Council Directives in Company Law

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Council Directives in Company Law

• and Workers Participation

Overview by Johannes Heuschmid (March 2006) The
presentation provides an overview of the most
important both already adopted and upcoming
council directives in corporate law. The purpose
of each directive is explained briefly, and a
link to the legal text is provided. We focus on
each directives impact on worker participation
rights, as far as this is relevant. European
Trade Union Institute for Research, Education and
Health and Safety http//www.etui-rehs.org
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Overview I Directives already adopted

• First Council Directive Disclosure (68/151/EEC)
• Second Council Directive Capital (77/91/EEC)
• Third Council Directive Domestic Mergers
  (78/855/EEC)
• Fourth Council Directive Annual Accounts
  (78/660/EEC)
• Sixt Council Directive Divison (82/891/EEC)
• Seventh Council Directive Consolidated Accounts
  (83/349/EEC)
• Eighth Council Directive Qualifications of
  Auditors (84/253/EEC)
• Eleventh Council Directive Branches
  (89/666/EEC)
• Twelfth Council Directive Single Member Limited
  Liability Companies (89/667/EEC)
• SE Directive (2001/86/EC)
• Thirteenth Council Directive Takeover Bids
  (2004/25/EC)
• Tenth Council Directive Cross Border Mergers
  (2005/56/EC)

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Overview II Directives coming up

• Forteenth Directive Cross-border Transfer of
  the Registered Offices of Limited Liability
  Companies (under consultation)
• Board responsibilities, improvement of financial
  information and corporate governance directive
  proposal COM (2004) 725 
• Company capital directive proposal COM (2004) 730
• Shareholders rights directive proposal COM
  (2005) 685

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Overview III Failed Directives

• Fifth Directive (structure of public limited
  liability companies)
• Ninth Directive (group law)

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Overview IV Measures planned in the longer term

• One share, one vote
• Alternative system for minimum capital
• Choice between one-tier and two-tier systems

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First Directive Disclosure of 9.3.1968
(68/151/EEC)

• Purpose
• To coordinate the Regulations concerning
  disclosure, organs powers of representation and
  the nullity of companies with limited liability.
• Legal basis
• Art. 44 II lit.g EC (former Art. 54 III lit.g
  EEC)
• Amendments
• Directive 73/101/EEC
• Directive 2003/58/EC

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Second Directive Capital of 13.12.1976
(77/91/EEC)

• Purpose
• Harmonisation of public liability companies in
  the EC, as well as the maintenance and alteration
  of their capital.
• Legal basis
• Art. 44 II lit.g EC (former Art. 54 III lit.g
  EEC)
• Amendments
• Directive 92/101/EEC
• Proposal COM (2004)730

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Third Directive Domestic Mergers of 9.10.1978
(78/855/EEC)

• Purpose
• To lay down rules concerning mergers between
  public limited liability companies from the same
  Member State.
• Legal basis
• Art. 44 II lit.g EC (former Art. 54 III lit.g
  EEC)
• Amendments
• No

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Fourth Directive Annual Accounts of 25.6.1978
(78/660/EEC)

• Purpose
• To coordinate Member States' provisions
  concerning the presentation and content of annual
  accounts and annual reports, the valuation
  methods used and their publication in respect of
  all companies with limited liability.
• Legal basis
• Art. 44 II lit.g EC (former Art. 54 III lit.g
  EEC)
• Amendments
• Directive 83/349/EEC
• Directive 84/569/EEC
• Directive 89/666/EEC
• Directive 90/604/EEC
• Directive 90/605/EEC
• Directive 94/8/EC
• Directive 2001/65/EC
• Directive 2003/38/EC
• Directive 2003/51/EC
• Proposal COM (2004) 725

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Sixth Directive Division of 17.12.1982
(82/891/EEC)

• Purpose
• To lay down rules concerning divisions of public
  limited liability companies from the same Member
  State.
• Legal basis
• Art. 44 II lit.g EC (former Art. 54 III lit.g
  EEC)
• Amendments
• No
• Employee participation
• A division could have impact on the
  participation rights. This depends on the
  thresholds of the national participation laws.

