Changes from report parliamentary committee draft to plenary report

ANNEX TO THE MOTION FOR A RESOLUTION: RECOMMENDATIONS AS TO THE CONTENT OF THE PROPOSAL REQUESTED

1. General principles and legal basis

Change 20

RemovedParliament proposes to call the corporate form covered by the 28th regime the ‘European Start-Up and Scale-Up’ company (ESSU). The ESSU should not be an autonomous pan-European corporate form, but a national corporate form in all Member States that must consist of certain elements that are harmonised by Union law. The abbreviation ESSU should be added to existing national corporate form abbreviations.

AddedParliament proposes to call the corporate form covered by the 28th regime ‘Societas Europaea Unificata’ (S.EU) (Unified European Company). The rules for the S.EU must be the same in all Member States, and, in order to overcome fragmentation of the internal market, the Member States may not maintain or introduce, in their national law, any provisions diverging from those rules. To ensure a robust, ambitious and comprehensive regulatory framework, Parliament insists on adopting the S.EU with a legal basis that provides for the ordinary legislative procedure with a qualified majority in the Council. Parliament therefore opposes the use of Article 352(1) TFEU as a legal basis. Parliament is critical of the use of enhanced cooperation since a 28th regime would then only be applicable in a subset of Member States, which, instead of overcoming fragmentation of the internal market, would further fragment it and which would undermine the attractiveness of S.EUs, which would not, in such a case, be recognised within the entire Union. The 28th regime establishing the S.EU might have to be adopted by means of several legal acts, rather than by a single comprehensive legal instrument. In that case, each separate legislative proposal should provide the same safeguards when it comes to the protection of public interests such as labour law and worker and trade union rights. The corporate law elements of the regime will need to be adopted under Articles 50 and 114(1) TFEU, which are the only legal bases available for legal acts in the area of corporate law that provide for the ordinary legislative procedure with qualified majority voting in the Council; Article 50 TFEU, however, only allow for the adoption of directives. Against that background the S.EU would not be an autonomous corporate form, but a national corporate form in all Member States that must consist of a set of essential elements that are harmonised by Union law, in order to avoid gold plating and divergent national S.EUs which would go against the objective of the 28th regime. The abbreviation S.EU should be added to existing national corporate form abbreviations.

Change 21

ChangedThe ESSUS.EU should build on corporate forms established under national law. The Member States should be free as to whether they choose to allow existing national corporate forms to convert into an ESSUS.EU or to create a new national corporate form. The founders or the owners of a national corporate form should be able to voluntarily opt in to the new regime, which would allow for the use of the company label ‘ESSU’.‘S.EU’.

Change 22

ChangedThe existence of an ESSUS.EU should be automatically recognised byin the national legal orders of all the Member States as a limited liability company.

Change 23

ChangedThe law applicable to the creation of an ESSUS.EU should be the law of the Member State in which the company in question is incorporated.registered. By way of derogation from that principle and for the purpose of protecting predefined public interests, it should be possible to determine the applicable law by means of an overriding connecting factor rather than the place of incorporation.

Change 24

ChangedThe legal bases for the ESSU should be Articles 50 and 114(1) TFEU. In order to achieve legal certainty as to the constitutive elements of the ESSU,S.EU, the directive adopted under Articles 50 and 114(1) TFEU must be a maximum harmonisation directive.

Change 25

ChangedParliament is mindful of the risk that an automatically recognised ESSUS.EU could lead to athe circumvention of mandatory domestic rules that protect weakerworkers, parties.their representatives and trade unions, and other vulnerable parties as well as other public interests.. The ESSUS.EU corporate rules should therefore be without prejudice to Union and national law in the area of individual and collective labour law, including rules on employee codeterminationparticipation rules,in the affairs of the company, and should contain safeguards that effectively prevent the abusive use of the ESSU.S.EU.

