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Corporate Governance and Company Law News

Topics: Corporate Governance Forum, European Private Company (EPC), Directive on the cross-border transfer of registered seat (14th company law directive), Corporate Governance Conference Helsinki, latest decisions from the European Court of Justice and the Shareholder rights directive

Corporate Governance Forum

On 1 June 2006 the European Corporate Governance Forum held its second last meeting. The Commission’s minutes contain a summary of the Forum’s discussions. The issue of employees as stakeholders in corporate governance and board-level participation were among the main topics. Moreover, the results of the ETUC Corporate Governance Conference, held on 19 May 2006, were presented to the Forum’s members. The outcome of the Forum’s discussion on employees as stakeholders was an agreement that the chairman and some members will discuss the question of how the Forum could approach employee involvement, at least from a CSR perspective!

Minutes of the meeting:

http://ec.europa.eu/internal_market/company/docs/ecgforum/minutes_01_06_2006_en.pdf

On 24 July the Commission published two documents related to the Corporate Governance Forum. The first document is the Recommendation of the European Corporate Governance Forum on the Commission proposal for a directive on the (cross-border) exercise of shareholders' voting rights; the other is the statement of the European Corporate Governance Forum on risk management and internal control.

Link to the documents:

http://ec.europa.eu/internal_market/company/ecgforum/index_en.htm

On the agenda of the Forum’s last meeting on 9 November were a number of different topics, including monitoring the comply-or-explain principle, the proportionality of capital and control and the disclosure of investors’ identities. Particularly interesting is the report on implementation of the Commission recommendations on independent directors and directors' remuneration which is being prepared by Commission services at the moment. Publication is planned for the end of this year or beginning next year.

Link to the agenda:

http://ec.europa.eu/internal_market/company/docs/ecgforum/agenda-09-11-06_en.pdf

European Private Company (EPC)

At present the European Parliament is preparing a resolution on the EPC. The Legal Committee of the European Parliament already voted on it on 21 November. Final adoption in the Parliament’s plenum is planned for December or January. The objective of the resolution is to demonstrate the Parliament’s strong support for this issue. The parliamentary resolution also deals with the participation question cautiously. In this context a detailed amendment which dealt with the participation issue was rejected by the legal committee.

Documents from the Legal Committee of the European Parliament:

http://www.europarl.europa.eu/meetdocs/2004_2009/documents/pr/630/630485/630485en.pdf (draft report)

http://www.europarl.europa.eu/meetdocs/2004_2009/documents/am/635/635410/635410en.pdf (amendments)

The ETUC has also set up a position on this issue. It is mainly based on the contribution of Joan Bloemarts presented on the public hearing in the European Parliament on 22 June 2006 (see SEEurope webpage on the EPC). The ETUC stresses that an EPC-statute without any substantial community dimension as a prerequisite for its applicability probably would not meet the subsidiarity criterion. Moreover it is highlighted that any proposal on an EPC-statute should adequately address the rights of the employees to information, consultation and participation in the affairs and decision making process of the European Private Company.

Link to the ETUC resolution:

http://www.etuc.org/a/3066

The position of the Commission seems a bit more reserved on this issue. Commissioner Mc Creevy promised to carefully examine the proposals of the Parliament. Before any legislative measures will be launched, the Commission has to undertake legal impact assessments which will probably last until the end of 2007. On the basis of the outcome the Commission will decide on whether to take legislative action.

Directive on the cross-border transfer of registered seat (14th company law directive)

The 14th company law directive is now part of the official working program of the Commission for the year 2007. In a speech delivered to the parliament on the 21 November Commissioner Mc Creevy announced the launching of the directive in spring 2007. At the moment the Commission is conducting the obligatory regulatory impact assessments to underline the necessity of that directive through empirical evidence.

Speech of the Commissioner:

http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/06/720&format=HTML&aged=0&language=EN&guiLanguage=en

The coming German EU Presidency will prioritise the 14th company law directive (other priorities: EPC, Rome I and II, International Company Law).

Corporate Governance Conference Helsinki

On 5 October the Finnish presidency, in cooperation with the European Commission and the Corporate Governance Forum, held a further Corporate Governance Conference. The Conference was divided into two parts. The first part dealt with better regulation and challenges of drafting EU company law. The second part focused on the issue of one share–one vote. Marco Becht (Professor of finance and economics, Université Libre de Bruxelles) presented his new study on corporate mobility in Europe. He presented by way of illustration the case of Air Berlin which set up a British PLC with registered seat in the UK and de facto head office in Germany as full partner of the German KG (PLC & Co. KG). This manoeuvre was obviously a bid to circumvent German board-level participation rules which only apply to German companies.

Information on the conference (see the presentation of Marco Becht):

http://www.om.fi/Etusivu/Ajankohtaista/BetterRegulationinEUCompanyLawProcessandSubstance?lang=en

Study on Corporate Mobility in Europe:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=906066

European Court of Justice

On 20 April 2006 a Hungarian court referred a case to the ECJ regarding the transfer of company seat abroad (case number: C-210/06). The circumstances in this new case are similar to but not the same as those of Daily Mail and therefore could have an impact on member state company law. In particular the case deals with the question whether the right to transfer the (registered) seat of a company (limited partnership) in another member state is protected by freedom of establishment in Art. 43, 48 EC Treaty.

Shareholder rights directive

EU legislative organs are discussing the shareholder rights directive at the moment. It is probable that the right to ask questions, as suggested by the Finnish presidency, will be annulled. The final vote on the directive in the Parliament will not be before January.

Book Recommendation

Finally I would like to recommend a book on European company law. It provides a very compact overview of the company law of all EU member states and the legal framework of European company law. Within national company laws it also deals with employee board-level participation.

European Corporate Law, ed. Van Hulle/Gesell, 2006, ISBN 3-8329-1811-6, language English.

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