An Interconnected Business Registry System for the European Union

Robert Miklós Babirad, J.D. Masters Diploma in EU Law (King’s College London), Post Graduate Diploma in EU Law, Member of the New York Bar.

I           Introduction

On 7 July 2012, Directive 2012/17/EU[1] entered into effect and a two year period began under which the EU’s Member States were to introduce its first set of obligations.[2]  On 7 July 2014, under Directive 2012/17/EU on the interconnection of central, commercial and companies registers (hereinafter “the Directive)[3], the first set of obligations were transposed after a two year introductory period.

The Directive’s provision, of an EU wide interconnected system of Member State business registers, will act as a replacement for the European Business Register (EBR) system of cooperation, which has operated on a voluntary basis between business registers within Europe since 1992.[4]  The Directive notes that the EBR has been an “under-used resource” with costly fees for membership, inadequate coverage throughout the EU, disparities in information and service, funding which has been inadequate and a failure by members of the EBR to commit to its effective application.[5]

The EU’s Single Market has acted as a catalyst for business expansion across Member State borders, necessitating a demand for the provision of greater accessibility of information concerning companies, which operate across the European Union.[6]  The Directive serves as a response to this demand and seeks to provide for a fiscal and legal environment that is more “business friendly” as a result of its implementation.[7] Additionally, the Directive intends to enhance credibility for both consumers and businesses by providing up to date registered information about EU companies.[8]

The predominant issue of the newly transposed Directive is whether its implementation on the interconnection of business registers will have a meaningful impact in its application.  The Directive seeks to increase EU wide accessibility to Member State business registry information.  An increase in transparency regarding transactions that cross Member State borders is an additional key objective.  It will also be of interest to observe whether legal certainty is enhanced as well as an expansion of European competitiveness.

II         Business Registries

A business registry contains information concerning the legal representatives of a company, its seat, its capital and pertinent legal information concerning the business, which is then made accessible to the public.[9]  Business registers exist in all of the EU’s Member States, but vary with regard to how often they are updated; the value from a legal perspective of the data contained therein; the legal checks applicable to the register based upon a Member State’s national rules; and the register’s content and accessibility, particularly with regard to the languages in which a Member State affords accessibility to its respective registry.[10]

III        Analysis of the Directive

A         The Directive’s Objectives and Aims

The Directive will create an EU level framework that will link all of the EU’s Member State business registry databases.[11]  Additionally, the Directive seeks to lower costs administratively and to resolve the legal insecurity, which is created by a variety of differing Member State business registration systems, and to subsequently provide for greater EU wide standardisation for Member State business registries.[12]  Standardised information from each of the EU’s Member States that can be accessed centrally would be particularly helpful where there is an inquiry concerning a business or one of its branches established in another Member State.[13]

An example would include a company’s subsidiary or branch being made aware, through its access to an up to date EU wide business registry, of a parent company’s insolvency or dissolution, even if the parent company is located in a Member State other than where its subsidiary is established.[14]  It has also been suggested that increased business registry accessibility, on an EU-wide level, will result in consumers having access to “safer and more transparent online shopping environments,” particularly with regard to those transactions, which span Member State borders.[15]  It is likely that online shopping will be made safer as a result of the implementation of this Directive.  Additionally, there will be greater availability to Member State business registry files, for merchants operating both online, as well as those established in a physical location.

A beneficial aspect of the Directive is its provision for Member States to enter any changes into their respective interconnected national registers “without undue delay,” thereby ensuring that information regarding companies within the EU level registry system will be kept current, and available throughout the European Union.[16]  An example of the prevention of previous “undue delay,” includes a new requirement under the Directive that Member State business registers now provide for documentation availability, within the EU level system, within twenty one days of it being received from a business, with respect to limited liability company submissions to a Member State’s business register.[17]

The Directive’s application also provides for the establishing of a cooperative framework for business registers across Member State borders.[18]  An EU company’s status will be kept current and accessible through the use of this integrated EU wide business registry system, which will be particularly useful with regard to linking and keeping up to date information concerning the foreign branches of EU companies that may be located in other Member States.[19]  The Directive also provides for a “unique identifier” at EU level for each registered company in order to facilitate the tracking of the operations of businesses throughout the EU.[20]

B         Accessing Information

A key objective that this Directive seeks to achieve includes providing for an enhanced ability to obtain access to official information pertaining to companies operating across Member State borders.[21]  Under the present voluntary system for business registers, a search for information about a company operating across Member State borders must occur “on a country by country basis.”[22]

The Directive states that the improvement of access to information concerning EU based businesses across Member State borders; providing for the housing of current data regarding the branches of EU businesses; and enabling “clear channels of communication between registers in cross-border registration procedures,” will be affected better as a measure that is carried out at an EU level.[23]  This appears to be a viable position based on the EU level scope and objectives, which the Directive seeks to achieve.

