The Gazette 1972

THE IMPACT OF EEC COMPANY LAW ON THE COMPANY LAW OF IRELAND EUROPEAN SECTION by G. M. GOLDING

In reply to a Parliamentary Question recently, the Minister for Industry and Commerce stated that "EEC Directives will necessitate numerous changes in existing company law". However, he later added, "Only one Directive on company law has so far been adopted by the EEC." Such a comment may escape notice by the lay public- but now that this country is over the threshold of the Common Market, legislators and the legal profession will have to become more aware of the effect of EEC law on our existing law, and cease thinking of the mass of Common Market legislation as an amorphous body of rules which have little or no effect in practice. In fact, while the amount of "secondary" or "sub- sidiary" legislation—in other words, Regulations, Direc- tives and Decisions of the Council and Commission of the European Communities under Article 189 of the Treaty of Rome—may appear imposing and formid- able, a closer examination reveals that much of it is of unexciting content for the lawyer. When, in turn, the part which is "lawyers' law" is extracted and analysed, a very small proportion of the whole will be found to necessitate the amendment of existing Irish law. This is well exemplified by the British European Communities Bill (which may have become an Act by the time this paper is published). The whole Bill is comprised of only thirty-seven pages, and of these all the provisions required to incorporate EEC company law into U.K. company law are con- tained in three pages (clause 9). No more is required of member States than the approximation of the respective national laws to the extent required for the Common Market to function as a whole. For example, in Britain where the ultra vires rule remained in full force, the EEC Directive on company law necessitates (as wll be seen) a radical amendment; whereas, in Ireland—the ultra vires rule having been extensivey modified by the 1963 Act—it appears that no amendment at all will be required to give effect to this part of the Directive. Finally, therefore, there is no question of setting up a new system of company law for the Community; all that is involved is a series of modifications of the com- pany law of each member State to be effected by the institutions of that State and by its own legal machinery. Before considering the provisions of the one and only existing EEC Directive on company law, it should be mentioned that there are other Proposals for Directives affecting company law, under consideration. They will deal, broadly, with company accounts, share capital, mergers and management. All these (and the sole exist- ing Directive) derive their origin from Article 100 of the EEC Treaty, which obliges the Council, acting on a Proposal of the Commission, to issue Directives for the approximation of such legislative and administrative provisions of the member States as have a direct inci- dence on the establishment or functioning of the Com-

mon Market. Company law falls within the scope of that Article. Article 58 .of the Treaty is global, by nature self- executing, and provides for the assimilation of com- panies of member States to natural persons for the purposes of effecting the right of establishment and free movement of capital within the Common Market. Article 54 (2) provides for the implementation of the general programme relating to the right of establishment by way of Directives; and Article 54 (3) (g) provides for the harmonisation of member States' company law relating to the protection of the interests of members and of third parties. In addition to this programme of harmonisation, draft Conventions are in course of preparation pursuant to Article 220 which provides that member States shall negotiate with each other for (inter alia) the mutual recognition of companies, the maintenance of their legal personalty when the registered office is transferred from one member State to another, and the merger of com- panies subject to the municipal law of different member States. Under this Article a Convention on the mutual recognition of companies has already been negotiated and was signed by the six original member States on 29th February 1968. Ultimately, there is the most ambitious project of all —the draft Regulation relating to the setting up of a European Company. (There are two papers dealing with the European Company in the Gazette, Vol. 64, No. 4A, September/October, 1970.) As we are concerned only with the effect of the single operatve Directive relating to company law, at this stage it may not be out of place to remind the reader that, in Common Market parlance, a Directive (as defined by Article 189 of the Treaty) shall be binding, as to the result to be achieved, upon each member State to which it is directed, while leaving to the nati- onal authorities the choice of forms and methods. The first Directive applies to both public and private, profit-making, limited liability companies (and also, as a matter of interest, probably to limited partnerships). What modifications of our law will be required? They fall into two groups : (1) publicity and (2) validity of transactions entered into by the company. (1) Publicity All those documents relating to a company which presently have to be filed in the Companies Office will, in addition, now have to be published in some official organ—presumably Iris Oifigiuil. Also, particulars of the appointment and termination of appointment of persons who are (a) empowered to represent the com- pany vis-a-vis third parties and in litigation and who (b) take part in the administration, supervision or con- trol of the company will have to be filed and published, likewise. Companies with net assets in excess of a given figure - 2 5 0