Advancing Digital Corporate Governance: New EU Directive on Company Formation and Administration

February 09 2025 08:57:14 by PCLMedia

On 10. January 2025, the European Union officially published Directive 2025/25 in the Official Journal. This Directive introduces significant updates and amendments to Directive 2019/1151 and earlier regulations regarding the use of digital tools and processes in company law.

The Directive introduces key innovations such as a multilingual, authenticated EU Company Certificate and a standardized EU Power of Attorney. It also mandates stricter timelines for domestic company registers to process and publicly disclose company information, reinforcing efficiency and transparency in corporate governance.

Enhancing Company and Branch Incorporations through Digitalization

The Directive strengthens the digital incorporation of companies and branches across the EU. While companies can already be registered entirely online, the new framework mandates enhanced security measures, including audiovisual identity verification and trusted authentication services to prevent fraud and enhance reliability.

For branch registrations, domestic company registers must ensure that the entire process can be completed online. Additionally, the Directive sets a maximum timeframe of ten business days for finalizing branch registrations upon submission of all necessary documents and fees. Furthermore, branch data will now be integrated into the EU’s interconnected company register system, improving information accessibility.

Streamlining Cross-Border Transactions

One of the most significant innovations introduced in the Directive is the EU Company Certificate. This standardized electronic certificate serves as official proof of a company's incorporation, existence, and essential details, including its name, registered office, and legal representatives. Companies will be entitled to obtain this certificate at least once per calendar year at no cost, facilitating smoother cross-border transactions.

Article 16c introduces the EU Power of Attorney, which allows corporate entities to authorize representatives for specific operations in other Member States through a standardized European template. This eliminates the need for additional authentication measures such as apostilles or translations, ensuring greater efficiency in cross-border business dealings.

Facilitating Document Filing and Authentication

Beyond company formation, the Directive extends digitalization to the filing of post-incorporation documents. By reducing the reliance on physical paperwork, the Directive aims to minimize registration delays and lower administrative costs.

To meet its objectives, domestic company registrars are encouraged to adopt advanced electronic controls, including remote identity verification systems, to reduce in-person interventions. However, robust oversight mechanisms are included to combat fraud and misuse.

All electronically filed documents must be authenticated using advanced trust services, as prescribed by the “eIDAS Regulation”, ensuring the security, reliability, and validity of electronic transactions. Domestic registrars also retain the authority to verify the identity and legal capacity of applicants, and in exceptional cases—such as suspected fraud—may require physical presence.

Company Formation in Malta under the New Directive

The Directive took effect on January 30, 2025, with Member States required to implement its provisions by July 31, 2027.

Malta had already taken significant steps in the past to align with the Directive’s standards through its Malta Business Registry (MBR). The MBR launched the Business Automation Registry Online System (BAROS), which enables companies to digitally submit documentation via authorized company-linked accounts. In fact, Maltese companies are now mandated to file their annual accounts online through BAROS.

Furthermore, the MBR has embraced the use of Qualified Digital Signatures (QES) for company documentation. QES, based on cryptographic technology, ensures the authenticity of signatories and carries the same legal authority as handwritten signatures. The MBR provides a QES service free of charge, enabling authorized company representatives to electronically sign and submit documents after completing an identity verification process in compliance with the eIDAS Regulation.

Malta offers an attractive jurisdiction for company formation due to its favorable tax regime, robust regulatory framework, and digitalized incorporation processes. Companies can be registered remotely through BAROS within days, and the adoption of the EU Company Certificate and EU Power of Attorney will further facilitate cross-border operations for maltese businesses.

The continued evolution of digital company law processes, both at the EU level and within Malta, reflects a broader commitment to modernizing corporate administration, enhancing transparency, and fostering a seamless business environment across the European single market.