2. Scope

Change 26

ChangedThe Member States should provide in their national legal orders a set of rules which, when complied with, allow a national corporate form to include the abbreviation ‘ESSU’S.EU in its company name. In order to be eligible to register as an ESSU,S.EU, a national corporate form should comply with the following:

▸4 unchanged paragraphs

– it must be a legal entity with legal capacity that is automatically recognised in all Member States on the date of its registration;

– it must be a limited liability company in which the owners’ liability for the company’s debts is limited to the amount of their contributions;

– it must not be a listed company;

– it must have been established by one or more natural or legal persons that reside in or are established in a Member State;

Change 27

Changed– it must be possible for it to serve as an autonomous single company or as a subsidiary company of an ESSUS.EU parent company;

– its registered seat must be located in one of the Member States;

Change 28

RemovedIf national company law provides for a minimum paid-in capital for the establishment of a company eligible to register as an ESSU, the immediately paid-in capital must, for the purpose of the registration of that company, be set at EUR 1 and the company should be obliged to allocate at least 25 % of its annual profits to a legal reserve until that reserve, together with the any initially paid-in capital, reaches the minimum capital required under the national law in question.

Added– it must be entitled to transfer its registered seat to another Member State without requiring dissolution or re-incorporation, in accordance with harmonised procedures ensuring continuity of legal personality;

RemovedIn the interest of simplification, the possibility to register as an ESSU should not be limited to a new category of ‘innovative companies’ or to other limiting factors as that would create additional red tape and an unnecessary bureaucratic burden.

AddedTo establish a company eligible to register as an S.EU, the immediately paid-in minimum capital requirement must, for the purpose of the registration of that company, be set at EUR 1, regardless of the minimum capital otherwise required under the national law in question.

RemovedIf an ESSU intends to list itself on the stock market, it should be required to convert into a public limited company under national or Union law in accordance with national and Union conversion rules.

AddedIn order to ensure the protection of creditors, the Commission should put forward a comprehensive legal framework which incorporates alternative mechanisms such as solvency tests. Such alternative mechanisms should be proportionate and transparent, with clear criteria for assessing the financial health of companies and mitigating risks to creditors.

AddedIn the interests of simplification, the possibility to register as an S.EU should not be limited to a new category of ‘innovative companies’ or to other limiting factors as that would create additional red tape and an unnecessary bureaucratic burden.

AddedIf an S.EU intends to list itself on the stock market, it should be required to convert into a public limited company under Union or national law in accordance with Union and national conversion rules.

3. Creation of the corporate form

Change 29

ChangedThe creation and registration of an ESSUS.EU should be fully digital and comply with the ‘once only’ principle.principle whereby companies submitting a document in one Member State should not have to submit it again in another Member State. The setting up of an ESSUS.EU must be finalised within 48 hours.

Change 30

ChangedUpon creation, an ESSUS.EU should receive a unified digital identity and company identifier to streamline registration, boost transparency and trust, facilitate company identity verification, and combat fraudfraud, money laundering and tax evasion.evasion, while ensuring legal certainty.

Change 31

ChangedTo facilitate the achievement of those objectives, a uniform Union-level digital companyportal registerthat serves as a direct entry point for ESSUsS.EUs should be created or integrated into existing structures and operated by the Commission. Such aThat registerportal wouldshould complement and extend the existing Business Register Interconnection System (BRIS).(BRIS) Theby uniformproviding Union-levela digitalharmonised, companysingle-access registerinterface for cross-border use, without creating a new separate or parallel register. The digital portal should not replace the existing national incorporation rules but, rather, serve as a common portal.platform Whenon registeringwhich onall relevant information necessary for investors would be aggregated. Member States should therefore automatically transmit documents to the Union-levelportal, ensuring recognition and seamless access for stakeholders. The platform should also provide information about national procedures and resources and give access to investor model documents for S.EUs, enable the verification of credentials, the e-signature of documents, the sale and allocation of shares, the creation and adoption of board resolutions and the provision of e-invoicing services. When using the digital companyportal register,to register an S.EU, a company must choose a Member State as the place of incorporation and, in so doing, the national law applicable to the incorporation.

