Whereas more than 3 million European students have benefitted from an EU Erasmus grant since the exchange scheme's launched, the other day -while reading an impact assessment from the European Parliament- we learnt that only 2% of European SMEs have set up a subsidiary in another EU country, i.e. “500,000 companies out of 20.7 million SMEs”.
These low figures are striking if we take into account the importance of SMEs for the European economy and the thirst for internationalisation experienced by companies during the last two decades of globalisation. Many are the causes that could explain such a little number of cross-border entrepreneurship adventures but two of them seem pretty undeniable: the lack of homogenisation of corporate legislation among the EU Member States and the existence of many regulatory and administrative burdens, the so-called and long-feared “red tape”.
Doing an Erasmus is not a cost-free option: many are the costs linked to cross-border ventures. When setting their feet in other EU countries, European companies face direct costs (for instance: minimum capital requirements, notary and other administrative costs) but also indirect costs (such as the legal and consultancy advisory work necessary to navigate among different legal systems and, consequently, among diverse ways of organising companies and subsidiaries).
The current diversity among national company laws is remarkable and harms cross-border projects, limiting the expansion possibilities of European companies. As an example, if we were about to incorporate a subsidiary today, we could do it for free (1€ or less) in 16 out of 28 EU Member States while in the rest of EU countries we could be forced to initially contribute up to 12,400 euros. Likewise, in 16 of the EU countries we could incorporate our subsidiary online, without the need of physically visiting a public official “vested with the power to draw up authentic acts”, saving us time and money.
Some action could indeed be taken. Initiatives such as: (i) a unification of the minimum capital requirements; (ii) the creation of an EU company bylaws template; (iii) making it possible to incorporate companies online in all EU countries; (iv) the standardisation of administrative procedures and, among all; (v) a progressive harmonisation of the core of corporate law among EU countries; would allow our businesses to send their subsidiaries on an Erasmus, which, in turn, would help stimulating the growth and development of the European economy.
By Xavier Costa and Júlia Gual
Xavier Costa is Vice-President of the Banking, Finance and Capital Markets Commission of AIJA (International Association of Young Lawyers) and Senior Associate of Roca Junyent (Barcelona).
Julia Gual is an associate within the corporate team of Roca Junyent, Barcelona
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