provides no justification for even laxer requirements at the European level, but on the contrary should provide an incentive for the creation of a system for identification within European company law with as few loop holes as possible.

2. Mandatory use of the standard template of the instrument(s) of constitution 41. In accordance with Art. 11 (1) sentence 1 and (3) of the General Approach, the instrument(s) of constitution must include a wealth of minimum information which goes far beyond the rudimentary requirements of § 3(1) GmbHG. Apparently following Art. 8 EPC Proposal89, information has to be provided among other things on the name and address of the single-member, the object and name of the enterprise, the registered office and central administration, the capital contributions and the management body, as well as an arbitration clause.90 42. Under the Commission’s Proposal and the Italian Compromise text (Art. 11(3), the matters referred to above were also to be included in a standard template of the instrument(s) of constitution to be adopted by the Commission.91 It was therefore unclear with the principles of subsidiarity and proportionality.”; see in more detail Nettesheim, EuR 2004, 511, 537; Calliess, in: Calliess/Ruffert, EUV/AEUV, 4th ed. 2011, Art. 5 EUV marginal nos. 63 et seq. 85 On the following Ries, NZG 2014, 569; Ries, in: Lutter/Koch (Fn. 23), pp. 65 et seqq.; Hommelhoff, in: Lutter/Koch (fn. 23), pp. 69 et seqq.; on the subsidiarity principle in this context Wicke, ZIP 2014, 1414, 1417; on the criticism of the Bundesrat, see Bundesrat document 165/14, pp. 3 et seqq. 86 Ries, in: Lutter/Koch (fn. 23), p. 65. 87 J. Mayer, in: Mu ¨ nchKommGmbHG, 2nd ed. 2015, § 2 marginal no. 67; foreign founders will often have a German representative already on account of the requirement for representation pursuant to § 96 MarkenG/Art. 2(3) Paris Convention for the Protection of Industrial Property. 88 Cf. § 167(2) BGB and in more detail Reichert/Weller, in: Mu ¨ nchKommGmbHG, 2 nd ed. 2015, § 15 marginal no. 61; the leading case is German Federal Court of Justice in BGHZ 13, 49, 53; subsequently Higher Regional Court Dresden, BeckRS 2008, 12874. 89 Doc. 10611/11 (SPE-Proposal-Hungarian presidency text), reprinted in Lutter/Bayer/Schmidt (fn. 4), pp. 1734 et seqq. 90 The mandatory requirement of an arbitration clause was dropped by the General Approch (cf. Art. 11(3). It is in fact problematic: it would be in conflict with Art. 101 (1) sentence 2 of the German Constitution which provides that nobody may be removed from the jurisdiction of his lawful judge. The constitutional premise of the legality of any arbitration proceedings is that recourse to state courts is waived voluntarily. In more detail Higher Reginal Court Munichen 15 January 2015, RIW 2015, 233 et seqq. – Claudia Pechstein; on the significance of the guarantee of effective legal protection in Art. 19 (4) GG and the right to access to justice – grounded in the principle of the rule of law – in relation to EU law German Constitutional Court, RIW 2009, 537 marginal no. 368 – Lisbon treaty. 91 In accordance with recital 25 in conjunction with Art. 27 SUP directive (both in the Commission’s and the Italian version), the Commission was to be supported in this by the Company Law Committee which was formed on the basis of regulation (EU) no. 182/2011.

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what the provisions regarding the standard template of the instrument(s) of constitution would look like in detail. As regards the envisaged – but hardly achievable –92 compatibility with the limited liability company law of all member states, it is to be welcomed that the General Approach dropped the idea of a European standard template. Art. 11(1) sentence 2 of the General Approach refers to national templates only; the previous recital 25 was deleted. 43. Thus, the online formation of the SUP requires the use of this national template of the instrument(s) of constitution as otherwise the requirements of Art. 11 of the publicity directive are not met (Art. 11(2) sentence 2 SUP directive/General Approach). The text of the national template of the instrument(s) of constitution is to be made available on the Internet (Art. 11(1) sentence 2). 44. In addition, Member States may allow SUPs to be registered in other ways than online, i. e. on paper (Art. 14(3) subpara. 1 sentence 2 of the General Approach; recital 13a). 45. Pursuant to the Commission’s Proposal and the Italian Compromise Proposal (Art. 14(4)), the member states had to issue a registration certificate without delay which confirms that the registration procedure has been completed; for newly formed SUPs the member states should attempt to issue such a certificate within three working days but no later than within eight working days after all required documentation has been received by the competent authority. The registration certificate is no longer mentioned in the General Approach (cf. Art. 13–14b). In any case, a copy of the whole or any part of the documents disclosed to the commercial register are obtainable on application pursuant to Art. 3(4) of the Publicity Directive. 46. Pursuant to Art. 14(3) subpara. 2 sentence 1 of the General Approach, for SUPs created ex nihilo with the use of the national templates referred to in Art. 11 and 13 Member States shall complete the registration process within five working days from the receipt of all the necessary documentation and information by the competent authority, except where there are exceptional circumstances that would make it impossible to comply with this deadline. This time frame is meant to be in line with the recommendations set out in the European Commission’s 2011 Review of the Small Business Act 93 to reduce the start-up time for new enterprises (recital 16). 47. In light of this tight time schedule for the registration authority it makes sense that use of the cost-saving possibility of registering online is to be possible only if the official template available on the Internet is used which does not require an in-depth verification in content terms on the part of the registration authority. 48. Nothing however speaks against allowing the use of individually created instrument(s) of constitution, although due to the greater effort required for verification without the requirement for the registration authority to complete the registration within no more than eight days. Corporate groups receiving competent legal advice will change the standard template for the instrument(s) of constitution anyway in most cases, 94 leading to further costs. The directive should therefore – if one wants to allow the online formation without reliable identification at all – provide the template of the instrument(s) of constitution also for the online formation on a purely optional basis. Small entrepreneurs founding an SUP who quite often will be overstretched with the individual drafting

Pessimistic insofar Malberti, Rivista delle societa` 2014, 848, 858. COM(2011) 78 final, 23.2.2011. 94 Ries (NZG 2014, 569, 570) reports that the “Musterprotokoll” (model protocol) pursuant to § 2 (1a) GmbHG is changed in the majority of cases soon after the founding of the company. This raises manifold legal questions: Higher Regional Court Du¨sseldorf, NZG 2010, 719; in more detail Roth, in: Roth/ Altmeppen, GmbHG, 7th ed. 2012, § 2 marginal no. 61. 92 93

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of instrument(s) of constitution may well take up this offer; to force the standard template of instrument(s) of constitution on a corporate group cannot be justified. 95 95

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Persuasive in so far the commercial law committee of the DAV (fn. 21), marginal no. 41.

III. Membership 49. There is to be only a single share in the SUP to which however, in accordance with the non-harmonised law of the state in which the SUP is registered (Art. 7(4)(b) General Approach), several persons who in combination are seen as a single-member can be jointly entitled (Art. 15(3) General Approach). Under German law, this is the case for instance for a community of heirs (§ 2032 BGB) or a community of part owners (§ 741 BGB),96 but not for a civil law partnership which pursuant to § 124(1) HGB is itself the sole owner of the business share.97 The SUP is therefore in reality not a “singleshareholder company” but a “single-share company”.98 The “fiction of a single shareholder” opens up the possibility of managing the SUP also as a company with several members which can be desirable when converting a private limited-liability company with several shareholders into a SUP. The joint holding of a business share by several persons is however misleading as regards the indication of its legal form as singlemember company “SUP” and not as single-share company (Art. 7(3) General Approach). It should only be allowed in special cases (e. g. a community of heirs) for a limited transitional period.99 96

On the community of part owners as business owner recently Madaus, ZHR 178 (2014), 98 et seqq. Roth/Altmeppen (fn. 93), § 18 marginal nos. 2, 6 with reference to German Federal Court of Justice in BGHZ 146, 341 – Weißes Roß. 98 Commercial law committee of the DAV (fn. 21), marginal no. 48. 99 Commercial law committee of the DAV (fn. 21), marginal no. 51. 97

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IV. Share capital: raising capital and capital protection 1. The basics 50. Pursuant to Art. 16(1) sentence 1 of the General Approach the minimum share capital of the SUP is EUR 1; what apparently is meant here is that the share capital is EUR 1 and the instrument(s) of constitution can set a higher amount.100 51. The Council views higher capital requirements as an unnecessary impediment to company formation.101 This assessment cannot be shared. It is regrettable that the SUP does not stipulate even a small minimum share capital as a probity threshold (Serio¨sita¨tsschwelle).102 It is and will continue to be an error of legal policy to provide people who set up businesses which are bound to fail with limited liability vehicles103 under corporation law:104 “necessity entrepreneurs” rarely create new jobs.105 52. A profit retention requirement as provided under German law in § 5a(3) GmbHG for the simplified private company (“Unternehmergesellschaft”) was explicitly ruled out for the SUP in the original proposal (Art. 16(4) proposal for the SUP directive of 9 April 2014). The Italian compromise proposal – using a very open wording – wanted to allow the member states to stipulate the building of legal reserves for certain sectors of the economy in the public interest (Art. 16(4) subpara. 1 SUP directive). A further important improvement in terms of the protection of creditors, irrespective of the economic sector concerned, was achieved in the General Approach: Under Art. 16(4) Member States may require the SUP to build up legal reserves as a percentage of the profits of the SUP and/or up to the amount of minimum share capital required for private limited liability companies listed in Annex I. The recitals of the General Approach refer to such requirements to build up legal reserves as a creditor protection mechanism. 106 53. Furthermore, a certain protection of creditors parallel to that of the German simplified private company (“Unternehmergesellschaft”) was meant to result also from the requirement – in the Commission’s and in the Italian Proposal – to fully pay up the share capital at the point in time of the registration of the SUP in the commercial register (Art. 17(1) sentence 1 SUP directive/Commission’s Proposal, Italian Compro100

Commercial law committee of the DAV (fn. 21), marginal no. 55. Recital 19 a General Approach; in view of the necessity of this kind of rule, however, it is more than questionable whether the harmonisation of the minimum capital requirements even falls in the competence of the Union: Mo¨slein, ZHR 176 (2012), 470, 506. The EPC failed over the disagreement regarding the minimum capital (among other things), cf. Jung, GmbHR 2014, 579, 587 with reference to the draft by the Hungarian EU Presidency of 23.5.2011 (10611/11), p. 2; text reprinted in Lutter/Bayer/ Schmidt (fn. 4), pp. 1734 et seqq. 102 For a basic account of this function of the minimum capital requirement Ballerstedt, ZHR 135, 384 ff; also Roth/Kindler (fn. 13), pp. 36 et seq.; Portale, Rivista delle societa` 2015, 815, 829 et seq.; Wicke, GmbHG, 2nd ed. 2011, § 5 marginal no. 3; differently Scho¨n, Der Konzern 2004, 162, 165: “only of symbolic significance”. 103 See the accurate functional description of the corporation by Goette, DStR 2010, 64 in reference to BGH of 26. 10. 2009, II ZR 222/08, DStR 2010, 63 = BB 2010, 19. 104 On the early mortality of the German “UG” cf. Bayer/Hoffmann, NZG 2012, 887 et seqq.; Niemeier, Festschrift Gu¨nter H. Roth, 2011, pp. 533, 549 et seq.; Braun/Eidenmu¨ller/Engert/Hornuf, ZHR 177 (2013), 131, 147. 105 This however is the expectation of the authors of the SUP, see recitals 4 and 6 (“creation of jobs”); on the “necessity entrepreneur” see Roth/Kindler (fn. 13), pp. 39 et seq.; Braun/Eidenmu¨ller/Engert/ Hornuf, ZHR 177 (2013), 131, 147. 106 General Approach, recitals 19aa, 19 b. 101

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mise Proposal); this rule echoes § 5a(2) sentence 1 GmbHG). Thus, the minimum capital contribution required for the regular private limited company would not apply to an SUP; this however would not entail any substantial improvement in terms of creditor protection given that the minimum share capital is only EUR 1 anyway (Art. 16(1)). It is coherent for the General Approach to delete the requirement to fully pay up the consideration for the share (cf. Art. 17). The basic deficiency is to not foresee any minimum capital at all (see above, para. 47). 54. Under the Commission’s and under the Italian Proposal, in case of online registration a formation of the SUP by contributions in kind – which is well-known to be vulnerable to misuse –107 was excluded pursuant to Art. 17(2) sentence 1,108 again in accordance with the German “Unternehmergesellschaft” (§ 5a(2) sentence 2 GmbHG); given however that contributions in kind can be made in the course of a subsequent capital increase shortly after (Art. 17(2) sentence 4 Commission’s and Italian Proposal), this too does not ensure any real creditor protection in the formation period. The General Approach leaves it up to the member states if they want to allow contributions in kind also in case of online registration and if any evaluation of the assets 109 is required. This follows from Art. 17 read with Art. 7(4)(b) of the text. 110

2. Preventive creditor protection a) No obligation to publicly disclose subscribed and paid-up share capital in business letters 55. Pursuant to Art. 16(5) SUP directive as per the Commission proposal of 9 April 2014, the subscribed and paid-up capital had to be stated in business letters and also on an existing company website (if any). The publicity directive explicitly allows member states to require the disclosure of the share capital in business letters (Art. 5), and applicable law provides for this for instance in France and Italy.111 This has been criticised in the relevant literature because the public, unversed in legal matters, would wrongly assume the share capital to be an inviolable guarantee fund for creditors of the company; also, the Commission draft did not in case of transgressions provide for any effective sanctions which would improve the creditors’ position.112 There is no empirical evidence however for the first of these concerns, and as a sanction, board members could be required to pay in the amount in case public disclosure obligations regarding business correspondence were breached in the year before insolvency proceedings were initiated. 56. In the Italian compromise proposal, Art. 16 (5) SUP directive was deleted on the grounds that the public disclosure obligation in respect to business letters is already required for the share capital under Art. 5 of the publicity directive. 113 Regrettably, the General Approach follows this reasoning; it contains no disclosure obligations as to the share capital.114 On typical avoidance strategies see Habersack/Verse (fn. 3), § 6 marginal nos. 36 et seqq. On this, see also recital 13 sentence 2 of the Italian Compromise Proposal. 109 As to public companies see Directive 2012/30/EU on the coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Art. 54 of the Treaty on the Functioning of the European Union, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent. 110 Bayer/Schmidt, BB 2015, 1731, 1734. 111 Omlor, NZG 2014, 1137, 1140; for Italy Art. 2250 (2) c.c. (share capital as per the most recent balance sheet); on this see Kindler, Italienisches Handels- und Wirtschaftsrecht, 2 nd ed. 2014, § 4 marginal no. 31. 112 Omlor, NZG 2014, 1137, 1140. 113 Italian Compromise Proposal (fn. 24), p. 30. 114 Bayer/Schmidt, BB 2015, 1731, 1734. 107 108

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57. The reference to the publicity directive is not correct. Only those companies that disclose their share capital in business letters in the first place are required to present complete information (subscribed and paid-up capital).115 Making the public disclosure of share capital a legal requirement appears like a sensible additional measure for protecting creditors116 without imposing an undue burden on companies. The Commission’s Proposal seems appropriate in this regard. b) Solvency test 58. Art. 18 of the General Approach sets out the rules for capital protection in case of illegal distributions on profits. The overriding principle is that member states shall ensure the establishment of “mechanisms” in national law that would prevent SUPs from being unable to pay their debts after making distributions (Art. 18(1)). The planned directive – as becomes clear from recital 19aa of the General Approach – merely gives examples what these mechanisms could be like.117 In this regard, Art. 18(2) provides for a balance sheet test (lit. a) and a solvency test (lit. b). 59. As to the solvency test, pursuant to Art. 18(1) of the Italian compromise proposal, the SUP could on the basis of a written recommendation of all members of the management body distribute profits to the member if certain preconditions are met. 118 This situation-specific distribution restriction is modelled on the Anglo-American solvency test. In a solvency statement to be disclosed in the register and on the website (if any), the managing director of the company has to confirm that the company is expected to be able to meet its liabilities due in the coming year despite the profit distribution (Art. 18(3) and (4) of the Italian Proposal). 60. In substance, the solvency test requirement seems acceptable because it at least partly offsets the structural reliability deficits of the proposed company form connected to not requiring a minimum share capital.119 The criteria largely correspond to the accounting principle of the going concern (Art. 6 (1) (a) accounting directive 2013/34/ EU) and should therefore be familiar to management.120 Less clear is how much room the EU member state legislatures are to retain in terms of implementation: according to recital 19 a sentence 5 of the Italian Proposal, the directive only sets out the “minimum requirements” for balance sheet tests.121 61. The General Approach seems to be less strict in terms of creditor protection, but it leaves it to the member states to establish stricter rules in this regard (Art. 18(5)). 122 In particular, under Art. 18(2)(b) of the General Approach, member states may provide that an SUP is not allowed to make a distribution to the single-member if, in the case of a distribution in the form of a payment of a dividend, it results in the SUP being unable to honour its obligations as they become due and payable during the period of six Grundmann, Europa¨isches Gesellschaftsrecht, 2nd ed. 2011, marginal no. 270. A different view was taken by the legislature in MoMiG during the introduction of the one-Euro “Unternehmergesellschaft” (§ 5 (1) and (2), § 5 a (1) GmbHG). 117 Bayer/Schmidt, BB 2015, 1731, 1734. 118 The proposed provision corresponds in its core aspects to Art. 21 (1) sentence 1 SPE statute: Jung, GmbHR 2014, 579, 588. 119 Argued also by the commercial law committee of the DAV (fn. 21), marginal no. 66; Malberti, Rivista delle societa` 2014, 848, 857 fn. 29, expresses doubts because the solvency test was excluded already in the recast directive on capital maintenance (2012/34/EU of 25.10.2012). 120 Argued also by the commercial law committee of the DAV (fn. 21), marginal no. 66; on the principle of the going concern see Staub/Kleindiek (fn. 8), § 252 marginal nos. 10 et seqq. 121 The recital text wrongly speaks of “minimum balance sheet requirements”: Jung, GmbHR 2014, 579, 588 with fn. 89 (on the in so far identical recital 19 sentence 7 of the Commission proposal). 122 See again recital 19aa of the General Approach. 115 116

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IV. Share capital: raising capital and capital protection

months following the payment of that dividend. This provision does not seem to cover the hidden distribution of profits and it refers to a relatively short period of time. For example, under German law the relevant forecast horizon for liquidity planning is two years, as recognised in respect to § 64 sentence 1 GmbHG.123 62. Under Art. 18(3) of the General Approach member states may formalize the solvency test by prescribing a “solvency statement” signed by the management body before the payment of a dividend, certifying in writing that the SUP will be able to honour its obligations as they fall due in the normal course of business during the period of six months following the payment of the proposed dividend. If a solvency statement is signed, it shall be considered as sufficient means of complying with Art. 18(2)(b) and it shall be disclosed in the register. c) The concept of “distribution” 63. Just like the Italian compromise proposal also the General Approach foregoes any legal definition of the term “distribution”.124 The substantive requirements for this therefore arise from the distribution restriction set out in Art. 18(2)(a) of the General Approach125 which is based on Art. 17 of the capital maintenance directive. 126 Pursuant to Art. 18(2)(a) General Approach, member states may provide that an SUP is not allowed to make a “distribution” to the single-member if, on the closing date of the latest financial statement the total assets after deducting total liabilities, as set out in the SUP’s annual accounts, are, or following such a distribution would become, lower than the amount of the share capital plus those reserves which may not be distributed under national laws requiring the SUP to build legal reserves in accordance with Art. 16(4), if any, or under the instruments of constitution of the SUP. 64. Furthermore, comparing Art. 18(2)(a) to Art. 18(2)(b) of the General Approach, the authors of these provisions seem to distinguish between distributions “in the form of a payment of a dividend” (lit. b) and distributions where no such payment is made (lit. a covering both categories). This is in line with Art. 17(4) of the Capital Maintenance Directive (2012/30/EU). In particular, this broad definition includes “concealed” asset transfers (constructive distributions). 127 The wording of Art. 18 should make that clear. 65. A precise delimitation of distributions from permissible asset transfers is known to be difficult, as evidenced by the considerable number of publications on the banned repayment of contributions under public limited-liability company law – also pre-shaped by EU law.128 In public limited-liability companies, pursuant to Art. 17(1) Directive 2012/ 30/EU no distribution to shareholders may be made when on the closing date of the last financial year the net assets as set out in the company’s annual accounts are, or following such a distribution would become, lower than the amount of the subscribed capital plus those reserves which may not be distributed under the law or the statutes. 66. The authors of the Commission’s Proposal succumbed to the difficulties of the concept of distribution in several respects: for instance, the originally proposed legal 123 Cf. Haas, in: Baumbach/Hueck, GmbHG, 20th ed. 2013, § 64 marginal no. 46 b; Bork, ZIP 2000, 1709, 1710; on the minimum harmonisation character of the proposal for the directive see above, para. 7. 124 Differently still Art. 2 no. 3 SUP directive in the version of the Commission proposal; on this see Jung, GmbHR 2014, 579, 588. 125 Art. 18(2) of the Italian Proposal. 126 Directive 2012/30/EU of 25.10.2011 (capital maintenance directive). 127 On constructive distributions see Roth/Kindler (fn. 13), pp. 58 et seqq.; the correct view here is that concealed asset transfers also fall under the capital protection under public limited liability company law of Art. 17 directive 2012/34/EU, cf. Habersack/Verse (fn. 3), § 6 marginal nos. 42. 128 Hu ¨ ffer/Koch, AktG, 11th ed. 2014, § 57 marginal no. 2 et seqq.

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definition omitted the precondition that the benefit accrued to the single-member has to stem from company assets.129 The reference to real estate in the German version was based on a mistranslation of the term “property” contained in the English version. 130 67. The Commission’s Proposal also did not take into account that capital protection is a priori not affected if the SUP conducts business transactions with its shareholder at arm’s length. In these cases, the company’s performance is compensated for by the consideration provided by the shareholder which the shareholder provides like a third party.131 As the European Court of Justice accurately pointed out in respect to the ban on contribution repayments (under public limited liability company law, Art. 17 Directive 2012/30/EU), this capital protection instrument is intended to regulate only those legal relationships established between the company and its shareholders which derive exclusively from the memorandum and instrument(s) of constitution and only concern internal relations within the company.132 A legal relationship of this kind is not given in the case of a third-party transaction conducted at arm’s length. 68. Therefore, a definition for the distribution restriction should be retained. A comprehensive definition could read as follows: “Within the meaning of this directive, the term ‘distribution’ means any financial benefit which the single-member because of the single share directly or indirectly draws from the assets of the SUP, including any transfer of money or non-money items. Distributions can take place in the form of a dividend, through the purchase or sale of company assets or in any other way.” d) The cash-pooling legal void 69. In light of the intention of the Commission to design the SUP as a building block for corporate groups (see above, para. 5, recital 23 in its original version), it is astonishing that the proposal contains no regulations on the much-used group financing via cash pooling. Put simply, what happens there is that liquidity is withdrawn from the subsidiaries and is centrally managed at the parent company for all group companies.133 The legal basis for this is an upstream loan which a subsidiary extends to the parent company. 70. Centralised cash management by the parent company – from a group perspective – lowers administration costs, enables higher interest income from group-wide surpluses and above all avoids borrowing from external sources by a group company while at the same time another group company has the required liquidity, to name but a few key advantages of this method.134 To ensure its legality it should be specified in the SUP directive, in line with § 30(1) sentence 2 GmbHG135, that if the SUP extends a loan to its single-member, this does not constitute a “distribution” if the interest on this loan corresponds to market rates and the repayment claim is unimpaired. 136 129

Rightly critical in so far also the commercial law committee of the DAV (fn. 21), marginal no. 16. Commercial law committee of the DAV (fn. 21), marginal no. 17. 131 Hu ¨ ffer/Koch (fn. 127), § 57 marginal no. 8; commercial law committee of the DAV (fn. 21), marginal no. 18; this is also the legal rationale of § 142 InsO (cash transaction). 132 CJEU of 19.12.2013, Case C-174/12, EuZW 2014, 223 with note Kalss (Alfred Hirmann/Immofinanz AG), marginal no. 27 (on Art. 15 directive 77/91/EEC of 13.12.1976 = Art. 17 directive 2012/30/EU of 25.10.2012). 133 See on this Roth/Kindler (fn. 13), p. 59; Kindler, NJW 2008, 3249, 3252 et seq.; also Komo, BB 2011, 2307 et seqq. (report on court rulings); Vetter, in: Goette/Habersack (eds.), Das MoMiG in Wissenschaft und Praxis, 2009, pp. 105 et seqq.; monographically Sieder, Cash-Pooling im GmbH-Konzern, 2011. 134 Habersack/Schu ¨ rnbrand, NZG 2004, 689, 690. 135 In place of all others, Kindler, NJW 2008, 3249, 3252 et seq. 136 Commercial law committee of the DAV (fn. 21), marginal no. 18. 130

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IV. Share capital: raising capital and capital protection

e) Further instruments for preventive creditor protection 71. It has already been stated that it is regrettable that the SUP does not stipulate even a small minimum share capital in order to prevent small “necessity entrepreneurs” from setting up a SUP (see above, para. 51). For corporate groups on the other hand – the second target group of the authors of the proposal – it shouldn’t matter if the minimum capital is one Euro or 25,000 Euros. The SUP directive should therefore require a certain minimum capital. The proposed requirement to build up reserves within the context of a member state option (Art. 16(4) of the General Approach; see above, para. 52) is no probity threshold in this sense. 72. This cannot be covered in detail here, but as an alternative, a liquidity guarantee137 or the posting of financial collateral for covering the transactions carried out in the member state of the real company seat could also be considered; in its 1996 “SIM” ruling, the Court of Justice approved the latter under the right of establishment and in that context pointed out that the solvency of market participants is in the reasonable interest of the member states.138 73. As regards the detailed arrangements, a number of models could be considered where the authorisation of the SUP to trade as a business139 is made dependent on the posting of a security (for instance by means of a deposit lodged with a competent authority in the country in question for the settlement of company liabilities in an appropriate amount, or at least for a lump-sum contribution to procedural costs, for the avoidance of insolvencies without assets to distribute, by means of a mandatory insurance scheme modelled on the professional liability insurance of lawyers, or at least in favour of tort victims etc.).140

3. Retrospective creditor protection: the liability of directors and of the shareholder in case of illegal distributions 74. In case of violations of the distribution restrictions set out in Art. 18 (see above, paras. 54–64), pursuant to Art. 18(6) any distribution made contrary to these restrictions has to be refunded to the SUP. The provision does not state who owes the refund to the SUP: is it just the single-member or also – like e. g. in German and Austrian law141 – the directors? The creditor protective rationale of Art. 18 142 speaks for a broad interpretation which includes directors’ liability. In any case, for the sake of clarity the addressee of this obligation should be named expressly. 75. In substance however, directors’ liability in this field does little to protect creditors, given that in retrospect a court can only with great difficulty examine the 137 In favour of this with sound reasoning Hommelhoff, GmbHR 2014, 1065, 1073 (guarantee commitment by a group-independent financial institution at first demand, with rights of recourse not against the SUP but against other group companies). 138 CJEU of 6. 6. 1996, Case C-101/94 [1996], I-2691 (SIM), marginal no. 23. “With respect to the solvency of operators, activity in Italy can be made subject to the provision of financial guarantees on Italian territory to cover the operations carried out on that territory.”; on this Luby, Clunet 1997, 567 et seq.; also Mu¨nchKommBGB/Kindler (fn. 76), marginal no. 115 et seq.; Schumann, DB 2004, 743, 744. 139 Cf. § 15(2) sentence 1 Gewerbeordnung (German Trade, Commerce and Industry Regulation Act) in conjunction with §§ 30, 33 a, 33 c, 33 d, 33 i, 34, 34 a, 34 b, 34 c, 34 d, 34 e GewO or the special trade laws such as §§ 2 PBefG (German Passenger Transportation Act); 2, 31 GastG (German Licencing Act); on the position of foreign companies under trade law Mu¨nchKommBGB/Kindler (fn. 76), marginal nos. 876 et seqq. 140 On this in detail Mu ¨ nchKommBGB/Kindler (fn. 76), marginal nos. 115–117; in favour also Scho¨ n, Der Konzern 2004, 162, 165. 141 § 43(3) GmbHG; see on this Roth/Kindler (fn. 13), p. 103. 142 Recitals 19aa, 19 b of the General Proposal.

