Category Archives: Intellectual Property

EU Directive on Trade Registry Practice

At the recent meeting of the EU leaders in Sibiu, Romania several important matters were raised. I am sure the B word came up, but that is not the subject of this post.

An important matter which seems to have been missed was that the EU decided to revise its corporate law rules to bring them into the digital age. The objective is to increase legal efficiency, transparency and legal certainty by using digital instruments. The Presidency of the Council reached a provisional agreement with the representatives of the European Parliament in February 2019 on a draft directive that will facilitate and promote the use of online solutions in a company’s relations with public authorities throughout its life cycle, according to a communiqué of the EU Council.

The new rules are to guarantee that:

• companies have the possibility to register as limited liability companies, set up new branches and file documents for companies and their branches with the trade register through a fully online procedure;
• national forms and information on national requirements are made available online in a language widely understood by most cross-border users;
• the rules on fees for on-line formalities are transparent and applied in a non-discriminatory manner;
• the fees charged for online registration of companies do not exceed the overall costs incurred by the Member State concerned;
• the principle of the single transmission of information applies, according to which a company should only submit the same information to public authorities once;
• documents submitted by companies are kept by the national registers in a format that allows steps towards a more efficient computer reading and searching and is also the subject of exchanges;
• more information about companies is made available to all interested parties free of charge in the trade registers.

The Directive also seeks to establishes the necessary safeguards against fraud and abuse in the online procedures, including checking the identity and legal capacity of the persons setting up the company and the possibility of requesting physical presence before a competent authority. This appears to be in contradiction of the digital age and will in my view be abused by the authorities to delay registration.

The Directive maintains the involvement of notaries or a Romanian law firm proceedings if these procedures can be fully completed online. It also provides for an exchange of information between Member States on persons who have lost the right to exercise a leading position in order to prevent fraudulent behavior.

One failing is that the draft Directive does not harmonize the substantive requirements for the establishment of companies or the pursuit of economic activities within the EU.
Now, this text on which a provisional agreement has been reached will have to be approved by the relevant bodies of the two institutions. It will then be formally adopted following the usual legal-linguistic revision.

No time scale has been set for the directive coming into force, but this is just one further step in the streamlining of procedures across the EU which should in theory be more efficient.

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