Change 32

ChangedThe uniform Union-level digital companyportal for companies should make it possible to register wouldas establishan aS.EU directand entryto pointsearch for companiesa tocompany registerregistered as an ESSU.S.EU. Incorporation,Registration, fillings and updates should be administered byvia thatthe registerdigital portal only once and should be accessible across Member States on the basis of a multilingual interface and harmonised identification standards under the eIDAS Regulation. The registerdigital portal could make use of a permissioned distributed ledger (DLT) network that records key corporate events, such as registrations or share transfers, with immutable timestamps.

Change 33

AddedIt should be possible for any cash contributions for the setting up of the company to be made to a public trust agency for the period before the opening of a bank account is finalised. After the opening of the bank account, the trust agency should transfer the cash contributions to that bank account.

4. Safeguards

Change 34

RemovedThe rules on ESSUs should be without prejudice to individual and collective labour law and to rules on employee codetermination.

AddedThe rules on S.EUs should be without prejudice to Union and national labour law including rules on the participation of employees, the employees’ representatives, or both, in the affairs of a company as defined in Article 2, point (k), of Directive 2001/86/EC. As a matter of principle, the S.EU should be treated by its home Member State in the same manner as the domestic limited liability company form that on which it is built and by any host Member State in the same manner as comparable Union foreign law companies, whilst ensuring that the artificial use of the S.EU with a view to circumvent current levels of employee participation protection in the law of the Member States is effectively prevented.

Change 35

ChangedThe law applicable to individual employment contracts shouldcontinues beto exclusivelybe determined byexclusively under Article 8 of Regulation (EC) No 593/2008.593/2008 and the jurisdiction over individual employment contracts continues to be determined under Section 5 of Chapter II of Regulation (EC) No 1215/2012, including the relevant case law of the Court of Justice of the European Union. Accordingly, the choice of the parties may not deprive employees of the protection afforded to them by mandatory provisions that cannot be derogated from by agreement.

Change 36

RemovedFor matters relating to employee codetermination, the applicable law should be determined by the real seat of the company, that is the place of the company’s central management.

AddedRegarding employee participation, the S.EU must be subject to the rules in force concerning employee participation, if any, in the Member State of the registered office. However, if an S.EU conducts an economic activity which entails employment in another Member State without setting up a branch, agency or subsidiary, the S.EU must be subject to the rules in force concerning employee participation, if any, in the Member State of the place of employment provided that the legal order of the S.EU’s registered office does not provide for at least the same level of board-level employee representation rights as required under the law of the place of employment. If necessary, the S.EU should adjust its Articles of Association accordingly.

Change 37

ChangedWhere there is athe disputeapplicable orlaw anycannot uncertaintybe asdetermined toin whichaccordance nationalwith lawthe governsprinciples mattersset relatingout toin employeethe codetermination,previous theparagraph, managementas boarda offallback anoption, ESSU,a thenegotiation representativesprocedure ofequivalent theto employeesthat orprovided tradefor unionsin thatArticles would3 haveto a7 nominationof rightDirective pursuant2001/86/EC tomust thebe nationalinitiated lawonce the applicationnumber of whichemployees isreaches in disputeat orleast uncertainone shouldMember beState ableany tothreshold requesttriggering theboard-level courtemployee orrepresentation tribunalrights ofin thethat Member State in whichwhere thean companyS.EU has its registered office to decide on thenot applicableyet law.introduced Thatemployee courtparticipation or tribunalwhere shouldreaching havethe exclusivethreshold jurisdictionimplies tochanges settleto the matter.existing employee participation.

Change 38

Removed5. Encouraging optional long-termism

AddedIf an existing national company transforms into an S.EU, Articles 86l, 133 and 160l of Directive 2017/1132 must apply mutatis mutandis provided that already established employee participation rights are not circumvented.

