DG JUST JUST/2015/PR/01/0003 EXECUTIVE SUMMARY

Transcription

1 DG JUST JUST/2015/PR/01/0003 Assessment and quantification of drivers, problems and impacts related to cross-border transfers of registered offices and cross-border divisions of companies EXECUTIVE SUMMARY

2 This document has been elaborated on the basis of the requirements and information communicated to us, with reference to the current context, and taking into account the current legal and economic environment. The information and views set out in this study are those of the author(s) and do not necessarily reflect the official opinion of the Commission. The Commission does not guarantee the accuracy of the data included in this Study. Neither the Commission nor any person acting on the Commission s behalf may be held responsible for the use which may be made of the information contained therein; The findings presented, were elaborated on the basis of our methods, processes, techniques and knowhow, which, together with the support medium, are our property. The decision as to whether or not to implement these findings, as well as the methods of such implementation, is your responsibility. We do not assume any liability with respect to third parties. In the data gathering and investigative phases of this project, we identified that some fundamental data from the Member States and statistical sources are unavailable and/or non-existent. In order to quantify our findings and conclusions, a specific model was developed based on estimates and assumptions clearly explained in this Report and accompanying Annexes. While available data at national and EU level was used to design a model in good faith and through the application of best practices in research statistics, it is acknowledged that the initial data forming the basis of our model was limited. 2

3 1 SCOPE OF THE STUDY EY was contracted by DG Justice to carry on a Study on the Assessment and Quantification of drivers, problems and impacts related to cross-border transfers of registered offices and cross-border divisions of companies. As outlined in the Commission s Work Programme for , a company law initiative should be presented in 2017 to facilitate cross-border transfers of registered offices and cross-border divisions of companies. The purpose of this Study is therefore to provide the Commission with a thorough independent assessment and quantification of drivers and problems caused by the issues existing with regard to cross-border transfers of registered offices and cross-border divisions of companies, as well as the impacts of potential solutions. This summary is organised in two main sections, the first one related to cross-border transfers of registered offices and the second one related to cross-border divisions, and summarises the following for each task: The assessment of the drivers; The assessment and quantification of the problems; The assessment and quantification of the target impacts of potential EU level solutions. The definition of the terms is clarified below: Registered Office: The company s official address in the State where it was incorporated and that which is registered in the Member State s official registry. Statutory Seat: The place indicated in the company s statute where its seat is supposed to be located. Real Seat: The place where the company s centre of administration and control is located. This is often used interchangeably with central headquarters and head office. Division: A division (or split) entails the transfer of assets and liabilities of a company either to a new company formed for that purpose or to an existing company. The latter is sometimes referred to as a partial merger. 2 METHODOLOGY METHODOLOGY The Study has been carried out between January and October The following tools have been used: In-depth desk research: The research focused on structural business statistics, legislative documents, academic literature and relevant previous studies, including the 2013 Lexidale Study on the application of the Cross-Border Mergers Directive 3 and the 2016 Study on the Law Applicable to 1 COM (2016) 710 final Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Commission Work Programme 2017 Delivering a Europe that protects, empowers and defends 2 A merger would require the dissolution without liquidation of at least one company, which is not the case where a division is made. 3 Available at 3

