2. European Company Law on the Move
Jaap Winter
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

3. Introduction Report High Level Group November 2002 General themes
Specific subjects
EU Company Law Action Plan
Short term
Medium term
Long term
Corporate Governance Regulation in the EU
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

4. High Level Group Report, General Themes
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

5. General Themes Facilitating efficient and competitive business in EU
primary purpose company law
cross-border activities
Modern company law making
petrifaction of rules and reduced shelf life
alternatives: secundary legislation, standard setting, models
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

6. General Themes Disclosure instead of substantive regulation
transparency, accountability, best practice
more scope for development, subtle enforcement
Types of companies
public vs. private
listed, open, closed
A well known theme, increased importance.
In number of areas disclosure more efficient and powerful regulatory tool than substantive regulation
Through disclosure corporate reality becomes visible: increases accountability; market participants can react on basis of information; market reaction provides incentive to apply best practice
Rationale for disclosure of capital and control structures in our report on takeover bids
Clear overlap with securities regulation. We see that securities laws already require wide disclosure, will increase. We should be careful not to fill company law with loads of substantive rules in the same areas, leads to overkill.
Light regulatory regime, less prescriptive rules, with more subtle enforcement through market reactions; more scope for development, greater flexibility
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

7. General Themes Abuse of company law
outside objectives: combat fraud or terrorism
mobile phones
specific enforcement instruments
Modern technology
listed company’s website central filing place
central electronic filing system per Member State
It seems governments have discovered company law as a part of law under their control they can use to achieve a number of different objectives
Tax/financial fraud
Terrorism, particular after 11 September, the day the HLG started its work; policy proposals from Jumbo Council meeting in November
To catch crooks: more burdens in company law, heavier formalities, loss of choice (abolition of bearer securities), loss of flexibility (no nominee shareholdings), heavier monitoring and enforcement
Burdens for all: good suffer for the bad
Mobile phones parallel: crooks use mobile phones so we introduce a three week waiting period for everybody who wishes to acquire one, plus government check on credentials
We wanted to take a strong position here that that is in fact abuse of company law, with mainly negative effects for all.
Catching crooks requires specific enforcement approach and instrument outside company law
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

8. High Level Group Report, Specific Subjects
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

9. Capital maintenance
Current ineffective and rigid rules in 2nd directive
Simplification
Npv shares/share buy back/pre-emption rights/financial assistance
Alternative system
Urgent because of IFRS
Solvency-test
Wrongful trading
Pre-emption rights/ fair value contribution
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

10. Groups and Pyramids Enhanced disclosure of group relationships Control
Financial relations
Concerns about pyramid structures
Tool to finance control by CMS
No transparency, minority shareholder protection, takeover proof
No listing for holding company whose sole or main asset is stake in other listed company
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

11. Restructuring and mobility
10th and 14th Directive on cross-border mergers and transfers of seat
Limited scope for real seat theory (cf. ECoJ Centros, Uberseering, Inspire Art)
Simplification 3rd and 6th directive
Squeeze-out and sell-out rights
Threshold 90-95% of capital
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

12. European Private Company
SE’s little sister
Real need?
Feasibility?
10th directive first, then reasses need and feasibility
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

13. Other European Legal Forms
European Co-operative
Common position of Member States
European Association, Mutual Society, Foundation
Wide variety of national forms, no harmonisation
Need?
Feasibility?
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

14. EU Company Law Action Plan
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

15. Objective and Agenda Objectives Agenda
to strengthen shareholder rights and third party protection, with a proper distinction between categories of companies, and
to foster efficiency and competitiveness of business, with special attention to some specific cross-border issues.
Agenda
Short term
Medium term
Long term
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

16. Short term priorities (2003-2005)
Corporate Governance Recommendations
Simplifying 2nd directive
Proposal sep 2004: simplification
New drafts for 10th and 14th directive
Proposal 10th directive nov 2003, MS agreed nov 2004: cross-border merger + co-determination
Amendment 4th and 7th directive
Proposal oct 2004: related parties and off-balance
Feasibility study into European Private Company
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

