The EU Inc. is a new type of company proposed by the European Union. According to its assumptions, it is going to make it easier to set up and run a business in any Member State without having to deal with different national laws. One of its defining features is a built-in commitment to the digital world: not only in the phase of establishment, but also in governance.
EU Inc. assumptions
EU Inc. is proposed in an EU Regulation draft. This means that the provisions of the Regulation would apply directly in the EU Member States.
EU Inc. is going to be governed by the Regulation, by its articles of association, and for other matters, by national law applicable to the relevant national legal forms in the Member State where the EU Inc. has its registered office. The Regulation clearly states that EU Inc. companies are going to be limited liability companies. Therefore, national provisions concerning the GmbH in Germany and Austria, the s.r.o. in the Czech Republic, and the spółka z o.o. in Poland will in principle apply to such EU Inc.
Online is now the default option
In the case of limited liability companies in the EU, the question of whether a company’s shareholders could meet and vote online depended and depends entirely on where the company was incorporated. Some jurisdictions were flexible. Others required physical presence almost as a matter of tradition. The EU is now moving to change that.
The framework for EU Inc. establishes clearly that both general meetings and board of directors meetings may be held fully online or in a hybrid format. What is in particular relevant, Member States are going to be prohibited from imposing requirements or conditions that restrict the ability to hold meetings or vote electronically.
Who controls the technology choices?
One of the more practically important details is that the board of directors – not the shareholders – decides which electronic communication means are going to be used. This affects who can realistically participate, and therefore who has effective access to shareholder rights.
In online and hybrid meetings, the company must ensure three things: shareholders can attend and participate in real time, they can exercise their voting rights, and they can be identified through electronic means that the board considers valid. The Regulation draft does not prescribe a specific identification method, leaving the board with discretion, but also with responsibility.
The physical presence exception
The Regulation draft includes an exception, but it is written narrowly. Physical presence can only be required where there is an overriding reason in the public interest – specifically, preventing identity misuse, preventing alteration of identity, or ensuring compliance with rules on legal capacity and authority to represent a company.
Even then, the physical presence requirement can only be imposed on a case-by-case basis, where there are specific reasons to suspect identity falsification or non-compliance with the relevant legal capacity rules.
Decision-making: majority rules
The Regulation draft also sets out majority requirements for shareholders’ decisions. First of all, it establishes a quorum requirement. Quorum is made up of holders of a simple majority of shares entitled to vote, present or represented, unless the articles of association provide otherwise.
If the quorum requirement is met:
1) ordinary shareholder decisions are adopted by a simple majority of votes cast;
2) amendments to the articles of association require a qualified majority of two-thirds of votes cast.
It is worth noting that the EU Inc. Regulation draft follows the rather standard approach where, if an amendment to the articles of association would increase the financial commitments or liability of a shareholder, that shareholder’s express individual consent is required, regardless of what the majority decides.
Conclusions
For companies operating across the EU, this framework draft provides a level of certainty and consistency that did not previously exist. The practical challenges, however, are real – though commonly known in EU national laws. Electronic identification systems vary in reliability and accessibility, and ensuring genuine real-time participation will also be a challenge. But solving these challenges at the EU level, rather than the national level, would simply make things easier for everyone involved.
In case of any questions – reach out to me: kontakt@spolkawsieci.pl