|Greece: New Law Introduced to Simplify Incorporation Procedures|
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On June 8 2010 Parliament voted in a new law (3853/2010) aimed at simplifying incorporation procedures. For some time now, this has been a key priority of the economy minister and viewed by her staff as a significant measure towards encouraging new business. It is also envisaged that incorporation costs will by cut by nearly half, as well as effectively facilitating one-day incorporation.
The new law appoints the General Merchants Registry as the sole registry of the entire Greek territory for all incorporation procedures. Furthermore, given the significant communications infrastructure developments over the last decade, it can be assumed that all branches of the government will now be online, making this ambitious legislation more feasible.
The new law provides for the operation of 'one-stop shop' incorporation service providers, which can either be: (i) a notary public for limited liability companies and Société Anonymes (SAs); or (ii) the Chamber of Commerce or the Citizens' Service Centre for personal companies (partnerships). These organizations are authorized to commence the incorporation procedure, dispatch documents and complete the process.
Specifically, these one-stop shops will: receive all the required documents from the parties of the incorporated company; register them with the General Merchants Registry; issue the company's value added tax number and collect capital tax; issue the social security registration numbers of the parties and/or the board members; receive payment for the single incorporation voucher (which includes the total cost of incorporation, except for the tax, the notarization and legal fees and the voucher for the Hellenic Competition Commission); and distribute the proceeds to the competent organizations without any involvement on the part of the incorporators.
One of the most significant provisions of this new law is that as soon as a company files for incorporation, the one-stop shop must complete all the necessary actions mentioned above on the same day or the next day at the latest.
This simplification of the procedures has been welcomed as it concentrates all the paperwork into one service. The legislation aims to allow for next-day incorporation through a significant update of the General Merchants Registry provisions.
Criticism of old provisions
The old system has long been criticized as bureaucratic and overregulated. This was recognized by a 2007 law (3406/2007) which simplified proceedings for SAs by eliminating the pre-emptive administrative check in the articles of incorporation and by other amendments thereafter with regard to SAs that have an issued share capital of less than €3 million.
However, a newly incorporated company would need anything between 10 and 40 days before it could become operational. In 2005 the General Merchants Registry was introduced by Law 3419/2005; it was supposed to be operational by January 1 2007, but it was rendered obsolete due to lack of funding with regard to the electronic infrastructure it required.
The main problem with incorporation procedures and start-up companies stems more from the inefficiency and complexity of Greek state bureaucracy than with the legal provisions themselves.
The new law tries to solve the reported problems in the only way politicians know – through legislation. As is evident from the brief description above, the Greek legislative framework was already extremely versatile, even without the latest amendments. The problem rested with implementation of the laws by the government agencies.
The new legislation entails three major problems:
The General Merchants Registry, which is the cornerstone for simplification, is not yet operational. All organizations to be appointed as one-stop shops must familiarize themselves with the new procedures and this takes time. The system is envisaged to be operational within four months – a very limited period.
Helping new companies means not only making incorporation faster, but also making the actual start-up easier. In practice, unless the administration cuts down on red tape, the fear is that paper chasing will continue, albeit now at the post-incorporation stage. Business people should be concerned only with their business, not the formalities of their company.
The new law provides that draft articles of incorporation will be provided by the Notary Public Association and the Greek Law Society. As long as these templates are used, then conformity with the law is presumed. This provision neglects the basic legal notion that the articles of incorporation form a contract between parties with regard to company. When two or more parties are involved, they must clearly understand all their commitments for the future and their rights. One-stop-shop officials are unlikely to offer such advice. The ease of incorporation may have the adverse effect of causing many disputes that could easily have been avoided if the parties had sought legal advice at the initial stage. In the end, it still is up to business people to realize their needs and seek legal advice when required. The system will not protect them.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on July 15, 2010