The Digitalization Directive II (Digitalisierungsrichtlinie II): Harmonization and simplification of European company law

1. Introduction: Digitalization is changing company law

The advancing digitalization also requires a legal and economic reorientation and standardization of register management in Europe.

With the Directive amending Directive 2009/102/EC and (EU) 2017/1132 on extending and optimizing the use of digital tools and processes in company law (Digitalization Directive II – Digitalisierungsrichtlinie II - DigiRL II), the European Union (EU) is taking another significant step towards a comprehensive modernization of European company law.

The DigiRL II was published in the Official Journal of the EU (Amtsblatt der EU) on January 10, 2025, and came into force on January 30, 2025.

What are the main innovations of the DigiRL II and the associated challenges and opportunities?

2. Background and objectives: A long road to digitization

The European Union's efforts to standardize the company registers of the Member States date back to the 1960s.

The first steps towards the standardization of company data were taken with the 1968 Disclosure Directive. Further expansion followed in 2003 with the introduction of the obligation to keep electronic registers and the establishment of the Business Register Interconnection System (BRIS), which aimed to strengthen the networking of national registers. The Digitalization Directive I (2017) laid the foundation for a networked and transparent presentation of company information at European level.

Now, with DigiRL II, a further significant step is being taken towards Europe-wide reliability of company data in order to increase the competitiveness of the EU economy and transparency of transactions.

3. Main innovations of the DigiRL II

a) Preventive control on the basis of harmonized minimum standards

DigiRL II significantly expands the preventive control of business register entries.

Previously, there were only rudimentary minimum standards that allowed Member States to choose whether they wanted to provide for preventive administrative or judicial control or public certification of the act of incorporation of companies and their articles of association. However, the procedure and intensity of the review were not regulated.

DigiRL II now introduces binding minimum standards for the legal verification of company formations and changes, both for online and offline procedures. In the past, the verification standards in the member states varied, which meant that register data from one member state could often not be recognized in others or could only be used with major restrictions.

In future, all incorporations and registrations of corporations and commercial partnerships must be checked for legal admissibility. This examination includes both formal requirements such as the correct use of models and substantive legal requirements such as the legality of the company's purpose and name. Amendments to the articles of association or founding documents of a company in the future must also be subjected to a comprehensive legal review to ensure that they are also lawful.

In addition, the DigiRL II requires companies to update their register data regularly and quickly to ensure that the information is always up to date. Member States must ensure that changes are reported to the register within 15 working days of their creation. In addition, the general registration period will be reduced from 21 days to 10 working days in order to speed up the updating process. These measures not only promote the efficiency of administrative processes but also ensure that all relevant stakeholders have access to the most up-to-date and reliable information.

A special procedure for removing incorrect or outdated entries is also to be introduced in order to prevent so-called “register corpses” (Registerleichen) (i.e. entries that are no longer relevant or incorrect).

Germany already fulfills most of these requirements. Only the introduction of the filing deadline and the shortening of the registration and disclosure deadline will need to be implemented by the German legislator.

b) Extension to commercial partnerships

One particularly noteworthy innovation of the DigiRL II is the inclusion of commercial partnership OHG into the scope of the digital register.

These types of companies were previously largely excluded from the comprehensive regulations of the Digitalization Directive I. Now, commercial partnerships must also disclose certain information in the national registers, such as the liability of the partners and the extent of this liability. These extended disclosure requirements create greater transparency and a level playing field, as they ensure that company forms such as OHG and KG are also subject to public scrutiny.

Since the DigiRL II contains an opening clause in favor of national law, according to which only those formation documents are subject to preventive control that must be submitted to the commercial register under national law (not the case for OHGs and KGs), control will nevertheless be limited in the future.

c) The once-only principle

The once-only principle is a significant step forward in terms of the digitalization of European company law.

This principle safes companies from having to resubmit information that has already been recorded once in a national register if they become active in another Member State. In the future, register in the destination state may not request documents or information that are available via the register of the home member state. Instead, register must obtain this information itself via the Business Registers Interconnection System (BRIS) or get in contact with the competent register themselves.