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IV. Share capital: raising capital and capital protection

solvency statement of the management body (see above, para. 62). 143 Moreover, such liability is difficult to realize in an EU member state with low assurance levels as to electronic identification means (see above, para. 22): in cases where the company was formed online enforcing one’s rights will frequently fail amongst other things because the individuals listed as directors in the register either do not exist (identity fraud) or were entered without their knowledge and consent (identity theft).144 76. On top of this, under the Italian Proposal (Art. 18(5)) the directors’ liability for violating their duty to maintain the share capital did not apply if the director shows that he acted with due care and that given the circumstances of the case he could not have known that the distribution occurred in violation of Art. 18 SUP directive. For the sake of creditor protection, the General Approach abandoned that view. 77. In accordance with Art. 18(6) of the General Approach, also the single-member too has to refund the company for illegal distributions. The single-member is personally liable in case of violations of the capital maintenance principles laid down in Art. 18(1). However, the balance sheet related distribution restriction of Art. 18(2)(a) of the General Approach (see above, para. 63) becomes largely ineffective when the share capital is set to one Euro (Art. 16(1) of the General Approach. 78. Convincingly, the General Approach does not foresee any protection of the bona fide recipient of distributions. In contrast to § 31(2) GmbHG, under the Italian compromise proposal (Art. 19) the claim to reimbursement was dispensed with completely if the single-member can show that – given the circumstances of the case – he could not have known that the distribution occurred in violation of Art. 18. In addition, the single-member according to Art. 18(5) sentence 2 Italian compromise proposal was liable for repayment of illegal distributions if, again, he does not show that under the circumstances he could not have known that the distribution occurred in violation of Art. 18 (2) or (3) Italian Compromise Proposal = Art. 18(2)(a) and (b) of the General Approach. 79. Such a protection of the bona fide recipient of distributions was abandoned for good reason by the General Approach. The Commission’s proposal had assumed that the liable party was neither positively aware of the illegality of the distribution nor through no fault of its own failed to recognise it, which the company had to demonstrate. In contrast to this, the tightening of the shareholder’s liability in the Italian compromise proposal by reversing the burden of proof was a step in the right direction. A repayment obligation which applies to the malicious shareholder only – with the burden of proof resting with the SUP as provided by Art. 18 of the capital maintenance directive (2012/30/EU) – provides for no effective capital protection in the SUP.145 This is because the rationale of the protection of good faith under public limited liability company law cannot be transferred to the closed single-member company: Under public limited-liability company law, the reason for a protection of the bona fide recipient of distributions is the insufficient insight of the shareholders in the permissibility of a distribution.146 These kinds of information deficits typically do not arise in the small single-member company: the single-member is either himself the director or in any case has far-reaching instruction and disclosure rights in respect to him (e. g. in German law pursuant to § 37(1) GmbHG; § 51 a GmbHG in conjunction with Art. 7(4)(b) General Approach). 143

Omlor, NZG 2014, 1137, 1140. On identity fraud and identity theft in the English commercial register, see again above fn. 56; Roth/ Kindler (fn. 13), p. 11. 145 J. Schmidt, in: Lutter/Koch (fn. 23), p. 1, 16. 146 Spindler/Stilz/Cahn (fn. 17), § 62, marginal no. 25 with further supporting evidence. 144

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80. The creditor protection function of the distribution restrictions found therefore expression in the text of Art. 18(6) without any limitations in favour of single-members acting in good faith. Another reason that speaks for this is that the claim to reimbursement does not constitute a claim to damages,147 which means that subjective factors on the part of the debtor should not play any role. 81. This last remark leads to Art. 18(7) of the General Approach. Under this provision, member states may provide for compensation to be sought for damage resulting from distributions made contrary to this Article by persons who suffered the damage under the conditions established by national laws. This member state option goes beyond the refund remedy (Art. 18(6)) which has to be adopted in national law in any case. In terms of creditor protection, there is nothing wrong with such a member state option – but of course the single-member will have to examine carefully the risks of a liability under national law before setting up an SUP. 147

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Verse, in: Scholz, GmbHG, 11th ed. 2014, § 31 marginal no. 5.

V. Structure of the SUP 1. Group law as a means of legal protection for third parties and minority shareholders 82. According to some legal writers, the announcement by the Commission in the action plan 2012 to start an initiative for recognising group interest (see above, para. 3) must be understood as a shift of emphasis in European group law: the harmonisation of group law which originally sought to protect creditors and minority shareholders, according to this view, is now following a new legislative plan in the EU: facilitating cross-border economic activity for the parent company. According to this view, group law is no longer just affording legal protection to the corporate constituencies mentioned above, but now primarily has an “enabling function” (Ermo¨glichungsfunktion),148 with the overriding aim to create a reliable framework for group management. 149 83. Of course, a right of the parent company to issue instructions to the members of the executive body of the subsidiary would be a suitable instrument for realising such a legislative plan. It does not however look as if the EU legislative wants to follow that path.150 84. This is firstly because the General Approach dropped the shareholder’s right to issue instructions on the management body. Art. 23 and recital 23 of the Commission’s Proposal were deleted.151 Art. 23(1) of the Commission’s Proposal and the Italian Compromise Proposal read: “The single-member shall have the right to give instructions to the management body.” 85. Secondly, even (the deleted) recital 23 to the SUP directive in the version of the Italian compromise proposal sounded rather reluctant with respect to the parent company’s right to issue instructions (emphasis added): “In order to facilitate the operation of groups of companies, instructions issued by the single-member to the management body should be binding. Only where following such instructions would entail violating the national law of the country in which the company is registered or in which it operates, the management body should not follow them. This Directive, therefore, obliges the directors to take into account the interests other than that of the single-member in case national legislation where the SUP is registered or operates requires such interests to be taken into account. In taking into account such interests the directors could consider, among others, the interest of the SUP as opposed to the interest of the group which it could form part, the interest of creditors or cont[r]actors as well as the interest of protection of environment or employees.” 148 Hommelhoff, ZGR 2012, 535 et seqq.; Teichmann, ZGR 2014, 45, 64; Weller/Bauer, ZEuP 2015, 6, 27; Forum Europaeum on Company Groups, ECFR 2015, 299, 301. 149 Teichmann, AG 2013, 184, 189 et seqq.; Ekkenga (AG 2013, 181) contrasts this “theory of group organisation” with the traditional “protective purpose theory”. 150 Jung, EBLR 2015, 686. 151 Bayer/Schmidt, BB 2015, 1731, 1734 interprete the deletion in a different way: according to these authors the Council did not want to interfere with the planned initiative in the field of group law, supra, fn. 20.

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86. This complex wording subjects the duty of the SUP director to comply with instructions issued by the single-member (sentence 1) to non-harmonised member-state law (sentence 2). In cases where the registered office and the head office are situated in different countries (see below, paras. 117 et seq.), the limitations of the duty to comply with the instructions issued by the single-member can even result from several legal systems: the law of the state in which the company is registered or the law of the state where the central administration is located (where business activity will largely take place). The use of the latter as the connecting factor clearly takes account of the creditor-protective nature of the director’s duties in a subsidiary such as the SUP, given that usually the majority of creditors and the largest part of the company’s assets are located in the state where the company has its administrative seat (see above, para. 9). In fact, sentence 3 explicitly clarifies that any subordination of the individual interest of the single-member under national law has to be taken into account. It is obvious that such a highly complex conflicts-of-law framework of the director’s duty to comply with instructions issued by the single-member was not aimed at facilitating group management (see above, para. 82), but rather at protecting third parties’ interests. 87. As to substance, in the overall assessment pursuant to sentence 4 of the deleted recital 23 the group interest is only one factor among several, again subject to national law. It is therefore simply not the case that European law provides – or even indicates – that the group interest (or the individual interest of the single-member) should be given priority. 88. Prioritising it in this manner would also be more than surprising given that the Proposal lacks any corresponding instruments of creditor protection used for instance in German law to compensate (§§ 300–303 AktG) for the authority in a contract-based group to issue disadvantageous instructions (§ 308(1) sentence 1 AktG). This is also the main historical difference to the right to issue instructions in the group interest as provided for by the Commission draft for the SE regulation of 1975.152 89. Also in general, a focus of group law on the management interest of the controlling company could be justified, which is why the restraint of the authors of the SUP proposal on this point (see above, para. 81) is deserving of praise. The expansion of the management authority of the shareholders on the one hand and the strengthening of creditor protection on the other are by their very nature conflicting legislative aims; strengthened managing authority comes at the cost of creditor protection and vice versa.153 The regulatory task of company law – the reconciliation of interests between the different corporate constituencies (shareholders, creditors and other third parties, members of executive bodies, employees) – would be missed if the interests of one of these constituencies – here: the controlling entity within the group – were to be given more weight than those of the other constituencies from the outset.154 90. It can also hardly be said that the European legislators are intent on reducing creditor protections. If the real problem should indeed be the decision problems and liability risks of the members of the executive bodies – both of the parent company and the subsidiary –155 we are faced with a case of a procedural deficit of legal certainty and not a substantive deficit in terms of parent company management authority. From this 152 German Bundestag publication VII/3713 (Art. 240/240a); on this Hommelhoff, GmbHR 2014, 1065, 1071 with fn. 61; on the “organic constitution of groups” in the original SE statute also see Hopt, ZHR 171 (2007), 199, 202. 153 Kindler, ZGR 1998, 35, 44 et seqq.; equally Ekkenga, AG 2013, 181: “im Zweifel konfligierende Regulierungsziele” (in case of doubt to be assumed to be conflicting regulatory aims). 154 On the reconciliation of interests under the “corporate constituencies” as a regulatory task of company law, in detail Roth/Kindler (fn. 13), pp. 71 et seqq. 155 According to Teichmann, AG 2013, 184, 190, 197.

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V. Structure of the SUP

point of view, the concern about the members of the executive bodies seems to be more a pretext for taking legislative action for strengthening the parent company’s role within the group hierarchy. As, however, instructions to the subsidiary of a disadvantageous effect per se endanger the interests of the subsidiary’s creditors and – depending on the particular situation – of the minority shareholders, a further expansion of the management authority of the parent company without accompanying protective instruments regarding the above-mentioned corporate constituencies is not advisable.

2. Permissibility of disadvantageous instructions? a) Harmonisation gap 91. Pursuant to Art. 23(1) of the Commission’s Proposal and of the Italian Compromise Proposal, the single-member had the right to issue instructions to the management body. The Commission believes that this right to give instructions in particular makes the SUP an attractive building block for corporate groups.156 92. This assessment is not correct in such general terms, because, as shown above, Art. 23(1) did not establish the limitations of the right to issue instructions in substantive terms; pursuant to Art. 23(2) Italian Compromise Proposal, these limitations result from the instrument(s) of constitution and the law of the state in which the company is registered (Art. 7(4)), and also – under the Italian compromise proposal – from “the laws of the countries in which the SUP operates”. Through their rules which lie outside of the scope of harmonisation of the SUP directive, these legal systems determine first of all the extent to which statutary arrangements for the right to issue instructions are permissible in the first place (Art. 7(4) Italian Proposal). 157 And they determine to what extent the management body is duty-bound to follow the given instructions, in other words, whether they are legal. 93. The key question in respect to the suitability of the SUP as a building block for corporate groups is whether and in how far the group interest or the interest of other group entities can justify an instruction that is disadvantageous to the SUP affected by it.158 In accordance with general opinion, instructions are disadvantageous if they concern measures that a careful and conscientious manager of an independent company who pursues solely the interests of his company would not have undertaken. 159 94. Under German law (for the contract-based group), recognised examples are transfer prices within the group which are disadvantageous to the dependent company, the transfer of opportunities or profitable fields of business to other group companies, the withdrawal of liquidity in particular in the context of cash-pooling systems, the discontinuation of promising developments or a disadvantageous exchange of securities.160 Such interventions in the interest of the group jeopardise the creditors’ and – in a multiple-shareholder company – minority shareholders’ interests (through deprivation of property as liable assets; loss of dividends). 156

Explanatory memorandum (fn. 21), p. 9; recital 23. Under German law, the freedom to adopt articles of association prevails in this respect: Scholz/U. H. Schneider/S. Schneider (fn. 146), § 37, marginal no. 24; Paefgen, in: Ulmer/Habersack/Lo¨ bbe (eds.), GmbHG, 2nd ed. 2014, § 37 marginal no. 33 et seqq. 158 Hommelhoff, GmbHR 2014, 1065, 1071. 159 Emmerich/Habersack, Aktien- und GmbH-Konzernrecht, 7 th ed. 2013, § 308 marginal no. 45. 160 Emmerich/Habersack (fn. 158), § 308 marginal no. 45 with reference to Langenbucher, in: Schmidt/ Lutter (eds.), AktG, 3rd ed. 2015, § 308 marginal no. 21; additional examples of typical conflict situations in Hommelhoff, ZGR 2012, 535, 538 et seq.; Weller/Bauer, ZEuP 2015, 6, 20 et seqq. 157

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V. Structure of the SUP

b) Permissibility of disadvantageous instructions in the non-harmonised LLC law of the member states 95. In comparative law, a varied picture on the permissibility of these types of interventions in the small corporation emerges. Under German law the single shareholder of a GmbH is allowed to issue disadvantageous instructions to its director pursuant to § 37 (1) GmbHG; the director’s duty to obey ends only when the single shareholder’s instructions have economic implications for third parties. This concerns instructions pertaining to violations of specific duties of executive bodies which exist in the interest of third parties, such as those applying to the distribution restrictions for the protection of share capital (§§ 30, 31 GmbHG) and the payment bans prior to an insolvency (§ 64 GmbHG) or the obligation to file for insolvency (§ 15 a InsO) (German Insolvency Statute).161 In addition, instructions are not to be observed if they are meant to oblige the director to collaborate in the economic destruction of a GmbH within the meaning of the Trihotel judgement162, i. e. the transfer of assets to the shareholders in a crisis.163 Accordingly, instructions whose execution would jeopardise the continued existence of the company, such as a complete withdrawal of liquidity, are also illegal according to prevailing opinion.164 Measures for the integration of the group on the other hand as a rule do not per se exceed the limits of the subsidiary director’s duty to follow. This applies for instance to the removal of executive personnel, the taking away of business opportunities or the arrangement to enter into risky and loss-bringing business transactions.165 96. Even in Austria where company law is very similar to German company law, however, the shareholders are only entitled to the net profit (§ 82 (1) o¨ GmbHG) (Austrian Limited Liability Companies Act), just as under European public limited liability company law; the freedom to transfer GmbH assets to the shareholders up to the limits of share capital does not exist in Austria.166 As concealed distributions are also illegal, any business transaction with the parent company entails the risk of a violation of capital protection provisions.167 The director of the subsidiary is not required or allowed to take part in these. 97. Under French law – the 1985 Rozenblum ruling (see above, para. 2) – it should be possible for the director of a subsidiary to put the interest of his company behind that of the group as long as he can reasonably assume that this disadvantage will be offset by benefits arising out of the group relationship in the foreseeable future: 168 he is not then 161 BGH, DStR 2010, 63 marginal no. 10 with note Goette = BB 2010, 19; Weller/Bauer, ZEuP 2015, 6, 16 with fn. 68. 162 German Federal Court of Justice in BGHZ 173, 246 = BB 2007, 1970 with note Vetter, 1965 et seqq., on this ruling also Dauner-Lieb, ZGR 2008, 34 et seqq.; Osterloh-Konrad, ZHR 172, 274 et seqq.; Habersack, ZGR 2008, 533 et seqq.; subsequently German Federal Court of Justice in BGHZ 176, 204 marginal nos. 10, 13 – GAMMA; German Federal Court of Justice in BGHZ 179, 344 marginal nos. 15 et seqq. – Sanitary; BGH, BB 2012, 1628 with note Kleindiek; BGH, NZG 2013, 827 marginal no. 20 – Spritzgussmaschinen, see on this Sto¨ber, ZIP 2013, 2295 et seqq. 163 Roth/Altmeppen (fn. 93), § 37 marginal no. 7; Weller/Bauer, ZEuP 2015, 6, 17 Fn. 80. 164 Scholz/U. H. Schneider/S. Schneider (fn. 146), § 37 marginal no. 61. 165 Emmerich/Habersack (fn. 158), annex to § 318, marginal no. 34; Weller/Bauer, ZEuP 2015, 1, 12 with fn. 75. 166 Teichmann, AG 2013, 184, 192; Roth/Kindler (fn. 13), p. 56. 167 Teichmann, AG 2013, 184, 192. 168 Cass Crim V 4. 2. 1985, JZP/E 1985, II, 14614 = Revue des Socie ´te´s 1985, 648, 650 et seq.; on the Rozenblum concept recently Weller/Bauer, ZEuP 2015, 6, 12 et seqq.; Gra¨bener, Der Schutz außenstehender Gesellschafter im deutschen und franzo¨ sischen Kapitalgesellschaftsrecht, 2009, pp. 105 et seqq.; Hopt, ZHR 171 (2007), 199, 222 et seqq.; summary in Sonnenberger/Dammann, Franzo¨ sisches Handels- und Wirtschaftsrecht, 3rd ed. 2008, pp. 152 et seq.; critical are Habersack/Verse (fn. 3), § 4

32

V. Structure of the SUP

subject to criminal liability because of abus de biens sociaux (Art. L241-3, L242-6 Code de commerce).169 This privilege presupposes that the group is structurally solid and that the requirements of a responsible group policy set out ex ante are met.170 Directors’ liability is extended to the controlling company under case law if the controlling company has exerted its influence on the management of the subsidiary as de-facto manager (dirigeant de fait) in a continuous and pervasive manner.171 98. But recent developments in France seemingly point in the opposite direction. Under Art. 1849 of the French civil code, in the relationships with third parties, a manager binds the partnership (for non-commercial purposes) through transactions which are within the objects of the partnership; clauses of the articles limiting the powers of the managers may not be invoked against third parties. Until 2012, French judges have recognized the validity of an enhancement provided in the form of a mortgage or other guarantee referred to the company’s immovable property, even where such was to guarantee for the debt of a third party, e. g. the parent company of the company providing the guarantee. In a much discussed judgment of 12 September 2012, the Civil Chamber of the French Cour de Cassation held that such a guarantee was invalid “if against the interest of the company”; when threatening its very existence (because it included nearly the whole of the company’s assets), and that the managers of the company therefore had no authority to bind the company.172 Interestingly, the unanimous shareholders’ resolution in favour of the guarantee was irrelevant in this case. The “interest of the company” was defined from the creditors’ perspective! 99. Italian group law regulations (Art. 2497 to 2497-sexies Italian civil code [c.c.]) 173 apply to the “management and control of companies” (attivita` di direzione e di coordinamento di societa`). The law assumes de-facto management and control to be the norm (de-facto group). While the possibility is mentioned that management and control exist on the basis of a contract or establishment via the instrument(s) of constitution, this is not specified in detail (Art. 2497-septies c.c.).174 There is an assumption under the law that majority shareholders or other controlling shareholders as well as shareholders for whom a consolidation obligation applies exercise management and control. The controlling company exercising management authority is liable vis-a`-vis the subsidiary, the subsidiary’s minority shareholders and creditors in so far as it pursues company-external interests and violates “the principles of proper investment and business management”. In marginal no. 34. From earlier Guyon, ZGR 1991, 218 et seqq.; Lutter, Festschrift Kellermann, 1991, pp. 257 et seqq.; Maul, NZG 1998, 965, 966; Forum Europaeum Konzernrecht, ZGR 1998, 672, 704 et seqq. 169 See in more detail Cozian/Viandier/Deboissy, Droit des socie ´te´s, 24th ed. 2011, p. 166 marginal no. 283, p. 325 marginal no. 638; further evidence in Weller/Bauer, ZEuP 2015, 6, 13; Teichmann, AG 2013, 184, 193. 170 In more detail Forum Europaeum Konzernrecht, ZGR 1998, 672, 705 et seqq. 171 Cour d’Appel Paris 11.6.1987, Bulletin Joly Socie ´te´s 1987, 719; in more detail Weller/Bauer, ZEuP 2015, 6, 13 at fn. 51 et seqq.; Gra¨bener, Der Schutz außenstehender Gesellschafter im deutschen und franzo¨sischen Kapitalgesellschaftsrecht, 2010, pp. 91 et seqq. 172 Cass. civ. 12.9.2012, Revue des socie ´te´s 2013, p. 16 note Viandier = Droit Socie´te´s 2013, 14 note Mortier; on this judgment also Mondini, Rivista delle societa` 2013, 293 et seq.; Roth/Kindler (fn. 13), p. 82. 173 On Italian group law, see Kindler (fn. 110), § 4 marginal no. 248 et seqq.; Kindler, ZEuP 2012, 74 et seqq.; Teichmann, ZGR 2014, 45, 61 et seq.; Tombari, Riforma del diritto societario e gruppo di imprese, Giur. comm. 2004, I, 61 et seqq.; monographically Tombari, Diritto dei gruppi di imprese, 2010; a comprehensive account offers J. Rock, Leitungsmacht und Haftung im italienischen Konzernrecht, 2011; Stein, Festschrift Hommelhoff, 2012, pp. 1149 et seqq. 174 On liability in the contract-based group as well as the de-facto group see Tombari, Il gruppo di societa`, 2010, p. 207; Dal Soglio, in: Maffei/Alberti (eds.), Commentario breve al diritto delle societa`, 2nd ed. 2011, Art. 2497 c.c. note II 4.

33

V. Structure of the SUP

this connection, the compensation for losses is to be assessed from the point of view of the controlled company and not the point of view of the group as a whole.175 Pursuant to Art. 2497(1) sentence 2 c.c., the controlling company is not liable if in light of the overall result of the exercise of management authority no loss has occurred. This provision has already given rise to a large body of literature around a new theory of the “countervailing benefits” (“vantaggi compensativi”) of group integration reminiscent of the French Rozenblum doctrine (see above, para. 93); a ruling by the court of cassation – delivered under the old law – also deals with this in detail.176 100. Under Portuguese law the position of the single shareholder is connected to a farreaching management authority vis-a`-vis the subsidiary.177 The controlling company has the right to issue instructions to the management of the subsidiary (Art. 503(1) of the Portuguese Trading Companies Act – CSC). As in § 308 (1) AktG, these instructions may be disadvantageous for the subsidiary, provided they serve the interests of the controlling company or other group entities (Art. 503 (2) CSC). In return, the controlling company is liable to third parties for those debts of the subsidiary which have arisen during group membership (Art. 501 CSC).178 This liability would probably have to be repealed in the context of the implementation of the SUP directive since the SUP directive provides for the liability of the single-member only up to the amount of subscribed share capital. An obvious step in this case would then be for reasons of creditor protection also to repeal the authority of the single-member to issue disadvantageous instructions. 101. English law emphasises the duty on the part of the subsidiary’s director to uphold the interests of the company managed by him and not of the group or parent company (Sec. 172 Companies Act 2006).179 A liability on the part of the parent company may be possible pursuant to Sec. 251(3) Companies Act 2006 if the parent company itself is to be considered a shadow director of the subsidiary.180 The control of the subsidiary in the interest of the group is not explicitly excepted from this; however, Sec. 251(3) Companies Act 2006 is in so far group-friendly in tendency as it provides that a legal entity should not be seen as a shadow director of a subsidiary merely because the subsidiary’s director usually follows that legal entity’s guidelines and instructions.181 Otherwise, the separation 175

Dal Soglio (fn. 173), Art. 2497 c.c. note V 4. Cass., 24 agosto 2004, n. 16707, Foro it. 2005, I, 1844, 1853 et seqq. with note Nazzicone = Banca, borsa, titoli di credito 2005, II, 373 with note Cariello = Giur. comm. 2005, II, 246 with note Salinas; guiding principle also in Giur. comm. 2005, II, 405 with note Monaci = Giur. it. 2005, 69 with note Weigmann; in more detail A. Di Majo, La responsabilita` per l’attivita` di direzione e coordinamento nei gruppi di societa`, Giur. comm. 2009, I, 537, 551. 177 Teichmann, ZGR 2014, 45, 51 et seqq. 178 On this liability see CJEU of 20. 6. 2013, Case C-186/12, EuZW 2013, 664 (Impacto Azul); on this Mu¨nchKommBGB/Kindler (fn. 76), marginal nos. 137, 681; more detailed Teichmann, ZGR 2014, 45 et seqq. 179 Charterbridge Corp v Lloyds Bank (1970) Ch. 62; more recently Extrasure Travel Insurances Ltd v Scattergood (2003) 1 B.C.L.C. 598; Gower and Davies, Principles of Modern Company Law, 9 th ed. 2012, p. 547 (No. 16–74), p. 551 (No. 16–80): “the potential problem faced by directors within corporate groups, where their instinct may be to look to the overall success of the group, whereas their duty of loyalty is owed only to their appointing company.”; in more detail Teichmann, AG 2013, 184, 192 et seq.; also Weller/Bauer, ZEuP 2015, 6, 10 et seqq.; monographically Baas-Holler, Gescha¨ftsfu¨hrerpflichten gegenu¨ber der Gesellschaft im englischen und deutschen GmbH-Recht unter Beru¨cksichtigung des Companies Act 2006 und des Entwurfs eines Gesetzes zur Modernisierung des deutschen GmbH-Rechts (MoMiG) – Ein juristischer Standortvergleich vor dem Hintergrund der Niederlassungsfreiheit von Gesellschaften in der EU, 2008. 180 On this Doralt, in: Schall (ed.), Companies Act. Kommentar, 2014, Sec. 251, marginal no. 3, p. 386; Teichmann, AG 2013, 184, 193; Davies/Rickford, ECFR 2008, 48, 62 with Fn. 60. 181 Sec. 251(3) CA 2006: “A body corporate is not to be regarded as a shadow director of any of its subsidiary companies (…) by reason only that the directors of the subsidiary are accustomed to act in accordance with its directions or instructions.”; on this Weller/Bauer, ZEuP 2015, 6, 12. 176

