COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(91) 363 f inal - SYN 317 
Brussels, 20 October 1991 
Amended proposal for a 
COUNCIL DIRECTIVE 
AMENDING DIRECTIVE 77/91/EBC CN THE 
K3RMATICH OF PUHLiq LIMITED LIABTT.TIY COMPANIES 
AND THE MAINTENANCE AND ALTERATICN OP THEIR CAPITAL 
(presented t?y the Commission pursuant to Article 149(3) 
of the EEC-Treaty) 
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EXPLANATORY MEMORANDOM 
I. Background 
The Second Council Directive on company law, Directive 77/91/EEC,1 
harmonizes the safeguards required by Member States of companies in respect 
of the formation of public limited liability companies and the maintenance 
and alteration of their capital, with a view to making such safeguards 
equivalent. 
With regard to capital, the Directive deals inter alia with the question of 
the acquisition by a company of its own shares. 
Following its communication of 10 May 19902 on the removal of certain 
obstacles to takeover and other general bids the Commission presented to 
the Council on 8 January of this year a proposal for a Directive amending 
the Second Directive.3 
The purpose of that amendment was to extend the Second Directive's 
arrangements concerning the acquisition of own shares to cover the 
acquisition of a company's shares by its subsidiaries. 
The Economie and Social Committee delivered its opinion on 3 July.4 
Parliament's opinion was delivered on 10 July.5 
The present amended proposal for a Directive, which the Commission has 
adopted on the basis of Article 149(3) of the Treaty, is designed to take 
account of those opinions. 
1 OT L 26, 31.1.1977, p. 1. 
2 SBC(90) 901 final, 10.5.1990. 
3 QJ C 8, 12.1.1991, p. 5; with explanatory memorandum, 0CM(90) 631. 
4 Not yet published. 
5 Not yet published. 
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II. Cororoentary 
Article 24a 
This article provides that a subsidiary company may acquire shares in its 
parent company only under the same conditions as those uner which the 
latter can acquire its own shares. 
For the purposes of this rule, the definition of subsidiary company was 
based on the criteria applied by other Community instruments, namely 
Directive 83/349/EEC on consolidated accounts6 and Directive 88/627/EEC on 
the information to be published when a major holding in a listed company is 
acquired or disposed of.7 
Under Article 24a(2) of the original proposal a company is deemed a 
subsidiary of another company (the parent company) if the latter fulfils 
one of the following conditions vis^a-vis the former: 
(a) it holds a majority of the voting rights; or 
(b) it has the right to appoint or remove a majority of the directors 
of the company, in which it is at the same time a shareholder; or 
(c) it has the right to control alone a majority of the voting rights 
pursuant to an agreement entered into with other shareholders or to 
a provision in the statutes of the former company. 
In the present amended proposal, as in the abovementioned Directives, it is 
made clear that even as regards the third criterion, criterion (c), the 
parent company must be a shareholder in its subsidiary, that is to say it 
must have a participating interest in its capital. 
Moreover, at Pari 1 aroent's request, the definition of subsidiary company has 
been broadened so as to include companies over which the parent company 
exercises indirect control through other subsidiaries. To this end, a new 
subparagraph has been added to Article 24a(2) according to which, in 
calculating the parent company's rights as regards voting, appointment and 
removal, account must also be taken of the rights of any other subsidiary 
company and of those of persons acting in their own name but on behalf of 
the parent company or of any other subsidiary. This new subparagraph 
corresponds to similar provisions in the two Directives referred to above. 
6 OJ L 193, 18.7.1983, p. 1. 
7 OJL348, 17.12.1988, p. 62. 
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In keeping with Parliament's wishes as indicated above, it must also be 
ensured that a company does not use a "sub-subsidiary" (a subsidiary of a 
subsidiary) to circumvent the safeguards provided for in the Second 
Directive in connection with the acquisition of own shares. To that end, a 
new paragraph 3 has been added to Article 24a. By virtue of this new 
paragraph "sub-subsidiaries" are also deemed subsidiaries of the parent. 
