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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 directive’s 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 entrepreneur’s 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.