4 Companies 4. The results of the 2013 Consultation on cross-border transfers and the 2015 Internal Market Consultation on cross-border mergers and divisions were also examined and exploited. Member State mapping: The EY legal network across the EU completed an inventory of the current national legislation and practices on cross-border transfers and divisions in 28 Member States and collected statistics on domestic and cross-border transfers and divisions from business registers in the Member States for which data were available. All these data are presented in 28 Member State Fiches. Field research: In total, 59 stakeholders with different backgrounds were interviewed. Among others these include representatives from EU institutions, EU associations, business associations, SME representatives, companies and insurance companies, investors, notaries and legal experts, social attachés and trade unions. Identification and analysis of successful and unsuccessful cases: EY legal experts in the 28 Member States identified practical case examples on cross-border transfers and divisions, of which 10 selected cases were studied in-depth. The above mentioned tools allowed to identify and analyse the main existing problems and their drivers, as well to measure the scale of the problems. In the following steps, the Study team identified and assessed the potential solution packages, which include more than one policy option and are presented below, to be addressed to the identified problems. Expected legal, social and economic impacts have been analysed per set of solutions. These final results were tested and discussed with external experts. LIMITS The lack of statistics and available data on cross-border transfers of registered offices in 24 Member States and cross-border divisions of companies in 21 Member States formed an important limit to the Study. The volumes of cross-border transfers of registered offices and cross-border divisions thus result from an estimate of the EY team based on a set of hypotheses. The external expert panel was consulted for the validation of the results. Moreover, the estimated volume for cross-border divisions only refers to direct ones, given the difficulty to gather data on indirect operations. CROSS-BORDER TRANSFERS OF REGISTERED OFFICES MOTIVATION AND SCALE The scale of this phenomenon is estimated at approximately 600 cross-border transfers on an annual basis across the EU. The primary reason for companies to transfer their registered office is to benefit from fiscal advantages in another Member State. DRIVERS A number of drivers have been identified leading to problems for the cross-border transfer of registered offices. They can be summarised as follows: Lack of common procedures for the cross-border transfer of registered offices. It was found that there are no common rules establishing the procedures for direct cross-border transfers of registered offices. Although the regulation establishing the European Society and the Cross-Border 4 Study on the Law Applicable to Companies Final Report, Carsten Gerner-Beuerle (London School of Economics); Federico M. Mucciarelli (SOAS & University of Modena); Edmund-Philipp Schuster (London School of Economics); Mathias M. Siems (Durham University) June

5 Merger Directive assist companies in exercising their freedom of establishment, they do not authorise to undertake such operations directly. Moreover, the application of the CJEU jurisprudence of the Vale and Cartesio case laws is unevenly interpreted across Member States. Divergences and incompatibilities in national legislation relating to cross-border transfers of registered offices. It was found that only five Member States (CY, CZ, DK, ES, MT) have a specific national procedure in place for the direct cross-border transfers of registered offices. While many Member States authorise the transfers from one Member State to another, some Member States do not permit such operations. Moreover, incompatible rules exist as regards the procedures, including the different requirements to be filled and the safeguards applying for the stakeholders protection. ACTIONS UNDERTAKEN BY MEMBER STATES AND EFFECTS The absence of EU common rules and the divergences and incompatibilities in national legislation relating to cross-border transfers of registered offices lead to obstacles to performing a direct cross-border transfer of a registered office, which push companies to undertake one of the three actions below: Action 1: Companies abandon the transfer of their registered office, remaining in the home Member State and not exercising the freedom of establishment; Action 2: Companies transfer the registered office directly through the use of national procedures or through the application of CJEU jurisprudence; Action 3: Companies transfer the registered office indirectly through alternative solutions, such as the preliminary wind-up of the company before creation of a new company in the new Member State, the use of a cross-border merger or the conversion of the company into a Societas Europeae (SE). It was observed that those actions have several effects. When companies abandon the transfer, this has economic impacts on companies and Member States. Some companies loose the opportunity to access market opportunities within the EU and Member States might experience reduced attractiveness and benefits resulting from the exploitation of the internal market. When a company undertakes a transfer of registered office through direct or indirect procedures, legal uncertainty is created not only for companies, due to the complexity of procedures, but also for creditors, employees, and shareholders, due to the divergence in rules protecting these individuals. Moreover, the existing complexities can increase the cost and duration of the procedures. In general, effects across the EU are observed in terms of a reduced attractiveness of the EU single market and of increased divergences in the competitiveness between Member States. POTENTIAL SOLUTIONS AND IMPACTS Following the assessment, the study team identified four packages of potential policy options. Package 1 refers to the status quo. Package 2 refers to European rules which would make it possible to perform direct cross-border transfers, with procedural rules in place at national level as is currently the case in 5 Member States. Package 3 includes European rules providing for the legal effects of crossborder transfers, clarifying the legal situation of employees, creditors and minority shareholders, the condition of the transfer and clarifying the transfer of assets and liabilities. Package 4 includes European rules providing for the procedural requirements for cross-border transfers, in terms of information obligations, obligations to analyse the legal, economic and social implications, the dates and deadlines, the publication requirements and the person legally responsible to comply with such requirements. Moreover, both packages 3 and 4 also include rules on communication, on the designation of a competent authority scrutinising the cross-border transfer as regards national law requirements and on the safeguards for stakeholders involved. Although they were initially suggested by the Commission as independent potential solutions, they were gathered as packages to ensure a meaningful impact on the problems. 5

