EU Company Law: Introduction and Sources Doc dr Tatjana Jevremović Petrović

General works Vanessa Edwards, EC Company Law, Clarendon Press, Oxford, 1999. Stefan Grundmann, European Company Law: Organization, Finance and Capital Markets, Intersentia, Antwerpen – Oxford, 2007. Еrik Werlauff, EU-Company Law: Common business law of 28 states, 2nd edition, DJØF Publishing, Copenhagen, 2003. Adriaan Dorresteijn, Tiago Monteiro, Christoph Teichmann, Erik Werlauff, European Corporate Law, second edition, Kluwer Law International, Alphen aan den Rijn, 2009. Маds Andenas, Frank Wooldridge, European Comparative Company Law, Cambridge University Press, Cambridge, 2009. Mathias Habersack, Europäisches Gesellschaftsrecht, 3. Auflage, Verlag C.H. Beck, München, 2006. Marcus Lutter, Walter Bayer, Jessica Schmidt, Europäisches Unternehmens- und Kapitalmarktrecht: Grundlagen, Stand und Entwicklung nebst Texten und Materalien, 5. Auflage, De Gruyter, Berlin – Boston 2012. Guido Ferrarini, Klaus J. Hopt, Japp Winter and Eddy Wymeersch (eds.), Reforming Company and Takeover Law in Europe, Oxford University Press, Oxford, 2004.

Introduction to the EU Law Founding treaties: European Coal and Steel Community 1951-2002. European (Economic) Community 1958. European Atomic Energy Community 1958. Single European Act (1986) EU (since Maastricht Treaty 1992) Nice Treaty 2000 Lisbon Treaty 2007

Internal (Single) Market Main task: Establishing a Common Market, later Single and Internal Market Goals and tasks: Establishment of the economic and monetary Union Implementation of the common policies or activities Promotion throughout the Community of harmonious, balanced and sustainable development of economic activities, a high level of employment and of social protection, equality between men and women, sustainable and noninflationary growth, a high degree of competitiveness and convergence of economic performance, a high level of protection and improvement of the quality of the environment, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States.

Internal (Single) Market Its activities include, among other things: An internal market characterised by the abolition, as between Member States, of obstacles to the free movement of goods, persons, services and capital; The approximation of the laws of Member States to the extent required for the functioning of the internal market Company law – free movement of persons (and capital) Capital markets and EU Securities Law

EU (Company) Law – Sources Primary sources Founding Treaties Conventions between MS EU and third countries and International Organizations Agreements

EU (Company) Law – Sources Secondary sources Regulations Directives Decisions Recommendations and Opinions Other sources ECJ decisions – not official and formal, but truly influential source of the EU Law. Important interpretative role in company law Especially important for interpretation of the primary establishment

EU Company Law – Primary sources (Treaty Establishing the EC) Treaty on the Functioning of the EU Art. 49 (43) Right of the establishment Free movement of companies to other MS (entering and doing business in another MS) Art. 50 (44), 2, g Council and EP acting by means of Directives Coordination of the safeguards which, for the protection of the interests of members and others, are required by Member States of companies or firms with a view to making such safeguards equivalent throughout the EU Art. 54 (48) Definitions: company, nationality of the company Art. 293 (Conventions) – abolished Art. 352 (308) and 114 (95) – adoptation of the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market.

EU Company Law – Secondary sources Directives Regulations – directly applied in MS laws Creation of “european” company forms Recommendations ECJ Decisions (Segers, Daily Mail, Centros, Uberseering, Inspire Art, Sevic, Cartesio, Vale) Interpretation of Treaty provisions (most important) and secondary sources (Conventions) obsolete Mutual recognition of companies Cross-border mergers Cross-border transfer of companies’ seat Model rules European Model Company Act

EU Company Law There is no systematic European Company Law Provisions concerning different issues of Company Law

EU Company Law Phase 1: From 1968. to 2000. Harmonisation Effects of the harmonised rules are equivalent in all MS (free choice of form and method of implementarion) In the begining harmonisation defined provisions for certain issues, later basic principles introduced minimum standards and made possible cross-border activities. Problems of harmonisation : concept, competence (subsidiarity), legitimacy, lack of modernisation and ability to evolve

EU Company Law Phase 2: From Action plan onwards Harmonisation concerning company’s mobility Simplification of rules English law vs. Continental (German) law Different methods introduced (Recommendation) Model rules Competion of national legal systems Competitiveness vs. Protection of interests

EU Company Law Phase 3: Financial crisis – national protectionism and “fortress Europe” Responses to financial crisis and wealth funds from non-EU countries National and EU intervention In financial sector Targeting non EU sovereign wealth funds