34

V. Structure of the SUP

principle has applied ever since the Salomon ruling in 1879182: according to this, shareholders’ liability comes into consideration in rare, exceptional cases only when special circumstances suggest that the company is a mere charade and the chosen construction only serves to circumvent legal limitations or to frustrate the rights of third parties. 183 102. The Dutch law on the besloten vennootschap met beperkte aansprakelijkheid (B.V.) was reformed with effect from 1 October 2012. 184 In Dutch corporate law, the group interest has always been accepted as part of the interest of the subsidiary – which is not self-evident, as the report of the Reflection Group shows. 185 The phrasing of Art. 239 B.W. (Dutch Civil Code) however hardly seems subsumable when the company interest to be upheld by the director there is described as “coloured” by the interest of the group (“concernrechtelijk gekleurd”). This “colouration” is not specified more closely in terms of its content but manifests itself in a kind of assessment prerogative of the parent company: according to this, the management of the subsidiary has to take guidance from the parent company as regards the determination of the group interest. c) Conclusions regarding the regulation of the right to issue instructions in the directive 103. This is not the place to give an evaluation of the meaningfulness of these different types of concepts of management authority and creditor and/or minority protection.186 A comparative legal analysis shows at any rate that a parent company with SUP subsidiaries in different member states would not be able to direct these on the basis of uniform principles if the right to issue instructions is merely established “on the merits” in the directive but without any substantive determination of content (Art. 23(1) Commission Proposal/Italian Compromise Proposal). Significant differences exist in respect to the recognition of the group interest as taking precedence and also in respect to the mechanisms for the protection of creditors and minority shareholders which can provide for internal compensation for losses or external liability. 187 Legal certainty in an international group would look quite different.188 104. Moreover, criminal “embezzlement and breach of trust” within a group (in German law § 266 StGB) (German Criminal Code) would require a separate comparative legal examination and possibly regulation.189 182 Salomon v. Salomon & Co Ltd [1897], AC 22, HL: “A company is at law a different person altogether from the subscribers to the memorandum (…).”; Weller/Bauer, ZEuP 2015, 6, 11. 183 Woolfson and Another v. Strathcycle Regional Council, 1978, SLT 159, 38 P & CR 521; on this Weller/Bauer, ZEuP 2015, 6, 11 at fn. 35; Da¨hnert, Konvergenz der Konzernhaftung im englischen und deutschen Kapitalgesellschaftsrecht, 2012, pp. 80 et seqq. 184 On this Hirschfeld, RIW 2013, 134 et seqq.; also Zaman, GmbHR 2012, 1062 et seqq. 185 Hirschfeld, RIW 2013, 134, 135 et seq. 186 The Rozenblum concept for instance could probably not be reconciled with the capital maintenance directive 1976 (Art. 15) or the capital maintenance directive 2012 (Art. 17) because it does not cover the aspect of individual compensation in case of permissible disadvantageous transactions; cf. Habersack/ Verse, critical (fn. 3), § 4 marginal no. 34; Habersack, NZG 2004, 1, 7 et seq.; Scho¨ n, RabelsZ 64 (2000), 1, 22 et seqq.; on “Rozenblum” see above, paras. 2, 93–94. 187 Weller/Bauer, ZEuP 2015, 6, 18. 188 Critically in so far already Hommelhoff, Festschrift Stilz, 2014, p. 287, 290; Hommelhoff, GmbHR 2014, 1065, 1071; Teichmann/Fro¨hlich, 21 Maastricht Journal of European and Comparative Law 3 (2014), 536, 541 (“Steine statt Brot”); Malberti, Rivista delle societa` 2014, 848, 856 fn. 25; Jung, EBLR 2015, 689 (“questionable”); for an orientation of the directors’ duty in alignment with group interest and its regulation by way of recommendation (Art. 288 (5) TFEU) Conac, ECFR 2013, 194 et seqq. 189 On this Dierlamm, in: Mu ¨ nchKommStGB, 3rd ed. 2014, § 266 marginal no. 74 et seqq.; from case law on matters of breach of trust in international groups for instance BGH, BeckRS 2012, 24264 = wistra 2013, 63.

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V. Structure of the SUP

105. A differentiated European regulation of the scope of the authority to issue instructions and of the protection of the creditors and minority shareholders 190 of the dependent SUP would therefore be required.191 Only in this form could the right to issue instructions of the group parent company play the central role to be awarded to it according to the recitals of the Commission’s Proposal concerning the group suitability of the SUP.192 In the General Approach of a SUP Directive European legislators – by deleting Art. 23 of the Proposal – failed to reach such a differentiated regulation on this key point. They could be said to lack quite obviously the political maturity necessary for a regulation of group law. d) The separation of the registered office from the central administration: a practical escape route? 106. As regards the creation of corporate groups, some legal writers emphasize the possibility to determine the applicable law of all foreign subsidiary SUPs of the same parent company by incorporation at the seat of the parent company – if the state in which the SUP is registered allows this kind of splitting of seat. 193 The room for manoeuvre thus gained should however not be overestimated.194 The German legislators too when eliminating the requirement of a domestic administrative seat195 had hoped that German groups would incorporate all their foreign subsidiaries as German corporations.196 This did not prove to be true, the reason being that this kind of group structure would jeopardise the acceptance of the subsidiaries in their host countries, 197 all the more so since in the present context Art. 7(3) General Approach also requires a reference to nationality in the indication of the legal form (member state option). 107. Moreover, in terms of insolvency law the law of the central administration applies (see above, para. 9), which – as is to be shown below – encompasses all insolvency-related duties of the SUP director (see below, para. 125).

3. Shareholder liability and directors’ liability 108. The structure-related creditor protection deficits of the single-member company are well-known:198 there is an increased risk that the share capital is not in fact raised, to the disadvantage of the creditors, the reason being that by nature there is no mutual 190 Due to the fact that co-beneficiaries in respect to the single share are possible under Art. 15(3) (see above, para. 49), minority shareholders may exist also in the SUP. 191 For a reconciliation of interest of all reference groups under company law in this context also Hommelhoff, Festschrift Stilz, 2014, p. 287, 292. 192 Recital 23 Commission’s Proposal: “In order to facilitate the operation of groups of companies, instructions issued by the single-member to the management body should be binding. Only where following such instructions would entail violating the national law of the country in which the company is registered or in which it operates, the management body should not follow them. (…)” 193 On this possibility Weller/Bauer, ZEuP 2015, 6, 29. 194 This kind of structure is not without problems also in tax terms; cf. Richter/Braun, GmbHR 2012, 18 et seqq. on the – limited – suitability of a British Ltd. with its management in Germany as a controlled company. 195 Cf. § 5(2) AktG, § 4a(2) GmbHG, each in the version valid until 31.10.2008. 196 German Bundestag publication 16/6140, p. 29 1 st column, where the former legal situation is lamented: “Es ist einer deutschen Konzernmutter nicht mo¨glich, ihre ausla¨ndischen Tochtergesellschaften mit der Rechtsform der GmbH zu gru¨nden.” (It is impossible for a German parent company to establish its foreign subsidiaries using the legal form of a GmbH.) 197 If the subsidiary is established under the law of the host country, experience shows that this facilitates conformity with the legal and social framework of that country: Raiser/Veil, Recht der Kapitalgesellschaften, 5th ed. 2010, § 50 marginal no. 9. 198 Kindler, Grundkurs Handels- und Gesellschaftsrecht, 7 th ed. 2014, § 14 marginal no. 99.

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V. Structure of the SUP

monitoring of the shareholders as would generally take place in multi-shareholder companies out of the self-interest of shareholders; a single-member acting in bad faith has a better opportunity for the intermixture of assets (as he will also, as a general rule, be the sole director); there is no liability for irretrievable debts (in German law § 24 GmbHG) if the single-member does not pay in the share capital. Creditor protection via both directors’ liability and shareholder liability has therefore a special significance for the single-member company.199 109. In a private limited-liability company such as the SUP shareholder liability is limited to the amount of the subscribed share capital (Art. 16 General Approach). The SUP shareholder is internally liable only for illegal distributions (Art. 18 (6) General Proposal; see above, para. 77). 110. Under the Italian Compromise Proposal, the SUP shareholder was also liable, in the case of de-facto management (Art. 22 (7)), for instructions to the executive body. 200 The concept of de-facto management was abandoned by the General Approach. 111. A liability of the SUP shareholder vis-a`-vis third parties is not specified anywhere. The planned elimination of the group related member state option in the single-member company directive (Art. 2(2) directive 2009/102/EC) 201 shows that in any case no structural liability derived from the cases described there should apply in future under member-state law. This concerns SUPs where (a) a natural person is the sole member of several companies or where (b) a single-member company or other legal person is the sole member of a company.202 In addition, a need for harmonisation will arise in domestic law in so far as companies whose sole member is a legal person are not permitted there.203 Far-reaching disclosure obligations under member-state law204 too are put into question. Those kind of rules are based on the group related member state option in Art. 2(2) of the 12th directive.205 112. The single-member’s liability for abusive conduct remains unaffected by this. Under German law, such liability arises from material undercapitalisation, 206 intermixture of assets,207 lack of funds of the parent company in a contract-based group (§ 303 AktG analogous)208 and interventions which economically destroy the very existence of the company209. In so far, the SUP shareholder is subject to the same liability regime as the single shareholder of a standard GmbH, which already follows from the mere minimum harmonisation effect of the SUP directive (see above, para. 7). 210

199

Basic account in Ulmer, ZHR 148 (1984), 391 et seqq. More on the de-facto SUP director F. Dreher, NZG 2014, 967 et seqq. 201 On this above fn. 12. 202 The commercial law committee of the DAV has argued that the group clause should be retained: opinion (fn. 21), marginal no. 11. 203 For instance in France until 2014: Art. L223-5 CCom: (1) Une socie ´te´ a` responsabilite´ limite´e ne peut avoir pour associe´ unique une autre socie´te´ a` responsabilite´ limite´e compose´e d’une seule personne. (A limited liability company cannot have as its sole shareholder another limited company consisting of only one person.) (…); on the repeal of this rule by the law of 31.7.2014 see Klein, RIW 2015, 60, 62; on Romania and Poland see Teichmann, NJW 2014, 3561, 3562. 204 For Italy see Art. 2362, 2470 codice civile; on this Kindler (fn. 110), § 4 marginal no. 120, 122, 150. 205 On this Kindler, ZHR 157 (1993), 1 et seqq. 206 According to German Federal Court of Justice in BGHZ 176, 204 (“Gamma”) marginal no. 25 this is possible at least under the conditions of § 826 BGB; in more detail Kindler, Grundkurs Handels- und Gesellschaftsrecht, 7th ed. 2014, § 14 marginal no. 86 et seqq. 207 German Federal Court of Justice in BGHZ 125, 366. 208 Emmerich/Habersack (fn. 146), § 303 marginal nos. 24 et seq. 209 BGHZ 173, 246. 210 On the compatibility of these liability rules with the freedom of establishment and the publicity directive (2009/101/EC of 16.9.2009) in detail Kindler, Festschrift Sa¨cker, 2011, pp. 393 et seqq. 200

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V. Structure of the SUP

113. This applies mutatis mutandis to liability under foreign law, such as the liability in case of the intermixture of assets or as joint employer of the employees of the subsidiary in French group law211 or the shareholder liability under Italian law in the case of management and coordination of companies in violation of the principles of proper company management (see above, para. 95).212 Thus liability for conduct within the group continues to apply unabated, despite the planned elimination of the group related member state option in the 12th directive.213 114. Directors’ liability is only covered to a limited extent by the SUP directive, namely in connection with violations of capital protection (Art. 18(6); see above, para. 74). 115. For the rest, the SUP directive neither contains a blanket clause of the kind contained in § 43(1) GmbHG nor is there a list of individual duties as we know it from the British Companies Act (ss. 170 ff. CA 2006).214 The absence of this kind of regulation is a further major weakness of the proposal which, after all, is aimed at facilitating the activities of groups of companies within the internal market. 215 Groups that are active across the internal market need uniform standards of liability for the directors of their subsidiaries – exactly the same applies here as for the right to give instructions (see above, para. 105).216 Also because exercising this right is possible only with regard to all the national laws of the member states where SUPs of a group are registered (Art. 7(4)(b) of the General Approach), 217 group parent companies should have little incentive to run their subsidiaries in other EU countries as SUPs. 116. Moreover, according to the SUP proposal (General Approach), directors’ liability is to be subject to the law of the state in which the company is registered (Art. 7(4)(b)),218 although the numerous insolvency-related situations giving rise to directors’ liability are determined by the law of the country where the company’s administrative seat is located (“COMI”, Art. 3, Art. 7(1) European Insolvency Regulation [EU] 2015/848); on this see below, paras. 123 et seq.). In case of a separation of the registered office from the central administration, the divergent criteria for the connecting factor lead to a mixture of laws in a company insolvency which is extremely difficult to handle. 211 Cass. comm., 4.7.2000, Az. 98-12117; on this Merle, Le socie ´te´s commerciales, 16th ed. 2013, marginal no. 671; Renner, ZGR 2014, 452, 466; on the liability as a joint employer Boetzkes, Die Konzernmutter als Mitarbeitgeberin im franzo¨sischen Recht, 2015; most recently court of cassation of 2. 7. 2014 (Molex), on this Klein, RIW 2015, 60, 63. 212 On this Kindler (fn. 110), § 4 marginal nos. 248 et seqq. 213 In this vein Lanfermann/Maul, BB 2014, 1283, 1291; differently it seems the commercial law committee of the DAV (fn. 21), marginal no. 11, which calls for retaining the group clause, in the same vein Malberti, Rivista delle societa` 2014, 848, 856. 214 On these two basic concepts of director’s liability already Hommelhoff, AG 2013, 211, 218. 215 Explicitly stated in the original recital 23 sentence 1 (deleted in the General Approach). 216 Convincing against the background of the action plan 2012 (fn. 19) already Hommelhoff, AG 2013, 211, 218. 217 On the additional risks related to the de-facto director (abandoned in the General Approach) Hommelhoff, GmbHR 2014, 1065, 1075; F. Dreher, NZG 2014, 967, 969, 971. 218 This conforms to Art. 51 SE regulation.

38

VI. Separation of the registered office from the central administration 1. The splitting of the seat (Sitzaufspaltung) as an indication of a lack of probity 117. Moving a company seat can have very different motives. A company moving both its registered office and at the same time its administrative seat to another country shows that it sees the host country as its new economic location.219 This measure conforms to the concept of the freedom of establishment as the freedom to select one’s location economically220 and it is clearly covered by the legally protected right to freedom of establishment (Art. 49 et seq. TFEU) – which according to “Sevic” means to participate in the economic life of the country effectively.221, 222 118. When a company however moves only its registered office or only its administrative seat to another country and thus splits the company seat, this company – as a general rule – is not concerned with an economic choice of location. This applies all the more so to companies whose seat is already split during formation. Contrary to assessments in the relevant literature that claim otherwise, the shareholders generally do not want to achieve “a legal structure which serves the best possible use of operational production factors” with this kind of construct. 223 Rather, the objective most commonly224 is to evade their creditors or commit abuse of law, even if euphemistically described as “jurisdictional arbitrage”,225 “migration for restructuring

219

On the following already Mu¨nchKommBGB/Kindler (fn. 76), marginal no. 818. Mu¨nchKommBGB/Kindler (fn. 76), marginal no. 143. 221 CJEU of 13. 12. 2005, Case C-411/03 [2005], I-10825 = RIW 2006, 140 (SEVIC), marginal nos. 17, 18; on this Mu¨nchKommBGB/Kindler (fn.74), marginal no. 126 et seq.; similar also CJEU of 12. 9. 2006, Case C-196/04 [2006], I-7995 = RIW 2006, 785 (Cadbury Schweppes), marginal nos. 53 et seq.; on this Mu¨nchKommBGB/Kindler (fn. 76), marginal no. 128. 222 W.-H. Roth, Festschrift Hoffmann-Becking, 2013, pp. 965, 989. 223 Scho ¨ n, ZGR 2013, 333, 354; similarly Scho¨n p. 359: “optimale Organisation unternehmerischer Ta¨tigkeit auf dem Gebiet der Europa¨ischen Union” (optimal organisation of entrepreneurial activity in the territory of the European Union). 224 In the course of the consultations carried out in 2013 on the transfer of the seat, participants gave the following reasons: favourable tax regime/tax mitigation (45 %), a better “business climate” in the host country (25 %), more favourable law in the host country in the following areas: company law (20 %), social law (15 %), insolvency law (10 %), European Commission, Feedback Statement. Summary of Responses to the Public Consultation on Cross-border transfers of registered offices of companies, September 2013, p. 12. 225 Cf. Weller, Festschrift Blaurock, 2013, p. 497, 507: “Insolvenzrechtsarbitrage”, p. 511: “Gesellschaftsrechtsarbitrage”; monographically Mucciarelli, Societa` di capitali, trasferimento all’estero della sede sociale e arbitraggi normativi, 2010. 220

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purposes”,226 “regulatory arbitrage”,227 “tax optimisation”,228 “co-determination avoidance”229, “accounting policy”230 etc.231 119. The “foreign company with domestic economic activity” is therefore not a “situation… which as such is wanted and accepted in the internal market”, 232 but on the contrary is the subject of one of the key concerns of the European Parliament in respect to a future EU directive on the transfer of the registered office. 233 A realistic assessment in conflict of laws is: “When real seat and registered office diverge, there is usually something fishy going on.”234 120. But are there even grounds for this kind of general suspicion about the splitting of the seat in so far as the issue is the SUP project? Doesn’t after all the splitting of the seat seem part of the very idea of the SUP, namely to make it easier for SMEs to establish foreign subsidiaries, especially under a uniform company law? 121. The General Approach seems to maintain a critical view on SUPs which maintain their registered seat and their central management in different member states. The permissive provision in Art. 10 of the Commission’s Proposal (“An SUP shall have its registered office and either its central administration or its principal place of business in the Union.”) was deleted. Thus, the possibility to separate the registered office from the central administration is left to national law (Art. 7(4)(b) of the General Approach). 235 122. Nevertheless, the use of the place of registration as the connecting factor in company law as proposed in Art. 7(4)(b) of the General Approach is not the preferable solution; it does not get to the root of the dangers for creditors and third parties in cases of letter box SUPs having their statutory seat outside the state where their central administration is located (see above, paras. 118, 119). The use of the place of registration as a

Steffek, in: Mu¨nchener Handbuch des Gesellschaftsrechts, vol. 6, 2013, § 37 (pp. 755 et seqq.). Cf. Ceyssens, NJW 2013, 3704, 3707 on the Single Supervisory Mechanism (SSM) in banking regulation. 228 As part of the consultations carried out by the EU Commission in 2013 on the cross-border transfer of company seats, almost half of the respondents stated that “fiscal shopping” was the main motive for moving the registered office: European Commission, Feedback Statement. Summary of Responses to the Public Consultation on Cross-border transfers of registered offices of companies, September 2013, p. 12; See also OECD/G 20: Base Erosion and Profit Shifting Project. Designing Effective Controlled Foreign Company Rules, 2015; Reimer/Waldhoff, DB 2015, 2106 et seq. 229 Morgenroth/Salzmann, NZA-RR 2013, 449, 455; Weller, Festschrift Blaurock, 2013, pp. 497, 511. 230 A case in point is the transfer of certain risks to special purpose vehicles pretending to be foreignbased to avoid the consolidation requirement pursuant to § 290 HGB, as in the case of HRE: German Bundestag publication 16/12407 p. 80; here the legislators in their response relied on accounting law (§ 290 (2) no. 4), cf. Staub/Kindler (fn. 8), § 290 marginal nos. 51 et seqq. 231 Cf. the drastic characterisation of the Centros shareholders by Gerhard Kegel, EWS 1999, issue 8, first page: “ … Begünstigung von Schlitzohren, die dem Recht den Vogel zeigen!” (preferential treatment of crooks who give the law the finger); on this Kindler, Festschrift Buchner, 2009, pp. 426, 427. 232 In the words of Scho ¨ n, ZGR 2013, 333, 359 et seq. 233 Kindler, EuZW 2012, 88, 892 with fn. 78; European Parliament, plenary session document A7-0008/ 2012 of 9. 1. 2012: Report with recommendations to the Commission on a 14 th company law directive on the cross-border transfer of company seats, recital H (“whereas the misuse of post-box offices and shell companies with a view to circumventing legal, social and fiscal conditions should be prevented”); on this Bo¨ttcher/Kraft, NJW 2012, 2701, 2703 with fn. 32; on the criticism of the abuse of law by means of letterbox companies also Reich et al., Understanding EU Internal Market Law, 2011, marginal no. 21. 8.; Reich EuZW 2011, 454, 455; less concerned is Drygala EuZW 2013, 569, 573 et seq. 234 Kegel/Schurig, IPR, 9th ed. 2004, § 17 II 1 (p. 574); on this also Kindler, Festschrift Buchner, 2009, pp. 426, 427. 235 Bayer/Schmidt, BB 2015, 1731, 1734; on the Italian proposal in this regard Kindler, ZHR 179 (2015), 330, 370. 226 227

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connecting factor is to be rejected above all236 because of the lack of parallelism with the applicable insolvency law and because of the corresponding legal uncertainty as to whether the SUP is subject to co-determination (see below, paras. 119 et seq., paras. 123 et seq.).

2. A first desideratum: parallelism with insolvency law 123. The proposed use of the registered office rather than the administrative seat as the connecting factor in company law (Art. 7(4)(b)) prevents the parallelism with applicable insolvency law (see above, para. 9). How much the creditor protection under company law is really worth however is usually only shown during insolvency proceedings.237 In practice, the protection under company law of capital and assets is enforced virtually exclusively during insolvency proceedings,238 and because of this too the parallelism in conflict-of-laws terms of insolvency law and company law is an urgent necessity. The mixture of foreign company law and domestic insolvency law can often not be resolved in a satisfactory way in practice.239 Also against this backdrop, the use of the state in which the company is registered as the connecting factor in company law (Art. 7(4)(b) General Approach; see above, paras. 6, 117–122) should be rejected. The use of a different connecting factor in the above-mentioned proposal for regulating international insolvency law (see above, para. 9) and in the SUP proposal (Art. 7(4)(b)) respectively – administrative seat versus statutory seat – is not based on a recognisable “master plan” but seems to be more due to the fact that two different Directorates-General within the EU Commission (Internal Market and Justice) are involved which do not coordinate their work. 124. Conflict-of-laws judicature highlights the confused situation caused by the application of different national laws. In this regard, the Court of Justice of late has taken a very broad view on insolvency law: according to a judgement of 4 December 2014, insolvency law covers all claims which are asserted before a court of law under insolvency proceedings240 and which presuppose insolvency proceedings to have formally been opened or the actual insolvency of the debtor company.241 236 For a fundamental critique of the theory of incorporation (and in favour of the real seat theory, in line with the COMI within the meaning of the EIR) see Mu¨nchKommBGB/Kindler (fn. 76), marginal nos. 359–386. 237 Haas, Reform des gesellschaftsrechtlichen Gla ¨ubigerschutzes, opinion E for the 66th DJT (German Conference of Jurists) therefore with good reason argues for the allocation of crisis responsibility based on insolvency law, 2006; Haas, WM 2006, 1417, 1420 et seqq.; also Veil, ZGR 2006, 374, 396 et seq.; Goette, ZGR 2006, 261, 266; Hopt, ZHR 171 (2007), 199, 230. 238 Legal actions under § 64 GmbHG (directors’ liability for erosion of company assets) in practice are generally brought by liquidators: BGH, ZIP 2015, 68 = NZI 2015, 85 with note Mock marginal nos. 9, 19 with reference to German Bundestag publication 16/6140, p. 47; the same probably applies to legal actions brought in respect to capital maintenance: in the period from 2010 until 2014, there were 11 BGH rulings on the repayment of illegal refunds (§ 31 GmbHG) all of which were based on actions brought by liquidators. In the same period, there were seven BGH rulings on directors’ liability vis-a`-vis the company under § 43 GmbHG of which five resulted from actions brought by liquidators. On § 31 GmbHG cf. BGH, NZG 2010, 701, 702, 1267; 2011, 273, 904; 2012, 545, 667, 1069; 2013, 469, 1028; on § 43 GmbHG cf. BGH, NZG 2012, 667, 795, 992; 2013, 1021, 1036; 2014, 780; NZI 2014, 881; on the insolvency-law orientation of creditor protection as codified under company law, fundamental description by Ro¨hricht, ZIP 2005, 505 et seqq. 239 An instructive example is the case BGH of 2.12.2014 – II ZR 119/14, ZIP 2015, 68 = NZI 2015, 85 with note Mock; CJEU, pending case C-594/14, Kornhaas. 240 CJEU of 4.12.2014, Case C-295/13, RIW 2015, 67 (H./. H.K.) marginal nos. 19 et seq. = EuZW 2015, 141 with note Kindler; on this Mankowski, EWiR 2015, 93; against the opening of proceedings as a classification element under insolvency law with sound reasoning D. Paulus, Außervertragliche Gesellschafter- und Organwalterhaftung im Lichte des Unionskollisionsrechts, 2013, pp. 224 et seqq. and on this Thole, ZHR 178 (2014), 763, 766. 241 CJEU of 4.12.2014 (previous Fn.), marginal no. 22 (“However, those considerations cannot be interpreted to the effect that an action based on a provision whose application does not require insolvency

