The European Commission has proposed new rules aimed at facilitating the free movement of companies within the Union. This proposal seeks to harmonise rules on moving, merging and dividing companies while safeguarding against unfair treatment of employees and tax evasion.
This proposal is a follow-up to the landmark decision of the Court of Justice in Polbud where it was decided that the rules on freedom of establishment include the right for a company to convert itself into a company governed by the law of another member state, provided the requirements of the host member state for its incorporation are satisfied. This possibility however, currently encounters substantial burdens especially due to the differing member state rules and the often excessive administrative burdens that serve to deter companies from pursuing their rights.
This proposal will facilitate the procedure for companies to be registered in another member state also by enabling the creation of companies online which is currently only possible within 17 of the Union’s 28 member states. This thereby making the process more efficient and cost effective. However, as a means of preventing abuse, national authorities will be able to rely on exchange of information relating to disqualified directors while also being able to request the physical presence of company owners.
In practical terms the Commission has estimated cost saving for companies of €12000 – €19000 per operation and a total of €176 – €280 million over 5 years.
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Article prepared by Dr. Ylenia Micallef Grimaud