17. Medium term priorities (2006-2008)
Feasibility study into alternative to capital maintenance rules (too late?)
Framework for groups (9th Directive?)
Prohibition of stock exchange listing for pyramid holdings
Simplification 3rd and 6th Directive (merger and split)
Possible proposal for EPC
Basic disclosure for all legal forms
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

18. Long term priorities (2009 onwards)
Possible proposal to amend 2nd directive to introduce alternative to capital maintenance rules
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

19. And more ECJ case law re: freedom of establishment
European Company Statute to be implemented by October 2004
13th Directive on Takeover Bids agreed, implementation summer 2006
Harmonisation and Regulatory Competition
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

20. Corporate Governance Regulation in the EU
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

21. Corporate governance crisis and regulation
US corporate scandals:
Principal-agent conflict
Regulation focused on combatting fraud, specificly relating to financial reporting
Europe scandals as well
Vivendi, Ahold, Parmalat, Shell
Report High Level Group
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

22. EU approach Diversity of corporate governance systems
Flexibility in governance structures
Effect of (mandatory) legal rules doubtful
Fraud is only tip of iceberg
Code of best practice, comply or explain
Flexibility and accountability
Long standing experience in UK (listing rules, « 1/3)
Since 2002 in Germany (company law, »90%)
Sinds 1999 in France (voluntary + criminal law)
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

23. No EU Code
Underlying diversity makes single EU code impossible or useless
National codes on corporate governance
EU corporate governance forum to discuss national codes, monitoring, enforcement
But EU rules for disclosure
And EU guidance in two key areas of substance:
Role of non-executive directors
Director’s remuneration
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

24. Company Law Action Plan
Corporate governance agenda
Role of non-executive directors
Director’s remuneration
Responsibility for financial reporting, corporate governance disclosure
Shareholders’ rights
EU Corporate Governance Forum
Draft Directive on Statutory Audit
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

25. Recommendation on role of non-executive directors (Oct 2004)
Scope: listed EU companies and non-EU companies with primary listing in EU
Recommendation to Member States
Commission monitors compliance by
Comply or explain or (mandatory) legislation
Sufficient independence
Chairman-CEO separation or other safeguards
Three committees (nomination, remuneration, audit), preparing board decision taking
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

26. Recommendation on Appropriate Regime for Remuneration of Directors (Oct 2004)
Scope: listed EU companies and non-EU companies with primary listing in EU
Recommendation to Member States
Commission monitors compliance by
To take appropriate measures
Remuneration statement
Shareholder vote on remuneration policy
Disclosure individual director´s pay
Shareholder approval of share based pay
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

27. Responsibility of directors and disclosure (Oct 2004)
Draft directive amending 4th and 7th directive
Collective responsibility board members for financial statements
Transparency on related party transactions
Transparency on off-balance vehicles
Corporate governance statement by listed EU companies
Reference to code, comply or explain, description of internal control, takeover defenses, operation AGM, composition and operation of board
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

28. Shareholders´rights (Consultation, draft directive expected fall 2005)
Cross-border voting
Intermediaries and ultimate accountholder
Communication of information
Share blocking prohibited
Electronic participation to be facilitated
Questions and proposals
Voting in absentia to be facilitated
Confirmation of GM results and voting execution
Depositary receipts and stock lending
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018

29. EU Corporate Governance Forum (set up Oct 2004)
15 members, business, shareholders, employees, academics, appointed for three years
Enhance convergence of national developments
Convergence as an EU objective?
Harmonisation vs. Competition
Diversity and innovation
Will good corporate governance create value?
Cross-border application of codes
Methods of monitoring and enforcement
What does comply or explain really mean?
Industry Lawyers Winter Seminar 3-6 March Vinstra, Norway
26/11/2018