International Cooperative Banking Association ICBA Paris 21/11/2008 Cooperative Groups and European Legislation Apostolos Ioakimidis Commission of EU, Social Economy Unit of DG Entreprise and Industry; SMEs

No community policy large commercial and industrial enter- prises in EU are groups of companies. They use a variety of structures and forms there is no Community policy in the area nor respective legislation enabling the creation of groups of companies.

Objectives of proposed legislation Back in the 70’s the Commission proposed to Member States a company law harmonisation measure, whose main objective was first the protection of creditors and of minority shareholders in foreign subsidiaries and second the waiver from any liability for the managers.

Some proposals The draft for a Ninth Company Law Directive, never saw the light and was buried in the 70s with the group provisions of the draft regulation for the Statute for a European Company. no text contains a unique definition which could be used in all cases. In various documents one can find definitions of what a group can be, but only for purposes of the respective legislation.

Some examples The seventh company law directive on the consolidated accounts. The similar special directives on insurance groups and on the supervision of financial conglomerates The directive on the establishment of a European Works Council for the purposes of consulting employees The Commission’s Recommendation on SME definition The group definition is also examined by tax authorities and competition authorities who consider the various companies composing a group as a single entity

Cooperatives create groups Cooperatives create synergies, co-operations, consortia, networks and alliances; cooperatives directly, or indirectly through subsidiaries, use all forms of economic cooperation designed in principle to serve the needs of capital, investor led, entities. no specific community legislation regulating the creation of groups of cooperatives

Provisions of the Regulation (1) Creation of groups of cross-border nature. The ECS can be created by two or more cooperatives. The ECS can be created by merger The ECS may conduct all its activities through a subsidiary, and becomes controlling undertaking ECS may become a dominated undertaking, if its subsidiary becomes a controlled undertaking An ECS may promote the participation of its members in economic activities in other ECS

Provisions of the Regulation (2) The ECS may admit investor non user members with minority voting rights (limited to up 25%). The ECS can participate in Unions, can create other ECS or national cooperatives, or participate as a founder in the creation of a joint venture in any form: European Company, an Economic interest grouping, an association, a foundation, strategic alliance, a consortium, a franchising scheme, and any type of network.

Freedom of contracts freedom of establishments cooperatives can use the ECS as a vehicle for the creation of peer groups However, all countries in EU respect the general principle of the freedom of contracts for the creation of a contractual network. If network is a legal entity the remedy is to be found in the case law concerning freedom of establishment and in the directive on services National measure should be justified by imperative reasons of public interest need to be appropriate and proportionate

Is legislation feasible? public consultation on the need to proceed to the harmonisation of the law of the groups: negative the very low success of the previous Regulations (EC, EEIG, ECS) No new proposal before the adoption of the draft European Private Company.