6 The following table provides an overview of the assessment of the impacts relating to the four packages. A scoring system was applied to all expected impacts for each solution package. This allowed to provide an evaluation score between -3 and +3. Table 1 Assessment of impacts for cross-border transfers of registered offices Assessment Criterion Scenario 1 - Status Quo Package 2 Package 3 Package 4 Economic Impacts Impact on Companies -Economic ,5 Impact on Companies - Other Impact on Competitiveness Impact on SMEs Impact on Competition Impact on Consumption Impact on Jobs and Growth Social Impacts Impacts on Employees Impacts on Social Protection Impacts on Fundamental Rights Right to Conduct a Business Impact on Data Protection Impacts on Tax Impacts on Tax Regimes Impacts on Member States' legal systems Impacts on Company Law systems at national level Impacts on Public Administrations Impacts on Public Administrations - Economic Impacts on Public Administrations - Organisational To conclude, because the volume of transfer is low in the EU, the maintenance of the Status Quo should be considered as a potential option. Package 2, introducing full European rules to perform a direct cross-border transfer, scores the highest. The estimates associated with the economic impacts of the package and the legal certainty it could bring to companies and stakeholders are the strengths of this option/package. While package 3 and 4 also have positive impacts, such instruments would not be all-encompassing and would therefore continue to leave space for ambiguity and legal uncertainty like in the current situation. Firstly, the benefits associated with an all-encompassing instrument are linked to the legal certainty of such an instrument by solidifying procedures already applied within the Member States and by enhancing the protection of stakeholders, particularly employees. Secondly, the option also has important economic impacts. Package 2 would lead to an overall avoided legal and administrative cost of approximatively 12,000 to 19,000 per cross-border transfer while also increasing the volume from approximatively 6 to 49 additional cross-border transfers per year. This can be compared to package 3, with an avoided cost per unit of approximatively 1,000 to 2,000, and package 4, with an avoided cost of approximatively 11,000 to 18,000 per unit. The approximate total avoided cost per annum, based on our assumptions on volume and costs, depends on the package adopted. It estimated at approximatively M 9,6 to M 10,2 for package 2, around M 1 for package 3 and between M 9,2 and M 9,6 for package 4. Despite the benefits associated with the packages, the negative impacts on social rights as well as the fiscal impacts associated with all packages must be considered. The opening of the internal market for companies can also bring with it negative impacts with regard to forum shopping with companies undertaking more frequent restructuring and reorganisation. This can impact negatively overall on employees due to the lack of stability it provides to them. While all three packages score negatively on this 6

7 aspect, it must be noted that the regulation of tax regimes do currently not fall under EU competence and therefore cannot be addressed. Finally, the overall impact of the adoption of such an instrument is questioned by stakeholders if the transfer of real seat is not considered too. However, this issue remains an issue of national law, as every Member State decides upon the application of the real seat or incorporation theory, and its political feasibility is considered to be difficult. CROSS-BORDER DIVISIONS MOTIVATION AND SCALE Unlike cross-border transfers, the primary reason for companies to undertake a cross-border division concerns the possibility to simplify their structure and adapt it to internal market opportunities. Concerning the scale, it is estimated that approximately 100 direct cross-border divisions occur per annum across the EU, with indirect cross-border divisions being hard to measure in the absence of available data. DRIVERS Drivers leading to problems in relation to cross-border divisions of companies were identified as follow: Lack of common procedures for the cross-border division of companies. At EU level, there is no common procedure for undertaking direct cross-border divisions and the existing EU and national instruments seem insufficient. At EU level, the CJEU jurisprudence on Cartesio and Vale cases, authorise cross-border divisions in Member States through the freedom of establishment. However, the authorisation is limited to the extent that divisions are accepted by Member States in their national law, which is the case for a limited number of Member States. At national level, the 1982 Divisions Directive allows divisions but only covers limited liability companies and applies for national divisions. Divergences and incompatibilities in national legislation relating to cross-border division of companies. Specific rules for direct cross-border divisions only exist in 3 Member States (CZ, DK, FI). Other Member States authorise cross-border divisions through the application of procedure for national divisions and/or cross-border mergers by analogy, or through the application of indirect procedures. In this scenario, incompatibilities exist with regards to procedural requirements, information and communication exchange, designation and role of the national authorities and protection of stakeholders, including employees, creditors and shareholders. ACTIONS UNDERTAKEN BY MEMBER STATES AND EFFECTS The absence of EU common procedures and the divergences and incompatibilities in national legislation for performing cross-border divisions may lead to the following actions: Action 1: Companies abandon the division of their companies, remaining in the home Member State and not exercising the freedom of establishment; Action 2: Companies operate a cross-border division indirectly, through alternative solutions, such as the use of a cross-border merger or the creation of a new company in the host Member States before the transfer of assets and liabilities to the new company. As for cross-border transfers, legal, social and economic effects were observed. Firstly, the creation of legal uncertainty impacts companies, as well as creditors, employees and shareholders. Secondly, it has an economic impact on companies and Member States. Companies can experience an increased cost and duration of the procedure. They can also decide to abandon the operation, missing the opportunity to restructure and benefit from internal market. Member States can observed a reduced attractiveness. POTENTIAL SOLUTIONS AND IMPACTS 7