ORIGINAL PROPOSAL 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty estahl 1 shing 
the European Economic Community, and In 
particular Article 54 thereof, 
Having regard to the proposal from the 
Commission, 
In cooperation with the European 
Parliament, 
Having regard to the opinion of the 
Economic and Social Committee, 
Whereas in order to maintain the 
subscribed capital and ensure equal 
treatment of shareholders, 
Directive 77/91/EEC1 limits the right 
of a company to acquire its own shares; 
Whereas the restrictions on the 
acquisition of own shares apply not only 
to acquisitions made by the company 
itself but also to those made by a 
person acting in his own name but on the 
company's behalf; 
Whereas a subsidiary company does not 
enjoy true Independence in determining 
its line of action; whereas in order to 
prevent a company from using a 
subsidiary to make such acquisitions 
without regard to the restrictions 
imposed in that respect, the 
arrangements concerning the acquisition 
by a company of its own shares should be 
extended to cover the acquisition of a 
company's shares by a subsidiary, - 5 -
AMENDED PROPOSAL 
THE COUNCIL OF THE EUROPEAN (XMMUNITTES, 
Unchanged 
Having regard to the proposal from the 
Commission, 
In cooperation with the European 
Parliament,1 
Having regard to the opinion of the 
Economic and Social Committee,2 
Unchanged 
Unchanged 
Unchanged 
1 OJ L 26, 31.1.1977. 1 Opinion of 10 July 1991 (not yet 
published). 
2 Opinion of 3 July 1991 (not yet 
published) 
HAS ADOPTED THIS DIRECTIVE: 
Article 1 
The Directive 77/91/EBC of the Council 
is amended as following: a new 
Article 24a is added after Article 24. 
"Article 24a 
1. A subsidiary company may acquire 
shares in its parent company only to the 
extent that the latter may acquire its 
own shares by virtue of provisions 
adopted pursuant to Articles 19 to 24. 
For the purposes of those provisions, 
acquisitions of shares in the parent 
company by its subsidiaries shall be 
deemed to have been made by the parent 
company. 
2. For the purposes of paragraph 1, 
"subsidiary company" means any company 
in which another company (the parent 
company): 
(a) holds a majority of shareholders' or 
members' voting rights; or 
(b) has the right to appoint or remove a 
majority of the members of the 
administrative, management or 
supervisory body and is at the same 
time a shareholder in or member of 
that company; or 
(c) has the right to control alone a 
majority of shareholders' or 
members' voting rights pursuant to 
an agreement entered into with other 
shareholders in or members of that 
Cîompany or to a provision in its 
statutes." - 6 -
Unchanged 
Article 1 
Council Directive 77/91/EBC is amended as 
follows: (rest unchanged) 
"Article 24a 
1. Unchanged 
2. Unchanged 
Unchanged 
Unchanged 
is a shareholder in or member of that 
oompany and controls alone a majority of 
shareholders' or members' voting rights 
pursuant to an agreement entered into 
with other shareholders in or members of 
that company or to a provision in its 
statutes." 
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Article 2 For the purposes of this paragraph, the 
parent company's rights as regards 
voting, appointment and removal shall 
include the rights of any other 
subsidiary company and those of any 
person acting in his own name but on 
behalf of the parent company or of any 
other subsidiary company. 
5. For the purposes of paragraph 1. 
where a subsidiary of the parent company 
Itself has subsidiaries, the latter shall 
also be deemed subsidiaries of the parent 
company. 
Article 2 
1. Member States shall adopt before ... 
the laws, regulations and administrative 
provisions necessary to comply with this 
Directive. They shall forthwith inform 
the Commission thereof. Unchanged 
2. The date of entry into force which Unchanged 
Member States lay down for these 
provisions shall be not later than ... 
3. Member States shall œmmunicate to Unchanged 
the Commission the text of the main 
provisions of national law which they 
adopt in the field covered by this 
Directive. 
4. When Member States adopt the 
provisions, the latter shall contain a 
reference to this Directive or shall be 
accompanied by such a reference at the 
time of their official publication. The 
methods of making such a reference shall 
be laid down by the Member States. 
Article 3 Unchanged 
Article 3 
This Directive is addressed to the 
Member States. Unchanged 

KSN 0254-1475 
COM(91) 363 final 
DOCUMENTS 
EN 08 
Catalogue number : CB-CO-91-423-EN-C 
ISBN 92-77-76031-1 
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