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The European Forum on the Transfer of Business on 3 and 4 February 1997 in Lille

The European Forum on the Transfer of Business on 3 and 4 February 1997 in Lille

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Conclusion from the Lille Forum
Conclusion from the Lille Forum

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Published by: StudioCentroVeneto s.a.s. on Mar 04, 2011
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Version of 24/3/97
The European Forum on the Transfer of Businesson 3 and 4 February 1997 in Lille
Introduction
The transfer of business is one of the key issues of the European Commission’s EnterprisePolicy. After the creation and growth of the business, the transfer is the third crucial phasein the life-cycle of a business. Many jobs are at stake when the founder reaches his or herretirement age and has to envisage the handing over of the business to the nextgeneration.On 28 and 29 January 1993, a symposium was organized in Brussels with the aim of finding out the situation in the different Member States and to define best practice in thefield of business transfers. This symposium was followed, in the course of 1994, by wideconsultation of all interested parties on the basis of a specific communication
1
. Thisconsultation led to the adoption, on 7 December 1994, of a formal recommendationconcerning the transfer of small and medium-sized enterprises (SMEs), which wasaddressed by the European Commission to the Member States
2
.After the period by which the Member States were invited to report on the progress made,i.e. 31 December 1996, the European Commission organized the European forum on thetransfer of business on 3 and 4 February in Lille (France). The recommendations whichemerged from the Forum, in particular from the different workshops, are set out below.
Recommendations of the Forum
1. Transformation of businesses from a partnership into a private/public limitedcompany and vice-versa
As pointed out in art. 4 (a) of the recommendation, it is important that SMEs of allMember States have the possibility of being transformed into another legal structurewithout having to be wound up. The German
Umwandlungsgesetz
of 28.10.1994 allowschanges of legal form, mergers and divisions for both limited companies and partnershipsand was accompanied by the
Umwandlungssteuergesetz
providing for tax neutrality of any transformation operation (see B.3 below). Both laws have turned out to be successful
1
O.J. n° C 204 of 23.7.1994.
2
O.J. n° L 385 and C 400 of 31.12.1994; hereinafter referred to as: the recommendation.
A. Legal measures facilitating the transfer of business
In some Member States, legal measures have been taken in recent years in order tofacilitate business transfers. Most of these measures concern civil and company law.Progress has been made in some areas, but little in others and the improvements areuneven across Member States. The following areas are of particular concern:
 
2in practice. This experience should therefore be extended to the other Member Stateswhere such changes are still not allowed or result in adverse tax consequences.
2. Introduction of a simplified public limited company into national law
Art. 4 (b) of the recommendation states that the concept of a simplified limited companyshould be introduced into all Member States’ laws. This would give SMEs easier accessto this kind of company, which is more robust in the process of transfer while permittingthe distribution of shares among actual or future heirs, as required by inheritance law.Such a simplified limited company has so far only been introduced in Germany, withinthe
Aktiengesetz
, which provides for certain lower administrative burdens for smallcompanies. In France, the
Société Anonyme Simplifiée (S.A.S.)
was introduced in 1994.However, this legal form aims at facilitating the cooperation between big companies andis therefore not a suitable instrument for SMEs.In all Member States, access to the limited company could be facilitated further, so thatthis type of company would be more widely used by SMEs. This is currently beingenvisaged in France in the report on the modernization of company law, which waspresented to the Prime Minister in 1996 by Senator
Philippe Marini
.
3. Introduction of a single-member public limited company into national law
The company law of all Member States should allow for the setting up of a public limitedcompany with a single member (art. 4 (c) of the recommendation). This is alreadypossible in Austria, Denmark, Germany (since 1994), Finland, Spain (since 1995), theNetherlands and Sweden. The other Member States should therefore modify theircompany law in this direction. This has recently been envisaged in France in the
Rapport Marini
(see above)
.
In Italy, such a company is so far only possible for private limitedcompanies and should be extended to public limited companies.
4. Increasing the continuity of businesses
As pointed out in art. 5 (a) of the recommendation, the continuity of partnerships as alegal principle should be introduced into all national civil laws, in order to avoid theunwarranted closure of SMEs. This principle exists already in Italy and Portugal, withthese countries representing best practice in this field. In Germany, this principle has beenintroduced for partnerships in liberal professions (by virtue of the
Partnerschaftsgesellschaftengesetz
of 25.7.1994). The introduction of this principle moregenerally into German law has recently been envisaged in the 1996 draft proposal for therevision of the Commercial Law (
Handelsrechtsreformgesetz)
.Other ways of achieving greater continuity of partnerships could be the introduction of aright of the entrepreneur to transfer his or her trading authorization, even provisionally, toa member of the family, in case of death, sickness or other permanent incapacity tocontinue the business (as introduced for example in Luxembourg in the
Loi réglementant l’accès aux professions d’artisan, de commerçant, d’industriel ainsi qu’à certainesprofessions libérales
of 28.11.1988).Partnerships, although very widespread among SMEs in continental Europe, areinherently weak forms of association when it comes to resisting the tensions which oftenarise in the course of a transfer. This is particularly true in cases where several heirs claimtheir share in the enterprise and as a result the partnership is dissolved and the businessceases, with a loss of economic activity and jobs. In order to protect partnerships from
 
