Mr. Pat Houlihan:

We thank the committee for inviting us to assist with its further scrutiny of single-member private limited liability companies and the long-term shareholder engagement and certain elements of the corporate governance statement.

The pivotal role which the Commission perceives for small and medium-sized enterprises, SMEs, in advancing the EU economy, the improvement of the operating environment for all companies, particularly SMEs, a priority of its ten-year growth strategy, Europe 2020, and the low rate of SME investment in member states other than that in which they are based, combine to provide the rationale for the present draft directive. The Commission's proposal in 2008 for a European private company statute, SPE, which was intended to facilitate cross-border activity by SMEs, fell because it failed to garner the unanimous support necessary for adoption. The present proposal is effectively a substitute for the SPE and has been brought forward by the Commission following deliberative and consultative processes including an impact assessment.

The so-called twelfth company law directive, (89/667/EEC), as given effect in Ireland by SI No. 275/1994, the European Communities (Single-Member Private Limited Companies) Regulations, provided for the incorporation of single-member private limited companies.

Changes made to the 1989 directive were codified in Directive 2009/102/EC. The intention is that the current directive, which captures the content of the codified directive of 2009, will repeal the latter. As of now, on a national basis, we have the scope for single members to incorporate.
I will now turn to the legal basis of the proposed measure-Commission justification. Article 50 of the Treaty of the Functioning of the European Union provides the legal basis for the draft directive. The Commission justifies its proposal on the grounds of subsidiarity by making the point that without action at the level of the EU, only non-harmonised approaches would be forthcoming and SMEs would still encounter obstacles to operating in another member state. It also justifies the proposal on the grounds of proportionality by stating that the harmonisation in question is confined to those aspects which are most important in a cross-border context and do not go beyond what is necessary and proportionate for the achievement of the regulatory objective.
The directive provides for the establishment of private single-member limited liability companies in accordance with the rules and procedures set out in the proposal. These companies are to be referred to as SUPs, an abbreviation of the Latin term "Societas Unius Personae". The directive provides for limited harmonisation of the relevant national laws by requiring that companies may have a single shareholder and regulating the powers of that single member in respect of the company. The proposed directive on single-member private limited liability companies is intended to make it easier for any potential company founder, and in particular for SMEs, to set-up companies abroad. This is designed to encourage and foster more entrepreneurship and lead to more economic growth, innovation and jobs in the EU.
I will now set out key features of the proposal. Member states would be obliged to allow for direct online registration of SUPs, eliminating the need for a founder to travel to the country of registration or to appoint an agent there for this purpose. The proposal would provide for a template of articles of association, which would be identical across the EU, available in all EU languages and contain the necessary elements to run a single-member private limited liability company. A minimum capital requirement of €1 for SUPs would be introduced. Protection for creditors is to be provided through a balance sheet test and a solvency statement.
The Department of Jobs, Enterprise and Innovation issued a consultation document on the proposal which elicited responses from four organisations, in addition to which the Companies Registration Office supplied some comments. Some of the points made do not appear to take due account of the existing scope to operate as a single-member private liability company. That scope already exists. Among the contributions received was a welcome for the proposal and its benefits in terms of administrative burden reduction and its perceived benefits for SMEs in accessing export markets. Another observation was the perceived benefit of the solvency statement provided for at Article 18 in the context of proposed distributions, which was considered prudential. Due to the role posited for registration and ancillary functions in the draft directive, the Companies Registration Office had a number of comments to offer in terms of new requirements proposed and implications vis-a-visthe Companies Bill 2012, which is likely to be enacted later this year. This is the rather large consolidated Bill about which I suspect people present know quite a bit.
The first meeting of the Council working group to consider the draft directive took place on 22 May 2014 and was introductory in nature setting out the scope of the directive and seeking preliminary views from member states. Two further meetings have taken place since then, the latest on 2 July. While there is no evidence of fundamental opposition on the part of member states to the principle of what is proposed here, the situation in general is that all member states continue to maintain scrutiny reservations. Much of the discussion is of a technical nature and delegations continue to seek clarification on the meaning and intent of aspects of the text. In many cases, the Commission has undertaken to revert at future meetings with the clarifications sought. To date, there has only been a partial reading of the measure. They have probably got about two thirds of the way through. One point being made by some member states is that the share capital requirement should be increased significantly from €1. The Commission responded by pointing out that the wording in the article in question, which is Article 16, "shall be at least €1" allows member states the flexibility to require a higher figure. The Italian Presidency at the most recent meeting invited member states to make written submissions with any proposals, questions or issues they wish to bring to attention. It is our intention to avail of the Presidency's offer.
It is understood that the Italian Presidency is seeking to achieve a general approach by the end of its term. A general approach is the term used for agreement at Council level. The European Parliament is obviously ploughing its own furrow in this regard. At the most recent Council working group meeting, the Council legal services gave a long oral presentation making the case for the appropriateness of Article 50 of the of the Treaty of the Functioning of the European Union as a legal basis for the draft measure. This is an indication of the relatively preliminary nature of consideration of the dossier. In the event, member states sought the Council legal services' views in writing, which suggests that they may have some issues around their consideration as to whether it is an appropriate basis.
The Department will be formulating its policy position on the directive over the coming time, which will take account of the consultation undertaken, with clarification on points raised there which could benefit from being amplified, and further discussions with the Companies Registration Office. Proposals or suggestions made in the present forum will also be taken account of in the discharge of this process.