Digitalization and EU Company Law – Recent

Developments
Prof. Avv. Francesco A. Schurr
Lecture, Università di Padova, 8 November 2019
Do businesses need digital tools to create their
legal environment?
• Establishing limited liability companies in many EU member states is
expensive and complicated.

• Therefore the business community in the EU has been asking for legal tools
to establish companies online and without the need to meet face-to-face
with a notary or any other institution (such as a court) competent on
member state level for the registration.

Francesco A. Schurr, Digitalization and EU Company Law

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(Re-)action of the European legislation/1

• Within the Company Law Package (CLP) the European Union legislation has
been focussing on a digital process in order to form companies.

• The CLP does not affect only the digitalization; another directive deals with
cross border conversions, mergers and divisions.

• The European legislation now provides for a legal frame regarding the digital
set up of companies in all member states.

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(Re-)action of the European legislation/2

• The new Directive 2019/1151/EU of 20 June 2019 amending Directive

2017/1132/EU as regards the use of digital tools and processes in company
law: https://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:32019L1151&from=EN

• The Directive 2019/1151/EU intends to facilitate a full online registration

and incorporation of companies.

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Implementation on member state level/1

• There is a two year period for the implementation of the directive.

• By August 2021 (expiration of the implementation deadline) the online

formation of companies will be available in all member states.

• Therefore, no physically presence of the involved persons with any authority

and/or notary will be required.

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Implementation on member state level/2

• Whenever the national company law requires the drafting of statutes, by-
laws and other legal texts, these can be drafted electronically.

• The setting up of companies shall be very efficient and fast.

• The formation shall not take longer than 10 days.

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Advantages/disadvantages of physical
presence?/1
• Under many jurisdictions in Europe (including Italy) a physical presence
before a notary is required for the notarization of the incorporation deed as
well as a registration with the registry.

• This physical presence will no longer be required.

• After August 2021 it will be possible to create e.g. a limited liability

company completely online, therefore without the requirement of any face-
to-face-meetings.

• Until now it’s only some member states that already allow a fully online set
up of limited liability companies.
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Advantages/disadvantages of physical
presence?/2
• It is arguable if the online registration (by the time the new regime will have
entered into force) will be used by the businesses or if the traditional way
(meeting a notary in person) to set up companies will still be the preferred
procedure.

• After August 2021 a significant number of new companies will probably be

set up online, especially because the costs will be much lower.

• Higher costs are also linked to the fact that until not all member states have
introduced a fully digitalized communication with the company register.

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Range of application?/1

• The Annex IIA of the Directive 2019/1151/EU specifies which types of

companies are affected.

• According to Art. 13g of the Directive 2019/1151/EU the member states are
actually asked to introduce online registration for all types of companies.

• Anyway the member states can opt-out for all types of companies, exept
those that are listed in Annex IIA.

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Range of application?/2

• As far as Italy is concerned, only the società a responsablità limitata (Art.

2462 Codice Civile) and the società a responsablità limitata semplificata
(Art. 2463-bis Codice Civile) are mentioned in Annex IIA.

• As far as the implementation in Italy is concerned, it is likely that the Italian

legislator will use its right to opt-out for those types of companies that are
more complicated to set up, such as the società per azioni (Art. 2325 Codice
Civile).

• Therefore we can assume that after August 2021 the new legislation will be
applied on the società a responsablità limitata (Art. 2462 Codice Civile) and
the società a responsablità limitata semplificata (Art. 2463-bis Codice Civile)
only.
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Electronic identification

• The e-IDAS is the essential tool for the online transactions required for the
set up of companies, see Regulation 910/2014/EU of 23 July 2014 on
electronic identification and trust services for electronic transactions:
https://ec.europa.eu/futurium/en/system/files/ged/eidas_regulation.pdf

• Therefore, member states will have to recognize the electronic

identifications of EU citizens, as long as the electronic identification falls
within the definitions of Regulation 910/2014/EU.

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Online submission of documents during the
companies’ life-cycle
• The Directive 2019/1151/EU doesn’t address the online formation of
companies only.

• It deals with online submission of documents by companies to the

competent company register, too.

• The submission of documents (e.g. the update on information regarding the

management etc) sometimes can be complicated and often takes to long.

