The Gazette 1980

GAZETTE

DECEMBER 1980

Company Law Notes

EEC Council Directive of the European Communities of 5th March, 1979 to co-ordinate the Conditions for Admission of Securities to Official Stock Exchange Listing.

wide powers to ensure that the information that it is publishing is accurate, complete and not misleading. It would seem therefore it will have to have power to inspect documents and examine witnesses. How practical such inspections and examinations of documents would be in protecting investors must be open to doubt in view of the length of time such investigations will take and the undoubted unfavourable publicity that they will attract. The Directive does not make it clear what is the legal position of the Directors of a company who believe that certain information should not be published or believe that the information which the national authority insists on publishing is misleading in form or content. By removing from the Directors of the company the ultimate responsibility for keeping shareholders informed and placing on the Stock Exchange is in effect undertaking to ensure that all information published by a company is complete, accurate and not misleading. EEC Third Council Directive Concerning Mergers of Public Liability Companies (EEC 78/855 OJ L 295/20/78) Scope The directive is concerned with harmonisation of national rules affecting domestic mergers of public limited liability companies, where one company acquires all the assets and liabilities of another, and the latter is dissolved without liquidation. Aim The aim of the directive is to co-ordinate the procedures for and effects of mergers and similar operations in order to arrive at an equivalent degree of protection throughout the Community for the members, creditors and employees of companies involved in such operations. Provisions The provisions of the directive, which must be converted into national law prior to 12th October, 1981, define what is meant by a merger, stipulate those companies which may be merged, lay down minimum requirements for the contents, publication and supervision of the draft terms of mergers to be drawn up by administrative or management bodies, and determine the powers of general meetings and the rights of individual shareholders and of minority shareholders. Other Articles are concerned with the protection of interests of creditors, particularly debenture holders. The protection of employees in the event of mergers and similar operations was dealt with in the specific directive (Directive EEC 77/187 OJ L 61/26, 14/2/77) adopted in 1977 on the maintenance of employees' rights

The purposes of the Directive are: (1) To co-ordinate the conditions for the admission of securities to official listing on stock exchanges situated or operating in the Member States; (2) To facilitate the admission to official stock exchange listing in each Member State of securities from other Member States and the listing of any given security on a number of stock exchanges in the community and thereby make for greater interpretation of national securities markets and therefore contributing to the prospects of establishing a European capital market; (3) To create the right to apply to the courts against decisions by the competent national authorities in respect of the application of the Directive. In addition the Directive recognises the right of competent national authorities to retain individual discretion regulating their own particular security market as each security market serves different needs which must be facilitated. Accordingly the Directive will initially establish minimum standards only. The stock exchange in Dublin will be the relevant national authority in respect of the Republic's security market. The most novel concept set forth in the Directive is contained in Article 15 which provides: "Member States shall ensure that decisions of the competent authorities refusing the admission of a security to official listing or discontinuing such a listing shall be subject to the right to apply to the courts". It may well be that the disciplines of merchant bankers and stockbrokers in bringing a company successfully to the market will ensure that undesirable applications to the Stock Exchange will be most unlikely. However the creation of the right to appeal to the Courts will force the Stock Exchange to be more legalistic in its approach to applications. Clearly the Stock Exchange will have to take legal advice for discountinuing a listing of any company in view of the right of appeal. The other area in which the Directive introduces a new concept is in Article 13, the publication of information by a company. The article provides that: "Where the protection of investors or the smooth operation of the market so requires, a company may be required by the competent authority to publish certain information in such a form and within such time limits as the national authority consider appropriate. Should the Company fail to comply with such requirement, the national authority may itself publish such information after having heard the company". The innovating principle is the right of the national authority to issue the information itself. If the national authority is to exercise this right it will need to have very

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