Our website is set to allow the use of cookies. For more information and to change settings click here. If you are happy with cookies please click "Continue" or simply continue browsing. Continue.

Law for Business

Knowhow - guidance - precedents

02 JUL 2013

Single member companies - EU launches consultation

We reported on Jordans Law for Business earlier this year  that a new corporate vehicle for single member companies was on the agenda both at EU level and in this country - see http://www.jordanslawforbusiness.co.uk/articles/single-member-companies-is-a-new-corporate-vehicle-on-the-way.  We also suggested that, in the short term at least, the EU was more likely to take steps to reform the law in this area than the UK government.

As it happens, the European Commission has, indeed, been the first to act, with the publication last month of a consultation paper inviting views on a possible initiative to harmonise rules in Member States relating to single member companies.

The consultation paper

The consultation paper takes the form of a questionnaire which seeks views on two main issues: 

  • the environment in which SMEs wishing to do business across the EU's internal borders operate at present - for example, the consultation paper asks:
    • whether it is difficult for SMEs to expand by setting up a subsidiary in another Member State
    • which aspects of the need to comply with foreign company law regimes cause particular difficulties
    • how the costs of establishing a single member company in another  Member State compare with the costs of establishing such a company in the  respondee's home jurisdiction
  •  possible reform of the regime governing single member companies - the crucial question, which underpins the entire consultation, is phrased as follows: "Would the legislative harmonisation of requirements concerning single-member private limited liability companies at the EU level encourage/facilitate an increase in cross-border activity of SMEs within the EU?" The consultation paper goes on to ask for views on the scope of a "potential initiative on single-member limited liability companies". For example, should such an initiative deal with matters such as registration procedure, minimum capital and the payment of dividends?

The deadline for responding to the consultation paper is 15 September 2013.

Comment

It seems that the Commission is determined to take action of one kind or another to assist small businesses wishing to trade across the EU's internal borders.  The introduction to the consultation paper repeats a statement of intent from the Commission's December 2012 action plan on European company law and corporate governance:  "As regards company law in particular, the Commission believes that SMEs need simpler and less burdensome conditions for doing business across the EU and it remains a clear priority for the Commission to take concrete measures in this regard."  The European Private Company having so far come to nothing, a project to reform the law governing single member companies is apparently regarded as the next best thing; at least such a project would, in the words of a recent ‘roadmap' document dealing with the Commission's work in this area, "partially achieve the objectives of the SPE Statute".

We do not yet know exactly what the Commission has in mind for single member companies.  The consultation paper, particularly when read together with the ‘roadmap' document, seems to suggest that it is not seeking to devise a new EU corporate vehicle which would sit alongside Member States' existing vehicles in the way that the European Company (SE) does.  Instead, the plan is merely to harmonise Member States' rules on certain key matters.

On the face of it, this is a relatively modest objective.  Much will depend, though, on precisely which areas of the law the Commission seeks to harmonise.  The danger of aiming for harmonisation across too many areas is that the project might stall in the same way as the European Private Company project has done.  On the other hand, if only a handful of core areas are harmonised, the regimes governing single member companies in different Member States will continue to differ markedly.  (The consultation paper raises the possibility that single member companies might be given a common label across the EU (and mentions Societas Europaea UniPersonam, or SEUP, as a rather unattractive option), but this would be nothing more than a cosmetic device, and would not alter the fact that, unless complete harmonisation were to be achieved, the regime governing the underlying corporate vehicle would differ from Member State to Member State.)

From the Commission's perspective, any increase in the level of harmonisation of domestic company law regimes would probably be regarded as a step in the right direction.  It is possible, therefore, that if it decides to proceed with an initiative in this area, it will opt to focus only on a select few areas of the law.  However, there will undoubtedly be some - especially in this country - who will feel that although measures designed to help SMEs are welcome in principle, minor reforms of that sort simply are not worth pursuing, on the basis that any benefits they may deliver will be outweighed by the time and effort involved in introducing them.

Companies Limited by Guarantee

The only book available that deals exclusively with such companies

More Info from £80.00
Available in Company Law Online
Jordan Publishing Health and Safety Management

Jordan Publishing Health and Safety Management

"The manual is a must for any employer that needs clear practical advice on managing health and...

Available in Health and Safety Law Online
Subscribe to our newsletters