Business in Europe, EU – Baltic States, Good for Business, Investments, Legislation, Markets and Companies

Commission’s plans for modernizing European company law and corporate governance date back to 2008 (“Small Business Act”). Corporate legislation and governance are aimed, among other things, at making sure that companies – while being profitable – are competitive and sustainable.

The Commission has indicated on several occasions that further improvements can be made, by facilitating long-term shareholder engagement, by increased transparency between companies and their shareholders and by simplifying cross-border operations.

On the basis of recent Commission’s reflection and the results of the consultations, several lines of action in the area of company law and corporate governance have been identified. Urgent actions by the EU institutions and the member states seems fundamental in putting in effect certain modern legislation for the efficient, sustainable and competitive companies in Europe.

Background

The Commission’s ‘EU- 2020’ Strategy (see IP/10/225) calls for improvement of the business environment in Europe. EU company law and corporate governance rules for companies, investors and employees must be adapted to the needs of today’s society and to the changing economic environment. European company law and corporate governance should make sure that companies are competitive and sustainable.

With its 2011 Green Paper on EU corporate governance (IP/11/404) the Commission initiated an in-depth reflection to evaluate the effectiveness of the current corporate governance rules for European companies. It also carried out an on-line public consultation on the future of European company law which generated a large number of responses by a wide variety of stakeholders (IP/12/149). See also MEMO/12/972

Commission’s opinion

In traducing the Commission’s action plan, the EU Internal Market and Services Commissioner Michel Barnier said: "This Action Plan on company law and corporate governance sets out the way forward for European companies. It means that shareholders should receive additional rights, but also fully assume their responsibilities to make sure that the company remains competitive over the longer term. Companies should also become more transparent in several respects. This will contribute to effective governance of companies."

General reference:

http://ec.europa.eu/enterprise/newsroom/cf/itemdetail.cfm?item_id=6353&lang=en&tpa_id=0&displayType=news&nl_id=1025

Key elements of the action plan

1. Increasing the level of transparency between companies and their shareholders in order to improve corporate governance. This will include in particular:

• Increasing companies' transparency as regards their board diversity and risk management policies;
• Improving corporate governance reporting;
• Better identification of shareholders by issuers;
• Strengthening transparency rules for institutional investors on their voting and engagement policies.

2. Initiatives aimed at encouraging and facilitating long-term shareholder engagement, such as:

• More transparency on remuneration policies and individual remuneration of directors, as well as a shareholders' right to vote on remuneration policy and the remuneration report;
• Better shareholders' oversight on related party transactions, i.e. dealings between the company and its directors or controlling shareholders;
• Creating appropriate operational rules for proxy advisors (i.e. firms providing services to shareholders, notably voting advice), especially as regards transparency and conflicts of interests;
• Clarification of the 'acting in concert' concept to make shareholder cooperation on corporate governance issues easier;
• Investigating whether employee share ownership can be encouraged.

3. Initiatives in the field of company law to support European businesses and encourage their growth and competitiveness:

• Further investigation on a possible initiative on the cross-border transfer of seats for companies;
• Facilitating cross-border mergers;
• Clear EU rules for cross-border divisions;
• Follow-up of the European Private Company statute proposal (IP/08/1003) with a view to enhancing cross-border opportunities for SMEs;
• An information campaign on the European Company/European Cooperative Society Statute;
• Targeted measures on groups of companies, i.e. recognition of the concept of the interest of the group and more transparency regarding the group structure.

In addition, the action plan foresees merging all major company law directives into a single instrument. This would make EU company law more accessible and comprehensible and reduce the risk of future inconsistencies.

The EIB’s activity

The European Investment Bank confirms that its shareholders, i.e. the 27 EU Member States, have approved a € 10 billion capital increase. The capital increase will allow Europe’s long-term lending institution to provide up to € 60 billion, over a 3 year period, in additional lending for economically viable projects across the EU.

In early 2012 the European Council asked the European Investment Bank to examine how to increase support for growth and the June 2012 European Council recommended that the bank’s capital be strengthened to allow an increase in lending activity. Unanimous support for increasing the paid-in capital of the EIB was reached following detailed examination of proposals for increased lending activity by the 27 EU member state shareholders.

