International Cooperative Banking Association ICBA Paris 21/11/2008 Cooperative Groups and European Legislation

1. International Cooperative Banking Association ICBA Paris 21/11/2008Cooperative Groups and European Legislation Apostolos Ioakimidis Commission of EU , Social Economy Unit of DG Entreprise and Industry; SMEsapostolos.ioakimidis@ec.europa.eu

2. 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.

3. 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.

4. 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.

5. 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

6. 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

7. 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

8. 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.

9. 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

10. 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.