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The European Commission's proposal to amend the First Directive.

Comments from the Association of Chartered Certified Accountants
August 2002

The UK is well advanced in terms of absorbing electronic communications media into company law. Companies House already allows the e-filing of several statutory documents as well as electronic incorporation. Its Companies House Direct system also allows electronic access to virtually all filed data. Compliance with the proposed Directive will not, therefore, be a significant problem for the UK.

We have, though, comments to offer on a number of technical aspects of the proposal, as set out below.

We agree that the law should be technologically neutral as between electronic and hard copy communication and support the move towards electronic filing. This should not, however, be other than an option for companies. Until such time as electronic filing becomes the norm for all or particular types of companies, the UK should not take up the member state option to require all or specified categories of company to file all or specified categories of document by electronic means.

In this connection we would point out that the UK's electronic incorporation service has experienced a number of problems since its introduction last Autumn. These relate both to systems failures and technical support. By the time of the scheduled implementation date of the revised Directive on 1 January 2005, it is essential that Companies House will have become technically able to receive and process the whole range of statutory information covered by the Directive. Once e-filing becomes a statutory right, it will not be acceptable for the system to fail as often as the incorporation service has done to date.

We support the proposal in art 3(a)(2) to require member states to allow companies to file an additional copy or copies of their statutory documents in an EU language or languages other than that in which the 'master copy' of the documents has been prepared. This could have benefits for companies operating in bilingual countries, such as Belgium, and cross-border areas where languages of two adjoining countries are spoken. Of greater significance, though, the proposal would open up the possibility for companies which trade internationally, or which aspire to do so, to file accounts in a language which is widely spoken internationally: this will most commonly be English. A significant potential benefit of this particular proposal is that it will assist third parties in their efforts to gain access to statutory information on individual companies in different member states. We recommend, however, that the UK takes up the option under the proposed amendment to require that any translations under art 3(a)(2) be certified.

We oppose the inclusion in art 3(a)(3) of a provision to allow member states to permit companies to file statutory documents in 'other' languages. The proposed art 3(a)(2) would already allow companies to file their 'master copy' document in an indigenous language of the state concerned and then to file an additional copy or copies of the same document in any other official languages of the EU. We consider that this would provide sufficient flexibility for companies.

If companies wish to prepare versions of their statutory documents in another language or languages not covered by art 3(a)(1) and (2), there should be no restriction on them doing so but those documents should be considered to be non-statutory documents with no legal status. It follows that national registries should be under no obligation to file them. We are also concerned about the implications of the provision in art 3(a)(4) to the effect that third parties should be able to rely on translated copies in the case of discrepancy. The potential for discrepancy lies not so much in financial statements but in narrative data, including the notes to financial statements, constitutional documents and non-financial reports (such as the proposed statutory version of the Operating and Financial Review), which are increasing in importance. The provision in question would allow for any number of translated versions to be filed, thus increasing the possibility of discrepancies and disputes arising. It is important that the scope for such disputes be reduced to the minimum.

If, notwithstanding the above comments, the option in art3(a)(3) is retained, we recommend that the UK should not adopt it. This would not affect the current entitlement of Welsh companies to file documents in Welsh (with a certified English translation).

We would add that the third paragraph of art 3(a)(2) would appear to have significant systems implications for Companies House and all national registries. It appears to suggest that member states must provide electronic access (to recorded information) in each and every official EU language in which statutory documentation has been filed. So, if one set of documents has been filed at (UK) Companies House in, say, Greek, then the Companies House search facility must include operational instructions in Greek. The technical problems involved here are not insurmountable but have clear implications for system capacity.

Provided that it does not impose undue expense on smaller companies, we support the proposed requirement to apply the existing company identification requirements to relevant e-mail communications and company web sites. Such changes are, in any case, likely to form part of the forthcoming Companies Bill.

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