Transparency of Stock Corporations in Europe

Rationales, Limitations and Perspectives

Vassilios Tountopoulos, Rüdiger Veil

• Publisher: Hart Publishing
• Year: 2019
• Print ISBN: 9781509952779
• eBook ISBN: 9781509925544
• Edition: 1
• Topic: Law
• Subtopic: Comparative Law
• Index: Law

This edited collection explores transparency as a key regulatory strategy in European business law. It examines the rationales, limitations and further perspectives on transparency that have emerged in various areas of European law including corporate law, capital markets law and accounting law, as well as other areas of law relevant for European (listed) stock corporations. This book presents a clear and accurate picture of the recent reforms in the European transparency regime. In doing so it endorses a multi-dimensional notion of transparency, highlighting the need for careful consideration and contextualisation of the transparency phenomenon. In addition, the book considers relevant enforcement mechanisms and discusses the implications of disparate enforcement concepts in European law from both the private and public law perspectives. Written by a team of distinguished contributors, the collection offers a comprehensive analysis of the European transparency regime by discussing the fundamentals of transparency, the role of disclosure in European business law, and related enforcement questions.

PART I

Transparency and Corporate Law

1

Access to Information in Company Registers

KARSTEN ENGSIG SØRENSEN

I.Introduction

Historically, the right to set up a company was granted either by the national parliament or the Crown. When the need arose to make the formation of companies easier, most countries allowed companies to be formed if they complied with the predefined conditions dictated by the national law and register. Today, incorporation by registration is the most common form of incorporation.¹ As part of this process, the register will naturally receive some information, and some of this information may be made available to the public.

Since the adoption of the First Company Law Directive 50 years ago,² the EU has had rules regulating the registration of companies and the disclosure of certain information and documents. The topic was so important that it was among the first topics to be harmonised in the EU.³ Even though the directive dealt with other topics, it was nevertheless the issue of access to corporate information that gave the directive its popular name: the Disclosure Directive. Later, this disclosure regime has been developed even further, in particular by harmonising the rules governing the framing and auditing of company accounts, the rules governing branches and by updating the system to the modern possibilities of electronic databases and the interconnection of these. As a result, disclosure has become a central part of EU company law.⁴

Not all countries provide for such a generous access to information.⁵ Even in developed countries, the information given is often more limited. In this light, the solution found in the EU is in no way self-evident. In fact, before the harmonisation took place in 1968, the level of access to information in the Member States at that time was quite diverse and it was no easy feat to agree on the directive.⁶

In the following, the main feature of the solution found in the EU is analysed and contextualised. The purpose is to understand the aims that underlie the access to information in company registers in the EU and to see whether the adopted solutions reflect these aims. It is not possible to make a detailed comparative analysis, but it will be illustrated how the EU solution differs from those found in many other jurisdictions and it will also be shown that there are still substantial differences of how the EU Member States have allowed access to corporate information.

The focus of this chapter is on access to information about private and public limited company in the company registers.⁷ As for listed companies, there is often access to more information, often in a different register.⁸ It will not be possible to cover the information available to listed companies despite these registers, but a few references will be made to compare how the two systems have evolved.

The structure of the chapter is the following: first, it will be discussed how the company registers are organised (section II), then which information they will register and disclose and then who this disclosure should benefit (sections III–IV). The information is only valuable if it is correct, and therefore it will be examined how the information is proceeded in the registers and how Member States should allow for the enforcement of duty to disclose corporate information (sections V–VI). Finally, the key question of how the information may be accessed is analysed, followed by a brief discussion of the effect that disclosure has on the position of third parties (sections VII–VIII). The last section concludes.

II.Company Registers

Company registers are differently organised in different states.⁹ In some states, companies need to register in business registers that aim to compile information on both companies and enterprises conducted by physical persons. In other states, there is a special register which is dedicated to the registration of companies, such as the Companies House in the UK. The way in which these registers are organised often differs. In Germany, the business register, Handelsregister, is organised with the courts, which in this capacity perform a non-judicial function.¹⁰ In other countries, the register is organised as part of a ministry or another public body, for instance, a chamber of commerce. In the following, the term ‘company register’ will be used to cover these different forms of registers. In addition, there may be private registers that function on a commercial basis.¹¹

Not only are the company registers organised in different ways, but their location can also be either centralised or local. For instance, the registers in Germany are decentralised, and in the US, each individual state organises its own company register. From a historical point of view, decentralised registers made sense as most businesses were local. However, nowadays many companies conduct business nationwide and some even internationally. In this situation, decentralised registers may not be optimal as it will often not be obvious – especially not to a foreigner – where to look for the information.

