A simplified business environment
The simplification of the business environment for companies in the area of company law, accounting and auditing is aimed at encouraging the economic activity of companies. In order to achieve this, the Commission is proposing measures to reduce the administrative burden to which they are subject.
Communication from the Commission dated 10 July 2007 on a simplifed business environment for companies in the area of company law, accounting and auditing [COM (2007) 394 final - Official Journal C191 dated 15.8.2007].
High administrative costs resulting from EU legislation restrict the competitiveness of European companies. Furthermore, legislation relating to company law, accounting and auditing has not developed in line with the business environment. The Commission proposes to re-examine EU directives in this area and their relevance. These proposals are subject to discussion with Member States, European Parliament and stakeholders with the aim of arriving at a consensus and submitting legislative proposals.
Member States need to be able to provide rapid and flexible responses appropriate to the constantly developing business environment. In this situation, a harmonised European framework promotes a climate of confidence that is required for the smooth running of the single market, but it also represents a restraint on innovation and imposes additional administrative burdens on companies.
An initial option consists in considering the relevance of directives and their complete or partial repeal where they do not regulate cross-border issues. This affects the following:
- Domestic mergers and divisions (Third and Sixth Directives);
- Rules on the capital of public limited companies (Second Directive);
- Rules on single-member private limited liability companies (Twelfth Directive).
A second option consists of considering simplifying legislation if repeal is too far-reaching. This is aimed at giving Member States a wider margin for manoeuvre in mergers and divisions, regarding:
- The choice between extending directors' responsibility and the provision of specific financial data to reduce the burdens resulting from information (reports) to be compiled;
- General meeting approval of the company acquiring another company and cases where this is necessary. In return, the protection of creditors needs to be ensured; Directive 2006/68/EC amending legislation relating to the formation of public limited liability companies and the maintenance and alteration of their capital may be used as a reference basis.
Specific simplification measures are also proposed in order to reduce unnecessary burdens and costs resulting from other legislative obligations for companies and their branches. These measures apply to:
- Publicity. The duty to publish certain information in the national gazettes in compliance with the First Company Law Directive may be abolished. In fact, this information has already been published in national registers, since 2007 in electronic format, and is accessible to all Member States. For this reason, a simple registration service would be sufficient. Furthermore, publicity obligations for branches in the establishment's Member State could also be simplified as regards the certified translation of certain documents and the Member State of the branch could have the certified translation prepared in another Member State. In both cases, the European Business Register (EBR) is an appropriate interface to access information taking full advantage of electronic registers;
- The European Company Statute, particularly the requirements regarding the registered office which should be reviewed in the light of case law at the European Court of Justice. The report scheduled for 2009 on the European Company Statute will provide an opportunity to re-examine legislation.
Accounting and auditing for SMEs
The directives which ensure the quality of financial information and auditing in the EU impose a high administrative burden on companies, especially on small and medium-sized companies (SMEs).
The Commission proposes to introduce the idea of a micro entity, already considered by certain Member States, and to exclude it from the scope of the Fourth Directive on annual accounts. The micro entity could satisfy the following criteria: fewer than 10 employees, balance sheet total less than €500,000 and turnover less than €1,000,000.
As regards SMEs, various additional measures are proposed, namely:
- To exempt small companies from the obligation to publish their accounts;
- To extend the exemptions reserved for small entities when managers of the medium-sized entity are also owners of the small entity or when these companies have unlimited liability;
- To realign periods of transition (from two years to five years when the threshold is exceeded and from two years to one year in the event of any movement in the opposite direction) and to review the procedure for adapting thresholds.
Additional measures may also be considered for SMEs, such as regular updating of thresholds, amendment of requirements in the area of consolidation (especially for small and medium-sized subsidiaries), revision of the need for accounting for deferred taxes and to remove certain disclosure requirements (on start-up costs and on breakdown of turnover).
Reducing administrative burdens for companies boosts the European economy. Initiated by the Commission in 2006, the updated simplification programme, completed with an action programme, following on from the European Council of 8 and 9 March 2007 (FR ) (pdf). Company law, accounting and auditing had been identified there as three priority action areas.