Proposal for a Council Decision providing that the European Community should subscribe for extra shares as a result of the decision to double the capital of the European Bank for Reconstruction and Development (96/C 288/06) COM(96) 377 final - 96/0204(CNS)

(Submitted by the Commission on 25 July 1996)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Decision 90/674/EEC on the conclusion of the Agreement establishing the European Bank for Reconstruction and Development (1),

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Whereas the initial capital of the Bank was fixed at ECU 10 billion of which the Community subscribed 3 %;

Whereas the operations of the Bank may not exceed the limits set by the Agreement and which depend on the size of the Bank's capital; whereas the Bank is expected to reach this limit in 1997;

Whereas, pursuant to Article 4 (3) of the Agreement, the Governors of the Bank, at their annual meeting in Sofia on 15 April 1996, decided to double the authorized capital stock of the Bank;

Whereas, pursuant to that Decision, the Community is entitled to subscribe an additional 30 000 shares of ECU 10 000 each,

HAS DECIDED AS FOLLOWS:

Article 1

The European Community shall subscribe an additional 30 000 shares of ECU 10 000 each in the European Bank for Reconstruction and Development under the terms and conditions of the resolution given in the Annex.

Article 2

The President of the Council shall deposit the requisite instrument of subscription on behalf of the Community.

Article 3

This decision shall be published in the Official Journal of the European Communities.

ANNEX (Text of the resolution of the Governors of the Bank referred to in Article 1) RESOLUTION No 59 Increase in authorized capital stock and subscriptions thereto

WHEREAS,

the Board of Directors of the Bank, having undertaken a study of the Bank's future resource requirements in accordance with resolution No 50 of the Board of Governors, has submitted a report thereon to the Board of Governors;

the Board of Governors, having considered such report and its related appendices and attachments, fully endorses the findings and recommendations embodied therein and has concluded that it is necessary to increase the authorized capital stock of the Bank;

the Board of Directors has proposed that each member, and each prospective member pursuant to Board of Governors' resolution No 30, be authorized, subject to certain conditions, to subscribe shares of the newly-authorized capital in proportion to the aggregate number of shares such member has subscribed, or such prospective member may be authorized to subscribe pursuant to Board of Governors' resolution No 30;

NOW, THEREFORE, the Board of Governors hereby

RESOLVES THAT:

the authorized capital stock of the Bank be increased and the shares of capital stock so increased be made available for subscription on the following terms and conditions:

1. Increase in authorized capital stock

(a) The authorized capital stock of the Bank shall, on the effective date as defined in paragraph 4 (a) of this resolution, be increased by 1 000 000 shares, each share having a par value of ECU 10 000.

(b) Of the shares authorized by this resolution, the number of whole shares up to, but not in excess of, 100 % of the shares subscribed to by each member immediately prior to the effective date, or the shares that may be authorized for subscription by each prospective member pursuant to resolution No 30 of the Board of Governors, shall be made available for subscription by such members and prospective members in accordance with paragraph 2 of this resolution.

(c) The shares authorized by this resolution which shall not have been subscribed to in accordance with paragraph 2 of this resolution shall be reserved for initial subscriptions by new members and for special increases in the subscriptions of individual members, as may be determined by the Board of Governors pursuant to paragraphs 2 and 4 of Article 5 of the Agreement establishing the Bank.

2. Subscriptions

(a) Each member, and each prospective member referred to in paragraph 1 (b), shall be entitled to subscribe, at par, a number of whole shares up to, but not in excess of, 100 % of the number of shares subscribed to by such member immediately prior to the effective date, or 100 % of the number of shares that may be authorized for subscription by any such prospective member. Each such subscription shall be on the terms and conditions set forth in this resolution, and in all events shall comprise paid-in and callable shares in such proportions that 22,5 % (as near as may be) of the shares subscribed shall be whole paid-in shares and the balance shall be callable shares.

(b) Each member, or prospective member referred to in paragraph 1 (b), wishing to subscribe pursuant to this resolution shall deposit with the Bank the following documents in a form acceptable to the Bank:

(i) an instrument of subscription whereby the member subscribes to the number of paid-in and callable shares specified in such instrument;

(ii) a representation that the member has duly taken all legislative and other internal action necessary to enable it to make such subscription;

(iii) an undertaking that the member will furnish such information as the Bank may request concerning such action.

Such documents shall be deposited on or before 15 April 1997 or such subsequent date not later than 31 December 1997 as the Board of Directors may determine.

(c) Each instrument of subscription shall become effective and the subscription thereunder shall be deemed to have been made on the effective date, or on the date on which the Bank notifies the subscribing member that the documents deposited by such member pursuant to paragraph 2 (b) of this resolution are satisfactory to the Bank, whichever is the later.

(d) If documents satisfactory to the Bank providing for subscriptions in the aggregate amount of shares specified in paragraph 4 (a) of this resolution shall not have been deposited by the effective date, then the Board of Directors may, at its option, declare that the instruments of subscription already deposited by members and the subscriptions thereunder shall become effective immediately notwithstanding any other provision in this resolution, provided that such action is considered by the Board of Directors to be in the best operational interests of the Bank, and provided further that the aggregate of instruments of subscription already deposited and expected to be deposited in the foreseeable future, in the judgement of the Board of Directors, sufficiently close to the aggregate amount of shares specified in the said paragraph 4 (a).

(e) Notwithstanding any other provision in this resolution, no prospective member referred to in paragraph 1 (b) shall be entitled to subscribe to shares under this resolution until such prospective member has become a member of the Bank pursuant to resolution No 30 and any other applicable resolution or resolutions of the Board of Governors.

