The 28th regime for EU companies
A new statute is intended to help overcome fragmentation in the legislation of the Member States.
UM – 11/2024
With a commitment to increasing the competitiveness of the European Union (EU), the Commissioner-designate for Democracy, Justice and the Rule of Law, Michael McGrath, announced working out a proposal for a new EU-wide company legal status at his hearing before the European Parliament on 5 November. As part of this 28th regime, a uniform law is to be created across borders for innovative companies in key areas such as company, labour and tax law, as well as insolvency law. The German Social Insurance sees opportunities here for targeted further development of insolvency law that takes account of the interests of the social insurance funds and protects the earmarked contribution funds. The initiative would also give new impetus to the stalled legislation to harmonise certain aspects of insolvency law.
The standard is high, as are the concerns
Companies should be able to voluntarily decide on the statute of the 28th regime. They will only do so if the standardised legal framework, which is placed alongside national law, brings advantages. The new legal statute is therefore subject to high standards. It must offer real added value to be successful. It must help in simplifying business activities and increasing their competitiveness and productivity. In particular, it must nevertheless overcome the resistance of the Member States, which are concerned that companies could opt out of their own national legal framework. McGrath also wants to consider applying the 28th regime not only to outstandingly innovative companies, but more broadly, if necessary. However, the idea is supported by the recently published Draghi report on the "Future of European Competitiveness". This proposes the legal form of an "Innovative European Company (IEC)" for innovative start-ups.
28th regime and insolvency law
The fact that the proposal for a directive to harmonise insolvency law has been in the pipeline since the last legislative period poses a particular challenge. A proposal for a 28th regime must ensure consistency with the revision of insolvency law. This may also mean that the new Commissioner will have to come up with a completely new proposal. This is because politicians are struggling with the current proposal. Reaching a consensus is not easy, as each Member State thinks it has the best insolvency law.
Nevertheless, everyone involved is aware that the fragmentation of insolvency law is one of the main obstacles to a genuine capital markets union. It was not without reason that the European Council identified the insolvency proposal as a priority task at its meeting in April and called for prompt continuation of work in its conclusions. This also applies to the European Parliament, where the responsible JURI Committee did not even manage to produce a report in the last legislative period.
Opportunities
The position of the German social security system is well known: The revision of insolvency law should be used to ensure that social security contributions paid are better protected against access by insolvency administrators and thus, against misappropriation. In March last year, the DSV (German Social Insurance) submitted an amendment proposal in this regard. The work on the 28th regime could provide further impetus to standardise the handling of claims from social insurance agencies in insolvency proceedings across Europe. For example, by prioritising demands that fulfil welfare state purposes.