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Setting up in the EU to become simple and cheaper

EU company law is being updated to reflect the digital age. The European Council has adopted a directive that facilitates and promotes the use of online tools in the contacts between companies and public authorities throughout their lifecycle.

The directive will provide improved online procedures, creating a modern and safe way for businesses to dismantle the obstacles involving setting up companies, registering their branches or filing documents, especially in cross border operations.

The new rules ensure that:

  • companies are able to register limited liability companies, set up new branches and file documents in the business register fully online;
  • national model templates and information on national requirements are made available online and in a language broadly understood by the majority of cross-border users;
  • rules on fees for online formalities are transparent and applied in a non-discriminatory manner;
  • fees charged for the online registration of companies do not exceed the overall costs incurred by the member state concerned;
  • the 'once-only' principle applies, meaning that a company will only need to submit the same information to public authorities once;
  • documents submitted by companies are stored and exchanged by national registers in machine-readable and searchable formats;
  • more information about companies is made available to all interested parties free of charge in the business registers.

At the same time, the directive sets out the necessary safeguards against fraud and abuse in online procedures, including control of the identity and legal capacity of persons setting up the company and the possibility of requiring physical presence before a competent authority. It maintains the involvement of notaries or lawyers in company law procedures as long as these procedures can be completed fully online. It also foresees exchange of information between member states on disqualified directors in order to prevent fraudulent behaviour.

The directive still has to be signed and published in the Official Journal of the EU. It will enter into force on the twentieth day following that of its publication. It will apply two years from the date of its entry into force. A number of provisions will however apply four years from the date of its entry into force.

According to figures provided by the Commission, there are around 24 million companies in the EU, out of which approximately 80% are limited liability companies. Around 98-99% of limited liability companies are small and medium-sized enterprises, which will be most directly impacted by these improvements.

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