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125. In so far as these broad qualifying characteristics adopted by the CJEU apply, numerous elements of liability which in accordance with the domestic classification may fall under company law have to be applied in insolvency proceedings to an SUP from another EU country (i. e. an SUP which has its administrative seat/COMI in the member state of the insolvency proceedings and its statutory seat in a different member state). 242 These elements include liability for delaying insolvency proceedings, 243 for the erosion of assets (§ 64 sentence 1 German GmbHG; § 25(3) no. 2 Austrian GmbHG; Art. 2634 codice civile)244 and for payments to shareholders causing insolvency (§ 64 sentence 3 GmbHG),245 for the liquidation proceedings under company law in case insolvency proceedings are dismissed for lack of assets (§ 26 InsO), 246 subordination and avoidance in case of shareholder loans,247 and the shareholder’s liability for shifting assets in the crisis (“liability for existence-destroying interventions”).248 126. For SUPs registered in other EU countries with domestic COMI 249, the broad scope of application of insolvency law means that management and shareholders of such an SUP are subject to the liability regime of insolvency-related German company

proceedings to have formally been opened but does require the actual insolvency of the debtor, and thus on a provision which, in contrast to the provisions at issue in the case which gave rise to the judgment in Nickel & Goeldner Spedition (…), derogates from the common rules of civil and commercial law, does not derive directly from insolvency proceedings or is not closely connected with them.”); the exclusion criterion of pre-insolvency locus standi of the debtor company formulated only shortly before in CJEU of 4.9.2014, Case C-157/13, RIW 2014, 673 = NZI 2014, 919 with note Mankowski (Nickel & Goeldner Spedition), marginal no. 28 thus seems to have been abandoned, given that it would also have applied to § 64 sentence 1 GmbHG. 242 The administrative seat (or “central administration”), from a conflict-of-laws perspective in corporate matters, is identical with the “centre of main interests” within the meaning of Art. 3, 4 of the European insolvency regulation: CJEU of 20. 10. 2011, Case C-396/09 [2011], I-9939 ruling no. 3 = RIW 2012, 161 = NZI 2011, 990 with note Mankowski (Interedil); CJEU of 15. 12. 2011, Case C-191/10 [2011], I-13211 = RIW 2012, 166 = NZI 2012, 147 with note Mankowski (Rastelli), marginal no. 32 (“For companies, the centre of main interests is presumed, according to the second sentence of Article 3(1) of the Regulation, to be the place of the company’s registered office. That presumption and the reference in recital 13 in the preamble to the Regulation to the place where the debtor conducts the administration of his interests reflect the European Union legislature’s intention to attach greater importance to the place in which the company has its central administration as the criterion for jurisdiction.”; emphasis added); Mu¨nchKommBGB/Kindler (fn. 76), marginal no. 422; on the parallelism of COMI and administrative seat also Weller, Festschrift Blaurock, 2013, pp. 497, 506. Already previously AG Duisburg, NZG 2003, 1167 et seq. = IPRax 2005, 151; U. Huber, Festschrift Gerhardt, 2004, pp. 397, 405 et seq.; P. Huber, ZZP 114 (2001), 133, 141; Borges, ZIP 2004, 733, 737; Vallender, KTS 2005, 286; Benedettelli, Riv. dir. int. priv. proc. 2004, 510; Eidenmu¨ller, NJW 2004, 3455; most recently D. Paulus (fn. 239), marginal no. 417. 243 Mu ¨ nchKommBGB/Kindler (fn. 38), Art. 4 European insolvency regulation, marginal no. 58 et seqq.; as to substantive law see Roth/Kindler (fn. 13), pp. 108 et seq. 244 For instance lately on § 64 sentence 1 GmbHG CJEU of 4.12.2014, Case C-295/13, RIW 2015, 67 = ZIP 2015, 196 = EuZW 2015, 141 with note Kindler (H./. H.K.), marginal no. 22; on this Mankowski, EWiR 2015, 93; also Mu¨nchKommBGB/Kindler (fn. 38), Art. 4 European insolvency regulation marginal nos. 87 et seq.; the insolvency-law orientation of the prohibitions to make payments in substantive law corresponds to this: in accordance with this orientation, these are aimed at the securing of assets and the equal treatment of all creditors, Habersack/Foerster, ZHR 178 (2014), 387, 395 et seq.; Habersack/ Foerster, in: Großkommentar AktG, 5th ed. 2015, § 92 marginal nos. 122, 125; Haas, ZHR 178 (2014), 603, 605 et seq.; in English as to substantive law see Roth/Kindler (fn. 13), pp. 103 et seq. 245 Mu ¨ nchKommBGB/Kindler (fn. 38), Art. 4 European insolvency regulation, marginal no. 89. 246 Mu ¨ nchKommBGB/Kindler (fn. 38), Art. 4 European insolvency regulation, marginal nos. 91 et seq. 247 Mu ¨ nchKommBGB/Kindler (fn. 38), Art. 4 European insolvency regulation, marginal no. 96; BGH, BB 2012, 14 – PIN; BGH, BB 2015, 209 marginal no. 7 with note M. Wilhelm; in English as to substantive law see Roth/Kindler (fn. 13), pp. 50, 61 et seq. 248 Mu ¨ nchKommBGB/Kindler (fn. 38), Art. 4 European insolvency regulation, marginal no. 101. 249 Centre of main interests; see on this term Mu ¨ nchKommBGB/Kindler (fn. 38), Art. 3 European insolvency regulation, marginal nos. 14 et seqq.

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law anyway.250 This is also the view held by the German Federal Court of Justice in its most recent 2014 reference for a preliminary ruling on the legal classification of the erosion of assets under insolvency law.251 According to this view, insolvency law covers all claims which the liquidator asserts as part of the insolvency proceedings and whose purpose is to protect the company from outflows of funds and thus to safeguard the insolvency estate in the interest of the creditors of the future insolvency proceedings; 252 the case concerns an action brought by a liquidator against the director of a British Ltd. with administrative seat in Germany in respect of whose assets German insolvency proceedings had been initiated.

3. A second desideratum: parallelism with the law applicable to corporate codetermination 127. Similar to the previous EPC project, the SUP project entails significant risks for the German system of workers’ participation in the supervisory bodies of companies (Unternehmerische Mitbestimmung; employees’ corporate co-determination).253 A German SUP, as a subtype of the German GmbH, would be one of the legal forms covered by § 1(1) no. 1 MitbestG and § 1(1) no. 3 DrittelbG. But given that employees’ corporate codetermination takes place on the supervisory board as an executive body of the company, it would be classified under conflict-of-laws rules as part of company law254 and as such would be subject to the law of the statutory seat in accordance with Art. 7(4)(b) SUP directive (General Approach).255 The Proposal says nothing on this, although European corporate law already deals with questions of co-determination in international cases and these provisions might be regarded as a model also for the SUP.256 128. Three avoidance strategies in particular come into consideration which in each case focus on an SUP with registered office in another EU country and administrative seat in Germany (see below a–c, paras. 129 et seq.). Ultimately, none of these strategies is successful, as the co-determination laws – as domestic overriding mandatory provisions – prevail over foreign company law (below d, paras. 132 et seq.). As also in relation to insolvency law (see above, paras. 123–126), however, referring to the member state in which the SUP is registered as a connecting factor (Art. 7(4)(b) SUP directive) leads to an – avoidable – mixture of national laws in the field of workers’ corporate co-determination. a) Avoidance strategy no. 1: a foreign SUP as holding company 129. It is possible to use an SUP with registered office in another EU country as the holding company within a corporate group. Because the German co-determination rules 250 Kindler, EuZW 2015, 141 (note on CJEU of 4.12.2014 – Case C-295/13); on this also Mankowski, EWiR 2015, 93. 251 BGH of 2.12.2014 – II ZR 119/14, ZIP 2015, 68 = NZI 2015, 85 with note Mock; CJEU, pending case C-594/14, Kornhaas. 252 According to this formula, even the claims to capital maintenance (§§ 30, 31 GmbHG) should qualify as falling under insolvency law; cf. Ro¨hricht, ZIP 2005, 505, 511 et seq. 253 On workers’ corporate co-determinaton in Germany see Kindler, La s.p.a. nell’esperienza tedesca: i tratti essenziali della Aktiengesellschaft, in Cagnasso/Panzani (eds.), Le nuove societa` per azioni, 2013, pp. 415, 450 et seq. 254 Mu ¨ nchKommBGB/Kindler (fn. 76), marginal nos. 568 et seqq. 255 Beurskens, GmbHR 2014, 738, 746. 256 Bayer/Schmidt, BB 2015, 1731, 1735, referring to CD 2001/86/EC (European Company); Art. 16 CD 2005/56/EC on cross-border mergers of limited liability companies; the silence of the proposal as far as corporate co-determination is concerned, is seen as an “imperfection” also by Lecourt, Revue des socie´te´s 2014, 699, 707 (pt. 31–32).

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classify as company-law rules, they do not apply to a letterbox SUP with effective seat in Germany under the proposed use of the statutory seat as the connecting factor in company law (Art. 7(4)(b) SUP directive). Instead, the co-determination regime of the member state in which the SUP is registered would apply, which country might in fact have no co-determination rules at all or at least a significantly lower level of codetermination than that under German law. The idea behind that strategy: A holding company thus free of co-determination could arise through the formation of an SUP with registered office in a foreign country to which the existing business is transferred as a contribution in kind. b) Avoidance strategy no. 2: a foreign SUP as the general partner of a SUP & Co. KG 130. A SUP from another EU country can also be used as the general partner of an SUP & Co. KG (limited liability partnership). The idea behind that strategy: In this constellation, the KG neither falls under the one-third co-determination (due to the numerus clausus of included legal forms in § 1(1) DrittelbG) (German One-Third Participation Act) nor – unlike the German GmbH & Co. KG (§ 4 MitbestG 1976) – under parity co-determination. Air Berlin PLC & Co. Luftverkehrs KG for instance has taken advantage of this legal situation. c) Avoidance strategy no. 3: a foreign SUP as a group subsidiary 131. The SUP can play a role in co-determination avoidance strategies also as a group subsidiary. If the parent company of the group has no co-determination because of being a foreign holding company, § 5(3) MitbestG ensures that co-determination rules apply at least at the subsidiary level.257 This anti-avoidance protection can – at least this is the idea – however be bypassed if an SUP with registered office in a foreign country is used as a subsidiary which is subject to foreign company and co-determination law (Art. 7(4)(b) SUP directive). d) The conflict-of-laws answer: a special rule for linking mandatory domestic regulations on corporate co-determination to the domestic real seat 132. Ultimately, the three co-determination avoidance strategies mentioned above are unsuccessful already because the German co-determination laws apply to an SUP from another EU country with administrative seat in Germany as overriding mandatory provisions (“lois d’application immediate”). Overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable under international private law (cf. Art. 9(1) Rome I regulation). 258 133. European law does not preclude this;259 after all, the Court of Justice in its ¨ berseering” judgement already recognised employee protection as an overriding “U 257

Mu¨nchKommBGB/Kindler (fn. 76), marginal no. 585. On overriding mandatory provisions (lois d’application immediate) as an exception to applicable law see von Hein, in: Mu¨nchKommBGB, vol. 10, 6th ed. 2015, introduction to private international law, marginal nos. 286 et seqq.; fundamentally CJEU of 23.11. 1999, Case C-396/96 [1999], I-8453 = EWS 2000, 221 = RIW 2000, 137 (Arblade), marginal no. 30. 259 Weller, Festschrift Hommelhoff, 2012, p. 1275, 1292 (also on the following); Kindler, Symposium Winkler von Mohrenfels, 2013, pp. 147, 150 et seqq.; Mu¨nchKommBGB/Kindler (fn. 76), marginal no. 571 with reference amongst others to Weiss/Seifert ZGR 2009, 542, 549 et seqq.; Staub/Koch (fn. 8), 258

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reason related to the public interest which can justify a restriction of the freedom of establishment.260 The applicability of German co-determination laws to corporations governed by foreign law is based on an analogy to Art. 9 Rome I regulation. 261 This is because corporate co-determination is not aimed at balancing individual interests but realises basic concepts of public policy of the Federal Republic of Germany in the area of social organisation.262 134. There is also a sufficient domestic nexus for enforcement of these concepts if an administrative seat exists within Germany;263 the intended international applicability of the co-determination laws extends to all companies with a domestic administrative seat. This is evidenced precisely by the legislative materials on the MitbestG 1976, It is true that according to the 1975 Explanatory Report that law “cannot lay claim to be valid for executive bodies of foreign companies…”.264 But under the then current of conflict of laws rules all companies with real seat in Germany were subject to German law. 265 135. If it is clear therefore that companies from other EU countries with administrative seat in Germany are – in conflict-of-laws terms – subject to the co-determination laws as loi d’application immediate, this immediately gives rise, on the level of substantive law, to the question which foreign company forms are affected by this. 266 In principle, the co-determination laws cover those foreign company forms which are functionally equivalent to the domestic corporations for instance within the meaning of § 1 MitbestG 1976 or § 1 DrittelbG. This does not mean “application by analogy” 267 but substitution. This is a classic concept of private international law which simply means that legal terms within the definition of a substantive rule are fulfilled by aspects of foreign law.268 It is accepted, for instance, that the terms “Aktienge-

§ 13 d HGB marginal no. 33; W.-H. Roth, IPRax 2003, 117, 125 with fn. 85; Grundmann/Mo¨ slein, ZGR 2003, 317, 350 et seq.; Franzen, RdA 2004, 257, 262, 263 et seq.; see also Lutter/Bayer/Schmidt (fn. 4), § 6 marginal no. 62 (p. 101 et seq.); in detail Deinert, Internationales Arbeitsrecht. Deutsches und europa¨isches Arbeitskollisionsrecht, 2013, § 17 marginal nos. 82 et seq.; for a different opinion see for instance Habersack/Verse (fn. 3), § 3 marginal no. 27; Grigoleit, in: Grigoleit (ed.), AktG, 2013, introduction, marginal no. 22. 260 CJEU of 5.2.2002, Case C-208/00 [2002], I-9919 = RIW 2002, 945 (U ¨ berseering), marginal no. 92. 261 On the applicability by analogy Mu ¨ nchKommBGB/von Hein (fn. 257), introduction to international private law, marginal nos. 45, 52; differently Zimmer, Internationales Gesellschaftsrecht, 1996, who argues for a specific company-law conflict-of-laws rule whose connecting factor is the employment of employees in domestic businesses (pp. 143 et seqq., 190 et seq.). 262 Ulmer/Habersack, in: Ulmer/Habersack/Henssler, Mitbestimmungsrecht, 3 rd ed. 2013, introduction marginal no. 35; on this formal legal criterion of overriding mandatory provisions in general terms Mu¨nchKommBGB/von Hein (fn. 257), introduction to private international law, marginal no. 43. 263 Mu ¨ nchKommBGB/Kindler (fn. 76), marginal no. 575; already Birk, RIW 1975, 589, 595; Großfeld/ Ehrlinghagen, JZ 1992, 217, 222; Franzen, RdA 2004, 257, 258 et seq.; for a different opinion Horn, NJW 2004, 893, 900; Junker NJW 2004, 728, 729; Sandrock, ZVglRWiss. 102 (2003), 447, 486 et seqq.; Thu¨sing, ZIP 2004, 381, 382. 264 German Bundestag publication 7/4845, p. 4. 265 Also correct in this respect Franzen RdA 2004, 257, 259; Ulmer/Habersack/Henssler (fn. 261) therefore point out quite rightly that the Bundestagsausschuss fu¨r Arbeit und Sozialordnung (parliamentary committee for labour and social affairs) at the same place explicitly pointed to the inclusion of businesses with a seat in Germany (§ 1 MitbestG marginal no. 6). 266 On this Mu ¨ nchKommBGB/Kindler (fn. 76), marginal no. 576. 267 This is argued incorrectly by Zimmer, Internationales Gesellschaftsrecht, 1996, pp. 161 et seqq.; Zimmer, in: Lutter (ed.), Europa¨ische Auslandsgesellschaften in Deutschland, 2005, pp. 365, 370; Weiss/ Seifert, ZGR, 2009, 542, 546. 268 In depth Mu ¨ nchKommBGB/von Hein (fn. 257), introduction to private international law, marginal nos. 227 et seqq.; on substitution in international company law most recently Weller, ZGR 2014, 865, 875 et seqq. (foreign notarisation); short overview in Palandt/Thorn, BGB, 74 th ed. 2015, introduction to Art. 3 EGBGB marginal no. 31.

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sellschaft” and “Gesellschaft mit beschra¨nkter Haftung” in §§ 13 e–g HGB should be substituted by the respective “equivalent”, i. e. comparable foreign legal forms. 269 136. Which foreign legal forms are suitable in each case needs to be checked on the basis of an evaluative comparison with German company law.270 The relevant EU directives, above all the publicity directive (2009/101/EC)271, offer important reference points for this. Judged by these criteria, a British Limited (private company limited by shares) for instance is to be treated as a “Gesellschaft mit beschra¨nkter Haftung” within the meaning of § 1 (1) no. 1 MitbestG, and the same applies to an SUP from another EU country. It is not possible here to expand on the practical difficulties in enforcing the law;272 they do not at any rate change in any way the character of the codetermination laws as overriding mandatory provisions.273

4. Conclusions for the drafting of the conflict-of-laws rule in a SUP directive 137. The above-mentioned problems of co-determination avoidance and the missing parallelism with insolvency law would not arise in the first place if the directive included a conflict-of-laws rule which – like European international insolvency law – uses the effective administrative seat as the connecting factor. Under the recent recast of the European insolvency regulation (EU) 2015/848 (Art. 3(1) and Art. 7 (1))274, the member state in whose territory the debtor has its centre of main interests (COMI) is the basis both for international jurisdiction and for the law applicable to a company insolvency. The Court of Justice equates this connecting factor with the central administration (real seat).275 138. Due to the insolvency-law classification of directors’ and shareholder liability in the crisis (see aboce, paras. 120–122), international jurisdiction of the courts in the country where the insolvency proceedings are opened also applies to individual disputes under the “Deko Marty-rule” established by the CJEU, based on Art. 3(1) EIR 2010. 276 This is in line with Art. 6 no. 1 EIR 2015.277 Under this provision, the courts of the member state where 269 Fundamentally Kindler, NJW 1993, 3301, 3303 et seqq.; Mu ¨ nchKommBGB/Kindler (fn. 76), marginal nos. 199 et seqq., 883 et seqq.; Staub/Koch (fn. 8), § 13 d marginal no. 10. For an example in European company law, see Art. 7 CD 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 (89/666/EEC). 270 Staub/Koch (fn. 8), § 13 e marginal no. 6 et seqq. 271 On this directive see Mu ¨ nchKommBGB/Kindler (fn. 76), marginal nos. 30 et seq. 272 On the enforcement of the law in status proceedings of foreign companies (§§ 98 et seq. AktG) see Mu¨nchKommBGB/Kindler (fn. 76), marginal no. 586; Oetker, Erfurter Kommentar zum Arbeitsrecht, 15th ed. 2015, § 1 marginal no. 5, sees insurmountable “execution problems” here (determining the courts having jurisdiction, enforcement of domestic court judgements vis-a`-vis foreign corporations as well as the registration of the representative bodies in the foreign commercial register); in the same vein Ulmer/ Habersack/Henssler (fn. 261) § 1 MitbestG marginal no. 8 a. 273 For a proposal for extending the co-determination laws to foreign companies cf. Kindler (fn. 258), pp. 161 et seq.; similar Zimmer, Internationales Gesellschaftsrecht, 1996, pp. 165 et seq. 274 For the 2015 European insolvency regulation see fn. 11. 275 CJEU of 15. 12. 2011, Case C-191/10 [2011], I-13211 = RIW 2012, 166 (Rastelli), marginal no. 32 (text see fn. 241); in favour of the central administration as the general connecting factor for corporations see Kindler, L’amministrazione centrale come criterio di collegamento del diritto internazionale privato delle societa`, Rivista di diritto internazionale privato e processuale 2015 (forthcoming). 276 CJEU of 4.12. 2014, Case C-295/13, RIW 2015, 67 (H./. H.K.) = EuZW 2015, 141with note Kindler, marginal no. 24 with reference to CJEU of 12. 2. 2009, Case C-339/07 [2009], I-791 = RIW 2009, 234 (Seagon./. Deko Marty); on this judgement Mu¨nchKommBGB/Kindler (fn. 38), Art. 3 European insolvency regulation marginal nos. 86 et seqq. 277 See fn. 11; on the reform Kindler/Sakka, EuZW 2015, 460 et seqq.; Thole, ZEuP 2014, 39 et seqq.

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the insolvency proceedings are opened have jurisdiction for all actions which arise directly out of these proceedings and are closely linked to them, such as actions to set a transaction aside (actions re´vocatoires fonde´es sur l’insolvabilite´).278 139. Using the real (administrative) seat as a connecting factor in respect to SUP company law avoids difficult questions regarding the delimitation of company law and insolvency law, and it also leads to a broad application of the lex fori in the majority of individual disputes before courts in the state where the insolvency proceedings have been opened. Art. 7(4) of the SUP proposal should be adjusted to this. At the same time, the application of national laws establishing employees’ participation in the supervisory bodies of companies with real seat in the state would be guaranteed. In relation to both insolveny law and co-determination law a mixture of several national laws would be avoided.

5. A digression: criminal law in the letterbox SUP 140. Criminal law related to private limited liability companies (§§ 82, 84, 85 GmbHG)279 under conflict-of-laws rules is not part of private international law but of criminal international law (§§ 3 fet seqq. StGB). If therefore German company law or insolvency law becomes applicable, the question is in each individual case whether shareholders or members of executive bodies (§ 14 StGB) of a foreign company can be subsumed under the domestic provisions of criminal law by means of substitution. 280 Otherwise, prosecution loopholes could arise because the forum state can only apply its own criminal law and not the penal provisions contained in the law governing the foreign SUP. A violation of a fiduciary duty (§ 266 StGB) vis-a`-vis a SUP with effective seat in Germany also comes into consideration; however, the BGH has previously assessed the duties of the members of the foreign company’s executive body on the basis of foreign company law.281 278

See Art. 7(2) point m, Art. 16 regulation (EU) 2015/848. On the following Mu¨nchKommBGB/Kindler (fn. 76), marginal no. 667. 280 On substitution above, paras. 131–132. 281 BGH, ZIP 2010, 1233 marginal no. 10 et seqq. = EWiR 2010, 761 with short commentary Rubel/ Nepomuck; in more detail Hefendehl, ZIP 2011, 601, 602 et seq.; Wietz, Vermo¨ gensbetreuerpflichtverletzung gegenu¨ber einer im Inland ansa¨ssigen Auslandsgesellschaft, 2009; on substantive law Mu¨nchKomm/ Dierlamm (fn. 188), § 266 marginal nos. 74 et seqq. 279

47

VII. On the choice of the legal basis for the SUP directive 141. It is noteworthy that the Commission proposal for a single-member company relies on Art. 50(2)(f) TFEU which would enable a majority decision of the European Council (Art. 293, 294 TFEU). The Legal Service of the Council of the European Union has approved this choice of legal basis in an opinion dated 17 October 2014. 282 For the other European company forms, however, the “flexibility clause” of Art. 352 TFEU was chosen as a legal basis283 which requires unanimity on the Council for the enactment of the legislation.284 142. Art. 352 TFEU would be the proper method for the adoption of the SUP directive, given that this legislative act too, in substance, would introduce a new legal form. This is reflected in the specific name (“SUP”) but also, for instance, in the fact that the conversion of a GmbH into an SUP and vice versa classifies as a change of the legal form in the technical sense (Art. 9 SUP directive), and finally in the proposal’s regulatory density.285 The parallels with the proposal for a common European sales law (CESL) – withdrawn on 14 December 2014 – are obvious:286 With the SUP, the EU would create a 28th regime and not just oblige the member states to harmonise the existing rules. 282 Council of the European Union, opinion of the Legal Service of 17.10.2014, file no. 14423/14, paras. 25 et seqq. 283 Cf. Habersack/Verse (fn. 3), § 13 marginal no. 3 on the SE. 284 The SCE regulation also, with the approval of the CJEU, relied on Art. 308 EC (today Art. 352 TFEU); the CJEU however explicitly ruled out an enactment as a directive: CJEU of 5.2.2002, Case C-436/ 03 [2006], I-3733 = EuZW 2006, 380 (European Parliament./. Council of the European Union), para. 44; on this Lutter/Bayer/Schmidt (Fn. 4), § 42 marginal no. 1, p. 1584; Malberti, Rivista delle societa` 2014, 848, 853 et seq.; according to Jung (EBLR 2015, 689) the choice of the legal basis is “politically motivated”. 285 Convincing in so far opinion no. 58/2014 of the commercial law committee of the DAV (fn. 21), marginal nos. 4–9; different however the opinion of the Legal Service (fn. 281), marginal nos. 25 et seqq. 286 On the German term “Rechtsangleichung” (in Art. 114 TFEU) (rendered as “approximation of provisions laid down by law [or] regulation” in the English version of the directive) Mu¨ller-Graff, Festschrift Ju¨rgen Schwarze, 2014, pp. 617 et seqq. (on the CESL).

49

VIII. General evaluation and conclusions The basic aim of the proposal, namely to achieve greater harmonisation of the laws governing single-member companies, can only be applauded. The General Approach however has two serious weaknesses, namely the online formation with an unsafe proof of identity (Art. 14(3)) and the insufficient protection of creditors (Art. 18). To these are added the missed parallelism with applicable insolvency law because of the adoption of the incorporation theory as a connecting factor (Art. 7(4) General Approach) and – from a German perspective – the risk that the SUP be used as a tool for avoiding codetermination.287 The concept of a single-share company whose one share can belong to several persons (Art. 15(3)) seems insufficiently thought through, and misleading in respect to the indication of the legal form (Art. 7(3) SUP directive). The SUP is largely unsuitable as a building block for corporate groups due to the non-regulation of the single-member’s right to issue instructions (deletion of Art. 23 SUP directive in the General Approach) and of directors’ liability (Art. 22): as long as the right to issue instructions follows the non-harmonised laws of the member state in which the SUP is registered (Art. 7 (4) (b)) and its exercise is possible only under the Damocles’ sword of liability under national law, group parent companies have little incentive to run their subsidiaries in other EU countries as SUPs. The cash-pooling regulation gap too negatively affects the usability of the SUP as a group company. All in all, the proposed SUP not only seems unnecessary. It is a reform of EU law on business organisations which leads to a backlash in several aspects.

Conclusions 1. Whether the SUP directive sets a minimum or maximum standard has to be decided for each provision individually. In case of doubt, minimum harmonisation should be assumed. Additional norm setting by member states should therefore be acceptable within the scope of the directive unless clearly excluded. This applies regardless of whether the national parliament of the member state extends the SUP rules to all single-member private limited liability companies under national law or introduces the SUP as a new national legal form to coexist with existing national singlemember private limited liability companies (see above, para. 7). 2. In the legal-policy context of the SUP directive, European international insolvency law has to be taken into consideration. On 20 May 2015, the recast of the European insolvency regulation was adopted (Regulation [EU] 2015/848). Under this regulation (Art. 3 read with Art. 7), it is not the insolvency law of the member state of incorporation which applies in cases where the registered office is separated from the real seat, but rather – for reasons of creditor protection – the law of the country in which the debtor company has the centre of its main interests (real seat). This is the state where in most cases also the majority of the creditors and of the company assets will be located (see above, para. 8). 3. Furthermore, the legal-policy context of the SUP proposal includes the efforts by the European and German legislatures to fight money laundering. These efforts are not sufficiently supported by the SUP directive which offers the possibility to form a company online without safe proof of identification of the founding member. A merely 287

Seibert, GmbHR 2014, R209.