This significantly reduces the administrative burden for companies, as companies no longer have to submit multiple documents such as certificates of incorporation, articles of association or register extracts if they operate across borders. The information can be registered once in the home country and then passed on to other countries via the networked system. In the future, this will not only simplify the formation of companies, but also the implementation of transformations or mergers in different EU states.

d) EU Company Certificate (EUCC)

The introduction of the EU Company Certificate (EUCC) is another very important innovation of the DigiRL II.

This certificate functions as a standardized document that contains basic information about a company and its representatives and serves as uniform proof for company declarations in all Member States. The EUCC contains information such as the company name and legal form of the company, the registration number and the Member State in which the company is registered, the registered office and contact address of the company and the company's bodies, including the representatives and their powers.

The EUCC is provided in both paper and digital form and is available in all official EU languages. Companies are entitled to receive this certificate free of charge at least once a month, which will significantly reduce the administrative burden for international transactions or cross-border business activities. The introduction of the EUCC will also facilitate the cross-border recognition of company information. The certificate regularly serves as sufficient proof of the data stored in the national register and is binding in all EU member states.

e) Digital EU power of attorney

In addition to the EU company certificate, DigiRL II introduces the digital EU power of attorney, which is an efficient and standardized form of power of attorney for certain corporate transactions.

The digital EU power of attorney can be used for the formation of companies, the registration of branches and for cross-border conversions. The power of attorney is issued in digital form and must be recognized by the member states.

The content of the power of attorney must clearly define the scope of representation as well as the authorized person and their specific powers.

The digital EU power of attorney will considerably simplify the legal representation of companies in a cross-border context in the future. Another important aspect of this digital power of attorney is its compatibility with the EU Digital Identity Wallet, which allows companies to digitally sign and store the power of attorney. This development will be particularly beneficial in the international business environment, as it reduces bureaucratic hurdles.

f) Simplified proof of authenticity for foreign documents

The DigiRL II contributes significantly to the simplification of bureaucratic processes by reducing the requirements for translations and certifications of documents.

A vital step is the abolition of the obligation to legalize and apostille documents in the EU , in particular those provided and certified by registers. This exemption also includes electronic copies and extracts of documents and information authenticated via trust services in accordance with the eIDAS Regulation.

Paper documents must have a unique protocol number or similar feature that enables the authenticity of the document to be verified. Furthermore, the directive provides for a “best efforts obligation”, which makes it possible to dispense with translations of documents as long as they are available via the EUCC or BRIS. Translations may only be required if they are absolutely necessary, for example if the document is used in court or is subject to a disclosure obligation.

g) Connection of register systems

Another key element of DigiRL II will be the improved interconnection of various registers such as the Business Registers Interconnection System (BRIS), the Register of Beneficial Owners (BORIS) and the Insolvency Register (IRI). This interconnection ensures that companies and authorities will be able to access complete and accurate company data more quickly and efficiently in future.

4. Conclusion

The DigiRL II brings both clear advantages and certain challenges.

For companies the introduction of this directive means a considerable simplification with cross-border transactions. One major advantage is the once-only principle, which significantly reduces the bureaucratic burden. This enables companies to use information that has been recorded once in a national register in other member states without having to submit it again. The introduction of the EU company certificate also helps to increase efficiency, as companies will in future have a standardized, Europe-wide recognized document that provides basic information on the company in a formally reliable manner. In addition, increased transparency through the comprehensive digital networking of registers strengthens competitiveness and helps to combat illegal activities such as money laundering. The improvement of security standards through digital procedures also ensures greater trustworthiness of company data, which facilitates cooperation and exchange within the European single market.

On the other hand, the implementation of the directive in the member states poses considerable challenges. The national adaptation of systems and the standardization of procedures represent a complex and costly task. The inclusion of commercial partnerships in some countries in particular could be problematic to implement. These companies are regulated differently in many member states, which could compromise the desired uniformity of the regulations. In addition, the technical infrastructure of the national registers will have to be adapted to the new requirements, which will require additional effort and investment.

Overall, the new regulations provide a solid basis for the further digitalization of European company law and create a more efficient, transparent environment for companies in the market.

It remains to be seen whether DigiRL II will be implemented by the member states in such a way that the hoped-for growth and improvement of the legal framework in the EU will actually take place.