The European Commission’s draft Directive on a ‘single member limited liability company’ is a charter for avoiding tax and national labour rules warns the European Trade Union Confederation (ETUC).

While the European Commission presents the Directive as a means of helping small business to trade across the single market, the ETUC points out that there is nothing to stop large companies setting up single member subsidiaries to avoid tax and labour regulations.  

The ETUC says the Directive has two major faults in that it 

  • fails to define the size of company that the Directive applies to
  • allows a company to register their business in a country different from the one in which they actually operate

Taken together the Directive would enable larger companies to misuse the legislation and choose a country of registration with lower taxes and less protection for workers

It would also enable businesses in EU member states where worker representation on the board is a legal requirement*, to avoid national worker representation rules by registering their business in another country where such rules do not exist.  

“Trade unionists want to encourage small business” said Claudia Menne, Confederal Secretary at the ETUC. “But this Directive simply encourages tax avoidance and the undermining of national labour standards.”

 

*Worker representation on company boards is a legal requirement in several member states, eg in Sweden for companies with over 25 employees; Denmark for over 35 employees; the Czech Republic, Slovenia and Slovakia over 50 employees; Netherlands 100; Finland 150; Hungary 200; Austria 300; Germany 500.