(First) Company Law Directive Directive 2009/101/EC of the European Parliament and of the Council of 16 September 2009 on coordination of safeguards which, for the protection of the interests of members and third parties, are required by Member States of companies within the meaning of the second paragraph of Article 48 of the Treaty, with a view to making such safeguards equivalent (Text with EEA relevance) (OJ L 258, 1.10.2009, p. 11–19) (First Council Directive 68/151/EEC of 9 March 1968 on co-ordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, with a view to making such safeguards equivalent throughout the Community) Nullity of the companies Disclosure and publication of certain informations and documents Third party responsibility

(Second) Company Law Directive Directive 2012/30/EU of the European Parliament and of the Council of 25 October 2012 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 54 of the Treaty on the Functioning of the European Union, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent Text with EEA relevance Before: Second Council Directive 77/91/EEC of 13 December 1976 in respect of the formation of public limited liability companies and the maintenance and alteration of their capital (modified on several occasions, most important 2006) Capital Directive Minimum capital requirements Capital modifications (increase and reduction) Distributions to shareholders Shares subscribed by company Redemption of shares Feasibility study on an alternative to the capital maintenance regime established by the Second Company Law Directive 77/91/EEC of 13 December 1976 and an examination of the impact on profit distribution of the new EU accounting regime, KPMG, January 2008. http://ec.europa.eu/internal_market/company/capital/index_en.htm

(Third) Company Law Directive Directive 2011/35/EU of the European Parliament and of the Council of 5 April 2011 concerning mergers of public limited liability companies Before: Third Council Directive 78/855/EEC of 9 October 1978 based on Article 54(3)(g) of the Treaty concerning mergers of public limited liability companies. Modifications 2007, 2009 Mergers (national)

Fourth Company Law Directive Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54 (3) (g) of the Treaty on the annual accounts of certain types of companies (OJ L 222, 14.8.1978, p. 11–31) Modifications 1990, 2001, 2003, 2006 Annual accounts Repealed

Proposal for a Fifth Company Law Directive Proposals from 1972, 1983, 1991. Structure of public companies and powers and obligations of their organs (internal organization of the company) Directive abandoned Corporate governance – new incentives

Sixth Company Law Directive Sixth Council Directive 82/891/EEC of 17 December 1982 based on Article 54(3)(g) of the Treaty, concerning the division of public limited liability companies. Modifications 2007, 2009 Divisions

Seventh Company Law Directive Seventh Council Directive 83/349/EEC of 13 June 1983 based on the Article 54 (3) (g) of the Treaty on consolidated accounts (OJ L 193, 18.7.1983, p. 1–17) Consolidated accounts (groups of companies)

Eight Company Law Directive Eighth Council Directive 84/253/EEC of 10 April 1984 based on Article 54 (3) (g) of the Treaty on the approval of persons responsible for carrying out the statutory audits of accounting documents Persons responsible for carrying out the statutory audits of accounting documents Abolished 2006.

Accounting directives Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC Text with EEA relevance

Proposal for a Ninth Company Law Directive Groups of Companies Abandoned Exceptions: Consolidated accounts (7th Company Law Directive) Disclosure of financial and non-financial information Already exists for listed companies (IAS reports, disclosure within 13the Company Law Directive, annual statements) Coordinated group policy (Prevention of abusive pyramid groups of companies) Protection of minority shareholders and creditors

(Tenth) Directive on cross-border Mergers Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies [Official Journal L 310 of 25.11.2005, p. 1]. Modifications 2007, 2009 Cross-border mergers are possible

Eleventh Company Law Directive Eleventh Council Directive 89/666/EEC of 21 December 1989 concerning disclosure requirements in respect of branches opened in a Member State by certain types of company governed by the law of another State (OJ L 395, 30.12.1989, p. 36–39) Branches Disclosure provisions

(Twelfth) Company Law Directive Directive 2009/102/EC of the European Parliament and of the Council of 16 September 2009 in the area of company law on single-member private limited liability companies (Text with EEA relevance) Before: Twelfth Council Company Law Directive 89/667/EEC of 21 December 1989 on single-member private limited-liability companies Single-member companies

(Thirteenth) Directive on take-over bids Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids (Text with EEA relevance) (OJ L 142, 30.4.2004, p. 12–23) Takeover bids

