1 Single-member private limited liability
companies
| Committee's assessment
| Legally and politically important |
| Committee's decision | Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Innovation and Skills Committee
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| Document details | Draft Directive on single-member private limited liability companies
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| Legal base | Article 50 TFEU; ordinary legislative procedure: QMV
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| Department
Document numbers
| Business, Innovation and Skills
(35953), 8842/14 + ADDs 1-5, COM(14) 212
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Summary and Committee's conclusions
1.1 This proposal would require Member States to establish, as
part of their national law, a specific form of single member private
liability company (SUP) which would be subject to standard and
simplified rules for its formation and governance. A business,
particularly any small and medium sized enterprises (SMEs), would
then have the option of using this form of company with a view
to alleviating the extra burdens of carrying out cross-border
business.
1.2 The proposal raises a legal basis question. Previously,
measures establishing a European form of company such as the European
Public Company, Societas Europaea, had a legal basis of
what is now Article 352 TFEU. This is because they involved creating
a new surpranational form of limited company rather than harmonising
national law. In this case, in contrast, the Commission has ostensibly
drafted the measure as one of harmonisation of national laws and
it asserts that the objectives of the proposal, as drafted, come
within the scope of Article 50 TFEU. This is the general legal
basis enabling the EU to adopt directives for the purpose of attaining
freedom of establishment.
1.3 When we first considered this proposal in June
this year we asked the Minister (Jo Swinson) to provide an update
once the Government's had given further consideration to the
legal basis and considered the views of stakeholders.
1.4 The Minister now indicates that the Government
will not be pressing for a change in the legal basis, but focussing
on trying to obtain changes to the substantive proposal to ensure
that it will offer benefits to UK entrepreneurs or companies.
1.5 She also provides a progress report on consultation
with stakeholders.
1.6 Finally, she draws our attention to a new issue,
namely conferral of powers on the Commission to adopt subordinate
legislation.
1.7 We are grateful to the Minister for this update.
We note that the use of Article 352 TFEU would give the negotiating
advantage of requiring unanimity in the Council, and we urge the
Government to take that fact fully into account in its future
approach to the negotiations.
1.8 We note that the consultations to date with
small business organisations do not appear to have resulted in
any specific objections to the proposals, nor any particular enthusiasm
for it.
1.9 We support the Government's specific negotiating
objectives of:
· seeking
to ensure simplified registration across the EU;
· keeping
the proposal as close as possible to UK law;
· removing
of limiting the articles relating to the management and control
of the SUP, and rules on distributions and dissolution; and
· removing
the power of the Commission to determine by the delegated legislation
procedure the type of company in each Member State which must
conform to the coordinating measures of the proposed Directive.
1.10 We ask the Minister to provide us with an
update, in due course, on the further views of stakeholders and
interested parties, and in particular, as we originally asked,
in respect of any adverse effect on UK SME's wishing to carry
out business in other Member States or any specific provision
which is either unnecessary to achieve the objectives of the proposal
or which would have adverse consequences for UK businesses.
1.11 We also ask for an update on the Government's
further consideration of the use of the implementing legislation
procedure for the Commission to adopt legislation concerning the
standard form for registering an SUP or the setting of
uniform articles of association.
1.12 In view of the fact that the Italian Presidency
is considering whether it may be possible to reach an agreement
in the Council on some general principles we draw this Report,
and our previous one, to the attention of the Business, Information
and Skills Committee.
Full details of
the documents: Proposal for a Directive
on single member private liability companies, (35953), 8842/14
+ ADDs 1-5, COM(14) 212.
Background
1.13 The key elements of the proposal are:
· Member
States would be required to provide in their national legislation
a company law form for single-member private limited liability
companies. It would have a common label — Societas Unius
Personae (SUP). Member States would have the choice of how to
introduce such a company form, e.g., by creating an additional
form of single-member companies or by replacing an already existing
form with SUP;
· Member
States would be obliged to allow for direct on-line registration
of SUPs, without the need for a founder to travel to the country
of registration for this purpose;
· The
proposal would provide for a standard template of articles of
association, which would be identical across the EU, available
in all EU languages and would contain the necessary elements to
run a single-member private limited liability company. 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; and
· Protection
for creditors would be ensured, through a balance sheet test and
a solvency statement.