3. Payments for paid-in shares

(a) Payment for the paid-in shares subscribed pursuant to this resolution shall be made in eight, equal, annual instalments. The first instalment shall be paid on or before 15 April 1998, and the remaining instalments shall be paid not later than the respective anniversaries of the first payment date; provided that a member may, after consultation with the Bank, make payments on terms more favourable to the Bank than those stipulated in foregoing provisions of this paragraph.

(b) Of each instalment 60 % of payments may be made by a subscribing member in promissory notes or other obligations issued by such member and denominated in ecu, in United States dollars or in Japanese yen. Such notes or obligations shall be non-negotiable, non-interest-bearing and encashable by the Bank at par value, on demand, in equal annual tranches in accordance with an encashment programme determined by the Board of Directors.

(c) All payment obligations of a member in respect of subscription to shares in accordance with this resolution shall be settled either in ecu, in United States dollars or in Japanese yen on the basis of the average exchange rate of the relevant currency in terms of the ecu for the period from 16 October 1995 to 15 April 1996 inclusive.

4. Effectiveness and other provisions

(a) For the purposes of this resolution, the effective date shall be the date, on or before 15 April 1997 or such subsequent date not later than 31 December 1997 as the Board of Directors may determine, on which documents satisfactory to the Bank have been deposited pursuant to paragraph 2 (b) of this resolution providing for subscriptions in an aggregate amount of at least 494 188 shares.

(b) Subject to the provisions of this resolution, the provisions of the Agreement establishing the Bank shall apply mutatis mutandis to the increase in shares authorized by, and to the subscriptions and payments made under, this resolution as if such shares were part of the initial capital stock of the Bank and such subscriptions and payments were initial subscriptions to and payments for such stock.

(Adopted 15 April 1996)

Extract from the report of the Board of Directors referred to in the first paragraph of the resolution Proposal for a capital increase and recommendations

Proposed capital increase

Size and structure

The Bank's authorized capital stock as of 31 December 1995 was ECU 10 000 000 000 (2) divided into 1 000 000 shares of ECU 10 000 each. Of this capital stock, 988 375 shares amounting to ECU 9 883,75 million had been subscribed. Of the subscribed capital 296 513 shares amounting to ECU 2 965,13 million were paid-in shares and the remaining 691 862 shares amounting to ECU 6 918,62 million were callable shares.

To support the Bank's future operations consistent with its medium-term growth strategy, an increase in the Bank's capital stock of 100 % is proposed (3).

The Board of Directors considers that the paid-in shares should be equal to 22,5 % of the proposed increase and that the remaining 77,5 % should be in the form of callable shares.

Payment terms

Consideration has been given to payment terms which could result in lower annual cash outlays by members than the outlays for the Bank's initial paid-in shares, although the payment period would be extended.

In this regard, it is proposed that payment for the paid-in shares be made in eight equal annual instalments.

It is further proposed that 60 % of each instalment payment may be made in promissory notes or other obligations of members to be drawn down by the Bank in accordance with the principles set forth in Article 6 (2) of the Agreement.

Subject to Article 6 (2), the Board of Directors proposes that each promissory note or other obligation issued by a member in connection with an instalment payment be encashed in five equal tranches: the first such tranche is to be encashed in the year in which the note or other obligation is issued, and the remaining tranches in each of the subsequent years.

Payments for the paid-in shares subscribed to by members under the proposed capital increase would be generally governed by the basic principles set forth in Article 6 and in the related explanatory notes in the accompanying chairman's report. Consistent with the Agreement, all payment obligations will be required to be settled either in ecu, in United States dollars or in Japanese yen on the basis of a fixed exchange rate as specified in the attached draft resolution of the Board of Governors. It is proposed that the exchange rate be fixed on the basis of the average exchange rate of the relevant currency in terms of the ecu for the period from 16 October 1995 to 15 April 1996 inclusive.

Summary framework

The framework of the proposed capital increase is set forth in the draft resolution of the Board of Governors which is attached and recommended for adoption. A summary of the key elements of the proposed increase is presented below.

The Bank's capital stock will continue to be reviewed at least every five years as required by Article 5 (3) of the Agreement.

Authorized capital:

to increase from ECU 10 billion to ECU 20 billion, as described

Paid-in shares:

22,5 % of the proposed increase

Deposit of instruments of subscription:

to occur by 15 April 1997

Payment for paid-in shares:

in eight equal annual instalments, the first of which is to be paid by 15 April 1998

Promissory notes and encashment:

60 % of each instalment payment may be made in promissory notes or other obligations, to be encashed in five equal annual tranches as described

Currency of payment for paid-in shares:

payment obligations shall be settled in ecu or in United States dollars or Japanese yen on the basis of a fixed exchange rate as described

(1) OJ No L 372, 31. 12. 1990, p. 1.

(2) Should the ecu, as determined by Council Regulation (EC) No 3320/94 of 22 December 1994, be converted to the Euro, the Bank would follow the decision by the European Council of 15 to 16 December 1995; conversion would be on 1:1 basis on the date the ecu ceased to exist, and the ecu obligations of shareholders would become Euro obligations.

(3) The calculation of the number of additional shares to which each member would be entitled to subscribe under the proposed capital increase is based on the number of actual shares subscribed immediately prior to the proposed capital increase (including the shares earmarked for countries of former Yugoslavia pursuant to Board of Governors' resolution No 30).