Company Law & corporate governance

Actions

The ETUC Action Programme 2019-2023 includes the objective of combating letterbox companies and artificial arrangements.

The ETUC actively engaged in the 2018-2019 negotiations on the Company Mobility Law Package with the European institutions. The aim was to introduce effective measures against letterbox companies to avoid the use of company mobility for the circumvention of companies’ social and fiscal obligations. The later agreement between the European Commission, the European Parliament (EP) and the European Council constitutes a step forward compared to the unregulated status quo..

The ETUC will be further active in pushing for an ambitious and effective transposition of the directives related to the Company Mobility Law Package.

Corporate governance

The current corporate governance system prioritises shareholders’ interests and imposes the costs on workers: loss of employment, loss of income, skills, opportunities & often health, etc. The ETUC calls for corporate governance with stakeholder participation and a long-term vision for sustainability. Such a corporate governance model can generate growth through high productivity and high-quality jobs.

D@W in company law
Letterbox companies

Letterbox companies are artificial business constructions with the main objective to minimize tax liability. They are domiciliated in a tax friendly country, while performing commercial activities in other countries. Such arrangements are expanding throughout the Union and they have become of major concern for the European trade union movement. Not only do they endanger public finances, they’re also directly threatening social Europe leading to social dumping and the exploitation of workers.

Full employment and social progress in Europe can only be achieved when our social market economy model is protected. It is therefore a responsibility of EU decision makers to introduce effective measures against artificial arrangements and letterbox companies.

Find further evidence how European and national legal frameworks still fail to regulate and effectively tackle letterbox companies.

Letterbox
Company Law package

The so-called Company Law Package is meant to regulate cross-border restructuring processes and was adopted by the European Parliament and the Council in June 2019.

Ever since the European Commission published its proposal 14 months earlier, the ETUC pushed for adequate safeguards against letterbox companies and more information, consultation and participation rights for European workers. Although the excellent report of the European Parliament introduced substantial improvements, the final agreement fell short of the necessary amendments.

Again, the EU has failed to create a balance between offering new opportunities to businesses and creating standards for a more social and democratic Europe. It is now time to deliver on the latter: introduce a new framework for information, consultation and board-level participation rights and effective instruments against letterbox companies and artificial arrangements.

History

Since the 1990s EU company law has been progressively deregulated. Its intrinsic purpose is to expand the economic freedoms of the internal market enabling businesses to carry out operations anywhere in the EU. This development came along with the

  • protection for shareholders,
  • purpose to make businesses more competitive,
  • incentives to encourage businesses’ cross-border activities.

Nowadays, European company law rules cover corporate issues such as

  • formation, capital and disclosure requirements,
  • cross-border operations (take-overs, mergers, and divisions).

The deregulation of company law fueled the growth of artificial legal corporate entities. Letterbox companies often serve as intermediaries, with no or only symbolic activities in the country of registration. They facilitate outsourcing, cross-border recruitment, and avoidance of regulation under the flag of the free provision of services.