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From the Brussels office

14 April 14

Recent developments in the EU: companies; insolvency; Common European Sales Law; VAT

 Agreement on company policy disclosure

The European Parliament and the Council have reached agreement on the Commission proposal on disclosure of non-financial information by certain large companies.

Large public-interest entities (listed companies together with some others of significant public relevance, such as unlisted banks and insurance companies) with more than 500 employees will be required to disclose information on their policies, risks and results as regards environmental, social and employee-related matters, respect for human rights, anti-corruption and bribery issues, and diversity of the workforce. The directive follows the comply-or-explain principle, leaving flexibility for companies to adapt their policies according to the specific business.

The agreement has been endorsed by the member states’ representatives but still needs formal approval by MEPs and ministers. The European Parliament will vote in April, with Council adoption to follow shortly thereafter.

Commission recommends new approach on insolvency

On 12 March, the Commission published a set of common principles for national insolvency procedures, aimed at shifting the focus away from liquidation towards restructuring and rescue of companies.

The recommendation follows a public consultation in 2013 on the possible harmonisation of certain elements of national insolvency laws. However, due to significant member state and stakeholder opposition, including from the Law Society of England & Wales, it opted in the end for a non-binding instrument intended to guide reforms on a national level.

In particular the Commission focuses on the need to introduce out-of-court proceedings, as these are globally recognised as facilitating the rescue of companies. The recommendation also aims to reduce the negative effects of bankruptcy on an individual’s chances of launching a new business, in particular by discharging their debts within a maximum of three years. The Commission will review the state of play of national insolvency reforms after 18 months to evaluate whether further measures are needed.

Backing for Common European Sales Law

The European Parliament has backed the proposal for an optional EU sales law which will give businesses and consumers the choice of using a single set of contract law rules for cross-border sales contracts. The optional law is intended to help small and medium enterprises to market their goods across Europe, and promote consumer confidence in the internal market by offering a high level of protection.

The proposal is limited to distance contracts, notably online contracts. However, the Commission hopes that this approach will provide an incentive for member states with lower levels of consumer protection to raise the standard.

The Law Society of Scotland is broadly supportive of the initiative, but the Law Society of England & Wales has raised a number of concerns. The Regulation will now be debated by the Council of Ministers.

Parliament supports standard VAT return

On 26 February, the European Parliament adopted a resolution on the proposed directive on the common system of value added tax (VAT) as regards a standard VAT return. This proposal is one of the European Commission’s key proposals to cut red tape for businesses and improve tax compliance in the EU.

The standard VAT return will replace national VAT returns, requiring businesses to provide the same information under the same time restrictions, regardless of their location within the EU. The idea is that simpler rules are easier to follow and enforce, therefore the VAT return should improve tax compliance throughout the EU. Flexibility is, however, retained where necessary to ensure compatibility with national systems.

The proposal is part of the European Commission’s mission to create a more efficient and fraud-proof VAT system.

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