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  1. European Company Law on the Move Jaap Winter Industry Lawyers Winter Seminar 3-6 March 2005. Vinstra, Norway

  2. 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 2005. Vinstra, Norway

  3. High Level Group Report,General Themes Industry Lawyers Winter Seminar 3-6 March 2005. Vinstra, Norway

  4. 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 2005. Vinstra, Norway

  5. 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 Industry Lawyers Winter Seminar 3-6 March 2005. Vinstra, Norway

  6. 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 Industry Lawyers Winter Seminar 3-6 March 2005. Vinstra, Norway

  7. High Level Group Report, Specific Subjects Industry Lawyers Winter Seminar 3-6 March 2005. Vinstra, Norway

  8. 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 2005. Vinstra, Norway

  9. 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 2005. Vinstra, Norway

  10. 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 2005. Vinstra, Norway

  11. 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 2005. Vinstra, Norway

  12. 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 2005. Vinstra, Norway

  13. EU Company Law Action Plan Industry Lawyers Winter Seminar 3-6 March 2005. Vinstra, Norway

  14. Objective and Agenda • Objectives • 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 2005. Vinstra, Norway

  15. 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 2005. Vinstra, Norway

  16. 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 2005. Vinstra, Norway

  17. 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 2005. Vinstra, Norway

  18. 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 2005. Vinstra, Norway

  19. Corporate Governance Regulation in the EU Industry Lawyers Winter Seminar 3-6 March 2005. Vinstra, Norway

  20. 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 2005. Vinstra, Norway

  21. 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 2005. Vinstra, Norway

  22. 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 2005. Vinstra, Norway

  23. 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 2005. Vinstra, Norway

  24. 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 30.06.06 • 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 2005. Vinstra, Norway

  25. 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 30.06.06 • 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 2005. Vinstra, Norway

  26. 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 2005. Vinstra, Norway

  27. 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 2005. Vinstra, Norway

  28. 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 2005. Vinstra, Norway