51

VIII. General evaluation and conclusions

“substantial” assurance level of electronic identification means is incompatible with the 4th money laundering directive according to which “[t]he need for accurate and up-todate information on the beneficial owner is a key factor in tracing criminals who might otherwise hide their identity behind a corporate structure.” (Directive [EU] 2015/849, recital 14), see above, para. 11. At a German national level, the amending statute of the public limited liability company act, too, which was adopted as a government draft bill on 7 January 2015 set to revise § 10 AktG is aimed, among other things, at strengthening transparency in respect to the involved parties of unlisted companies. The SUP directive offers incentives to establish an SUP instead of an unlisted German AG (see above, para. 14). 4. Art. 11 of the EU publicity directive also belongs to the legal-policy context of the SUP proposal. It provides that in all member states according to whose legislation the formation of a company is not subject to any preventive administrative or court control, the instrument of incorporation and instrument(s) of constitution of the company as well as changes to these instruments have to be publicly notarised. The information on the SUP’s shareholders and board members in the register however have little value if they are not verified by a notary and/or the registration authority at any stage of the online registration process (see above, para. 15). It is no solution to simply provide for the legal fiction that the standards of the publicity directive are met also in the case of an online registration (cf. Art. 11(2) of the General Approach), see above, para. 16. 5. One central point of the planned SUP directive is the introduction of an online formation using an official electronic template (Art. 11, 13, 14, 14 b General Approach). The purpose is to avoid putting foreign-based founders in particular at a cost disadvantage; these no longer have to appear in person before a notary or other authority of the country of registration (Art. 14 (3) subpara. 1 sentence 1). But the Commission has never provided substantiated evidence that there is even a need for harmonisation regarding the legal systems of the member states, let alone referring to the exact costs in the single-member states (see above, para. 39). Establishing subsidiaries in, for example, Germany is neither time- nor cost-intensive. The founders are not required to appear before the commercial register or the notary in person (see above, para. 40). 6. It is inacceptable that foreign SUPs have to be recognised even where the founding member and the members of the executive bodies have not been safely identified. Due to potential manipulation in the course of the online registration, the reliability of the commercial register and the land register is seriously jeopardised. This is questionable also in terms of constitutional law: the loss of rights which the true beneficiary has to accept in the context of a good-faith acquisition can only be justified if the medium in which the legal presumption of correctness resides is extremely reliable (see above, paras. 9, 22, 27, 31, 71). 7. The Member States can maintain existing rules or enact new rules concerning the possible verification of the legality of the registration process, including rules on the verification of identification and legal capacity in order to provide for safeguards for the reliability and trustworthiness of registers (e.g. a legality check via a video-conference). The identification based on a visible contact provided by a video-conference, however, lags behind any identification on a face-to-face basis. Therefore the “webcam identification” as provided for in the compromise proposal cannot be welcomed as a generally adequate means of identification (see above, para. 32). 8. The General Approach does give room for additional safeguards. This cannot overcome the general reservations associated with identifications carried out online. The Member States are strongly encouraged to provide for regulation that aims at securing video-conference based identifications by additional safeguards (see above, para. 33). 52

VIII. General evaluation and conclusions

9. The reference of the SUP directive to electronic identification under the e-IDAS regulation (EU directive on electronic transactions) is fundamentally correct. The reference to electronic identification means from other EU countries should, however, be limited to those with a “high” assurance level (such as the electronic identity card) (see above, para. 34). 10. The accuracy of information is safeguarded by legal scrutiny before registrations are made. Such legal scrutiny can either be performed by the register itself or by other persons or bodies required to assist or control the legality of registration. As a result, an online registration can require the founding member to electronically contact a person that is by national law charged with the verification of the legality of the registration (e.g. via a video-conference to have their identity verified and the formation of a SUP authenticated) (see above, para. 35). 11. An authentication conducted via a video-conference lags behind the safeguard functions of a normal authentication. The concept of video-conference based authentications therefore should rather be abandoned. At least, national legislators should make all efforts to set as high standards as needed to maintain the public functions associated with an authentication (see above, para. 36). 12. Given that the registration process is to be completed no later than five days after the online formation, a standard template of the instrument(s) of constitution has to be used for online registration. This template makes an in-depth verification in content terms on the part of the registration authority unnecessary (Art. 14(3) subpara. 2 General Approach), see above, para. 47. Nothing, however, speaks against allowing the use of individually created instrument(s) of constitution, although without the requirement to complete the registration within no more than five days (see above, para. 48). 13. As several persons can be joint owners of the single business share (Art. 15(3) SUP directive), the SUP is in reality not a “single-member company” but a “single-share company”. The joint holding of a business share by several persons is misleading as regards the indication of its legal form (Art. 7(3) SUP directive) and should only be allowed in special cases (e. g. a community of heirs) for a limited transitional period (see above, para. 49). 14. It is to be welcomed that Member States may require the SUP to build up legal reserves (see above, para. 52). In the same context, making the public disclosure of share capital in business letters and on the SUP’s website a legal requirement appears like a sensible additional measure for protecting creditors without imposing an undue burden on companies. Art. 16 (5) SUP directive in the version of the Commission’s proposal of 9 April 2014 should be retained (see above, paras. 55–57). 15. The solvency test requirement pursuant to Art. 18(2)(b) and (3) General Approach is very welcome as a capital protection instrument because it at least partly offsets the structural reliability deficits of the proposed company form connected to not requiring a minimum share capital. The criteria in part correspond to the accounting principle of going concern (Art. 6 (1) (a) Accounting Directive 2013/34/EU) and should therefore be familiar to management. For the implementation of the directive, national legislators should consider extending the forecast for liquidity planning to two years (see above, paras. 58–62). 16. The capital protection regime of the SUP directive in Art. 18 should contain a definition for the distribution restrictions which replaces the term “profit distribution” with “distribution”. The clarification that so-called “concealed” asset transfers too are covered by this should be retained (see above, para. 64). A suggested wording is formulated above, at para. 68.

53

VIII. General evaluation and conclusions

17. Cash-pooling regulative gap: in line with § 30(1) sentence 2 GmbHG the SUP directive should specify that if the SUP extends a loan to its single-member, this is not a “distribution” provided the interest on this loan corresponds to market rates and the repayment claim is unimpaired (see above, para. 70). 18. Unfortunately, the SUP does not even require a moderate minimum share capital as a probity threshold. Such a threshold would prevent business founders with no hope of success from choosing this legal form and at the same time would not overburden corporate groups (see above, paras. 51, 71). 19. As an alternative to a minimum share capital, a liquidity guarantee or the posting of financial collateral for covering the transactions carried out in the member state where the company actually has its seat could also be considered (for instance for a lump-sum contribution to procedural costs to avoid insolvencies without assets to distribute, as a mandatory insurance scheme modelled on the professional liability insurance of lawyers, or at least in favour of tort victims etc.) (see above, paras. 72, 73). 20. The liability regime of directors and shareholders in case of illegal profit distributions (Art. 18(6) General Approach) does not contain any bona fides protection. This creditor friendly approach deserves praise (see above, para. 80). 21. Group law, according to some legal writers, no longer just aims at the legal protection of creditors and minority shareholders, but now also has an “enabling function”, with the overriding aim to create a reliable framework for company management within the group (see above, para. 82). The Commision’s Proposal and the Italian Compromise Proposal do not heed this more recent view. Recital 23 on the SUP Proposal (in its initial wording) lists the group interest as just one of several aspects which the director of the subsidiary has to take into consideration (see above, paras. 82– 90). The General Approach is even more reluctant on such a new rationale of group law: the right of the single-member to issue instructions vis-a`-vis the management body (ex. Art. 23) was deleted. 22. A glaring weakness of the SUP proposal is the lack of a differentiated European regulation of the scope of the right of the single-member to issue instructions vis-a`-vis the management body (see above, para. 105). Rules for the protection of creditors and minority shareholders of the dependent SUP are also missing (see above, paras. 90, 94). Due to the fact that co-beneficiaries in respect to the single share are possible under Art. 15(3) SUP Proposal, minority shareholders may exist also in the SUP (see above, paras. 18, 49). 23. To ensure legal certainty in respect to the right to issue instructions (by avoiding a mixture of national laws in this regard), the relevant literature points to a possibility to determine the applicable law of all foreign subsidiary SUPs by incorporation at the seat of the parent company – if the state in which the company is registered allows this kind of splitting of the seat (Art. 7(4)(b) of the Proposal; see above, para. 106). However, in terms of insolvency law the law of the administrative seat applies anyway (see above, para. 9), which encompasses all insolvency-related duties of the director (see above, para. 107). 24. In the German SUP, the liability for abusive conduct of the single-member remains unaffected under non-harmonised law. This applies to material undercapitalisation, intermixture of assets, lack of funds of the parent company in a contract-based group (§ 303 AktG analogous) and interventions which destroy the economic existence of the company (see above, para. 112). The planned elimination of the group related member state option in the 12th directive does not preclude this (see above, para. 111). 25. The General approach only partially regulates directors’ liability. The SUP directive neither contains a blanket clause of the kind contained in § 43(1) GmbHG 54

VIII. General evaluation and conclusions

nor is there a list of individual duties as we know it from the British Companies Act (ss. 170 et seqq. CA 2006). The absence of this kind of regulation is one of the greatest weaknesses of the proposal which, after all, is aimed at facilitating the activities of groups of companies within the internal market (see above, para. 115). 26. “When real seat and registered office diverge, there is usually something fishy going on.” (G. Kegel). Most commonly, this concerns abuse of rights (“jurisdictional arbitrage”, “migration for restructuring purposes”, “regulatory arbitrage”, “tax optimisation”, “co-determination avoidance”, “accounting policy” etc.). Therefore, the use of the place of registration as the connecting factor in company law proposed in Art. 7(4) SUP directive should be rejected (see above, paras. 117–122). 27. In order to achieve parallelism with international insolvency law (Art. 3 and 7(1) European insolvency regulation [EU] 2015/848), the connecting factor in company law should be the law of the country in which the debtor company has the centre of its main interests. This as a rule is the country where the company has its effective administrative seat. This is supported by the fact that the Court of Justice of late has taken a very broad view on insolvency law (Court of Justice of 4 December 2014, Case C-295/13). It covers all claims which are asserted before a court of law under insolvency proceedings and which presuppose insolvency proceedings to have formally been opened or the actual inability to pay of the debtor company. The directors and shareholders of an SUP from a foreign EU country with administrative seat in Germany in German insolvency proceedings are therefore subject to liability for delaying insolvency proceedings, for the reduction of assets and for causing insolvency, the liquidation proceedings under company law in case insolvency proceedings are dismissed for lack of assets, to subordination and insolvency rescission during the clawback of shareholder loans, and to the shareholder’s liability for diluting assets in the crisis (“liability for existence-destroying interventions”). The determination of applicable company law in parallelism with applicable insolvency law thus avoids a “mixture of national laws” (see above, paras. 123–126). 28. An SUP from another EU country with administrative seat in Germany in conflict-of-laws terms is subject to the German co-determination laws. The co-determination laws cover those foreign company forms which are functionally equivalent to domestic companies for instance within the meaning of § 1 MitbestG 1976 or § 1 DrittelbG (public limited-liability companies; private limited-liability companies). This includes too the SUP as a variant of the GmbH (private limited-liability company). The determination of applicable company law in parallelism also with applicable codetermination law thus avoids a “mixture of national laws” here as well (see above, para. 139). 29. The choice of the legal basis (Art. 50(2)(f) TFEU) is politically motivated. In contrast to the proposed EPC regulation, the enactment of the SUP directive only requires a qualified majority. Contrary to the assessment of the Legal Service of the Council of the European Union, Art. 352 TFEU is the correct legal basis, because the SUP in substance constitutes an independent legal form (see above, para. 142).

55

Appendix I

EUROPEAN COMMISSION

Brussels, 9.4.2014 COM(2014) 212 final 2014/0120 (COD)

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

(Text with EEA relevance) {SWD(2014) 123 final} {SWD(2014) 124 final} {SWD(2014) 125 final}

57

Appendix I: EC, 9 April 2014, COM(2014) 212 final EXPLANATORY MEMORANDUM 1.

CONTEXT OF THE PROPOSAL

Improving the business environment for all companies, and in particular for SMEs, is one of the main priorities of the EU’s ten-year growth strategy, Europe 20201 -making business easier and better. A number of actions relevant to SMEs were set out in the Communication on “An Integrated Industrial Policy for the Globalisation Era”2, one of Europe 2020’s seven key flagship initiatives. The review of the Small Business Act3 and the Single Market Acts I4 and II5 also included actions designed to improve access to finance and to further reduce the costs of doing business in Europe. Companies find it costly and difficult to be active across borders and only a small number of SMEs invests abroad. The reasons for this include the diversity of national legislations, in particular differences in national company laws, and the lack of trust in foreign companies among customers and business partners. In order to overcome the lack of trust, companies often establish subsidiaries in other Member States. The advantage of this being that they are able to provide customers with the brand and reputation of the parent company, whilst also offering them the security of dealing with a company which has the legal status of a national rather than foreign company. Establishing a company abroad involves, among others, the costs of meeting legal and administrative requirements in other countries, which are frequently different to what companies are used to “in the home country”. Those costs (including the additional necessary legal advice and translation) are likely to be particularly high for groups of companies, since any parent company, and particularly an SME parent, is presently faced with different requirements for each country in which it wishes to establish a subsidiary. European small and medium-sized enterprises (SMEs) - have an essential role to play in strengthening the EU economy. However, they still face a number of obstacles, which hamper their full development within the Internal Market, and therefore prevent them from making their full potential contribution to the EU economy. The European Commission aimed to address these costs in its 2008 proposal for a European Private Company Statue (SPE).6 This proposal was intended to offer SMEs an instrument facilitating their cross-border activities, which would be simple, flexible and uniform in all Member States. It was issued in a response to a number of calls from businesses for the creation of a truly European form of a private limited liability company. Despite strong support from the business community it has not been, however, possible to find a compromise allowing for the unanimous adoption of the Statute among Member States. The Commission decided that it would withdraw the SPE proposal (the REFIT exercise7) and instead announced to come up with the proposal of an alternative measure designed to address at least some of the problems addressed by the SPE. This approach is consistent with the 2012 Action

1 2 3 4 5 6 7

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COM(2010) 2020, 3.3.2010. COM(2010) 614. COM(2011) 78, 23.2.2011. COM(2011) 206, 13.4.2011. COM(2012) 573, 3.10.2012. Proposal for a Council Regulation on the Statute for a European private company, COM(2008) 396. The withdrawal of the SPE proposal was announced in the Annex to the Communication on “Regulatory Fitness and Performance (REFIT): Results and Next Steps”, COM(2013)685, 2.10.2013.

Appendix I: EC, 9 April 2014, COM(2014) 212 final Plan on European company law and corporate governance8, which reaffirmed the Commission’s commitment to launch other initiatives, further to the SPE proposal, in order to enhance cross-border opportunities for SMEs. The overall objective of this proposal, which provides an alternative approach to the SPE, is to make it easier for any potential company founder, and in particular for SMEs, to set-up companies abroad. This should encourage and foster more entrepreneurship and lead to more growth, innovation and jobs in the EU. The proposal would facilitate cross-border activities of companies, by asking Member States to provide in their legal systems for a national company law form that would follow the same rules in all Member States and would have an EU-wide abbreviation - SUP (Societas Unius Personae). It would be formed and operate in compliance with the harmonised rules in all Member States which should diminish set-up and operational costs. In particular, the costs could be reduced by the harmonised registration procedure, a possibility of on-line registration with a uniform template of articles of association and a low legal capital required for the set-up. The creditors would be protected by the obligation imposed on the SUP directors (and in some cases on the SUP single-member) to control distributions. To enable businesses to reap the full benefits of the internal market, Member States should not require that an SUP's registered office and its central administration be necessarily located in the same Member State. In parallel to this proposal, the Commission is also carrying out related work aimed at improving legal certainty for companies and more generally regarding the law applicable to them when operating in other Member States, in line with the 2009 European Council’s Stockholm Programme on an open and secure Europe serving and protecting citizens9. This proposal, once adopted, will repeal Directive 2009/102/EC and amend Regulation 1024/201210 in order to allow for the use of the Internal Market Information System (IMI). 2.

CONSULTATIONS ASSESSMENT

WITH

INTERESTED

PARTIES

AND

IMPACT

The initiative builds on the research conducted in the preparation of previous EU initiatives such as the 2008 SPE proposal and on a number of relevant consultations and discussions which have taken place subsequently to this proposal. As a part of the reflection process on the future of EU company law, in April 2011 the Reflection Group of company law experts published a report with a number of recommendations.11 The report called for increased efforts to simplify the legal regime applicable to SMEs. It mentioned in particular the need to simplify the formalities before a company can be established (e.g. registration, access to electronic procedures). The report also proposed introducing a simplified template for single-member companies across the EU,

8 9 10

11

COM(2012) 740, 12.12.2012; “Action Plan: European company law and corporate governance – a modern legal framework for more engaged shareholders and sustainable companies”. The Stockholm Programme – An Open and Secure Europe Serving and Protecting Citizens (2010/C115/01) Regulation (EU) No 1024/2012 of the European Parliament and of the Council of 25 October 2012 on administrative cooperation through the Internal Market Information System (IMI) (OJ L 316, 14.11.2012, p. 1). The Report of the Reflection Group: http://ec.europa.eu/internal_market/company/docs/modern/reflectiongroup_report_en.pdf.

59

Appendix I: EC, 9 April 2014, COM(2014) 212 final which would allow both single shareholder start-ups and holding companies with wholly owned subsidiaries to reduce transaction costs and avoid unnecessary formalities. On the basis of this report, the Commission launched a broad public consultation on the future of European company law in February 2012. The conclusion included the opinions of interested parties on possible measures to provide further support to European SMEs at EU level. Nearly 500 responses were received, from a wide range of stakeholders including public authorities, trade unions, business federations, investors, academics and individuals. A vast majority were in favour of Commission actions supporting SMEs, but views differed as to the means to achieve it. The Commission has also benefited from input from company law experts involved in the Reflection Group, e.g. as regards advice on the key aspects of the potential future Directive on single-member companies. A more detailed on-line public consultation on single-member companies was launched in June 201312, examining whether the harmonisation of national rules on single-member companies could provide companies, and in particular SMEs, with simpler and more flexible rules and reduce their costs. A total of 242 responses were received from a broad range of stakeholders including companies, public authorities, trade unions, business federations, universities and individuals. Of those respondents who expressed an opinion 62% of respondents considered that the harmonisation of rules for single-member private limited liability companies could facilitate cross-border activities of SMEs; 64% considered that such an initiative should include rules relating to on-line registration with a standardised registration form throughout the EU. On 13 September 2013, the Commission’s Internal Market and Services Directorate-General met a number of EU business representatives13. Most participants supported the initiative emphasising the positive impact it could have on companies in the EU. However, they stressed that this initiative should not be considered as a fully-fledged alternative to the SPE and that the efforts towards the SPE should continue. Other stakeholders, such as notaries, were also generally supportive of the initiative, but raised a number of concerns relating specifically to the security of on-line registration of companies and to the need to guarantee the appropriate level of control over the procedure. In addition, some stakeholders were of the opinion that the reduction of the minimum capital requirement should be accompanied by appropriate measures e.g. a solvency test or restrictions on the distribution of dividends. The Impact Assessment carried out by the Commission discards a number of options at the outset (most notably, the introduction of a new supranational legal form; harmonisation of company law related to establishment of subsidiaries with only SMEs as founders or both in the form of public and private limited liability companies) due to their infeasibility and/or a lack of support from stakeholders. The options considered following the assessment envisaged the creation of forms of national company law for single-member private limited liability companies with harmonised conditions, in particular in respect of the registration process and the minimum capital requirement.

12 13

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http://ec.europa.eu/internal_market/consultations/2013/single-member-private-companies. Business Europe, Council of Notaries of the EU, European Small Business Alliance, Council of Bars and Law Societies of Europe, Chambre de Commerce et d’Industrie de région Paris et Ile-de-France, Association Nationale des Sociétés par Actions and Eurochambers.

Appendix I: EC, 9 April 2014, COM(2014) 212 final The chosen policy option, that would provide for the possibility of on-line registration, with the standard template for the articles of association, a minimum capital requirement of EUR 1, accompanied by a balance sheet test and a solvency statement, was chosen. Compared to the other policy options, it provides the best overall solution, as measured by its effectiveness in achieving the objectives (in particular a reduction in costs for companies), its efficiency and its level of coherence with EU policies. The Impact Assessment Board adopted an overall positive opinion on the Impact Assessment on 20 November 2013. The comments received from the Board resulted in the modification of the sections regarding: the problem definition and problem tree, the size of the market and the policy options and their impacts. In addition, the description of the situation in Member States was converted into tables and the summary of the results of the 2013 on-line consultation was added. In particular, following the opinion of the Impact Assessment Board, the Impact Assessment includes now the options on a minimum capital requirement and creditors' protection as well as regarding on-line registration and the use of the uniform template for the articles of association. Moreover, the size of the market concerned is showed more prominently in the Impact Assessment: there are around 21 million SMEs in the EU out of which approximately 12 million are limited liability companies and around half of them (5,2 million) are single-member private limited liability companies. 3.

LEGAL ELEMENTS OF THE PROPOSAL

Legal basis, subsidiarity and proportionality The proposal is based on Article 50 of the Treaty on the Functioning of the European Union (TFEU) which is the legal basis for the EU competence to act in the area of company law. In particular, Article 50(2)(f) TFEU provides for progressive abolition of restrictions on freedom of establishment as regards the conditions for setting-up subsidiaries. The draft proposal does not establish a new supra-national legal form for the single member company but rather contributes to the progressive abolition of restrictions on freedom of establishment as regards the conditions for setting up subsidiaries in the territories of Member States. In principle, the objective of the draft proposal could thus have been achieved through the independent adoption of identical laws by the Member States. Under these circumstances, Article 50 provides a sufficient legal basis for the proposal and recourse to Article 352 TFEU is not necessary. According to the principle of subsidiarity the EU should act only where it can provide better results than intervention at Member States’ level. The solutions adopted so far by individual Member States with regard to the reduction of setup costs have not been so far coordinated at EU level. Such coordination among Member States, which would aim at introducing in national legal systems identical requirements for a particular national company law form, although theoretically possible, also appears unlikely in the near future. Instead, it is likely that individual actions by Member States will continue to result in divergent outcomes, as illustrated in detail by the Impact Assessment. In particular, individual actions by Member States, most often, focus on their specific national context and usually would not seek to facilitate the cross-border establishments. For instance, a requirement of a physical presence before the notary or any other authority of the Member State of registration, although not directly discriminatory, has a different impact on residents and non-residents. The costs for foreign founders are likely to be more significant than for domestic founders. Also, on-line registration accessible in practice only to nationals or

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Appendix I: EC, 9 April 2014, COM(2014) 212 final residents, which appears acceptable in the national context, generates additional costs for foreign companies, which are not incurred by domestic ones. It appears, therefore, that without any action at EU level only non-harmonised national solutions would be available and SMEs would continue to face barriers making their expansion abroad more difficult and the resulting costs would in particular affect foreign founders. The simplification resulting from harmonised rules is theoretically possible to be achieved by Member States acting individually, but it is highly unlikely. In this context, the targeted EU intervention appears to comply with the principle of subsidiarity. As regards the principle of proportionality, the EU action should be appropriate to achieve the objectives of the policy pursued and should be limited to what is necessary to achieve them. It is appropriate to harmonise the conditions of setting-up and operation of single-member limited liability companies to achieve a higher cross-border participation of SMEs in the Internal Market. This action should facilitate and encourage the set-up of companies, and in particular lead to the increase of the number of subsidiaries within the EU. It does not go beyond what is necessary to achieve this objective, since it does not attempt to fully harmonise all aspects related to the operation of single-member limited liability companies, but is limited to those aspects which are the most important in the cross-border context.The new Directive, which repeals the existing Directive on single-member companies, also ensures that the content and form of the proposed EU action does not go beyond what is necessary and proportionate in order to achieve the regulatory objective. Detailed Explanation of the Proposal Part 1: General rules for single-member private limited liability Companies The general rules for single-member private limited liability companies apply to all companies listed in Annex I, including the companies referred to in the second part of this Directive (Articles 1-5). The Twelfth Council Company Law Directive 89/667/EEC, which was codified by Directive 2009/102/EC, has introduced a legal instrument allowing for the limitation of liability of a company with a single-member throughout the EU. Furthermore, the provisions of the first part of this Directive require disclosure of information about a single-member company in a register accessible to the public and regulate both decisions taken by the single member and contracts between the single member and the company. If a Member State also grants public limited liability companies the possibility of having a single shareholder, the rules of the first part of the Directive apply to those companies as well. Part 2: Specific rules for the Societas Unius Personae (SUP) Chapter 1: General provisions The provisions of the second part of this Directive apply to single-member private limited liability companies established in the form of an SUP (Article 6). Where a matter is not covered by this Directive, relevant national law should apply. Chapter 2: Formation of an SUP The Directive restricts the possible ways of founding an SUP to either establishing a company ex nihilo (founding an entirely new company) or converting a company which already exists under another company law form. Certain provisions for each of these two methods are made in the Directive (Articles 8 and 9) and the process of forming an SUP is also governed by national rules for private limited liability companies.

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Appendix I: EC, 9 April 2014, COM(2014) 212 final An SUP can be formed ex nihilo by any natural or legal person, even if the latter is a singlemember limited liability company. Member States should not prevent SUPs from being single-members in other companies. Only private limited liability companies listed in Annex I are allowed to form an SUP by conversion. A company which converts to an SUP preserves its legal personality. The Directive refers to national law with regard to conversion procedures. According to this Directive, an SUP must have its registered office and either its central administration or its principal place of business in the EU (Article 10). Chapter 3: Articles of association The Directive provides for the standard template for the articles of association, the use of which is obligatory in the case of on-line registration. It further sets out the minimum content of the template, as will be included in the implementing act to be adopted by the Commission (Article 11). The articles of association can be changed after registration, but the changes must comply with the provisions of the Directive and national law (Article 12). Chapter 4: Registration of an SUP Provisions relating to the registration procedure form the main part of this Directive being a critical issue in facilitating the establishment of subsidiaries in EU countries other than the home country of the company. The Directive requires Member States to offer a registration procedure that can be fully completed electronically at a distance without requiring the need of a physical presence of the founder before the authorities of Member State of registration. It must therefore also be possible for all communication between the body responsible for registration and the founder to be carried out electronically. The registration of the SUP must be completed within three working days in order to allow companies to be formed quickly (Article14). Moreover, the Directive contains an exhaustive list of documents and details which Member States may require for the registration of an SUP. After registration, the SUP may change the documents and details in accordance with the procedure specified by national law (Article 13). Chapter 5: Single share As an SUP has only one shareholder, it is only allowed to issue one share that cannot be split (Article 15). Chapter 6: Share capital The Directive prescribes that the share capital shall be at least EUR 1, or at least one unit of the national currency in Member State in which this is not the euro. Member States should not impose any maximum limits on the value of the single-share or the paid-up capital and should not require an SUP to build legal reserves. However, the Directive allows SUPs to build voluntary reserves (Article 16). The Directive also contains rules regarding distributions (e.g. dividends) to the single-member of the SUP. A distribution may take place if the SUP satisfies a balance-sheet test, demonstrating that after the distribution the remaining assets of the SUP will be sufficient to fully cover its liabilities. In addition, a solvency statement must be provided to the singlemember by the management body before any distribution is made. The inclusion of the two requirements in the Directive ensures a high level of protection of creditors, which should help the label ‘SUP’ to develop a good reputation (Article 18).

