14 May 2012

FEE commented to the European Commission on the Future of European Company Law

FEE published its comment letter on the European Commission Consultation on the Future of European Company Law. FEE favours a holistic approach to the fundamental review, and looks forward to a sustainable future company law framework that is fit for purpose for European companies.

FEE awaits with great interest the debate on the Future of European Company Law that is bound to follow as an outcome of this consultation. FEE encourages the Commission to engage with its broad range of stakeholders in this further debate in order to obtain as much input as possible, also beyond what is received through the responses in this consultation where little detail on the issues raised will be provided. For questions where FEE found it relevant, at this point of the consultation phase, to elaborate its response beyond the possible limited response provided through the online questionnaire, an elaborated response has been added in the appendix. Additional comments have been provided in response to Questions 6, 7, 13, 16, 19 and 20.

Some general comments as well as FEE's comments to the questions raised by the European Commission can be summarised as follows:

1. Consolidating and updating EU company law Directives with a similar scope would be an appropriate approach.
2. Harmonising company law affects other areas too, such as liability regimes for companies and boards. While direct tax remains a sovereign matter for EU Member States, the attractiveness of using EU company legal forms in practice is limited.
3. With the developments of corporate governance and especially with regard to the role of audit committees over the last couple of years throughout Europe, the role and responsibilities for boards and audit committees should be further addressed in the broader context of the relationship between company law, corporate governance, internal control and risk management. Measures in these areas should be proportionate to the size and complexity of the company in question.
4. The capital regime for limited liability companies should be reviewed. Various models for capital regimes exist in different European countries. A certain level of harmonisation of EU company law is an ultimate goal. An in-depth analysis of the impact deriving from proposals is needed to measure costs and benefits of potential alignments.
5. Further analysis on the continued relevance of the distinction “public/private” for limited liability companies could be undertaken. One model for replacing it could be introduction of objective criteria related to size of the company with a distinction between listed and unlisted companies, due to the need for the transparency for listed companies. This would better align company law with accounting used in the fourth Directive, audit and relevant parts of capital market requirements. Similar considerations apply to the discussion regarding the EU legal form companies of the (public) SE and the (private) SPE at EU level.
6. Introduction of a possibility to apply a solvency test for distribution of profits which could include the cumulative use of a “snapshot test” and a forward-looking test is appropriate.

Full paper

© FEE