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Brussels, 20 December 2005

Frequently Asked Questions (FAQs) on company law and corporate governance: consultation on future priorities for Action Plan

(see also IP/05/1639)

Why has this consultation been launched?

The context in which future priorities in the field of corporate governance and company law will be set is very different from 2003. EU action must now be based on the twin objectives of (1) improving the competitiveness of EU companies, in line with the Lisbon agenda and (2) Better Regulation. The medium and long term priorities must be conducive to entrepreneurship. This consultation will help to identify market needs and define future priorities in order to ensure that the action undertaken at EU level provides the most efficient reply to those market needs.

Why consult now?

The first phase of implementation of the Action Plan is coming to an end. We should now start to reflect on what should be done in the second phase. Given the importance of this consultation, Commissioner McCreevy has decided to allow market participants and all interested parties a three-month deadline for submitting their replies.

How does this fit with the Commission’s Better Regulation policy?

As required by Better Regulation, we are consulting stakeholders systematically on future initiatives, EU-level legislation will be proposed only when proved absolutely necessary and due consideration will be given to the instruments which put the least burden on companies and leave as much flexibility as possible. In addition, a comprehensive impact assessment will be carried out for any new piece of legislation and the modernisation and simplification of company law Directives will be addressed.

Which measures does the consultation cover?

The consultation covers all measures scheduled for adoption by the Action Plan but which have not yet been launched. Stakeholders will be invited to give their views on the appropriateness of these measures and the potential form of EU action. Stakeholders are also invited to identify any additional measures which may need to be addressed. Finally, in view of its relevance to the company law landscape in Europe, the Commission is asking for views on the operation of the European Company Statute.

Why modernise and simplify European Company Law?

The Company Law Directives were designed in the 1960s and early 1990s. They now require updating to reflect the context in which they operate today. Initiatives have been launched for the revision of specific Directives. However, the proliferation of amending acts does not help to make European Company Law more user-friendly. Specific amending acts make legislation difficult to understand and hence to apply. A single codified legislative act would provide stakeholders with an easily identifiable and manageable source of law.

How could European Company Law be modernised and simplified?

The mere simplification of European Company Law could be achieved through 'codification', which allows existing legislation to be put into a single legislative text, without any changes to substance. However, in order to ensure that European Company Law is modernised as well, recourse should be made to the 'recasting' technique, which allows for limited amendments to be introduced at the same time as the codification of existing provisions. This would mean that the existing Company Law Directives would be repealed and replaced with a single piece of new legislation.

What are the next steps?

The consultation will close on 31 March 2006. An analysis of the replies received will follow. In addition, a public hearing will be organised.

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