In the context of its Action Plan of 12 December 2012 which is intended, amongst other things, to improve the competitiveness of European businesses, the European Commission presented a proposal for a directive on the single-member private limited-liability company, commonly referred to as the societas unius personae (SUP).
The objective is to facilitate the cross-border mobility of small and medium-sized enterprises (SMEs) within the European Union by authorising the creation of SUPs. SMEs indeed play a vital role in economic development and allowing them to set up shop more easily in neighbouring countries should help to stimulate entrepreneurship and growth.
The establishment and operating costs of SUPs will be reduced owing to a low minimum capital requirement upon incorporation and a uniform on-line registration procedure. When incorporating an SUP (with on-line registration), the same template for the articles of association must be used but, in order to respond to the specificities of individual companies, it will be possible to amend these articles.
An SUP can be formed either as a new company (ex nihilo) or through the conversion of an existing company. An SUP can thus have a single founder and member (a natural or legal person), in which case it will be authorised to issue only one share. The organisational rules will thus be simplified insofar as it will not be necessary to hold general meetings (with respect for the associated convocation rules), and the sole member will be authorised to take a substantial number of decisions, in addition to the power to delegate certain decisions to the management organ. SUPs can also be sole members of other companies.
The minimum subscribed capital can be as little as one euro, provided the Member States so permit. With such a low minimum capital requirement, it is important to ensure that creditors are adequately protected. To this end, the proposal for a directive also contains rules on distributions (such as dividends) to the sole member of an SUP. The SUP will be allowed to proceed with such distributions only if it successfully passes a balance sheet test demonstrating that, following the distribution, its assets will be sufficient to cover its liabilities in full. Moreover, prior to any distribution, the management organ must provide the sole member with a certificate of solvency. The managers of SUPs must be natural persons, unless the national law of the Member State where the SUP is registered authorises legal entities to serve in this capacity. In Belgium, this requirement should not present particular difficulties, given that any legal person appointed to a corporate organ must designate a natural person as its permanent representative, who is subject to the same requirements and exposed to the same liability as if (s)he were performing this office in his or her own name and on his or her own behalf.
The promotion of SME entrepreneurship is certainly a worthy goal, and stimulating entrepreneurship is indeed a necessity in today's world. That's why we truly hope that this is not mere wishful thinking and that SUPs will flourish. However, the absence of an obligation to prepare a financial plan in order to form an SUP raises a red flag in our mind. Despite its size, it appears to us essential that any business project be well prepared, and the establishment of a financial plan is a necessary stage in this regard.
Moreover, it is expected that the SUP will be a particularly attractive model for corporate groups, which will be able to easily - and at minimum expense - establish subsidiaries in other Member States, with a single member whose liability is limited to the amount of subscribed capital. Currently, under Belgian law, the consolidation of all shares of a limited company (SA/NV) in the hands of a sole shareholder renders this shareholder jointly liable for all obligation of the company, if the company is not wound up or converted into another corporate form within a period of one year following consolidation of all shares in the hands of the sole shareholder. The same rule applies to private limited-liability companies (SPRL/BVBA) whose sole member is a legal entity. Allowing corporate groups to establish subsidiary SUPs with a sole member (a parent or grandparent company, for example) whose liability is limited to the amount of subscribed capital is undeniably a giant step forward.
The European Commission also wishes to contribute to the long-term sustainability of businesses by creating an attractive environment for the shareholders of all types of companies, including listed companies. Various objectives have been defined to this end, including (i) the strengthening of a link between remuneration and the performance of company managers (say on pay), (ii) enhanced transparency of transactions with related parties, and (iii) the regulation of proxy advisors with a view to monitoring and ensuring the quality of their advice. Led by the EU, the Belgian legislative arsenal will continue to grow.