1.14 The proposal would also set out the rules and
procedures applicable to SUPs:
· An
SUP would have full legal personality;
· A sole
member of an SUP would not be liable for any amount exceeding
the subscribed share capital;
· The
sole member may exercise the powers of the general meeting of
the company and decisions taken must be recorded in writing;
· An SUP
and its articles of association would be governed by the national
law of the Member State where the SUP is registered;
· An SUP
may be incorporated by a natural or legal person (including another
SUP);
· An SUP
may be formed as a new entity or by converting a company that
already exists under another company form by following a conversion
procedure prescribed by applicable national laws;
· An SUP
may be converted into another company form following the relevant
procedure laid down by applicable national laws;
· Any
founder who is resident or who has a seat in the EU would be able
to establish an SUP in another Member State electronically, without
a need to travel to the country of registration (types of registration
other than online will also be available);
· Limited
information and documentation only could be required for an SUP's
registration, including its name, registered office address, business
object, information about the founder and/or beneficial owner,
and share capital;
· An SUP
would have only one issued share, which shall not be split, but
which can be owned by more than one person (in which case, such
persons will be regarded as one member in relation to the SUP,
and act through a notified representative);
· The
share capital of an SUP must be at least €1 (or, if the Member
State's currency is other than Euro, one unit of its currency).
It must be fully paid and not be subject to a maximum value; and
· A distribution
to the sole member may take place if the SUP satisfies a balance
sheet test, demonstrating on the basis of the most recently adopted
balance sheet that, after the proposed distribution, the remaining
assets of the SUP will be sufficient to fully cover its liabilities.
In addition, the management body of the SUP (comprising one or
more directors) must provide a solvency statement to the sole
member before any distribution is made, certifying 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.
The Minister's letter of 26 November 2014
1.15 The Minister addresses the legal basis issues
and the Government's negotiating objectives as follows:
"As a result of the considerations we remain
of the view that there is some scope to argue that the legal base
for the proposal should be Article 352. However, we also recognise
that, given the manner in which the Commission has drafted the
proposal, there are legal arguments to the contrary (i.e. in favour
of the chosen Article 50 legal base).
"Accordingly, we have decided not to continue
to press the legal base issue in our active negotiations on the
proposal going forward. We believe that at this stage in the negotiations
we should concentrate on trying to obtain changes to the substantive
proposal to ensure that the Directive will offer benefits to those
UK entrepreneurs or companies who might benefit. To achieve this
we will seek to align the provisions of the directive as closely
as possible to the UK company law regime. This will offer assistance
to those UK companies who are looking to set up an SUP in other
Member States. We will seek to remove as many burdens as possible
from the proposal and to obtain light touch approach where possible.
"The UK negotiating position will be to
focus on ensuring the proposal simplifies registration across
the EU, and seek to remove or limit the articles relating to the
management and control of the company, rules on distributions
and dissolution (the later articles) be left to national law."
1.16 She reports on consultations with stakeholders:
"We have been in touch with a number of
small business organisations. They have pointed out that many
of their members do not have significant problems working in other
Member States. Those that do, generally have problems related
to working practices, language and tax. That said they have noted
that any simplification of rules in other Member States would
of course be welcomed. We have also reassured the organisations
that should there be an agreement on the SUP this would not mean
that there would be any changes to the UK private limited company
form."
1.17 Finally she outlines the issues with regard
to conferring power on the Commission to adopt subordinate legislation.
"The proposed Directive (Article 1(2)) would
confer a power on the Commission to adopt delegated acts. Part
1 of the Directive applies in relation to the types of company
listed in Annex 1, and Part 2 requires that the types of company
listed in Annex 1 must be able to convert into a SUP.
"The delegated act power would enable the
Commission, where there are changes to the types of private limited
companies provided for in national law, to amend the list of types
of companies contained in Annex 1 to the Directive. We do not
believe that the Commission should be given this power and therefore
will be seeking the removal of this delegated act power as part
of our negotiations.
"The Directive would also confer two powers
on the Commission to make implementing acts. Article 13(2) confers
power to establish a template to be used for the registration
of SUPs. Article 11(3) confers power to adopt the uniform articles
of association. As part of the Working Group we are considering
what elements of these provisions should be left to implementing
acts and what should appear in the body of the Directive itself.
We will aim to strike a balance between the certainty of wording
within the Directive and the flexibility that implementing acts
can provide."
Previous Committee Reports
First Report HC 219-i (2014-15), chapter 3, (4 June
2014).
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