Reorganization of companies and mobility within the EU
As a result of increasing integration in the single market, more and more companies in the European Union conduct business over national borders, including in the Baltics. Latvian companies are also trying to use these new opportunities by extending their business activities and entering markets of other member states. In order to align their structure and business activities, these companies have repeatedly called for the introduction of legal instruments that will diminish obstacles and satisfy the need for reorganizing companies that are from several member states and transferring a company's registered office from one member state to another.
Status quo. Companies from different member states operating in the European Union need reorganization to be regulated by laws that would be compliant with national reorganization rules. At present companies cannot transfer their registered office from one member state to another freely.
While laws of member states regulating cross-border mergers and transfer of the registered office are not approximated, such activities are not possible, or are at best dependent on complex legal measures. These measures often complicate business activity and are not always exercised clearly and with legal certainty. In many cases neither mergers nor transfers are presently possible by maintaining the company's legal personality.
It is expected that a balance could be struck via the 10th Company Law Directive on cross-border mergers and the 14th Company Law Directive on transferring registered offices from one member state to another. However, presently these directives are only at the draft stage.
Instruments already available. Still, cross-border reorganization and transfer of a business' registered office are not as cumbersome or impossible as they were. Once the Council Regulation of Oct. 8, 2004 No 2157/2001 on the statute for a European company came into force, they became possible. The regulation offers companies novel merging and migration possibilities throughout the European Union, regardless of national borders. It should be added, however, that the regulation stipulates only cross-border mergers whereby a European company is established. The right to transfer the registered office, in its turn, is granted only to a European company established as provided by the regulation.
European companies in Latvia. On Oct. 28, 2004 amendments were made to the Law on the Republic of Latvia Register of Enterprises, according to which the register of enterprises began the registration of European companies in the Commercial Register. Then, on April 7, 2005 the European Company Law came into force, which is a legal basis for full implementation of the regulation in Latvia. The law regulates the creation of a European company, transfer of a company's registered office to another member state and management of a company, neither of which are explicitly stated in the regulation.
So now that regulations of European companies may also be applied in respect to the structure of mergers with Latvian companies, as well as when the registered office of a European company is transferred to and from Latvia.
European companies wishing to operate in a separate region of the European Union, as well as small and medium-sized companies that intend to perform any of the activities stated in the regulation in the nearest future, should consider whether creating a European company would cost as much as merging or transferring the registered office for the following reasons:
First, introduction of provisions of the 10th and 14th directives on company law into laws of member states will take quite some time after adopting these directives on company law.
Second, the minimum share capital for a European company is determined so that European companies will have sufficient funding, and at the same time problems would not be created for small and medium-sized companies to establish a European company. Such a minimum share capital is, for example, just about 3.4 times larger than the minimum share capital of a Latvian public company.