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Seventh Directive Consolidated Accounts of
13.6.1983 (83/349/EEC)

• Purpose
• To coordinate national laws on consolidated (i.e.
  group) accounts. Together with the Fourth
  Directive on the annual accounts of public
  limited liability companies, it belongs to the
  family of "accounting directives" formed by the
  Community legal acts on company accounts.
• Legal basis
• Art. 44 II lit.g EC (former Art. 54 III lit.g
  EEC)
• Amendments
• Directive 89/666/EEC
• Directive 90/604/EEC
• Directive 90/605/EEC
• Directive 2001/65/EC
• Directive 2003/51/EC
• Proposal COM (2004)725

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Eighth Directive Qualifications of Auditors
of 10.4.1984 (84/253/EEC)

• Purpose
• To define the qualifications of persons
  responsible for carrying out the statutory audits
  of the accounting documents required by the
  fourth and seventh Directives.
• Legal basis
• Art. 44 II lit.g EC (former Art. 54 III lit.g
  EEC)
• Amendments
• Proposal COM (2004)177

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Eleventh Directive Disclosure Requirements in
Respect of Branches of 21.12.1989 (89/666/EEC)

• Purpose
• To lay down rules concerning the disclosure
  requirements imposed in a Member State in respect
  of branches of companies governed by the laws of
  another State in order to provide an equivalent
  level of protection for shareholders and third
  parties.
• Legal basis
• Art. 44 II lit.g EC (former Art. 54 III lit.g
  EEC)
• Amendments
• no

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Twelfth Directive Single Member Limited
Liability Companies of 21.12.1989 (89/667/EEC)

• Purpose
• To create a legal instrument allowing the
  limitation of the individual entrepreneurs
  liability throughout the Community.
• Legal basis
• Art. 44 II lit.g EC (former Art. 54 III lit.g
  EEC)
• Amendments
• no

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SE Directive of 8.10.2001 (2001/86/EC)

• Purpose
• To complement the Statute on the European Company
  with regard to the involvement (participation) of
  employees in the European company.
• Legal basis
• Art. 308 EC (this is the wrong basis the right
  one would be Art. 137 I lit.f EC)
• Amendments
• no
• Employee participation
• Several models of participation by agreement are
  possible, the most important being the
  board-level representation of employees. If there
  is no satisfactory arrangement, a set of standard
  rules on participation becomes applicable.
• Mandatory information and consultation standards.

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Thirteenth Directive Takeover Bids of
21.04.2004 (2004/25/EC)

• Purpose
• To achieve greater legal certainty with regard to
  takeover bids, while protecting the interests of
  shareholders (and particularly minority
  shareholders), employees and any other interested
  parties.
• Legal basis
• Art. 44 I EC
• Amendments
• no
• Employee participation
• employees or their representatives of the offeree
  and the offeror company must be informed about
  the bid
• employees or their representatives have the right
  to draft an opinion relating to the takeover.

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Tenth Directive Cross-border Mergers of the
25.11.2005 (2005/56/EC)

• Purpose
• To create a legal instrument to facilitate
  cross-border mergers of commercial companies.
• Legal basis
• Art. 44 EC
• Amendmnets
• No.
• Employee participation
• Provisions pretty close to the SE. In cases in
  which participation rights are concerned the SE
  procedure will apply. That means, first
  negotiations, after which, if no agreement is
  reached, a set of standard rules apply.

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Forteenth Directive Cross-border Transfer of
the Registered Offices of Limited Companies

• Purpose
• To make it possible for a company to choose the
  national law which, in its view, best meets its
  requirements and to relieve companies of the
  obligation, when carrying out such a transfer, to
  go through liquidation proceedings.
• Legal basis
• Art. 44 EC (probably)
• State of the art
• Subject to a consultation.
• Employee participation
• Provisions probably pretty close to the 10th. If
  the transfer results in a reduction or lost of
  participation rights the SE procedure will apply.
  That means, first negotiations, after which, if
  no agreement is reached, the participation rights
  of the previous company will apply.