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Appendix I: EC, 9 April 2014, COM(2014) 212 final Chapter 7: Structure and operational procedures of an SUP The Directive covers the decision-making powers of the single member, the workings of the management body and the representation of the SUP in relation to third parties (Article 21). In order to facilitate cross-border activities of SMEs and other companies, the Directive grants the single-member to right to take decisions without the need to organise a general meeting and lists subjects that must be decided by the single member. The single-member should be able to take other decisions than mentioned by this Directive, including the delegation of its powers to the management body, if it is permitted by national law. Only natural persons can become directors of SUPs, unless the law of the Member State of registration allows legal persons to do so. The Directive includes certain provisions on the appointment and removal of directors. The directors are responsible for managing the SUP, and also represent the SUP in its dealings with third parties. It is envisaged that the SUP may be an attractive model for groups of companies and the Directive therefore allows the singlemember to give instructions to the management body. However, these instructions must comply with national laws protecting the interest or of other parties (Article 22). The SUP can be converted into another national legal form. In case the requirements of this Directive are no longer fulfilled, the SUP is required to either transform into another company law form or to dissolve. If it fails to do so, national authorities must have the power to dissolve the company (Article 25). Part 3: Final provisions The Directive requires the Member States to lay down appropriate penalties for breaches of the Directive, of national law or of the articles of association (Article 28). It also empowers the Commission to adopt delegated and implementing acts. In order to keep the list of company law forms in Member States up-to-date, the Commission will propose an amendment to Annex I, when necessary, through a delegated act, which will not require reopening of the Directive and going through the legislative procedure (Article 1 (2). Also, it is proposed to delegate the power to adopt two implementing acts to the Commission – with regard to the templates for registration and articles of association (Articles 11 (3) and 13 (2)). The templates contained in the implementing acts would be easier to adapt to changing business environment than the ones adopted in the ordinary legislative procedure. In drafting the templates, the Commission will be assisted by the Company Law Committee. The Directive repeals Directive 2009/102/EC which is replaced by this Directive and amends Regulation 1024/201214 in order to allow for the use of the Internal Market Information System (IMI) (Articles 29 and 30). Member States must transpose the provisions of this Directive no later than two years from the date of its adoption. In the meantime, the Commission will adopt the necessary implementing acts. Member States are invited to start the process of implementation immediately after the entry into force of the Directive.

14

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Regulation (EU) No 1024/2012 of the European Parliament and of the Council of 25 October 2012 on administrative cooperation through the Internal Market Information System (IMI) (OJ L 316, 14.11.2012, p. 1).

Appendix I: EC, 9 April 2014, COM(2014) 212 final 4.

EXPLANATORY DOCUMENTS

According to the Joint Political Declaration of 27 October 2011, the European Commission should only request explanatory documents if it can "justify on a case by case basis […] the need for, and the proportionality of, providing such documents, taking into account, in particular and respectively, the complexity of the directive and of its transposition, as well as the possible administrative burden". The Commission considers that in this particular case it is justified to ask Member States to provide it with explanatory documents in view of the existing implementation challenges that arise, inter alia, due to the considerable degree of variations in the ways in which company law is regulated in Member States (e.g. in civil codes, company law codes and companies acts). Implementation measures will have a number of effects at a national level, and will influence, for example national company law, the registration procedure, communications between the body responsible for registration and the founder, websites of the competent authorities and on-line e-identification procedure. In particular, the provisions of the second part of the Directive will most likely be transposed into several national acts. This could particularly be the case in Member States with more than one central business register. In this context, the notification of transposition measures will be essential to clarify the relationship between the provisions of this Directive and national transposition measures, and therefore to assess the conformity of national legislation with the Directive. The simple notification of individual transposition measures would not be self-explanatory and would not therefore allow the Commission to ensure that all the EU legal provisions were faithfully and fully implemented. The explanatory documents are necessary to gain a full understanding of the way in which Member States are transposing the provisions of the Directive into national law. Member States are encouraged to present the explanatory documents in the form of easily readable tables showing how the individual national measures adopted correspond to the provisions of the Directive. Given the above, the following recital is included in the proposed Directive: "In accordance with the Joint Political Declaration of Member States and the Commission on explanatory documents of 28 September 2011, Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified".

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Appendix I: EC, 9 April 2014, COM(2014) 212 final 2014/0120 (COD) Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on single-member private limited liability companies (Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 50 thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national Parliaments, Having regard to the opinion of the European Economic and Social Committee, Acting in accordance with the ordinary legislative procedure, Whereas: (1)

Directive 2009/102/EC of the European Parliament and of the Council of 16 September 2009 in the area of company law on single-member private limitedliability companies15, has made it possible for individual entrepreneurs to operate under limited liability throughout the Union.

(2)

Part I of this Directive takes over the provisions of Directive 2009/102/EC as regards all single-member limited liability companies. It requires that in case all shares come to be held by a single shareholder, its identity should be disclosed to the public by the entry in the register. This Directive also provides that decisions taken by the single shareholder exercising the power of the general meeting as well as the contracts between the shareholder and the company should be recorded in writing, unless they relate to contracts concluded under market conditions in the ordinary course of business.

(3)

Establishing single-member limited liability companies as subsidiaries in other Member States entails costs due to the diverse legal and administrative requirements which must be met in the Member States concerned. Such divergent requirements continue to exist among Member States.

(4)

The Commission Communication entitled "Integrated Industrial Policy for the Globalisation Era - Putting Competitiveness and Sustainability at Centre Stage"16 encourages the creation, growth and internationalisation of small and medium-sized enterprises (SMEs). This is important for the Union economy as SMEs account for two-thirds of employment in the Union and offer significant potential for growth and for the creation of jobs.

15

OJ L 258, 1.10.2009, p. 20 COM(2010) 614 final, 28.10.2010.

16

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Appendix I: EC, 9 April 2014, COM(2014) 212 final (5)

The improvement of the business environment, especially for SMEs, by reducing transaction costs in Europe, promoting clusters and promoting the internationalisation of SMEs, were the key elements of the initiative “Industrial policy for the globalisation era” outlined in the Commission Communication on the Europe 2020 strategy17.

(6)

In line with the Europe 2020 strategy, the Review of the Small Business Act for Europe18 advocated further progress in making smart regulation a reality, enhancing market access and promoting entrepreneurship, job creation and inclusive growth.

(7)

In order to facilitate the cross-border activities of SMEs and the establishment of single-member companies as subsidiaries in other Member States, the costs and administrative burdens involved in setting-up these companies should be reduced.

(8)

The availability of a harmonised legal framework governing the formation of singlemember companies, including the establishment of a uniform template for the articles of association should contribute to the progressive abolition of restrictions on freedom of establishment as regards the conditions for setting up subsidiaries in the territories of Member States and lead to a reduction in costs.

(9)

Single-member private limited liability companies formed and operating in compliance with this Directive should add to their names a common, easily identifiable abbreviation – SUP (Societas Unius Personae).

(10)

To respect Member States’ existing traditions of company law, flexibility should be afforded to them as regards the manner and extent to which they wish to apply harmonised rules governing the formation and operation of SUPs. Member States may apply Part 2 of this Directive to all single-member private limited liability companies so that all such companies would operate and be known as SUPs. Alternatively, they should provide for the establishment of an SUP as a separate company law form which would exist in parallel with other forms of single-member private limited liability company provided for in national law.

(11)

To ensure that the harmonised rules are applied as widely as possible, both natural and legal persons should be entitled to form SUPs. For the same reason private limited liability companies that were not formed as SUPs should be able to benefit from the SUP framework. They should be able to be transformed into SUPs in accordance with applicable national law.

(12)

To enable business to enjoy the full benefits of the internal market, Member States should not require the registered office of an SUP and its central administration to be in the same Member State.

(13)

In order to make it easier and less costly to establish subsidiaries in other Member States, the founders of SUPs should not be obliged to be physically present before any Member State's registration body. The register should be accessible from any Member State and a company founder should be able to make use of existing points of single contact created under Directive 2006/123/EC of the European Parliament and of the

17

COM(2010) 2020 final, 3.3.2010. COM(2011) 78 final, 23.2.2011.

18

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Appendix I: EC, 9 April 2014, COM(2014) 212 final Council19 as a gateway to national on-line registration points. It should, therefore, be possible to establish SUPs from distance and fully by electronic means. (14)

In order to ensure a high level of transparency, all documents registered at the register of companies should be made publicly available via the system of interconnection of registers referred to in Article 4a(2) of Directive 2009/101/EC of the European Parliament and of the Council20.

(15)

To ensure a high level of uniformity and on-line accessibility, the documents used to register SUPs should follow a uniform format available in all official languages of the Union. Each Member State may require registration to be completed in an official language of the Member State concerned, but are also encouraged to allow for registration in other official languages of the Union.

(16)

In line with the recommendations set out in the European Commission's 2011 Review of the Small Business Act21 to reduce the start-up time for new enterprises, SUPs should receive the certificate of registration in the relevant register of a Member State within three working days. This facility should only be available to the newly created companies and not to existing entities that wish to convert to SUPs as the registration of such entities by their very nature, may take more time.

(17)

Each Member State should designate a competent electronic registration point. To support the designated bodies in exchanging information about the identity of the founder, Member States may use the means provided for under Regulation (EU) No 1024/2012 of the European Parliament and of the Council22.

(18)

Provisions concerning the establishment of single-member private limited companies should not affect the right of Member States to maintain existing rules concerning the verification of the registration process, provided that the whole registration procedure may be completed electronically and at a distance.

(19)

The use of the template of articles of association should be required if the SUP is registered electronically. If another form of registration is allowed by national law, the template does not have to be used, but the articles of association need to comply with the requirements of the Directive. The minimum capital required for the formation of a single-member private limited liability company varies among the Member States. Most Member States have already taken steps towards abolishing the minimum capital requirement or keeping it at a nominal level. The SUPs should not be subject to a high mandatory capital requirement, since this would act as a barrier to their formation. Creditors, however, should be protected from excessive distributions to singlemembers, which could affect the capacity of an SUP to pay its debts. Such protection should be ensured by the imposition of minimum balance sheet requirements (liabilities not exceeding assets) and the solvency statement prepared and signed by

19

Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market (OJ L 376, 27.12.2006, p. 36). Directive 2009/101/EC of the European Parliament and of the Council of 16 September 2009 on coordination of safeguards which, for the protection of the interests of members and third parties, are required by Member States of companies within the meaning of the second paragraph of Article 48 of the Treaty, with a view to making such safeguards equivalent (OJ L 258, 1.10.2009, p. 11). COM(2011) 78 final, 23.2.2011. Regulation (EU) No 1024/2012 of the European Parliament and of the Council of 25 October 2012 on administrative cooperation through the Internal Market Information System and repealing Commission Decision 2008/49/EC ('the IMI Regulation') (OJ L 316, 14.11.2012, p. 1).

20

21 22

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Appendix I: EC, 9 April 2014, COM(2014) 212 final the management body. There should be no further restrictions placed on the use of capital by the single-member. (20)

In order to prevent abuse and simplify control SUPs should neither issue any further shares nor should the single share be split. Nor should SUPs acquire or own their single share whether directly or indirectly. Rights attached to the single share should only be exercised by one person. Where Member States allow for co-ownership of a single share, only one representative should be entitled to act on behalf of the coowners and be considered as a single-member for the purpose of this Directive.

(21)

In order to ensure a high level of transparency, decisions taken by the single-member of an SUP exercising the powers of the general meeting should be recorded in writing. Such decisions should be disclosed to the company and their written record kept for at least five years.

(22)

The management body of an SUP should be composed of one or more directors. Only natural persons should be appointed as directors, unless the Member State of registration allows legal persons to act as directors.

(23)

In order to facilitate the operation of groups of companies, instructions issued by the single-member to the management body should be binding. Only where following such instructions would entail violating the national law of the Member State in which the company is registered, the management body should not follow them. With the exception of any provision in the articles of association which limit the company's representation to all directors jointly, any other limitation of powers of the directors, following from the articles of association, should not be binding insofar as it concerns third parties.

(24)

The Member States should lay down rules on penalties applicable to the infringements of the provisions of this Directive and should ensure that they are implemented. Those penalties should be effective, proportionate and dissuasive.

(25)

In order to reduce the administrative and legal costs associated with the formation of companies and to ensure a high level of consistency in the registration process across Member States, implementing powers to adopt the templates for registration and for the articles of association of an SUP should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council23.

(26)

In order to accommodate future changes to the laws of Member States and to Union legislation concerning company types, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission to update the list of undertakings contained in Annex I. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at experts' level. The Commission, when preparing and drawing-up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and Council.

23

Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).

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Appendix I: EC, 9 April 2014, COM(2014) 212 final (27)

In accordance with the Joint Political Declaration of Member States and the Commission of 28 September 2011 on explanatory documents24, Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified.

(28)

Since the objectives of this Directive, namely, to facilitate the establishment of singlemember private limited liability companies, including SUPs cannot be sufficiently achieved by the Member States, but can rather, by reason of their scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary to achieve those objectives.

(29)

Since substantial amendments are being made to Directive 2009/102/EC, in the interests of clarity and legal certainty that Directive should be repealed.

HAVE ADOPTED THIS DIRECTIVE:

24

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OJ C 369, 17.12.2011, p. 14.

Appendix I: EC, 9 April 2014, COM(2014) 212 final

Part 1 General Provisions Article 1 Scope 1.

2.

The coordination measures provided for in this Directive shall apply to the laws, regulations and administrative provisions of the Member States relating to: (a)

the types of company listed in Annex I;

(b)

Societas Unius Personae (SUP) referred to in Article 6.

Member States shall inform the Commission within two months of any changes to the types of private limited companies provided for in their national law affecting the contents of Annex I. In such a case the Commission shall be empowered to adapt, by means of delegated acts in accordance with Article 26, the list of companies contained in Annex I.

3.

Where a Member State allows other companies than those listed in Annex I to be established as or become single-member companies, as defined in Article 2 (1), Part 1 of this Directive shall also apply to them. Article 2 Definitions

For the purposes of this Directive, the following definitions shall apply: (1)

"single-member company" means a company whose shares are held by a single person;

(2)

“conversion” means any process by which an existing company becomes or ceases to be an SUP;

(3)

"distribution" means any financial benefit derived directly or indirectly from the SUP by the single-member, in relation to the single share , including any transfer of money or property. Distributions may take the form of a dividend, and may be made through a purchase or sale of property or by any other means;

(4)

"articles of association" means articles of association or statutes or any other rules or instruments of incorporation establishing a company;

(5)

"director" means any member of the management body either formally appointed or who de facto acts as a director. Article 3 Disclosure

Where a company becomes a single-member company because all its shares come to be held by a single person, that fact, together with the identity of the sole member, must either be recorded in the file or entered in the register as referred to in Article 3(1) and (3) of Directive 2009/101/EC or be entered in a register kept by the company and accessible to the public.

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Appendix I: EC, 9 April 2014, COM(2014) 212 final Article 4 General meeting 1.

The single-member shall exercise the powers of the general meeting of the company.

2.

Decisions taken by the single-member exercising powers referred to in paragraph 1 shall be recorded in writing. Article 5 Contracts between the single member and the company

1.

Contracts between the single-member and the company shall be recorded in writing.

2.

Member States may decide not to apply paragraph 1 to contracts concluded under market conditions in the ordinary course of business which are not detrimental to the single-member company.

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Appendix I: EC, 9 April 2014, COM(2014) 212 final

Part 2 Societas Unius Personae Chapter 1 Legal form and General Principles Article 6 Legal form 1.

Member States shall provide for the possibility of registering private single-member limited liability companies in accordance with the rules and procedures set out in this Part. Such companies shall be referred to as SUPs.

2.

Member States shall not hinder SUPs from being single-members in other companies. Article 7 General principles

1.

Member States shall grant SUPs full legal personality.

2.

Member States shall provide that the single-member shall not be liable for any amount exceeding the subscribed share capital.

3.

The name of a company, which has the legal form of an SUP, shall be followed by the abbreviation ‘SUP’. Only an SUP may use the abbreviation ‘SUP’.

4.

The SUP, and its articles of association, shall be governed by the national law of the Member State where the SUP is registered (hereinafter ‘applicable national law’).

5.

Member States shall provide that the SUP is set up for an unlimited period of time, unless provided otherwise in the articles of association.

Chapter 2 Formation Article 8 Incorporation An SUP may be incorporated by a natural or legal person. Article 9 Conversion into an SUP 1.

Member States shall ensure that an SUP may be formed by the conversion of the types of companies listed in Annex I.

2.

The formation of an SUP by conversion shall not result in any winding-up procedures, any loss or interruption of the legal personality or affect any rights or obligations existing prior to the conversion.

3.

Member States shall ensure that a company shall not become an SUP unless:

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Appendix I: EC, 9 April 2014, COM(2014) 212 final (a)

a resolution of its shareholders is passed or a decision of its single-member is taken authorising the conversion of the company into an SUP;

(b)

its articles of association comply with the applicable national law; and

(c)

its net assets are at least equivalent to the amount of its subscribed share capital plus those reserves which may not be distributed according to its articles of association. Article 10 Seat of the SUP

An SUP shall have its registered office and either its central administration or its principal place of business in the Union.

Chapter 3 Articles of Association Article 11 Uniform template of articles of association 1.

Member States shall require that the articles of association of the SUP shall cover at least the subject matters provided for in paragraph 2.

2.

The uniform template of articles of association shall cover the questions of formation, shares, share capital, organisation, accounts and the dissolution of an SUP. It shall be made available by electronic means.

3.

The Commission shall adopt the uniform template of articles of association by an implementing act. That implementing act shall be adopted in accordance with the examination procedure referred to in Article 27. Article 12 Amendments to the articles of association

1.

An SUP may, after registration, amend its articles of association by electronic or other means in accordance with applicable national law. This information shall be entered in the register of companies in the Member State of registration.

2.

The amended articles of association of the SUP shall cover at least the subject matters provided for in the uniform template referred to in Article 11(2).

Chapter 4 Registration Article 13 Formalities relating to registration 1.

Member States may only require for the registration of an SUP the following information or documentation: (a)

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the name of the SUP;

Appendix I: EC, 9 April 2014, COM(2014) 212 final

2.

(b)

the address of the registered office, the central administration and/or the principal place of business of the SUP;

(c)

the business object of the SUP;

(d)

the names, the addresses and any other information necessary to identify the founding member and, where applicable, the beneficial owner and a representative that registers the SUP on the member’s behalf;

(e)

the names, addresses and any other information necessary to identify the persons who are authorised to represent the SUP in dealings with third parties and in legal proceedings and whether they have not been disqualified by laws of Member States referred to in Article 22;

(f)

the share capital of the SUP;

(g)

the nominal value of the single-share, where relevant;

(h)

the articles of association of the SUP;

(i)

where applicable, the decision authorising the company's conversion into an SUP.

The Commission shall establish, by means of an implementing act, a template to be used for the registration of SUPs in the registers of companies of the Member States in accordance with paragraph 1. That implementing act shall be adopted in accordance with the examination procedure referred to in Article 27. Article 14 Registration

1.

An SUP shall be registered in the Member State in which it is to have its registered office.

2.

An SUP shall acquire legal personality on the date on which it is entered in the register of companies of the Member State of registration.

3.

Member States shall ensure that the registration procedure for newly incorporated SUPs may be completed electronically in its entirety without it being necessary for the founding member to appear before any authority in the Member State of registration (on-line registration).

4.

National on-line registration web-sites shall include links to the registration web-sites in other Member States. Member States shall ensure that the following templates are used for on-line registration: (a)

the uniform template of articles of association referred to in Article 11, and

(b)

the registration template referred to in Article 13.

Member States shall issue a certificate of registration confirming that the registration procedure has been completed. The certificate of registration shall be issued no later than three working days from the receipt of all the necessary documentation by the competent authority. 5.

Member States may lay down rules for verifying the identity of the founding member, and any other person making the registration on the member's behalf, and the acceptability of the documents and other information submitted to the registration

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Appendix I: EC, 9 April 2014, COM(2014) 212 final body. Any identification issued in another Member State by the authorities of that State or on their behalf, including identification issued electronically, shall be recognised and accepted for the purposes of the verification by the Member State of registration. Where, for the purposes of the first subparagraph, it is necessary for Member States to have recourse to administrative cooperation between them, they shall apply Regulation (EU) No 1024/2012. 6.

Member States shall not make the registration of an SUP conditional on obtaining any licence or authorisation. The registration of the SUP, all documents provided during the process of registration and subsequent changes to them, shall be disclosed in the relevant register of companies immediately after registration.

Chapter 5 Single share Article 15 Single share 1.

An SUP shall not issue more than one share. This single share shall not be split.

2.

An SUP shall not, directly or indirectly, acquire or own its single share.

3.

Where in accordance with the applicable national law, a single share of an SUP is owned by more than one person, those persons shall be regarded as one member in relation to the SUP. They shall exercise their rights through one representative and shall notify the management body of the SUP, without undue delay, of the name of that representative and any change thereto. Until such notification, the exercise of their rights in the SUP shall be suspended. The owners of the single share shall be jointly and severally liable for the commitments made by the representative. The identity of the representative shall be recorded in the relevant register of companies.

Chapter 6 Share Capital Article 16 Share capital 1.

The share capital of an SUP shall be at least EUR 1. In Member States in which the euro is not the national currency, the share capital shall be at least equivalent to one unit of that Member States’ currency.

2.

The capital of the SUP shall be fully subscribed.

3.

Member States shall not impose any maximum value on the single share.

4.

Member States shall ensure that the SUP is not subject to rules requiring the company to build up legal reserves. Member States shall allow companies to build reserves in accordance with their articles of association.

5.

Member States shall require letter and order forms whether in paper form or in any other medium, to state the capital subscribed and paid up. If the company has a website, that information shall also be made available on it.

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Appendix I: EC, 9 April 2014, COM(2014) 212 final Article 17 Consideration for the share 1.

The consideration for the share shall be fully paid up at the moment of registration of an SUP.

2.

In case of on-line registration, the consideration shall be paid into the bank account of the SUP. The subsequent increase or decrease of share capital shall be allowed at least in cash and in kind.

3.

In case of cash payment, the Member State of registration of an SUP shall accept payment into a bank account of a bank operating in the Union as evidence of payment or increase in the share capital. Article 18 Distributions

1.

An SUP may, on the basis of a recommendation from the management body, make a distribution to the single-member provided that it complies with paragraphs 2 and 3.

2.

An SUP shall not make a distribution to the single-member if on the closing date of the last financial year the net assets as set out in the SUP's annual accounts are, or following such a distribution would become, lower than the amount of the share capital plus those reserves which may not be distributed under the articles of association of the SUP. The calculation shall be based on the most recently adopted balance sheet. Any change in the share capital or in the part of the reserves which may not be distributed occurring subsequently to the closing date of the financial year shall also be taken into account.

3.

The SUP shall not make a distribution to the single-member if it results in the SUP being unable to pay its debts as they become due and payable after distribution. The management body must certify in writing that, having made full inquiry into the affairs and prospects of the SUP, it has formed a reasonable opinion that the SUP will be able to pay its debts as they fall due in the normal course of business in the year following the date of the proposed distribution (a "solvency statement"). The solvency statement must be signed by the management body and a copy of it must be provided to the single member 15 days before the resolution on the distribution is adopted.

4.

The solvency statement shall be disclosed. If the company has a website, this information shall also be made available on it.

5.

Any director shall be personally liable for recommending or ordering a distribution if that director knew, or, in view of the circumstances, ought to have known that the distribution would be contrary to paragraph 2 or 3. The same applies to the singlemember with regard to any decision to make a distribution referred to in Article 21. Article 19 Recovery of distributions wrongfully made

Member States shall ensure that any distributions paid out contrary to Article 18(2) or (3) are refunded to the SUP, where it is established that the single-member knew, or, in view of the circumstances, ought to have known that the distribution would be contrary to Article 18(2) or (3).

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Appendix I: EC, 9 April 2014, COM(2014) 212 final Article 20 Share capital reduction Member States shall ensure that reductions of the share capital of an SUP that lead de facto to a distribution to the single-member comply with Article 18(2) and (3).

Chapter 7 Organisation Article 21 Decisions of the single member 1.

Decisions taken by the single-member of an SUP shall be recorded in writing by the single-member. Records of decisions taken shall be kept for at least five years.

2.

A single member shall decide on the following: (a)

approval of the annual accounts;

(b)

distribution to the member;

(c)

increase of share capital;

(d)

reduction of share capital;

(e)

appointment and removal of directors;

(f)

remuneration, if any, of directors, including when the single member is a director;

(g)

change of the registered office;

(h)

appointment and removal of the auditor, where applicable;

(i)

conversion of the SUP into another company form;

(j)

dissolution of the SUP;

(k)

any amendments to the articles of association.

The single member may not delegate the decisions referred to in the first subparagraph to the management body. 3.

The single-member shall be allowed to take decisions without calling a general meeting. No formal restrictions shall be imposed by Member States on the power of the single member to take decisions, including as regards the place and the time at which such decisions may be taken. Article 22 Management

1.

An SUP shall be managed by a management body comprising one or more directors.

2.

The number of directors shall be specified in the articles of association.

3.

The management body may exercise all the powers of the SUP that are not exercised by the single member or, where applicable, by the supervisory board.

4.

The directors shall be natural persons, or legal persons, where allowed by applicable national law. They shall be appointed for an unlimited period of time, unless

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Appendix I: EC, 9 April 2014, COM(2014) 212 final otherwise specified in the single-member’s decision appointing them or in the articles of association. The single member may become a director. 5.

The single-member may remove a director, by means of a decision, at any time. Once removed from the office, a director shall be immediately deprived of the authority and power to act as a director on behalf of the SUP. Any other rights or obligations under the applicable national law shall not be affected.

6.

A natural person who is disqualified by either the law or a judicial or administrative decision of the Member State of registration cannot serve as a director. If the director has been disqualified by a judicial or administrative decision taken in another Member State and this decision remains in force, the decision must be disclosed upon registration in accordance with Article 13. A Member State may refuse, as a matter of public policy, the registration of a company if a director is the subject of an outstanding disqualification in another Member State. Where, for the purposes of this paragraph, Member States need to have recourse to administrative cooperation between them, they shall apply Regulation (EU) No 1024/2012.

7.

Any person, whose directions or instructions the directors of the company are accustomed to follow, without having been formally appointed, shall be considered a director as regards all duties and liabilities to which directors are subject. A person shall not be considered a director solely on the grounds that the management body acts on advice given by him or her in a professional capacity. Article 23 Shareholder’s instructions

1.

The single-member shall have the right to give instructions to the management body.

2.

Instructions given by the single-member shall not be binding for any director insofar as they violate the articles of association or the applicable national law. Article 24 Authority to act and enter into agreements on behalf of an SUP

1.