The additional capital to be paid in by each shareholder will reflect their current shareholding. The additional lending will target four priority sectors and be dedicated to supporting innovation and skills, SMEs, clean energy and modern infrastructure. The new financing will be in addition to the EUR 50 billion regular annual lending.

“The unanimous decision by the Governors of the European Investment Bank to strengthen the bank’s capital base and enable an additional € 60 billion of increased lending demonstrates a shared desire to support investment that will create jobs and contribute to economic growth in Europe. We are committed to working with national authorities, public investors and private business to ensure effective use of the additional lending across all member states and to unlock significant private investment for projects.” said Werner Hoyer, President of the European Investment Bank.

Reference:

http://ec.europa.eu/enterprise/newsroom/cf/itemdetail.cfm?item_id=6352&lang=en

Entrepreneurship in the EU

Almost 4 out of 10 Europeans would like to be their own boss if they could. If this potential could be tapped, millions of new businesses could be added to the almost 21 million small and medium-sized enterprises (SMEs) in the EU.

Various obstacles prevent Europeans from opting for self-employment, in particular fear of bankruptcy and risk of irregular income. The Flash Eurobarometer "Entrepreneurship in the EU and beyond", presented by European Commission Vice President Antonio Tajani at SME Summit in Cyprus, also highlights that in 2009 more Europeans (45%) wanted to be self-employed. This is a drop of 20% within three years, which reflects the current economic situation with its less promising business prospects.

According to the Commission, yet there are still millions who consider becoming their own boss, driven by the prospects of personal independence, better income and freedom to choose the place and time of work. To unlock the enormous potential of millions of would-be entrepreneurs, the European Commission will launch a European Entrepreneurship Action Plan to boost entrepreneurship at all levels, aiming to bring growth and employment back to Europe.

Desirability of self-employment reflects large differences between the EU member states; the main results of the recent Eurobarometer survey can be summarised as follows:

• 37% of EU respondents would rather be self-employed, while a majority (58%) would prefer to be an employee. Self-employment is generally more popular among non-EU countries; 
• In 2009, 45% wanted to be self-employed. Europeans stress the lack of financial resources as well as their lack of skills as reasons for not regarding self-employment as a feasible career, not to mention the current economic climate with less promising business prospects; 
• Lithuania and Greece are most interested: Respectively 58% and 50% of respondents would rather be self-employed. Self-employment is least popular in Sweden (22%), Finland (24%), Denmark (28%) and Slovenia (28%); 
• Men and young people (42% and 45%) are more interested in being self-employed than women (33%) or older people (36%);
• 43% of EU respondents say they would be afraid of the risk of going bankrupt (-6 points compared with 2009 survey), while 33% say that the risk of irregular income would make them afraid of setting up a business (-7 points); 
• Self-employment is more popular in many non-European countries, namely China (56%), Brazil (63%) and Turkey (82%); 
• In the US and Asia preference for self-dependence decreased, too: in China from 71% to 56% since 2009, while the preference for working as an employee has increased from 28% to 32%. In the US the preference for employee has notably increased from 37% to 46%; 
• Several reasons hold back Europeans to start up a business: 43% of EU respondents say they would be afraid of the risk of going bankrupt, while 37% say that the risk of losing their property/home would concern them the most. Other difficulties are lacking financial support and complex administrative procedures. More than 50% think that it is difficult to obtain sufficient information on how to start a business; 
• Key considerations are taken when starting a business: 87% of Europeans who have started a business says that having an appropriate idea was an important factor, as well as having the necessary financing for 84% of them. Other important factors are appropriate business partners, role models, addressing an urgent social or ecological need and dissatisfaction with their previous work situation; 
• New entrepreneurs are positively perceived: 87% of Europeans agree that entrepreneurs are job creators and 79% that they create new products and services which benefit the whole society.

Reference: http://ec.europa.eu/enterprise/newsroom/cf/itemdetail.cfm?item_id=6357&lang=en