• The online submission will be particularly relevant for companies that are in
a cross-border situation as far as their management is concerned.

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Online registration of branches

• The Directive 2019/1151/EU doesn’t deal with online registration and

online filing of documents only.

• It covers the online registration of branches of existing companies, too.

• The fast and registration of branches without any high costs is essential to
realise the principles on the freedom of establishment (laid down by the
European Court of Justice in several cases, such as Centros, Überseering,
SEVIC etc.) in today’s business world.

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Which role will notaries and courts play in the
future?
• Currently notaries and/or courts have the role to avoid fraud through
fraudulent document submission as well as fake identities of the founding
persons.

• Notaries sometimes are called „ gatekeeper to honesty and integrity “

• Can notaries keep that role even if parties don’t meet them face-to-face?

• Would a video conference be a viable alternative to a personal meeting

(allowing identification through video, see Recital 22 of the Directive
2019/1151/EU)

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Economic analysis of the new regime

• Allegedly the costs for setting up companies in the EU add up to around 50

Mio per year in the EU.

• It might be true that these costs can be lowered significantly by encouraging

people to set up companies using the much cheaper online procedure (that
will be available in all the EU after August 2021).

• Anyway if the online procedure encourages criminals to commit fraud and if

the safety procedures can’t prevent such fraud, the economic risk of an
online set up of companies would not be proportionate to the money saved
by substituting a notary with a digital tool.

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Can legal persons set up companies online?

• It has been discussed extensively if a legal person should benefit from the
online registration like a natural person.

• It seems to be more difficult to find out about the ultimate identity for legal
persons.

• Therefore online registration of companies by legal persons seems to be a

even higher risk.

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Security levels in the e-IDAS-system

• In the Regulation 910/2014/EU the European legislator has defined various

security levels.

• It is not clear from the directive, which security level is required within a
member state’s online company formation system.

• Anyway it is all about mutual recognition.

• Therefore key question whether the other member states have to recognize
an online registration if the security is not at the highest level.

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Status quo in Italy and impact of new legislation
on Italy?
• As many other member states, Italy has already lowered the standards for
the set up of a limited liability company.

• By introducing the “new” form of società a responsablità limitata

semplificata (Art. 2463-bis Codice Civile) the standard template released by
the ministry needs to be used:
https://www.gazzettaufficiale.it/do/atto/serie_generale/caricaPdf?cdimg=0
12G016000100010110001&dgu=2012-08-
14&art.dataPubblicazioneGazzetta=2012-08-
14&art.codiceRedazionale=012G0160&art.num=1&art.tiposerie=SG

• But even in this very simplified form of company formation, a notary is still
required as „gatekeeper“.
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Member states’ duties/1

• According to Art. 13g of the Directive 2019/1151/EU member states have to

make sure that the online formation of companies may be carried out fully
online without the necessity for the applicants to appear in person before
any notary or authority.

• Now Italy, as well as all the other member states, have to lay down detailed
rules for the online formation of companies.

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Member states’ duties/2

• Member states will also lay down rules regarding the use of templates (Art.
13h of the Directive 2019/1151/EU).

• The procedure adopted in Italy and in all other member states will have to
ensure that the applicants have the necessary legal capacity and have
authority to represent the company (Art. 13g (3a) of the Directive
2019/1151/EU)

• The procedure adopted in Italy and in all other member states procedures
to verify the legality of the object of the company (whenever national law
requires such a check) (Art. 13g (3d) of the Directive 2019/1151/EU).

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Opportunities in the implementation process

• In their implementation Italy as well as the other member states can define
the role of a notary or any other person or body mandated under national
law to deal with any aspect of the online formation of a company (opt-in for
notaries in the online-process) (Art. 13g (4c) of the Directive 2019/1151/EU)

• In their implementation Italy as well as the other member states can

exclude online formation in cases where the share capital of the company is
paid by way of contributions in kind (opt-out for companies other than
those that are formed by cash subscription) (Art. 13g (4d) of the Directive
2019/1151/EU)

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Digitalization and EU Company Law – Recent
Developments
Prof. Avv. Francesco A. Schurr
Lecture, Università di Padova, 8 November 2019