Understanding the Second Company Law Directive in the EU

The Second Company Law Directive is a crucial piece of legislation in the EU, aimed at harmonizing the laws of member states regarding the formation and management of companies.

In 1989, the EU adopted the Second Company Law Directive, which established a framework for the creation of public limited liability companies (PLCs) across the EU.

The directive set a minimum capital requirement for PLCs, which was €120,000, to ensure that companies had sufficient funds to operate and meet their financial obligations.

This capital requirement has since been revised, with the current minimum capital requirement being €25,000, making it easier for companies to form and start operating in the EU.

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The Second Company Law Directive outlines the rules for public limited companies, including exemptions for investment companies and cooperatives.

Art 1 sets the stage by applying the directive to public limited companies. Investment companies and cooperatives, however, can be completely exempted.

The directive requires publicized information when a company is incorporated, including its name, objects, capital subscriptions, and governance rules. This information must be made public according to Art 2.

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Companies must also report to the registrar, as specified in Art 3. Liability rules for individuals who fail to properly register companies are outlined in Art 4.

Public companies must have a minimum capital of €25,000, which can be revised every five years (Art 6). This ensures a certain level of financial stability and security.

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