On April 9, 2014, the European Commission presented a proposal for a Directive on single-member private limited liability companies. The Directive is aimed to simplify the creation of companies with a single shareholder across the European Economic Area (EEA) and to target obstacles that hamper the economic cross-border activities of these enterprises within the EEA, including the related costs. In particular, it aims to encourage small and medium-sized enterprises, including single-member enterprises, to carry out their activities in other member states. It is also meant to benefit groups of companies by allowing them to set up wholly-owned subsidiaries according to the same main requirements across the EEA.
The proposal focuses on private limited liability companies, i.e. companies that are not listed and do not offer shares to the public. It does not introduce a new legal form at a European level. Instead, member states will be required to make a national company law form for single-member private limited liability companies available in their national legislation with the same requirements across the EEA and a common indication: Societas Unius Personae (SUP).
General legal characteristics of the SUP
The SUP may either replace the existing local private limited liability company form, or exist as a separate company law form in addition to it. This is up to each member state. The SUP can be formed either by incorporating an entirely new company or by converting an existing company into a SUP. It must have its registered office and either its central administration or its principal place of business in the EEA. As a SUP has only one shareholder, it is only allowed to issue one share, which cannot be split, with a value of at least EUR 1. Member states are required to allow for the incorporation of a SUP by means of an online registration procedure, without the need for the incorporator to be physically present before the relevant authorities in the country of registration. The registration can be done using a template form and template articles of association, identical across the EEA, available in all EEA languages and containing the necessary elements to run a SUP. The member states can provide for further rules regarding the verification of the identity of the incorporator and any other person registering the SUP on his or her behalf.
The Directive also contains rules regarding (dividend) distributions to the single-member of the SUP. In order to ensure a high level of protection of creditors (and as such developing a good reputation for the SUP), a distribution can only be made following (i) a balance sheet test demonstrating that, after the distribution, the remaining assets of the SUP will be sufficient to fully cover its liabilities and (ii) a solvency statement made by the management body to the single member of the SUP. The Directive also covers the decision-making powers of the single member, the workings of the management body and the representation of the SUP in relation to third parties.
Reception of the SUP in the Netherlands
For Dutch legal purposes, the obligatory introduction of an online registration system is not in line with the current system of incorporating Dutch private limited liability companies (BVs), which requires a notarial deed. On May 23, 2014, the Dutch Minister of Foreign Affairs sent a letter informing the Dutch Parliament on the Directive, in which he also expresses the views of the Dutch government on the introduction of the SUP. In principle, the Dutch government supports the efforts of the European Commission and realizes that a European company form may be useful. However, in its opinion, competition between national company forms can lead to good results and innovation, since national company law forms are closely linked to the specific (legal) practice of the relevant member state. In addition, an important area of concern – considering the lack of notarial involvement – is the identification of incorporators in the online registration process, in light of the prevention of abuse of legal entities.
The proposal has been submitted to the European Parliament and is awaiting possible amendments and a final decision. In addition to the Dutch government’s aforementioned point of concern, several other provisions have been criticized. The European Economic and Social Committee has expressed that the proposal is in need of further development, since in its current form it entails serious potential risks to the proper conduct of trade on the internal market. It is yet unknown when the Directive will be adopted. Considering the proposal is likely to be subject to amendments, the process may take longer than anticipated by the European Commission. Once adopted, the new Directive will have to be implemented into the laws of all EEA member states within two years from the adoption date. In the Netherlands, this would require amendments to Book 2 Dutch Civil Code and the Dutch Trade Register Act.