8 The study team identified four packages of potential policy options. Package 1 refers to the status quo. Package 2 refers to European rules which would make it possible to perform a direct cross-border division, introducing a complete legislative proposal which would oblige all Member States to have procedural rules in place at national level. Package 3 refers to European rules providing for the legal effects of cross-border divisions, clarifying the transfer of assets and liabilities and the legal situation of the divided company, as well as the legal situation of employees, creditors and minority shareholders. Package 4 refers to European rules providing for the procedural requirements for cross-border divisions, with regards to information obligations, the obligation to analyse the legal, economic and social implications, dates and deadlines, publication requirements and the legally responsible person. Both packages 3 and 4 also include rules on communication, on the designation of a competent authority scrutinising the cross-border divisions and on the safeguards for stakeholders involved. Although they were initially suggested by the Commission as independent potential solutions, they were integrated into packages to ensure a meaningful impact on the current existing problem. The following table provides an overview of the assessment of the impacts relating to the four packages. As for transfers, a scoring system was applied to all expected impacts for each solution package. This allowed to provide an evaluation score between -3 and +3. Table 2 Assessment of impacts for cross-border divisions of companies Assessment Criterion Scenario 1 - Status Quo Package 2 Package 3 Package 4 Economic Impacts Impact on Companies - Economic Impact on Companies - Other Impact on Competitiveness Impact on SMEs Impact on Competition Impact on Consumption Impact on Jobs and Growth Social Impacts Impacts on Employees Impacts on Social Protection Impacts on Fundamental Rights Right to Conduct a Business Impact on Data Protection Impacts on Tax Impacts on Tax Regimes Impacts on Member States' legal systems Impacts on Company Law systems at national level Impacts on Public Administrations Impacts on Public Administrations - Economic Impacts on Public Administrations - Organisational Package 2 scores the highest, due to the estimates of economic impacts and the legal certainty it could bring. While package 3 and 4 also score well, such instruments would continue to leave space for ambiguity and legal uncertainty, like the current situation. With regard to economic impacts, package 2 would lead to an overall avoided cost of approximately 12,000 to 37,000 per cross-border division. Based on our assumptions on volume and costs, it would generate a total avoided cost at EU level of approximately M 2,9 to M 3,6 per annum, while also increasing the volume from approximately 9 to 36 additional cross-border divisions per annum. This can be compared with the global avoided cost occurring with package 3, estimated at approximately M 0,4 per annum, and package 4, estimated at approximately M 2,7 to M 3,1 per annum. Indeed, as outlined by stakeholders interviewed through the study, it is indicated that the creation of an instrument similar to the Cross Border Merger Directive for cross-border divisions would increase the 8

9 impetus for companies wishing to exercise cross-border reorganisations and restructuring and wishing to benefit from the Single Market. As for cross-border transfers, the impacts on social rights as well as the fiscal impacts associated with all packages must be, however, also taken into account. While the creation of an all-encompassing instrument could provide protection for stakeholders - particularly employees-, the opening of the internal market for companies can also bring negative impacts. The phenomenon of forum shopping could increase with companies undertaking more frequent restructuring and reorganisation. This can have an overall negative impact on employees due to the lack of stability providing them. In this line, none of the legal scenarios provided would benefit positively on the tax regimes currently existing within the Member States with uncertainty existing as to whether the simplification of procedures would have a knock-on effect on shopping for the best fiscal paradise for companies. While all three legislative scenarios score negatively on this aspect, it must be noted that currently the regulation of tax regimes does not fall under EU competence and therefore cannot be addressed. 9