Additionally, the Directive states that it is in compliance with the Charter of Fundamental Rights of the European Union, particularly with regard to the principle that “everyone has the right to the protection of personal data concerning him or her” under Article 8.[24]  The Directive lacks clarity regarding the assurance of adequate safeguards in this respect.  The actual transposition by the EU’s Member States, the subsequent application of the Directive in practice, as well as its future development and expansion, will be the actual determinant of whether the Directive in effect, protects the personal data of individuals for purposes of Article 8.

C         Quality of Information

The Directive further seeks to provide for a minimum standardised degree of information concerning EU based companies that may be accessed in all of the languages of the EU’s Member States and will be kept up to date via a European wide database (BRIS).[25] The establishing of a Business Registers Interconnection System (BRIS) under the Directive will serve a critical role in providing for this standardisation at the EU level.[26]  The Commission has the responsibility of providing for an act implementing BRIS by 7 July 2015, and the EU’s Member States will have two additional years for transposition of any additional rules as well as for making preparatory arrangements for connecting to BRIS.[27]

The key benefit of BRIS, upon completion of transposition of the Directive in its entirety, will be the facilitating of access through the EU’s e-Justice system as well as additional web portals at the Member State level, which will provide access to information pertaining to EU companies conducting business operations across national borders.[28]  Communication between business registries will subsequently be potentially enhanced with regard to, for example, company mergers spanning national borders, as well as with regard to other Member State company registrations, which will now be linked through this interconnected EU level data system.[29]  A minimum standardised degree of information concerning EU companies, which may be accessed in all of the languages of the EU’s Member States and is kept up to date via BRIS, will serve as a key benefit of this new electronic system.[30]

D         State Co-operation towards an EU Wide Platform

The interconnection of business registers serves as a part of the European e-Justice Action Plan and the European e-Justice Portal, which will act as “the single access point” for the EU’s legal information and also constitutes one of the Commission’s Communication on the Single Market Act proposals.[31]  However, it is important to note that the Directive calls for a database model that is decentralised and that “relies on the capacities of existing national business registers” while seeking to enhance the degree of cooperation between these Member State business registers.[32]

The Directive states that the information of EU based companies, as well as their respective branches across Member State borders, can only be enhanced if improvements are made to communication electronically between the business registers in each of the EU’s Member States, and provide company information throughout the European Union “in a standard way, by means of identical content and interoperable technologies.”[33]  An EU wide “common interface” is provided for by the Directive and will be employed by each Member State’s domestic business registry for connecting to the EU wide system.[34] The Directive also provides for the Member States to adapt their existing business registry systems to link with this new EU wide interface.[35]

It is interesting to note that the Directive states that the EU wide platform should only serve as “an instrument for the interconnection of registers” from each of the EU’s Member States rather than acting as a new and independent legal entity.[36]  Additionally, the Directive states that a centralised registry database is not being created, which would contain “substantive” business information.[37]  However, in effect the Directive is indirectly creating the type of centralised EU wide registry database, which it argues is not being established.[38]  The Directive seems to be indirectly advocating a centralised EU wide business registry, but wishes to avoid placing this label on the proposed system, at the risk of encroaching upon the national autonomy of the EU’s Member States.  The Directive focuses on the idea that the business registries of each Member State will remain independent and only employ the use of a European level interface for connecting the various registries of each Member State, with respect to sharing at EU level, information regarding EU based businesses.[39]

The Directive also claims that greater interconnection of Member State business registries will increase European competitiveness through enhanced legal certainty, a reduction in burdens of an administrative nature and aid in “an exit from the global and financial crisis.”[40]  Enhanced legal certainty seems likely, because of greater standardisation and the availability of business information pertaining to EU companies that is more up to date.  Greater communication with respect to business registers between the business registries of the EU’s Member States also seems probable through employing the aid of new technological developments that will aid in creating greater EU wide accessibility to Member State business registry information throughout the EU.[41]

However, the claim that administrative burdens and associated expenses, with respect to implementation of the Directive, in contrast to the existing system of voluntary business registry cooperation between Member States, appears to be an argument that is open to questioning, as well as the suggestion that implementation of this Directive will have an impact, which is so significant that it will play a key role in helping Europe to exit the global financial and economic crisis.  These claims appear over exaggerated, debatable and perhaps suggest more of an effort at making a case for the implementation of an EU level directive than representing the actual effect that this Directive will have in its practical application.

IV        Conclusion

The improvement of accessibility to business registry information on an EU wide basis appears to be a beneficial aspect of the Directive, as well as the potential for a resulting increase in transparency.  Legal certainty will, in all likelihood, also increase as well as greater consumer confidence and business credibility through the Directive’s implementation.  However, whether there will be a noticeable reduction in administrative expenses as a result of the Directive remains debatable, in addition to the argument that the Directive is seeking to avoid the establishment of a centralised database of business registry information, but rather solely providing for an interface that will link the business registry systems of each of the EU’s Member States.  Moreover, whether Article 8 of the Charter of Fundamental Rights of the European Union is adequately supported through the application of this Directive will remain debatable until after it is transposed in its entirety, applied and developed by each of the EU’s Member States.

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