RemovedWith a view to protecting European innovative companies from ‘killer acquisitions’ and to preventing the relocation of innovation, the creation of which is often supported by European public research funds, to outside of the Union, Member States should introduce rules that allow for companies to irrevocably opt in to additional legal protection schemes such as:

Added5. Encouraging long-term strategies and optional forms

Removed the separation of voting rights and economic rights through different classes of shares, especially dual-class shares;

AddedWith a view to stimulating European innovative companies, attracting investment and creating alternative paths for access to capital and financing models and preventing the relocation of innovation, the creation of which is often supported by European public research funds, outside of the Union, Member States should introduce rules that allow for companies to voluntarily and irrevocably opt in to additional legal protection schemes. The purpose of such additional legal protection schemes should be to help European companies that might want to protect themselves from ‘killer acquisitions’ and relocation. Those schemes can include:

Added the separation of voting rights and economic rights through different classes of shares, including dual-class shares, veto shares and preferred shares;

▸4 unchanged paragraphs

 the qualification of voting rights as non-transferable and non-inheritable;

 profit distribution to investors or economic rights holders on the basis of a contractual agreement limited either in time or in amounts and which can be terminated by either party at any time;

 the limitation of cross-border conversion into entities that have opted for the additional legal protection scheme, in particular for asset locks;

Companies that have opted in to such additional legal protection schemes should be able to include the label ‘steward-owned’ in their company name.

Change 39

ChangedDirective (EU) 2017/1132 should be amended as regards cross-border conversions, mergers and divisions should be amended in order to allow Member States that have chosen to introduce their own national corporate form of steward ownership to limit the cross-border conversion of such a national corporate form to corporate forms of other Member States that also provide for similar forms of steward ownership.

Change 40

Changed6. Attracting and supporting talent

Change 41

ChangedAttracting skilled and innovative talent is crucial for driving economic growth, fostering innovation and maintaining competitiveness in a rapidly evolving global market. Productivity growth, innovation and social inclusion must go hand-in-hand. The ESSUS.EU framework should facilitate free movement within the Union, without the need for intermediaries in administrative processes, while respecting applicable Union and national rules on labour and social law. The S.EU should provide for optional harmonised rules across the Union on employee financial participation schemes, in particular on the structuring of employee stock ownership plans (‘ESOPs’), facilitated via a separate intermediary.legal Thisentity willand notthe onlycreation of employee stock option plans (‘ESOs’). This will enable SMEs, start-ups and scale-ups not only to attract talent andtalent, incentivise long-term commitment and facilitate their operations across different national markets due to the design of existing distinct frameworks, but also ensureto promote the full and fair participation of employees in the value they help create through their labour and intellectual capital. The harmonised rules on optional ESOPs and ESOs should focus on harmonising the key corporate law elements, framework and structural features of plans for employee financial participation, without affecting fiscal rules. The following principles must be taken into account when designing harmonised rules in the framework of the ESSU:S.EU:

Change 42

Changed as a pre-condition, suchemployee financial participation schemes should, under no circumstances, replace or diminish normal basic remuneration or any other form of contribution such as social security contributions, but should be a benefit complementary to all social and contractual rights;

Change 43

Changed transparency and democratic governance must be a key principleprinciples throughout the design and implementation of such schemes;

Change 44

Changed participation in such schemes must be non-discriminatorynon-discriminatory, and be open and exclusive to all employees;

Change 45

Changed participation in such schemes must remain voluntary for employees;employees and the setting up of such schemes must remain optional for S.EUs;

 such schemes must be accompanied by mechanisms to safeguard employees against unreasonable financial risks,

Change 46

ChangedThe Commission, in consultation with the social partners and based on best-practise examples, should design simple,relevant elementarystakeholders and basic supportivebased modelon profit-sharingbest-practice, agreementsshould anddesign guidance for ESSUsS.EUs to ease implementation, to improve awareness about ESOPsemployee financial participation and convergeto ensure the convergence of employee financial participation schemes across Member States. The model agreements and guidance should include information about associated financial risks for employees, specify employee buy-out options and democratic governance, and consider the impact on employees with a specific view to gender equality.employees.

Change 47

Removed7. Attracting venture capital

AddedIn addition, the Commission should address, as part of the 28th regime package, issues related to the tax treatment of employee financial participation to ensure legal coherence and cross-border applicability. Until Union-wide harmonisation is achieved, Member States should be strongly encouraged to proactively adopt supporting measures for employee financial participation, aligned with the S.EU’s objectives, in order to make it attractive for both employers and employees, fostering cross-border mobility and fairness.