JURI examines safeguards for social security.

On 29 June, René Repasi (S&D, Germany), rapporteur in the Committee on Legal Affairs (JURI), presented his draft report on the Proposal for a Regulation on the 28th legal regime for innovative companies (“EU Inc.”). Members had until 17 July to examine the draft report and table amendments. These amendments will be assessed and negotiated after the parliamentary summer recess, with the European Parliament expected to vote on the report in plenary in October.

Draft report provides greater legal clarity on the scope of application

From the perspective of the German statutory social insurance institutions, Repasi’s draft addresses the key issues. It introduces important safeguards into the proposed Regulation on the 28th Regime that are essential to enable social security institutions to continue carrying out their supervisory and enforcement tasks effectively and to prevent losses of social security contributions.

In particular, the newly inserted Article 1a clarifies the scope of the proposed Regulation. It explicitly states that neither the social security legislation of the Member States nor Union law on the coordination of social security systems is affected. This avoids substantive inconsistencies between the proposed Regulation on the EU Inc. and the applicable rules governing social security.

Social security enforcement is strengthened

The draft report also equips social security institutions with instruments intended to ensure that they can continue to fulfil their responsibilities in relation to companies operating under the 28th Regime. For example, where the information available on an EU Inc. or its branches is insufficient to establish employer status or to verify compliance with other social security obligations, the competent institutions should be entitled to request the necessary information directly. It remains unclear, however, whether this information would be obtained through the business register, directly from the EU Inc., or from another competent body.

Preventing the misuse of the new legal form

The draft report also makes clear that the new European company form should not be open to abuse. This objective is reflected in several provisions of the report. In particular, with regard to the proposed employee share ownership and stock option schemes, it explicitly clarifies that such schemes must not result in reductions in wages or salaries and, consequently, in lower social security contributions.

Furthermore, Member States would be required to provide for effective sanctions where companies misuse the new legal form to circumvent collectively agreed wages or evade social security contributions. These provisions address many of the concerns expressed by the German statutory social insurance institutions.

Insolvency rules become more practical

The draft report also introduces significant changes to the provisions on insolvency and liquidation proceedings. The possibility of dispensing with an insolvency practitioner is made subject to the fulfilment of a number of conditions, thereby limiting its application. In addition, the deadlines for approving or objecting to simplified insolvency proceedings are substantially extended, as are the deadlines for lodging claims.

From the perspective of the German statutory social insurance institutions, these changes are necessary. The 30-day deadlines proposed by the European Commission are too short to enable social security institutions to exercise effectively their participation rights in simplified insolvency proceedings. While the proposed extensions represent an improvement, the revised deadlines remain relatively tight.

EMPL preparing its opinion

In mid-June, the Committee on Employment and Social Affairs (EMPL), which has been asked for an opinion, presented its draft opinion. The draft opinion by Johan Danielsson (S&D, Sweden) follows a broadly similar approach to Repasi’s draft report. It is not yet known when the EMPL Committee will vote on its opinion.