Explanatory Memorandum to COM(2007)91 - Amendment of Council Directive 78/855/EEC concerning mergers of public limited liability companies and Council Directive 82/891/EEC concerning the division of public limited companies as regards the requirement for an independent expert's Report on the occasion of a merger or a division [SEC(2007) 298] [SEC(2007) 300] - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2007)91 - Amendment of Council Directive 78/855/EEC concerning mergers of public limited liability companies and Council Directive ... |
|---|---|
| source | COM(2007)91  |
| date | 06-03-2007 |
- Grounds for and objectives of the proposal
A large part of EC legislation was introduced to correct market failures and ensure a level playing field. These goals could often only be achieved by imposing obligations on businesses to provide information and report on the application of the legislation.
With time, some of these procedures have become needlessly time-consuming or obsolete. These unnecessary administrative burdens hamper economic activity and have a negative impact on the competitiveness of European enterprises.
The Commission is committed to reducing these unnecessary burdens to the maximum extent possible. This is a part of the Better Regulation strategy and it is of vital importance for achieving our 'Lisbon' targets of more growth and jobs.
- General context
On 14 November 2006, the Commission presented a Strategic Review of Better Regulation in the European Union (COM (2006) 689), including a proposal for a target to reduce the administrative burdens on businesses by 25% by 2012.
Ten concrete proposals for 'fast track action' were thereupon identified in Annex III of the Action Programme for reducing administrative burdens in the EU (COM (2007) 23), based on broad stakeholder consultation and suggestions from Member States and Commission experts. The 'fast track actions' aim at significantly reducing administrative burdens on businesses through minor legislative changes without challenging the level of protection or the original purpose of the legislation.
One of these 'fast track action' proposals concerns Council Directive 78/855/EEC concerning mergers of public limited liability companies and Council Directive 82/891/EEC concerning the division of public limited liability companies. The aim of this proposal is to remove unnecessary administrative burdens on businesses by giving shareholders the direct i possibility to renounce to the written expert report on the draft terms of merger or division, if they so desire. This will bring the two directives in line with the current requirements in the Tenth Company Law Directive (Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies).
- Existing provisions in the area of the proposal
The existing provisions that this proposal seeks to modify are Articles 9 and 11 of Council Directive 78/855/EEC concerning mergers of public limited liability companies and Articles 8 and 9 of Council Directive 82/891/EEC concerning the division of public limited liability companies.
2. Consultation of interested parties and impact assessment
- Consultation of interested parties
Consultation methods
In the Action Programme of 24 January 2007, the Commission presented ten concrete proposals for 'fast track actions'. These proposals were based on consultations with experts and in particular on a pilot project comparing the baseline measurements of administrative burdens in the Czech Republic, Denmark, The Netherlands and the United Kingdom in 2006.
One of these 'fast track actions' concerned Company Law and proposed to 'ease requirements regarding written reports to the stockholders in case of merger and division'. Council Directives 78/855/EEC and 82/891/EEC provide for the company having to set up an expert report on the draft terms of a merger or a division. Council Directive 82/891/EEC leaves Member States the possibility not to apply these provisions if all the shareholders and holders of other securities giving the right to vote have so agreed. Following an indication from some Member States, consultations with the Commission's Advisory Group on Corporate Governance and Company Law were held.
Summary of responses
Consultations with the Commission's Advisory Group on Corporate Governance and Company Law have confirmed that this requirement of Council Directive 78/855/EEC concerning the expert report on the draft terms of mergers is excessive. As it has already been recognised in the context of the adoption of Directive 2005/56/EC, this requirement becomes an unnecessary formality where the shareholders of all companies involved in the merger do not consider such a report necessary.
Furthermore, the Commission has received positive responses to the presentation of its Action Programme, including the fast track proposal related to Company Law. A few responses have underlined concerns about transparency and shareholder protection. These concerns have been taken into account in the current proposal. It seems therefore appropriate to align the provisions of Council Directives 78/855/EEC and 82/891/EEC with the exemption contained in Directive 2005/56/EC.
- Impact assessment
The Impact Assessment considered three policy options:
Option 1 No-Policy Change.
Option 2 Abolition of the requirements unless shareholders ask for it.
Option 3 Abolition of the requirements where all the shareholders agree that it is not needed.
Option 3 is the preferred option because it provides a satisfactory level of transparency and shareholder protection whilst contributing to the objective of reducing administrative burdens on companies.
- Summary of the proposal action
It is proposed to align the provisions of Council Directives 78/855/EEC and 82/891/EEC on the expert report on the draft terms of merger or division with the corresponding rule in Article 8 of Directive 2005/56/EC.
- Legal basis
The legal base of Community action in this area is laid down in Article 44 EC Treaty.
- Subsidiarity principle
Action by the Member States would not suffice to reduce administrative burdens in this area as the information requirements were imposed for mergers and divisions of public limited liability companies by way of EC Directives.
EU action will ensure that all future mergers and divisions of public limited liability companies taking place in Europe can benefit from this administrative burdens reduction.
The proposal therefore complies with the subsidiarity principle.
- Proportionality principle
By proposing to modify the relevant Articles of Council Directive 78/855/EEC and Council Directive 82/891/EEC by way of a Directive, the Member States still have sufficient scope for transposing the Directive and achieving the required result in a manner that they see fit and that is best suited for their national legal system.
This proposal ensures that the administrative burdens falling upon the economic operators in the case of mergers and divisions of public limited liability companies are minimized.
- Choice of instruments
Proposed instruments: Directive
The objective of reducing administrative burdens caused by the information requirements imposed by the Council Directive 78/855/EEC and Council Directive 82/891/EEC can only be reached by modifying these Directives, which can only be done by way of a binding EC legal instrument of the same type and level, a Directive.
The proposal has no implication for the Community budget.
5. Additional information
- Simplification
The proposal provides for simplification of administrative procedures for private parties.
The administrative procedure to be followed by public limited liability companies in case of mergers and divisions will be simplified in the sense that certain information obligations will be made voluntary instead of mandatory.
- Correlation table
The Member States are required to communicate to the Commission the text of national provisions transposing the Directive as well as a correlation table between those provisions and this Directive.