Proposal for a (Fourteenth) Company Law Directive on transfer of the company’s seat No official Proposal yet Unofficial Proposal 1997 Impact Assessment with No-action Scenario adopted Impact assessment on the Directive on the cross-border transfer of registered office, Commission Staff Working Document, Commission of the European Communities, SEC(2007) 1707, Brussels 12.12.2007; http://ec.europa.eu/governance/impact/ia_carried_out/docs/ia_2007/sec_2007_1707_en.pdf New incentives: Report of the Reflection Group ECJ Judgements

Shareholders rights Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies (OJ L 184, 14.7.2007, p. 17–24)

Business registers Directive 2012/17/EU of the European Parliament and of the Council of 13 June 2012 amending Council Directive 89/666/EEC and Directives 2005/56/EC and 2009/101/EC of the European Parliament and of the Council as regards the interconnection of central, commercial and companies registers Text with EEA relevance.

EEIG Council Regulation (EEC) No 2137/85 of 25 July 1985 on the European Economic Interest Grouping (EEIG).

European Company – SE Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a European company with regard to the involvement of employees [Official Journal L 294, 10.11.2001].

European Cooperative Society Council Regulation (EC) No 1435/2003 of 22 July 2003 on the Statute for a European Cooperative Society (SCE) (OJ L 207, 18.8.2003, p. 1–24) Council Directive 2003/72/EC of 22 July 2003 supplementing the Statute for a European Cooperative Society with regard to the involvement of employees (OJ L 207, 18.8.2003, p. 25–36)

Proposal for a European Private Company Proposal for a Council Regulation of 25 June 2008 on the Statute for a European Private Company (SPE) Proposal for a Council Regulation on the Statute for a European Foundation (FE) 2012

Remuneration of Directors 2004/913/EC: Commission Recommendation of 14 December 2004 fostering an appropriate regime for the remuneration of directors of listed companies Text with EEA relevance (OJ L 385, 29.12.2004, p. 55–59) Commission recommendation complementing Recommendations 2004/913/EC and 2005/162/EC as regards the regime for the remuneration of directors of listed companies, 2009 Commission Recommendation of 30 April 2009 on remuneration policies in the financial services sector (Text with EEA relevance) (OJ L 120, 15.5.2009, p. 22–27)

Board of directors structure EC Commission Recommendation of 15 February 2005 on the role of non-executive or supervisory directors of listed companies and on the committees of the (supervisory) board (Text with EEA relevance) (OJ L 52, 25.2.2005, p. 51–63)

Future of the EU Company Law Final Report of the High Level Group of Company Law Experts chaired by Jaap Winter, presented on 4 November 2002 21.05.2003 Communication from the Commission to the Council and the European Parliament – Modernising Company Law and Enhancing Corporate Governance in the European Union – A Plan to Move Forward (Action Plan 2003) Report of the Reflection Group On the Future of EU Company Law, 5 April 2011 Communication from the Commission – Action Plan 2012.

Future of the EU Company Law Report of the High Level group: Facilitating efficient and competitive business in Europe Modern Company Law making Disclosure of information as a regulatory tool Distinguishing types of companies Increased flexibility vs. tightening of rules Modern technology

Future of the EU Company Law Phase 2: Action plan of the Commission and ECJ decisions Policy objectives: Strengthening shareholders rights and third party protection vs. fostering of efficiency and competitiveness of business Harmonisation concerning company’s mobility and new European company forms. Simplification of rules Modern corporate governance: Disclosure, Strenghtening shareholders’ rights, Board of directors (disqualification, remuneration) Capital rules (modernisation) and creditor protection Groups of companies Different methods introduced (Recommendations, model rules) Competion of national legal systems Similar goals underlined in the Report of the Reflection Group (2011)

Further reading Report of the High Level Group of Company Law Experts on a Modern Regulatory Framework for Company Law in Europe, Brussels, 4 November 2002. http://ec.europa.eu/internal_market/company/modern/index_en.htm#background Communication from the Commission to the Council and the European Parliament: Modernising Company Law and Enhancing Corporate Governance in the European Union – A Plan to Move Forward, Commission of the European Communities, Brussels, 21.5.2003., COM (2003) 284 final. http://ec.europa.eu/internal_market/company/modern/index_en.htm Report of the Reflection Group On the Future of EU Company Law, Brussels, 5 April 2011, http://ec.europa.eu/internal_market/company/docs/modern/reflectiongroup_report_en.pdf, 7.11.2011. Communication from the Commission – Action Plan 2012. http://ec.europa.eu/internal_market/company/modern/index_en.htm#actionplan2012 European Commission – Internal market – Company Law – Modernisation of Company Law and Enhancement of Corporate Governance http://ec.europa.eu/internal_market/company/modern/index_en.htm