3being dissolved by heirs with conflicting interests, a number of Member States haveintroduced a pre-emption right or another form of preferential attribution of shares in abusiness to one of the heirs working in the business, coupled with the obligation tocompensate the other heirs (e.g. Luxembourg in art. 815-1 to 815-18
Code Civil,
asmodified by the
Loi relative à l’organisation de l’indivision et étendant l’attributionpréférentielle en cas de succession aux entreprises commerciales, industrielles et artisanales
of 8.4.1993; for agricultural businesses in Belgium by virtue of art. 41 of thelaw of 7.11.1988).The continuity of businesses could also be increased by introducing a form of certificationof shares into national law (as for instance the
administratiekantoor 
of Dutch law, whoseintroduction is being considered in Belgium). An even stronger instrument would be theintroduction of a form of trust, as is well known in English law, or of the
fiducie,
asrecently envisaged in Belgian and French law.Another practical way to increase the continuity of the business is the use of so-calledbusiness or family agreements (
pacte d’entreprise, protocole familial
). Especially infamily businesses, such agreements can be used in order to maintain a certain number of management rules throughout the change of generations. They are already used to acertain extent in France and Spain, so as to mitigate the consequences of the prohibitionof future succession pacts.The wisdom of the prohibition of future sucession pacts can be questioned, because itmakes proper estate planning unnecessarily difficult in the countries concerned (Italy,France, Belgium, Spain, Luxembourg). Those Member States should therefore considerallowing the conclusion of future succession pacts.
5. Administrative simplification
The administrative requirements of the transfer of businesses should be simplified in thesame way as for the setting up of companies, i.e. less formalities, shorter deadlines andwith a single contact point for the entrepreneur. At present, for example in Italy, theentrepreneur often has to contact several offices and complete time-consumingadministrative procedures before the transfer can take place.Since the publication of the Commission’s recommendation, a number of tax measureshas been taken in Member States to improve the tax treatment of business transfers. Mostof the measures concern inheritance or gift taxes. Like for legal measures, the generalpicture is of progress in some areas, but little in others - and the improvements are unevenacross Member States. Capital gains tax, inheritance tax and (where it exists as a separatetax) gift tax, sometimes at prohibitively high rates, continue to cause difficulties for thetransfer of business in almost all Member States, whether the transfer is by way of gift orsuccession within the family, or to third parties.In general, transfers of businesses should not be tax driven. The aim should be to ensurethat tax systems do not stand in the way of sound business preparations for transfer. Theclear objective of taxation policies concerning transfers should be the protection of 
B. Tax measures facilitating the transfer of business

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