An SUP's management body, comprising one or more directors, shall have the authority to represent the SUP, including when entering into agreements with third parties and in legal proceedings.

2.

Directors may represent the SUP individually, including when entering into agreements with third parties and in legal proceedings, unless the articles of association provide for joint representation. Any other limitation of the powers of the directors, by the articles of association, by a decision of the single-member or by a decision of the management body, may not be relied upon in any dispute with third parties, even if that limitation has been disclosed. Acts undertaken by the management body shall be binding on the SUP, even if they are not within the object of the SUP.

3.

The management body may delegate the right to represent the SUP insofar as it is allowed by the articles of association. The duty of the management body to file for bankruptcy or to commence any similar insolvency procedure shall not be delegated.

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Appendix I: EC, 9 April 2014, COM(2014) 212 final Article 25 Conversion of an SUP into another company law form 1.

Member States shall ensure that their national law requires SUPs to be dissolved or transformed into another form of company if SUPs cease to comply with the requirements laid down in this Directive. If an SUP fails to take appropriate steps to convert into another company law form, the competent authority shall be granted the powers necessary to dissolve the SUP.

2.

An SUP may, at any moment, decide to convert into another company law form following the procedure laid down by applicable national law.

3.

A SUP that has been converted into another company law form or dissolved in accordance with paragraphs 1 or 2, shall cease to use the abbreviation SUP.

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Appendix I: EC, 9 April 2014, COM(2014) 212 final

Part 3 Final Provisions Article 26 Exercise of delegated powers 1.

The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article.

2.

The delegation of power referred to in Article 1(2) shall be conferred on the Commission for an indeterminate period of time.

3.

The delegation of power referred to in Article 1(2) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.

4.

As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.

5.

A delegated act adopted pursuant to Article 1(2) shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of two months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or the Council. Article 27 Committee procedure

1.

The European Commission shall be assisted by the Company Law Committee. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011.

2.

Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply. Article 28 Penalties

Member States shall provide for penalties applicable to infringements of the national provisions adopted to implement this Directive and shall take all the measures necessary to ensure that those penalties are enforced. The penalties provided for shall be effective, proportionate and dissuasive.

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Appendix I: EC, 9 April 2014, COM(2014) 212 final Article 29 Repeal 1.

Directive 2009/102/EC is repealed 24 months after the date of adoption of this Directive plus one day.

2.

References to the repealed Directive shall be construed as references to this Directive and shall be read in accordance with the correlation table in Annex II. Article 30 Amendment to Regulation (EU) No 1024/2012 In the Annex to Regulation (EU) No 1024/2012, the following point 6 is added: "6. Directive […/…/EU] of the European Parliament and of the Council of […] on Single-Member Private Limited Liability Companies*: Articles 14 and 22. _________ * OJ L […]." Article 31 Transposition

1.

Member States shall adopt and publish 24 months after the date of adoption of this Directive at the latest, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions.

2.

They shall apply those provisions from 24 months after the date of adoption of this Directive plus one day. When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made. 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 32 Entry into force

The Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. Article 33 Addressees This Directive is addressed to the Member States. Done at Brussels,

For the European Parliament The President

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For the Council The President

Appendix II

Council of the European Union Brussels, 21 May 2015 (OR. en)

PU

8811/15 LIMITE

C

LI

DRS 39 CODEC 706

B

Interinstitutional File: 2014/0120 (COD)

NOTE From: To:

General Secretariat of the Council Council

No. prev. doc.: No. Cion doc.:

8320/15 DRS 35 CODEC 601 8842/15 DRS 52 CODEC 1088

Subject:

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

I.

INTRODUCTION

1.

On 10 April 2014, the Commission submitted a proposal for a Directive of the European Parliament and of the Council on single-member private limited liability companies. The overall objective of this proposal is to make it easier to set-up companies across borders between Member States. This should encourage and foster more entrepreneurship and lead to more growth, innovation and jobs in the EU. The proposal would facilitate cross-border activities of companies, by asking Member States to provide in their legal systems for a national company law form that would follow similar rules in all Member States and would have an EU-wide abbreviation SUP (Societas Unius Personae).

83

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 II.

STATE OF PLAY

2.

The Working Party on Company Law examined the proposal at fourteen occasions during the Hellenic, Italian and Latvian Presidencies. The latest Working Party meeting (Attachés) took place on 27 April 2015.

3.

The European Parliament's Legal Affairs Committee (JURI) is due to vote its report on 15 September 2015.

4.

On the basis of in-depth discussions at expert level, the Presidency submitted to the Permanent Representatives Committee on 8 May 2015 a compromise package to be adopted as a general approach by the Competitiveness Council on 28 May 2015 and to serve as basis for forthcoming negotiations with the European Parliament aiming at exploring the possibilities for a first-reading agreement.

5.

At that meeting of the Committee, some delegations expressed concerns about the risks that could be associated with this Directive (on-line registration, minimum capital and seat) in particular as regards money laundering and threats to public order. Most other delegations also examined those risks but have come to different conclusions. In this context, the Presidency undertook to clarify the understanding of the proposed compromise package, including in a non-paper.

6.

The main elements of the compromise are described in Section III. Limited editorial changes in the preamble compared to doc. 8320/15 are marked in bold underlined and strike-through.

7.

It is understood that the text including the recitals will be amended during the trilogue process and that the Council preparatory bodies will be kept fully involved.

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Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 III. MAIN ELEMENTS OF THE COMPROMISE

Following the discussions at the Committee of Permanent Representatives on 8 May 2015, the Presidency re-assessed the joint effect of provisions on minimum capital, seat and on-line registration in the compromise package. The Presidency came to the conclusion that the risks of any misuses have been minimised, as the compromise text: - provides for a whole set of guarantees related to on-line registration, - is without prejudice to anti-money laundering rules (and even improves them), - leaves the question of seat of companies to national laws, and - allows Member States to control distributions and to oblige companies to build up legal reserves. As the text currently stands, any risks related to SUP are not bigger than they are for any other national company law types. The main elements of the compromise package are the following:

A.

On-line registration (Articles 11, 13, 14, 14b) The main innovation of this Directive is the possibility for SUPs to be registered entirely online using on-line templates provided by Member States. Most delegations see such a possibility as an important opportunity offered by the Directive to foster economic activity, growth and jobs in the EU. It also contributes to the Digital Agenda of the EU.

85

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 A number of delegations presented their own existing national schemes for on-line registration (which exist in sixteen Member States), and many good practices have been exchanged at several occasions in the Working Party on Company Law. Among delegations having put in place a system of on-line registration, none has reported insurmountable difficulties. Although putting in place such system had presented a number of challenges, the Member States concerned mainly highlighted the benefits for citizens and public administrations alike. However it should be noted that some delegations still have a number of concerns and see the introduction of on-line registration as presenting security risks. In order to address those concerns, provisions (see Articles 11, 13, 14 and new Article 14b) and corresponding recitals have been added to the compromise text in the Annex with a view to making on-line registration as secure and compliant with existing national rules as possible, inter alia by adding a reference to the e-IDAS Regulation. The Presidency considers that the current text represents a well-balanced compromise between the various interests and concerns that have been expressed. Any further change to the on-line registration system would devoid it of its substance.

B.

One euro minimum capital requirement (Article 16) The minimum capital required for the formation of a single-member private limited liability company varies among Member States. The one-euro capital requirement is essential in order to facilitate the creation of start-ups. The compromise mitigates the risks presented by this requirement by allowing Member States to require the SUP to build up legal reserves as a percentage of the profits made by the SUP and/or up to the amount of minimum share required for other private limited liability companies listed in Annex I to the proposed Directive.

86

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 Moreover, in order to better protect creditors and other stakeholders, Article 18 requires Member States to put in place mechanisms in national law that would prevent SUPs from being unable to pay their debts after making distributions. The Presidency considers that this represents a well-balanced compromise that allows for entrepreneurs to set up businesses without endangering legitimate expectations and stability for creditors and other stakeholders. C.

Seat (Article 10, deleted) Provisions on the seat have been deleted by the Presidency. This leaves unchanged the current legal situation. This Directive is without prejudice to any national laws governing matters outside its scope, such as matters related to labour law, posting of workers, workers' participation in the management or supervisory bodies of companies, right to information and consultation, taxation, accounting or insolvency proceedings (Article 7(4) and recital (10a) ).

IV.

CONCLUSION In the light of the above, the Council is invited to examine the compromise proposal presented by the Presidency (in Annex) with a view to reaching a general approach at its meeting on 28 May 2015. ____________________

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Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 ANNEX

Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on single-member private limited liability companies (Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 50 thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national Parliaments, Having regard to the opinion of the European Economic and Social Committee, After consulting the European Data Protection Supervisor, Acting in accordance with the ordinary legislative procedure, Whereas: (1)

Directive 2009/102/EC of the European Parliament and of the Council of 16 September 2009 in the area of company law on single-member private limited-liability companies 1, has made it possible for individual entrepreneurs to operate under limited liability throughout the Union.

1

88

OJ L 258, 1.10.2009, p. 20

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 (2)

Part I of this Directive takes over the provisions of Directive 2009/102/EC as regards all single-member limited liability companies. It requires that in case all shares in a company are held by a single person, the Member State should ensure that that fact, together with the identity of the single member, must either be recorded in the file or entered in the central, commercial or companies register (“the register”) as referred to in Article 3(1) and (3) of Directive 2009/101/EC or be entered in a register kept by the company and accessible to the public .This Part of the Directive also provides that decisions taken by the single shareholder exercising the power of the general meeting as well as the contracts between the shareholder and the company should be recorded in minutes or drawn up in writing and Member States may provide that they may be stored electronically in an appropriate format. Records should be kept for at least five years. Part I of the Directive should apply to all single-member limited liability companies, without prejudice to the specific provisions provided by Part II.

(3)

Establishing single-member limited liability companies as subsidiaries in other Member States entails costs due to the diverse legal and administrative requirements which must be met in the Member States concerned. Such divergent requirements continue to exist among Member States.

(4)

The Commission Communication entitled "Integrated Industrial Policy for the Globalisation Era - Putting Competitiveness and Sustainability at Centre Stage" 2 encourages the creation, growth and internationalisation of small and medium-sized enterprises (SMEs). This is important for the Union economy as SMEs account for twothirds of employment in the Union and offer significant potential for growth and for the creation of jobs.

2

COM(2010) 614 final, 28.10.2010.

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Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 (5)

The improvement of the business environment, especially for SMEs, by reducing transaction costs in Europe, promoting clusters and promoting the internationalisation of SMEs, were the key elements of the initiative “Industrial policy for the globalisation era” outlined in the Commission Communication on the Europe 2020 strategy 3.

(6)

In line with the Europe 2020 strategy, the Review of the Small Business Act for Europe 4 advocated further progress in making smart regulation a reality, enhancing market access and promoting entrepreneurship, job creation and inclusive growth.

(7)

In order to facilitate the cross-border activities of SMEs and the establishment of singlemember companies as subsidiaries in other Member States, the costs and administrative burdens involved in setting-up these companies should be reduced.

(8)

The availability of a harmonised legal framework governing the formation of singlemember companies should contribute to the progressive abolition of restrictions on freedom of establishment as regards the conditions for setting up subsidiaries in the territories of Member States and lead to a reduction in costs.

(9)

Single member private limited liability companies formed and operating in compliance with Part 2 of this Directive should add to their names a common, easily identifiable abbreviation SUP (Societas Unius Personae). In order to reflect that the SUP is a national company law form, Member States of registration should be able to require that SUPs add to their company name an indication which enables the identification of the Member State of registration. Member States should be able to choose freely the way in which the Member State of registration is indicated in the company name; this could be, for instance, by an abbreviation of the name of the Member State, or by using the abbreviation applicable to private limited liability companies in that Member State. In any event, the location of the registered office should be mentioned in letters and order forms, whether they are in paper form or use any other medium in accordance with Article 5 of Directive 2009/101/EC.

3 4

90

COM(2010) 2020 final, 3.3.2010. COM(2011) 78 final, 23.2.2011.

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 (10)

To respect Member States’ existing traditions of company law, flexibility should be afforded to them as regards the manner and extent to which they wish to apply harmonised rules governing the formation and certain aspects of operation of SUPs . Member States may apply Part 2 of this Directive to all single-member private limited liability companies so that all such companies would operate and be known as SUPs. They may provide for the establishment of an SUP as a separate company law form which would exist in parallel with other forms of single-member private limited liability company provided for in national law.

(10a)

To ensure consistency, in case of matters not regulated by this Directive, the rules applicable to private limited liability companies limited by shares in the Member State of registration of the SUP should apply to SUPs, including Directive 2009/101/EC and Directive 2013/34/EU. This Directive should be without prejudice to Directives 96/71/EC and 2014/67/EU and furthermore be without prejudice to any national provisions governing matters outside its scope, such as matters related to labour law, posting of workers, tax, accounting or insolvency. It should also be without prejudice to the application of the national rules on the conflict of laws, to the application of EU rules on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, in particular the Directive on anti-money laundering 5, as well as national rules transposing those EU rules as long as they comply with EU law and they do not undermine the effective application of this Directive, and to the application of the enforcement of rules on taxation and mutual assistance provided in Directive 2010/24/EU and employee participation rules established at national level.

5

Note for lawyer-linguists: the reference to the new Directive should be inserted (see doc. 5933/3/15 REV 3), Directive (EU) 2015/… of the European Parliament and of the Council of …on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC.

91

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 (11)

To ensure that the harmonised rules are applied as widely as possible, both natural and legal persons should be entitled to form SUPs, and SUPs themselves should be able to establish companies in the forms of SUPs or other limited liability companies. However, Member States should be able to prohibit an SUP from being a single-member in another limited liability company in cases of cross or circular ownership, in particular in order to prevent situations where an SUP, indirectly, holds its own share, either in a situation where companies hold shares in each other, or where more than two companies holding shares in each other in such a way that the last company in the chain holds the single share of the SUP. Outside the SUP framework Member States should remain entitled to restrict the chain of companies by not allowing single-member companies to be the single-member in other companies.

(11a)

In order to avoid additional administrative burden on SUPs, the decisions taken by the single-member should not be subject to restrictions as regards the place where they are taken. This should be without prejudice to the right of Member States to impose restrictions as to the manner in which such decisions may be taken.

(11b)

Private limited liability companies that were not formed as SUPs should be able to benefit from the SUP framework to ensure that harmonised rules are applied as widely as possible. They should be able to be converted into SUPs subject to compliance with procedures and conditions in national law. In the absence of harmonisation at EU level in the field of transferring registered offices from one Member State to another, and without prejudice to the case-law of the Court of justice of the European Union, the conversion may only lead to the transfer of the registered office from one Member State to another if it is allowed by national laws of both Member States.

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Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 (12)

(deleted)

(13)

In order to make it easier and less costly to establish subsidiaries in other Member States, the on-line registration of SUPs should be allowed, i.e. it should be possible to complete the registration procedure electronically in its entirety without the need of a physical presence before any authority of any Member State

(13a)

The on-line registration should be without prejudice to the Member States' choice of persons or bodies that might be required to assist or control the legality of registration provided that the whole process can be completed electronically. Each Member State should designate (a) competent on-line registration point(s). Member States may provide that existing points of single contact created under Directive 2006/123/EC of the European Parliament and of the Council could or should be used as a gateway to national on-line registration points. In addition to on-line registration, Member States should also be able to allow other forms of registration, for instance, on paper.

(13b)

To encourage cross-border set-ups of SUPs, Member States should include in their SUP on-line registration point(s) the links to SUP on-line registration point(s) other Member States. This may be done via a link to a central EU web-site or portal such as the E-Justice portal which could provide the links to all SUP on-line registration points in Member States.

(14)

[deleted]

93

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 (15a)

In order to encourage cross-border set-ups of SUPs, Member States should make available on-line templates for on-line registration and for the instrument(s) constituting SUPs. Those templates should be governed by national law, inter alia, as to their outlook, form, number, name or substance, including the right of Member States to require SUPs to have an instrument of constitution including rules regulating the internal affairs of the SUP . Member States should make such templates available in their own official language(s), but should also endeavour to make them available in other EU languages to avoid unnecessary burden on founders, especially in language(s) commonly used in business,

(15b)

To ensure foreseeability and transparency of the content of the national template(s) for the instrument(s) of constitution of an SUP , that would enable to register SUPs with minimum delay, this Directive lays down a maximum list of information that Member States could request from the founder in the national template(s) for the instrument(s) of constitution. Member States should be able to request this information from the founder as it will not be covered by any default national rules that could substitute this information.

(15 ba) The maximum list of required information should be without prejudice to information the founder provides voluntarily or to individualised choices he could make under national law. (15c)

It is crucial that founders are fully informed about the relevant national laws, in particular in cases where they decide, when establishing an SUP, to only make choices on the items indispensable for a simplest set-up and rely for the rest on default national rules. Therefore, Member States should make available to founders, clear, concise and updated information about national law in a user-friendly manner together with the relevant provisions of national default rules which apply if no individualised choice were made by the founder, or at least reference to such default rules. This Directive establishes a minimum list of information and provisions that should be available to the founder, and Member States should be free to provide more.

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Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 (15ca) The forms and methods of providing the information and the relevant provisions should be left to Member States, as long as they can be found either in the national template(s) of the instrument(s) of constitution or on the national SUP registration web-sites or are provided by any other means which would enable the founder to get easily acquainted with them. Therefore, national template(s) for instrument(s) of constitution may set out rules to regulate the internal affairs of the SUP. (15d)

To ensure a high level of uniformity, on-line accessibility and to facilitate cross-border setups of SUPs, the founders of SUPs should be allowed to register SUPs through on-line templates of registration, providing only indispensable information for simplest set-up. If the founders decided to make use of the opportunities provided by national law and make individualised choices or use bespoke templates for the instrument(s) of constitution, going beyond the simplest set-up, the registration authorities or any persons or bodies required by national law to be involved in the registration process, should be able to request more information from them.

(15e)

Member States should be able to request by registration more information from the founders which is outside the scope of this Directive, in particular for tax, social, antimoney laundering and other purposes. Member States should also be able to require the founder to submit appropriate items of evidence with a view to proving the information required for the purpose of registration under this directive; appropriate items of evidence should be those that are necessary and suitable for proving the respective items without imposing a disproportionate burden on founders.

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In line with the recommendations set out in the European Commission's 2011 Review of the Small Business Act 6 to reduce the start-up time for new enterprises, national authorities should complete the on-line registration process within five working days, if national templates for registration and for the instrument(s) of constitution which are available online are used, unless there are exceptional circumstances, such as, in particular, the complexity of the case which requires a special examination in the context of registration, that would make it impossible to comply with this deadline. The deadline for completion of the registration process should be counted from the moment when the registration authority receives a complete application , including any necessary supporting documentation and a confirmation that all necessary fees for registration have been paid.

(16a)

Compliance with the five working days limit should only be required for SUPs created online ex-nihilo and not for existing entities that wish to convert to SUPs as the registration of such entities by their very nature, may take more time. This is without prejudice to the right of Member States to register all SUPs within five working days limit.

(17) (18)

[deleted] Provisions concerning the establishment of SUPs should not affect the right of Member States to maintain existing rules or enact new rules concerning possible verification of the legality of the registration process, including rules on the verification of identification and legal capacity in order to provide for safeguards for the reliability and trustworthiness of registers. Such rules may include, for example, the legality check via a video-conference or other on-line means that provide a real-time audio-visual connection . In any event, national rules should not affect the possibility of completing the whole registration procedure on-line.

6

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COM(2011) 78 final, 23.2.2011.

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 (18a)

To ensure a high level of security and trust, in the context of on-line cross-border identification of the founders of the SUP, electronic identification means issued in another Member States and notified to the Commission, in accordance with Regulation (EU) No 910/2014 should be accepted by the authorities of the Member State of registration. In addition, that Member State may recognise other electronic and non-electronic identification means. If, for the purpose of registration, the registration authorities recognise non-electronic identification means issued in the Member State of registration, they should also recognise the same type of identification means issued in other Member States.

(19a)

The minimum capital required for the formation of a single-member private limited liability company varies among the Member States. Most Member States have already taken steps towards abolishing the minimum capital requirement or keeping it at a nominal level. Therefore, the SUPs should not be subject to a high mandatory capital requirement, since this would act as a barrier to their formation. Creditors, however, should be protected from excessive distributions to single-members, which could affect the capacity of an SUP to pay its debts.

(19aa) In order to protect creditors and other stakeholders Member States should ensure that there exist mechanisms in national law that would prevent SUPs from being unable to pay their debts after making distributions.

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Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 The choice of form and methods to ensure the compliance with this requirement is left to Member States. In this context, Member States should be able, for example, to require companies to build legal reserves, establish minimum balance sheet test requirements and/or to require the management body to prepare and sign a solvency statement which should then constitute sufficient means of complying with that requirement. (19b)

In order to provide additional safeguards for creditors, Member States should be able to require the SUP to build legal reserves, as a percentage of the profits of the SUP and/or up to the amount of minimum share capital required for private limited liability companies listed in Annex I,. Member States should consider whether it would be appropriate to adopt a sectoral approach with regard to the requirement to build legal reserves, taking into consideration the difference in capital needed to protect creditors in different sectors of the economy. Member States should ensure that information on the obligation to build reserves forms part of the information provided to founders on relevant laws under this directive.

(20)

In order to prevent abuse and simplify control SUPs should neither issue any further shares nor should the single share be split. Nor should SUPs acquire or own their single share whether directly or indirectly. Rights attached to the single share should only be exercised by one person. Where Member States allow for co-ownership of a single share, in particular in inheritance and matrimonial law, only one representative should be entitled to act on behalf of the co-owners and be considered as a single-member for the purpose of this Directive. The co-owners should be identified.

(21) (22)

[deleted] The management body of an SUP should be composed of one or more directors, and Member States should be able to provide for an SUP to have a supervisory board.

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Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 The Directive should further clarify the consequences of a removal of a director. This is without prejudice to the obligations of disclosure under Directive 2009/101/EC as regards the persons authorised to represent a company in dealings with third parties and in legal proceedings, as well as the obligations under that Directive to ensure that up-to-date information on provisions of national law according to which third parties can rely on particulars and documents disclosed in that context is made available. (22a)

To increase the trustworthiness and reliability of SUPs, this Directive should lay down provisions relating to disqualification of directors. A person who is disqualified by either the law of or a judicial or administrative decision of the Member State of registration should not be able to serve as a director or a member of the supervisory body, where applicable. Furthermore, Member States should be able to decide that they wish to refuse to allow a person to serve as a director, or a member of the supervisory body, where applicable, if that person is the subject of disqualification by a judicial or administrative decision still in force in another Member State.

(23)

Where there is a need to have recourse to administrative cooperation between Member States for the purposes of exchanging information about the disqualification of the members of the management and/or supervisory body, Regulation (EU) No 1024/2012 should apply.

(23a)

Since the Annex to Regulation (EU) No 1024/2012 contains a list of provisions on administrative cooperation in Union acts which are implemented by means of the IMI, that Annex should be amended to include this Directive.

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The Member States should lay down rules on sanctions applicable to the infringements of the provisions of this Directive and should ensure that they are implemented. Those sanctions should be effective, proportionate and dissuasive. Each Member State should apply at least the same sanctions to the violation of the provisions of this Directive as it applies to similar violations by private limited liability companies having a registered office on its territory.

(25) (26)

[deleted] In order to accommodate future changes to the laws of Member States and to Union legislation concerning company types, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission to update the list of undertakings contained in Annex I. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at experts' level. The Commission, when preparing and drawing-up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and Council.

(27)

In accordance with the Joint Political Declaration of Member States and the Commission of 28 September 2011 on explanatory documents, Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified.

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Since the objectives of this Directive, namely, to facilitate the establishment of singlemember private limited liability companies, including SUPs cannot be sufficiently achieved by the Member States, but can rather, by reason of their scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary to achieve those objectives.

(29)

Since substantial amendments are being made to Directive 2009/102/EC, in the interests of clarity and legal certainty that Directive should be repealed.

(30)

This Directive should be applied in compliance with the requirements laid down by EU law regarding the protection of personal data, in particular with Articles 7, 8 and 52 of the Charter of fundamental rights of the EU and Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data [OJ L 281, 23.11.1995, p.31] as interpreted by the Court of Justice, and with national law implementing those requirements." In so far as the IMI is used, administrative cooperation and the exchange of information between the competent authorities should also comply with the rules set out in Regulation (EU) No 1024/2012.

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Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 HAVE ADOPTED THIS DIRECTIVE:

Part 1 - General provisions

Article 1 Scope 1.

Part 1 of this Directive shall apply to the laws, regulations and administrative provisions of the Member States relating to:

2.

(a)

the types of company listed in Annex I;

(b)

Societas Unius Personae (SUP) referred to in Article 6.

Member States shall inform the Commission within two months of any changes to the types of private limited companies provided for in their national law affecting the contents of Annex I. In such a case the Commission shall be empowered to adapt, by means of delegated acts in accordance with Article 26, the list of companies contained in Annex I.

3.

Where a Member State allows other companies than those listed in Annex I, in particular public limited liability companies, to be established as or become companies, whose share or shares are held by a single person (single-member companies), Part 1 of this Directive shall also apply to them.

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Article 2 Definitions [deleted] 7 Article 3 Disclosure Where a company becomes a single-member company because all its shares8 come to be held by a single person, that fact, together with the identity of the single member, must be recorded in the file or entered in the central, commercial or companies register (“the register”) as referred to in Article 3(1) and (3) of Directive 2009/101/EC or be entered in a register kept by the company and accessible to the public. Article 4 General meeting and decisions of the single member 1.

The single-member shall exercise the powers of the general meeting of the company.

2.

Decisions taken by the single-member in the field referred to in paragraph 1 shall be recorded in minutes or drawn up in writing and kept for at least five years. Member States may provide that it is sufficient for the decisions to be stored electronically by the company, in a safe and accessible format preventing the loss of integrity of decisions. Member States may also provide that decisions must be kept for a longer period than five years.

7 8

Definitions have been moved to relevant Articles. Following the deletion of Article 2, the numbering of Articles is subject to change at a later stage. Remark for lawyers linguists – In many Member States different words are used for shares depending on whether shares are mentioned in the context of private or public limited liability companies. Some Member States use the term "participation" for shares in private limited liability companies The difference between private and public limited liability companies is not connected with the ownership structure in any way (private or public).

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Article 5 Contracts between the single member and the company 1.

Contracts between the single-member and the company shall be recorded in minutes or drawn up in writing and kept for at least five years. Member States may provide that it is sufficient for the contracts to be stored electronically by the company, in a safe and accessible format preventing the loss of integrity of contracts. Member States may also provide that the contracts must be kept for a longer period than five years.

2.

Member States may decide not to apply paragraph 1 to current operations concluded under normal market conditions.

Part 2 - Societas Unius Personae

Chapter 1 General Principles and Legal form

Article 6 Scope and Legal form 1.