When the EU embarked on a harmonisation process involving company registers, it would have been natural to consider whether the company registers could be organised differently. It seems that they did, in fact, consider creating a central EU register, but this idea was rejected.¹² Instead, the EU legislator chose to build up the harmonisation around the existing registers in the Member States. Thus, the Member States were required to open a file for each company in ‘a central register, commercial register or company register’,¹³ thereby accepting that each Member State could organise its registers as it saw fit. Not only were the Member States free to decide who should run the register, they were also free to decide whether it should be one central register or several decentralised registers. To help those dealing with the company to find their way to the right register, companies should specify in their ‘letters and order forms’ the registers where the file on the company is kept and the number of the company in that register.¹⁴

This model – relying on national registers – was also used later when harmonising the rules on branches of companies.¹⁵ Here EU legislators used the solution that branches should register and make information available in the Member States in which they set up branches according to the rules in these Member States. A simpler solution would have been to require that the companies should list their branches and information on the branches in the Member States in which the company is incorporated and therefore has its file.¹⁶ This solution may have been simpler for the companies, but may have made it more difficult for those who seek information on the branches. Even though a branch should list the register where information on the branch is available, it may be more difficult for those persons who seek information on branches to find their way around in a foreign company register. Additionally, there could be a linguistic challenge in accessing information through a foreign register. However, if access to foreign registers could be made easier and the linguistic problem could be overcome, it would simplify matters if all corporate information were made available by the national register where the company has its main file.¹⁷

More surprisingly, the same solution – relying on national registers – was used when the EU started introducing supranational corporate forms such as the EEIG, SE company and SCE company. Despite the fact that they are supposed to be supranational, they need to be registered in one Member State.¹⁸ Also in other areas, the EU has relied on national registers instead of creating central registers – see, for instance, the Officially Appointed Mechanism (OAM) for the central storage of regulated information under the Transparency Directive¹⁹ and the registration under the Insolvency Regulation.²⁰

Relying on national registers made it easier to achieve harmonisation. Creating a central register does not only mean that there should be a central database, but would also require that the EU should create a supervisory and enforcement unit. This would have been controversial at the time when the First Company Law Directive was adopted, and probably would still be.

But even if the EU may not establish central registers in this area at present,²¹ it could be avoided that the Member States register corporate information in different national registers. Thus, harmonisation does not prevent the Member States from establishing different registers for basic corporate information, insolvencies of companies, beneficial owners and information disclosed under the Transparency Directive. As a consequence, gaining access to all corporate information may require not only the location of one register but several.²²

In recent years, the EU has embarked on a different model to reduce the disadvantages of having national registers that third parties may find difficult to navigate. The solution has been to interconnect these registers to create a single entry point and to facilitate searches and access across the registers.²³ This is the solution used for company registers,²⁴ but similar projects have been set up for OAMs,²⁵ in the area of insolvency,²⁶ and for information on beneficial owners.²⁷ In the field of company law, it is now possible to search for EU and European Economic Area (EEA) companies through the e-justice portal,²⁸ which makes it possible to search for companies by name or alternatively by registration number. To facilitate the latter, all companies should now be provided with a unique identifier which ensures that it is possible to identify both the relevant register and the company within that register.²⁹

The interconnecting of registers in the area of company law has not substantially changed the role of the national registers. To allow for the new platform to operate, they should enable access to the information stored,³⁰ but apart from this, there is no obligation for the Member States to change their internal systems of registers.³¹ The solution of interconnecting the national registers is in no way equivalent to setting up a European central register. The EU only provides a platform for interconnecting the national registers, and the EU does not store information, nor does it in any way modify the information disclosed through the platform.³² The platform is therefore far from offering a central register that examines and validates the information stored on companies.³³

III.What Type of Information is Disclosed?

The registers may accumulate different kinds of corporate information. Some information may be collected without being disclosed. This would include information that the authorities may need to verify that the incorporation is complying with the requirements of the Companies Acts, for instance, proof that the capital has been paid up or minutes from the constitutive general meeting. Another type of information that may not be publicly available is information on shareholders and beneficial owners. Even though information on these is gathered in a number of jurisdictions, often this information is not available to the public.³⁴ In a European context, the Fourth Anti-Money Laundering Directive (Directive 2015/849) requires that information on benef...

Table of contents

• Cover
• Title Page
• Preface
• Contents
• List of Contributors
• Introduction
• PART I: TRANSPARENCY AND CORPORATE LAW
• PART II: EVOLUTION OF DISCLOSURE IN CAPITAL MARKETS LAW
• PART III: DEVELOPMENTS IN BUSINESS LAW
• PART IV: THE LIMITS OF TRANSPARENCY
• PART V: ENFORCEMENT
• PART VI: CONCLUSION
• Index
• Copyright Page