The Gazette 1974

LEGAL EUROPE Wexford Seminar on EEC Company Law

panies belonging to a group, want to obtain a true and fair view of the situation of the group and therefore require the presentations of group accounts. A decision will have to be made as to which companies will have to be taken into the group accounts. The Irish an° British definition of a subsidiary is very precise. On the other hand, in German law, the notion of a Group Company is much broader, there must first be a rela- tionship of dependency and furthermore the holding company must at all times exercise its dominating influence. It is difficult to forecast the final implications on the directive of group accounts. Proposed consolidate 0 balance sheets and consolidated profit and loss account* are wider than those foreshadowed by the Irish Section 151. Henceforth the obligation to present group account* will also extend to foreign subsidiaries. Furthermore a Holding Companies, whether public or private, vvil' henceforth be compelled to present group accounts. (At the moment the interests of shareholders are protected» as long as the company does not join a group. Usualh the directors of a holding company then appoint th c directors of the subsidiary company; this may lead t0 damages on behalf of outside shareholders and to a transfer of liquidities by creditors or stop activities as between one subsidiary and another). The remedies of classic company law only protect th e above mentioned interests to a limited extent. German Law and the Statute of the Euro-Company provide f° r specific new remedies. These problems also have to b e tackled by the forthcoming harmonisation. Many rul eS of Company Law will have to be adapted to subsidiary companies. Another question in this context, concern* the reciprocal holdings for which specific legislation exists in France and Germany. In France two Com- panies may not hold up to more than 10% of each other's shares. All this shows that the programme 01 harmonisation is an ambitious one and that its achieve- ment can only be foreseen in a relatively long peri°° of time. By Dr. Ivo Schwartz Dr. Schwartz emphasised that one of the ma" 1 characteristics of the European Communities is precisely the fact that there existed a separate body of law distin ot from Public International Law called Community La While other International Organisations operate on f 11 inter-governmental basis, the Community Treats* created a new legal order with an independent existence- The citizens of the Member States are directly affected» and the Sovereignty of these States has been p a r t i al transferred to the Communities. In considering the Organs of the Communities, must be stressed that the Council of Ministers and th e Commission possess legislative and administratis powers conferred upon them by the Treaties. 176 LAW MAKING PROCEDURE OF THE COMMUNI TY

THE FIRST DIRECTIVE AND THE PROPOSED FOURTH DIRECTIVE By Dr. C. W. A. Timmermans, Principal Administrator of the European Comission The Third Lecture was delivered by Dr. C. W. A. Timmermans, Principal Administrator of the European Commission, especially competent for current and future proposals on consolidated accounts and groups of companies. The subject was the First Directive and the proposed Fourth Directive. The First Directive had been adopted by the original Six Members of the Com- munity in 1968, and came into force, as regards the three new Member States, on 1 July 1973. The First Directive dealt essentially with disclosure of documents, and the principles underlying nullity of incorporation and the ultra vires rule which for Ireland were not of much practical value. According to the Irish Com- panies Act 1963 the delivery of the certificate of in- corporation is already conclusive evidence of the forma- tion of the company. As regards disclosure, it is im- portant to note that all relevant statutory notices must be filed in the Gazette, "Iris Oifigiuil". Section 9 of the Irish Companies Act 1963 is similar to the first part of Article 9 of the First Directive. The Second Part of Article 9 states that limitations on the powers of the organs of the company can never be relied upon against third parties, even if they are disclosed; it follows that the rule of constructive notice has been abandoned. In the Irish European (Companies) Re- gulations 1973, the notion of awareness appears to be substituted for the former notion of good faith. The question arise; therefore if this article of the directive has been correctly implemented into Irish Company Law. The Fourth Directive deals with the presentation of accounts and the valuation of the Company's assets and liabilities. There are many systems of presentation of accounts in the different Member States, and they are so various that they present a real hindrance to capital investment. Accountancy is essentially an art and not a science. Two tendencies have shown themselves. In Ireland, Britain and the Netherlands there has broadly been a very liberal tendency in which no specific rules were enacted. The essential principle laid down in Section 149 of the Irish Companies Act, 1963, requires a true and fair view to be given of the companies position and results. Here much is left to the discretion of companies who are advised by highly competent accountants. On the other hand in France, Germany and Italy there are very detailed provisions which are narrowly construed. The adoption of the Fourth Directive as it stands would imply many changes. A very detailed Profit and Loss Account would have to be provided, and specified rules as to valuation of assets and liabilities would have to be adhered to. The present flexibility of the lay-out and valuation rules will have to be tightened. But this directive is not complete, inasmuch as, many com-