Part 2 of this Directive shall apply to the laws, regulations and administrative provisions of the Member States relating to the possibility of establishing private single-member limited liability companies in the form referred to as SUP. Member States shall provide for the possibility of registering SUPs in accordance with the rules and procedures set out in this Part.

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Member States shall not hinder SUPs from being single-members in other limited liability companies. However, Member States may establish rules prohibiting SUPs from being single-members in other limited liability companies if it leads to cross or circular ownership. Article 7 General principles

1.

Member States shall grant SUPs full legal personality

2.

Member States shall provide that SUPs are a type of single-member private limited liability companies.

3.

The name of a company, which has the legal form of an SUP, shall be followed by the abbreviation 'SUP' (Societas Unius Personae). The Member State of registration may require SUPs to add to the company name an indication that the company is registered in that Member State. Such indication may include an abbreviation applicable to private limited liability companies in accordance with national laws. For the purpose of conversion into an SUP, the names of companies shall be adapted to comply with those requirements. Only an SUP may use the abbreviation ‘SUP’. Companies and other legal entities, registered in a Member State before the entry into force of this Directive, in the names of which the abbreviation ‘SUP’ already appears shall not be required to alter their names in accordance with the second subparagraph. This is without prejudice to the right of the authorities of the Member States to require such companies and other legal entities to alter their names in accordance with national law.

4.

An SUP shall be governed (a)

by national laws adopted by the Member State in which the SUP is registered in order to comply with this Directive, and,

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in case of matters not regulated by this Directive, by national laws applicable to private limited liability companies limited by shares listed in Annex I in the Member State in which the SUP is registered.

This Directive is without prejudice to any national laws governing matters outside its scope, such as matters related to labour law, posting of workers, workers' participation in the management or supervisory bodies of companies, right to information and consultation, taxation, accounting or insolvency proceedings. It is also without prejudice to the application of the national rules on the conflict of laws, EU rules on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing. 5.

Member States may not impose any restrictions as regards the place where the singlemember of the SUP takes the decisions that are disclosed in the register.

Chapter 2 Formation

Article 8 Incorporation An SUP may be incorporated by a natural or legal person. If allowed by national law of the Member State of registration, an SUP may also be incorporated by other entities not having legal personality.

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Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 Article 9 Conversion into an SUP 1.

Member States shall ensure that the types of companies listed in Annex I are allowed to convert into an SUP following the procedure and subject to the conditions laid down by national law . A conversion pursuant to this Article may not result in the transfer of the registered office of the company from one Member State to another, unless such transfer complies with the applicable laws of both Member States concerned.

2.

The formation of an SUP by conversion shall not result in any winding-up procedures, any loss or interruption of the legal personality of the company or affect any rights or obligations existing prior to the conversion.

Chapter 3 The instrument(s) of constitution for an SUP Article 11 On-line template(s) for the instrument(s) of constitution of SUPs 1.

The instrument(s) of constitution of an SUP, in particular with regard to substance, form, name and number of such instruments, shall be governed by national law, subject to the requirements of paragraph 3. Member States shall make available on-line a national template for each instrument of constitution of an SUP. The template(s) shall be made available in the official language(s) of the Member State. Member States shall endeavour to make the template(s) also available in other languages, in particular in languages used in international business.

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Member States shall ensure that an SUP may be registered on-line with the use of the national template(s). Where the instrument(s) of constitution are drawn up and submitted on-line with the use of the national template(s) and have been accepted by the registration authority, the obligation under Article 11 of Directive 2009/101/EC to have founding instruments drawn up and certified in due legal form shall be considered fulfilled.

3.

Member States may only request some or all of the following information to be provided by the founder of an SUP in the national template(s) for the instrument(s) of constitution: a)

the name of the SUP ;

b)

the name and other information necessary to identify or otherwise related to the SUP's single-member,

ba)

the name and other information necessary to identify or otherwise related to the members of the management body and, if there is a supervisory body, the members of that body ;

c)

the number of the members of the management body and, if there is a supervisory body, the number of the members of that body ;

108

ca)

the business object of the SUP ;

d)

the SUP's registered office ;

e)

the SUP's head office;

f)

the duration of the SUP

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 g)

the SUP's share capital, the type of the single-share, the form of consideration for the share and the form and the procedure to create legal reserves;

h)

[deleted]

i)

provisions on when the members of the management body are absent or unable to act;

4.

j)

legal value of decisions made by a company in formation ;

k)

the financial year.

Paragraph 3 is without prejudice to national laws which establish conditions under which the founders of an SUP may provide more information or make individualised choices in national instrument(s) of constitution.

5.

Member States may request some or all of the information from paragraph 3 either in the the instrument(s) of constitution of SUPs or the template for registration referred to in Article 13, or in both, even if it leads to the result that the same information is requested twice .

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Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 Chapter 3a Information available to the founder Article 12 1.

Member States shall make available to the founders of SUPs, before registration, up-todate, clear, concise and user-friendly information about national law governing at least the following aspects of the functioning and registration of an SUP : a)

the powers and responsibilities of the management body, including representation of the SUP towards third parties ;

b)

requirements for member(s) of the management body, and, where applicable, the supervisory body ;

c)

decision-making by the management body, and, where applicable, the supervisory body ;

d)

powers of the single-member ;

da)

dividends and other forms of distributions ;

e)

legal reserves, if applicable ;

f)

all formalities related to registration referred to in Article 13.

Member States shall also make available the relevant provisions of default national laws governing at least the above aspects of the functioning and registration of SUPs if any, or references to those provisions.

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For the purpose of paragraph 1, Member States shall provide the information and default national laws , or references to them, in the national template(s) of the instrument(s) of constitution or on the national SUP registration web-sites or by any other means which would enable the founder to get easily acquainted with them. This information and default national laws shall be available in the official language(s) of the Member State of registration and be made available free of charge. Member States shall endeavour to make them also available in other languages, in particular in languages used in international business.

3.

National on-line registration web-sites for SUPs shall include links to the on-line registration web-sites for SUPs in other Member States. This obligation may be fulfilled via a link to a central EU web-site such as the European e-Justice portal providing the links to all on-line SUP registration points in Member States.

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Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 Chapter 4 Registration

Article 13 Formalities relating to registration 1.

The registration formalities related to SUPs, in particular with regard to substance and form of national registration templates, shall be governed by national law, subject to the requirements of the following paragraphs.

2.

Member States shall allow SUPs to be registered via a national template of registration 9available on-line, if the founder or its representative provides the registration authorities with following information for the purpose of registration: (a)

information listed in Article 11(3);

(aa)

information related to the proposed SUP name;

(b)

information necessary to identify or otherwise relating to : ba)

means of communication with the SUP

bb)

the representative that establishes the SUP on the member’s behalf, where applicable ;

9

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Remark for lawyers linguists – « template » means in French « modèle », whereas « application form » means “formulaire de demande” . In French, the relevant wording should be “ "formulaire" refering to registration of a company.

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 bc)

[deleted]

bd)

[deleted];

be)

persons authorised to certify the accounts of the SUP (auditor) ;

bf)

persons authorised to represent the SUP in dealings with third parties, alone or jointly, including in legal proceedings, together with the powers of representation.;

bg) (c)

any beneficial owner of the SUP ;

whether the directors and, where applicable, the members of the supervisory body are disqualified either by law or by a judicial or administrative decision from acting as directors or members of a supervisory body in the Member State of registration or in any other Member State ;

3.

d)

the nominal value of the single share and the amount unpaid on the share, if any ;

e)

information relating to the conversion into an SUP.;

f)

a bank account into which the consideration for the share may be paid;

g)

the instrument(s) of constitution of an SUP.

Member States may decide not to request all the information from the founder that is listed under paragraph 2. However, Member States may request more information than is listed in paragraph 2, if a founder has used the opportunity offered by national law to make individualised choices as referred to in Article 11(4), and additional information from the founder is needed which is not covered by national default rules. .

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Member States may require the founder of an SUP to submit appropriate items of evidence to prove or to support the information provided under paragraphs 2 and 3 if such items of evidence are requested from private limited liability companies limited by shares listed in Annex I.

5.

Paragraphs 2, 3 and 4 of this Article are without prejudice to Articles 2 and 2a of Directive 2009/101/EC and the right of Member States to request additional information or items of evidence from the founder of an SUP by the moment of registration in relation to requirements outside the scope of this Directive.

6.

The national law referred to in paragraphs 2, 3 and 4 shall not affect the possibility of online registration referred to in Article 14 (3) of this Directive.

7.

If any item of evidence is required to be signed or sealed, it may be signed or sealed electronically in accordance with Regulation (EU) N°910/2014.

Article 14 Registration 1.

An SUP shall be registered in a Member State in which it is to have its registered office and complies with the rules of that Member States.

2.

An SUP shall acquire legal personality on the date determined by national law. Member States shall ensure that the date on which legal personality was acquired and the completion of the registration procedure may be confirmed in electronic form.

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Member States shall ensure that the registration procedure for SUPs established ex nihilo may be completed electronically in its entirety without it being necessary for the founding member to appear before any authority in any Member State ('on-line registration'). In addition, Member States may allow SUPs to be registered in other ways than on-line. For SUPs created ex nihilo with the use of the national templates referred to in Articles 11 and 13 Member States shall complete the registration process within five working days from the receipt of all the necessary documentation and information by the competent authority, except where there are exceptional circumstances that would make it impossible to comply with this deadline. The obligations in this paragraph are without prejudice to the registration fee and any other formalities an SUP has to fulfil to start operations in accordance with national law.

Article 14a Rules and conditions regarding registration 1.

Without prejudice to Article 14 (3), the process of registration, including possible control of legality that may consist of verification of identity and legal capacity of the founding member and/or a representative that establishes the SUP on the member’s behalf shall be governed by national law.

2.

Member States shall lay down procedural rules, including the rules on the acceptability of the documents and other information submitted to the registration authority.

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Member States shall not make the registration of an SUP conditional on obtaining any licence or authorisation, unless obtaining such licence or authorisation before registration is indispensable to the proper control of carrying out certain activities laid down in national law. This is without prejudice to provisions of national law that make carrying out certain activities after registration conditional on obtaining licence or authorisation.

Article 14b Recognition of identification means for the purposes of on-line registration 1.

For the purposes of on-line registration of an SUP, the registration authorities shall recognise: (a)

electronic identification means issued under an electronic identification scheme approved for the purpose of on-line registration of SUPs by the Member State of registration;

(b)

electronic identification means issued in another Member State complying with Article 6 of Regulation (EU) N°910/2014.

2.

The registration authorities may also recognise other electronic or non-electronic identification means. When non-electronic identification means, issued in the Member State of registration, are recognised by the registration authorities for the purpose of online registration, the same type of non-electronic identification issued in other Member States shall be equally recognised.

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Member States shall ensure that any measures taken to comply with this Article or Article 14 (a) do not affect the possibility of on-line registration referred to in Article 14(3).

CHAPTER 5 SINGLE SHARE

Article 15 Single share 1.

An SUP shall not have more than one share. This single share shall not be split.

2.

An SUP shall not, either itself or through a person acting in his own name but on the SUP's behalf, acquire or own its single share.

3.

Where in accordance with national law, a single share of an SUP may be owned by more than one person, those persons shall be regarded as the single-member of the SUP. They shall exercise their rights through one representative and shall notify the management body of the SUP, without undue delay, the name of that representative and the name of the coowners and any change thereto. Until such notification, the exercise of their rights in the SUP may be suspended in accordance with national law. The identity of the representative shall be recorded in the relevant register or be entered in a register kept by the company and accessible to the public.

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Chapter 6 Share Capital Article 16 Share capital 1.

The share capital of an SUP shall be at least EUR 1. In Member States in which the euro is not the national currency, the share capital shall be at least equivalent to one unit of that Member States’ currency. Member States shall not require that the share capital exceeds EUR 1 or equivalent to the one unit of Member States’ currency other than EUR.

2.

The share capital of the SUP shall be fully subscribed.

3.

Member States shall not impose any maximum value on the single share.

4.

Without prejudice to paragraph 1, Member States may require the SUP to build up legal reserves as a percentage of the profits of the SUP and/or up to the amount of minimum share capital required for private limited liability companies listed in Annex I. Member States shall allow companies to build reserves. This is without prejudice to an obligation to include reserves, if any, in the presentation of the balance sheet in accordance with Article 10 of Directive 2013/34/EU and any disclosure obligations relating to reserves laid down in national laws.

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Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 Article 17 Payment of the consideration for the share If national law requires the payment of the consideration for the share in cash, such consideration may be paid into any credit institution to which authorisation has been granted to operate within the European Union.

Article 18 Distributions 1.

Member States shall ensure the establishment of mechanisms in national law that would prevent SUPs from being unable to pay their debts after making distributions.

2.

For the purpose of paragraph 1, Member States may provide that an SUP is not allowed to make a distribution to the single-member if: a)

on the closing date of the latest financial statement the total assets after deducting total liabilities, as set out in the SUP's annual accounts, are, or following such a distribution would become, lower than the amount of the share capital plus those reserves which may not be distributed under national laws requiring the SUP to build legal reserves in accordance with Article 16(4), if any, or under the instruments of constitution of the SUP ; and/or

b)

in the case of a distribution in the form of a payment of a dividend, it results in the SUP being unable to honour its obligations as they become due and payable during the period of six months following the payment of that dividend.

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For the purposes of paragraph 2 (b), Member States may provide that the management body must sign a statement, before the payment of a dividend, certifying in writing that, having made full inquiry into the affairs and prospects of the SUP, they have formed a reasonable opinion on the date the statement was signed that the SUP will be able to honour its obligations as they fall due in the normal course of business during the period of six months following the payment of the proposed dividend (a "solvency statement"). If a solvency statement is signed, it shall be considered as sufficient means of complying with paragraph (2) (b) and it shall be disclosed in the register.

4.

The modalities for the implementation of the mechanisms referred to in paragraphs 2 and 3 shall be left to national law. This may include, in particular, the possibility of adoption of a longer period referred to in paragraphs 2b and 3 up to one year.

5.

Member States may lay down in their national laws provisions limiting distributions to those covered by this Article, provided that such provisions do not subject the SUP to stricter requirements than the national laws applicable to private limited liability companies limited by shares listed in Annex I.

6.

Member States shall require that any distributions, or share capital reductions leading to a distribution to the single-member made contrary to this Article, are refunded to the SUP.

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Member States may provide for compensation to be sought for damage resulting from distributions made contrary to this Article by persons who suffered the damage under the conditions established by national laws.

Article 19 Recovery of distributions wrongfully made [deleted] Article 20 Share capital reduction [deleted]

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Article 21 Decisions of the single member [deleted] Article 22 Management 1.

An SUP shall be managed by a management body comprising one or more directors. It Member States may provide that an SUP may have a supervisory board.

2.

If removed from office, a director shall be immediately deprived of the authority and power to act as a director on behalf of the SUP. Any rights or obligations of the removed director and third parties reliance on the information in the business register under national law shall not be affected.

3.

A person who is disqualified by either the law or a judicial or administrative decision of the Member State of registration cannot serve as a director or a member of the supervisory body, where applicable.

4.

A Member State may refuse to accept a person to serve as a director, or a member of the supervisory body, where applicable, if that person is the subject of disqualification by a judicial or administrative decision still in force in another Member State.

122

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 If necessary, and for the purpose of the first subparagraph, Member States may exchange information regarding the decision on disqualification. To this end, Member States shall use the Internal Market Information System ('IMI') established by Regulation (EU) No 1024/2012 and this Regulation shall apply to this information exchange. A Member State may refuse to transmit information regarding the disqualification of a specific person only if such transmission entailed the violation of requirements laid down by its national law regarding the protection of personal data. In such a case, the Member State shall state the reasons for its refusal. In any event, for the purpose of this Article, Member States shall ensure the confidentiality of the information which they exchange and comply with the requirements laid down by EU law regarding the protection of personal data, in particular by Directives 95/46/EC and 2002/58/EC. Article 23 The single-member’s instructions [deleted] Article 24 Power to act and enter into agreements on behalf of an SUP [deleted]

123

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 Article 25 Conversion of an SUP into another company law form An SUP may voluntarily, at any moment, decide to convert into another company law form following the procedure and subject to the conditions laid down by national law. Part 3 Final Provisions

Article 26 Exercise of delegated powers 1.

The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article.

2.

The delegation of power referred to in Article 1(2) shall be conferred on the Commission for a period of 5 years from the date of entry into force of this Directive. The delegation of power shall be tacitly extended for periods of an identical duration, unless the European Parliament or the Council opposes such extension not later than three months before the end of each period.

3.

The delegation of power referred to in Article 1(2) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.

124

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 4.

As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.

5.

A delegated act adopted pursuant to Article 1(2) shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of two months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or the Council.

Article 27 Committee procedure [deleted] Article 28 Sanctions Member States shall provide for sanctions applicable to infringements of the national provisions adopted to implement this Directive and shall take all the measures necessary to ensure that those sanctions are enforced. The sanctions provided for shall be effective, proportionate and dissuasive.

125

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 Article 29 Repeal 1.

Directive 2009/102/EC is repealed 24 months after the date of entry into force of this Directive

2.

References to the repealed Directive shall be construed as references to this Directive and shall be read in accordance with the correlation table in Annex II.

Article 30 Amendment to Regulation (EU) No 1024/2012 In the Annex to Regulation (EU) No 1024/2012, the following point X is added: "X. Directive […/…/EU] of the European Parliament and of the Council of […] on SingleMember Private Limited Liability Companies*: Article X (22). _________ * OJ L […]."

126

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 Article 31 Transposition 1.

Member States shall adopt, publish and apply not later than 24 months after the date of entry into force of this Directive, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions. This is without prejudice to the implementation date of Regulation (EU) No 910/2014.

2.

When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made. 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 32 Entry into force

The Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. Article 33 Addressees This Directive is addressed to the Member States. Done at Brussels,

For the European Parliament

For the Council

The President

The President

127

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 ANNEX I TO THE ANNEX Types of companies referred to in Article 1(1)(a) — Belgium: ‘société privée à responsabilité limitée/besloten vennootschap met beperkte aansprakelijkheid’, — Bulgaria: ‘��������� � ���������� �����������', — Czech Republic:

��������������������������������� — Denmark: ‘anpartsselskab’, — Germany: ‘Gesellschaft mit beschränkter Haftung’, — Estonia: ‘osaühing’,

128

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 — Ireland: ‘private company limited by shares or by guarantee/cuideachta phríobháideach faoi theorainn scaireanna nó ráthaíochta', — Greece:

���������������������������������� — Croatia: 'društvo s ograni�enom odgovorno��u' — Spain: ‘sociedad de responsabilidad limitada’, — France: ‘société à responsabilité limitée’, — Italy: ‘società a responsabilità limitata’, — Cyprus:

�������������������������������������������������������������������

129

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 — Latvia: ‘sabiedr�ba ar ierobežotu atbild�bu’, — Lithuania: ‘uždaroji akcin��bendrov���� — Luxembourg: ‘société à responsabilité limitée’, — Hungary:

�������������������������������', — Malta: ‘kumpannija privata/private limited liability company’, — The Netherlands: ‘besloten vennootschap met beperkte aansprakelijkheid’, — Austria: ‘Gesellschaft mit beschränkter Haftung’,

130

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 — Poland:

������������������������������������������� — Portugal: ‘sociedade por quotas’, — Romania:

������������������������������������ — Slovenia: ‘družba z omejeno odgovornostjo’, — Slovakia:

����������������������������������� — Finland: ‘yksityinen osakeyhtiö/privat aktiebolag',

131

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 — Sweden: ‘privat aktiebolag’, — United Kingdom: ‘private company limited by shares or by guarantee’

132

Appendix II: General Secretariat of the Council, 21 May 2015, 8811/15 ANNEX II TO THE ANNEX

CORRELATION TABLE

Directive 2009/102/EC

This Directive

Article 1

Article 1 (1)

Article 2(1)

Article 2 3

Article 2(2)

-

Article 3

Article 3

Article 4

Article 4

Article 5

Article 5

Article 6

Article 1 (3)

Article 7

-

Article 8

Article 31

Article 9

Article 29

Article 10

Article 32

Article 11

Article 33

______________________

133

Appendix III

Competitiveness Council - 28 May 2015

Agreed amendments to the Presidency compromise text (Draft directive on single-member private limited liability companies)

Recital 18 This Directive is without prejudice to the actions Member States may take in accordance with national law to ensure appropriate verification of identity within the framework of their existing online registration procedures. Provisions concerning the establishment of SUPs should not affect the right of Member States to maintain existing rules or enact new rules concerning possible verification of the legality of the registration process, including rules on the verification of identification and legal capacity in order to provide for safeguards for the reliability and trustworthiness of registers. Such rules may include, for example, the legality check via a video-conference or other on-line means that provide a real-time audio-visual connection. In any event, national rules should not affect the possibility of completing the whole registration procedure on-line.

(new) Recital 18b Member States should be able to decide to refuse the on-line registration of SUPs in the cross-border context in all cases where a founder uses electronic identification means that are not e-IDAS compliant. This Directive is without prejudice to the actions Member States may take in accordance with national law in case of genuine suspicion of fraudulent identity, including measures requiring a physical presence before an authority of a Member State on a case by case basis.

135

Appendix III: Competitiveness Council, 28 May 2015

Article 14b Recognition of identification means for the purposes of on-line registration 1.

For the purposes of on-line registration of an SUP, the registration authorities shall recognise: (a)

electronic identification means issued under an electronic identification scheme approved for the purpose of on-line registration of SUPs by the Member State of registration;

(b)

electronic identification means issued in another Member State complying with Article 6 of Regulation (EU) N°910/2014.

2.

The registration authorities may also recognise other electronic or non-electronic identification means. When non-electronic identification means, issued in the Member State of registration, are recognised by the registration authorities for the purpose of on-line registration, the same type of non-electronic identification issued in other Member States shall be equally recognised.

3.

Member States may decide to refuse the on-line registration of SUPs in the cross-border context in all cases where a founder uses electronic identification means that are not e-IDAS compliant.

4.

This Directive is without prejudice to the actions Member States may take in accordance with national law in case of genuine suspicion of fraudulent identity, including measures requiring a physical presence before an authority of a Member State on a case by case basis.

35.

Member States shall ensure that any measures taken to comply with this Article or Article 14 (a) do not affect the possibility of on-line registration referred to in Article 14(3).

136

Appendix III: Competitiveness Council, 28 May 2015 Article 31 Transposition 1.

Member States shall adopt, publish and apply not later than 2436 months after the date of entry into force of this Directive, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions. This is without prejudice to the implementation date of Regulation (EU) No 910/2014.

2.

When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made. 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.

137

Index Action Plan on European Company law (2003) 2 Action Plan on European Company law (2012) 2 Administrative seat (as connecting factor) 46 et seq., 55 Arbitrage 39 et seq. Assurance level (of electronic identification means) 13 et seq., 53 Audio-visual connection 13 et seq. Austria 32 Authorisation to trade 26

Identity fraud 9, 13 et seq., 27 Identity theft 9, 27 Insolvency law 4 et seq., 38, 41 et seq., 51, 54 et seq. Instructions (power to issue) 29–36, 54 Instrument of constitution 16 et seq., 21, 24 et seq., 31, 33, 52 Insurance scheme 26, 54 Italian Compromise Proposal 3, 4, 6, 11, 16 et seq., 21–24, 26 et seq., 29, 31, 35, 37, 40, 54 Italy 22, 33 et seq.

Bona Fide recipient of distributions 27 et seq., 54 Business letters (disclosure of share capital) 22 et seq., 53

Job creation 21

Capital protection 21 et seq. Cash-pooling 25, 54 Co-determination (workers’ participation) 40, 43 et seq., 55 Commercial register 10–13, 16 et seq., 21, 27, 46, 52 Commission proposal 55 et seq. Companies House 9 et seq., 27 Competitiveness Council (Amendments to General Approach) 135 et seq. Conclusions (of this study) 51 et seq. Cost (of formation of a company) 15 et seqq., 52 Creditor protection 10, 21 et seq., 26 et seq., 29 et seqq., 33–37, 39 et seqq., 43, 51, 53 et seq. Criminal law 5, 33, 35, 47, 52 Directors’ liability 26 et seq., 36 et seq., 54 Disadvantageous instructions 29–38, 51, 54 Distribution (of assets) 24 et seq., 53 e-IDAS regulation 11 et seq., 53 Electronic identification means 11 et seq., 52 Embezzlement 35 England 9, 27, 34 et seq., 38, 52 European Group law (development) 1 et seq. Ex nihilo formation 17 Financial collateral 26, 54 Formation of an SUP 9 et seq., 21 et seq., 31, 44, 51 et seqq. France 22, 32 et seq., 37 et seq. Full harmonisation 4, 24, 37, 51

Land register 9–13, 52 Legal basis (for the SUP directive) 49, 55 Legal capacity 13 et seq., 52 Legal policy context of the SUP 51 et seq. Legal reserves 21, 24, 26, 53 Liability of directors 26 et seq., 36 et seq., 54 Liability of the shareholder 26 et seq., 36 et seq., 54 Liquidity guarantee 26, 54 Mandatory provisions 44 et seq. Maximum standard 4, 51 Membership 19 Minimum harmonization 4, 24, 37, 51 Minimum share capital 21, 26, 54 Minimum standard 51 Minority shareholders 19, 29–31, 33, 35 et seq., 54 Money laundering 5 et seq., 11, 14, 51 et seq. Necessity entrepreneurs 21, 26 Netherlands 35 Online registration 5–7, 9 et seq., 27, 51 et seqq. Portugal 34 Preventive creditor protection 22 et seq. Probity threshold 26 Profit retention requirement 21 Proxy (for setting up a company) 16 Publicity directive (EU) 6 et seq., 22, 52

General Approach 81 et seq. Germany 16, 21 et seq., 24, 32, 35, 37, 43 et seq., 47, 51 Group interest 2, 29 et seq. Group law 29 et seq., 54

Raising capital 21 et seq. Recognition of foreign SUPs 14 Reflection group on the future of EU Company law 2 et seq., 35 Registered office 4 et seq., 9, 16, 30, 36, 38, 39 et seq., 54 Regulatory arbitrage 39 et seq., 55 Rome I-Regulation 44 et seq. Rozenblum case 2, 32, 34 et seq.

Identification (of shareholder and directors) 52 Identity (proof during online registration) 9 et seq.

Share capital 21 et seq. Shareholder’s liability 26 et seq., 36 et seq., 54

139

Index Small business act 17 Solvency test 23 et seq., 53 Structure of the SUP 29 et seq. Succession law 19, 53 Tax (avoidance strategies) 36, 39 et seq., 55 Template of the instrument of constitution 7, 9, 16 et seq., 52 et seq. Tort victims 26, 54 Transparency (of shareholder structures) 2, 4, 6, 11, 52

140

Unternehmergesellschaft 16, 21 et seqq. Video-conference 13 et seq., 52 et seq. Webcam-based authentication 13, 15, 52 Website of the SUP (disclosure of share capital) 22 et seq., 53