No C 139/42 Official Journal of the European Communities 5. 6. 89 
APPENDIX 
to the Opinion of the Economic and Social Committee 
(fourth paragraph of Article 43 of the Rules of Procedure) 
The following amendments were rejected in the course of the plenary session discussions: 
Point 4.4 
Add new sentence: 
'Serious consideration should now be given to the prompt implementation of effective supply management 
schemes, which for cereals could take the form of a compulsory set-aside scheme.' 
Reasons 
The present policy of price pressure augmented by a voluntary set-aside scheme can create a better market 
balance only in the very long term. Meanwhile, the effects of dramatic fallbacks in income will lead to 
unacceptable political, social and environmental problems. Effective control of production could also pave 
the way for more orderly international trade. 
Voting 
For: 36, against: 44, abstentions: 11. 
Citrus fruit 
Amend the first paragraph to read: 
'The Committee considers that the proposed 7,5% reduction for oranges and mandarines is unacceptable, 
and at the same time demands that all quantities ...' 
Voting 
For: 23, against: 34, abstentions: 21. 
Opinion on the proposal for a Council Directive amending Directive 78/660/EEC on annual 
accounts and Directive 83/349/EEC on consolidated accounts with respect to the exemptions 
for small and medium-sized companies and to the drawing up and publication of accounts 
in ECU (!) 
(89/C 139/12) 
On 4 November 1988 the Council decided to counsult the Economic and Social Committee, 
under Article 54 of the Treaty establishing the European Economic Community, on the 
abovementioned proposal. 
The Section for Industry, Commerce, Crafts and Services, which was responsible for preraring 
the Committee's work on the subject, adopted its Opinion on 1 March 1989. The rapporteur 
was Mr Speirs. 
At its 264th plenary session (meeting of 31 March 1989), the Economic and Social Committee 
adopted the following Opinion by 50 votes in favour, 11 against and one abstention (vote 
recorded). 
The Committee, subject to the specific comments which 
follow, can accept the proposed modification of the 
(!) OJ No C 287, 11. 11. 1988, p. 5. seventh Directive. Whilst totally subscribing to the 
Commission's concept of attempting to reduce adminis­
trative burdens hw small and medium-sized enterprises 
(SME), it nevertheless finds the proposed modification 
5. 6. 89 Official Journal of the European Communities No C 139/43 
of the fourth company law Directive, especially 
Articles 4 and 11, totally unacceptable in its present 
form and calls upon the Commission to undertake a 
substantial revision for the following reasons. 
1. General comments 
1.1. Community harmonization of company law 
should be seen in the context of the freedom of estab­
lishment rules. The object is to ensure that firms from 
different Member States—in particular when operating 
outside their home country—provide both third parties 
and shareholders with equivalent safeguards. Com­
munity legislation thus on the one hand prevents distor­
tions of competition between firms from different Mem­
ber States and on the other prevents the protection of 
third parties and shareholders from impeding freedom 
of establishment or freedom to provide services. 
1.2. These ideas underlie the fourth company law 
Directive whose recitals are very explicit in this regard: 
'Whereas the coordination of national provisions 
concerning the presentation and content of annual 
accounts ... and their publication in respect of cer­
tain companies with limited liability is of special 
importance for the protection of members and third 
parties.' (First recital); 
'Whereas simultaneous coordination is necessary in 
these fields for these forms of company because, on 
the one hand, these companies' activities frequently 
extend beyond the frontiers of their national terri­
tories and, on the other, they offer no safeguards 
to third parties beyond the amounts of their net 
assets.' (Second recital); 
'Whereas it is necessary, moreover, to establish in 
the Community minimum equivalent legal require­
ments as regards the extent of the financial infor­
mation that should be made available to the public 
by companies that are in competition with one 
another.' (Third recital). 
1.3. The fourth company law Directive, though 
adopted in 1978 and modified in 1984, is in its very 
first year of its practical implementation in several 
Member States of the Community. In fact it has not 
yet been implemented in three Member States. Thus 
the present proposal which amounts to a change of 
certain of the basic principles of the fourth Directive, 
is introduced before the Directive has even been put to 
the test of time and practicability. Of even greater 
significance is the fact that the proposed exemptions 
which currently can be granted voluntarily by Member 
States but would in terms of the proposed Directive become obligatory have only been applied, in total, by 
three Member States. Such a situation calls into ques­
tion the Commission's claim that there is widespread 
demand from all sectors of the Community for the 
change now proposed. 
1.3.1. The Committee regrets the fact that there 
appears to be a major change of attitude towards third 
party rights within the Commission which in the 
opinion of the Committee threatens to undermine confi­
dence in the Community institutions and the credibility 
of Community law and the policies pursued by the 
Community. 
1.3.2. The current Commission proposal is a major 
departure from the view generally held today of the 
role of annual accounts, the significance of their publi­
cation, the protection of members and third parties 
and the social and economic importance of small and 
medium-sized companies. 
It must also be borne in mind that, especially in the light 
of the revised thresholds, the effect of the Commission's 
proposals will be substantial both in terms of the num­
ber of companies involved and their size. 
1.4. The Commission bases its proposed modifi­
cation on the following main reasons: reduction of 
administrative burden for SME is called for, optionality 
of certain exemptions is made compulsory in view of 
the widely varying use of the possibilities of exemptions 
causing distortions of competition—in short more har­
monization and simplification is called for—and small 
closely-held companies are exempted from most Com­
munity rules because they are unlikely to engage in 
intracommunity trade. 
1.5. The Committee finds it difficult to accept the 
Commission's arguments. The present proposal is not 
beneficial to SME. SME need the discipline of manage­
ment account and independent official auditing. Fur­
thermore, the ready availability of meaningful financial 
information on firms is clearly a precondition for SME 
obtaining finance to expand their activities. The publi­
cation and filing of accounts have not hitherto been 
regarded as burdens on companies in those Member 
States where this has been the norm but rather as the 
fulfilment of a natural obligation which companies have 
towards those with whom they have dealings. On the 
other hand, the procedure of companies having to make 
arrangements for dealing with people who wish to 
No C 139/44 Official Journal of the European Communities 5. 6. 89 
exercise the right to inspect accounts could prove more 
burdensome than the existing arrangements. Therefore 
the Committee is in favour of maintaining the system 
of registration. 
1.5.1. The Committee regards the Commission's 
proposal as a derogation from the paramount import­
ance of the principle of the fourth Directive concerning 
the protection of third parties. Thus as far as creditors 
are concerned the proposals could raise serious prob­
lems in such respects as valuation of assets and liabilities 
which, if left to managers, would in the Committee's 
opinion be left wide open to varying interpretations. 
The fact that so many factors in the field of accounting 
are to be left to the companies themselves to determine 
surely discredits the Commission's argument that the 
proposals are necessary for the purpose of harmoniz­
ation. 
1.6. The Commission's argument that the proposal 
is necessary as a means of achieving greater harmoniz­
ation of Community legislation is further eroded by the 
fact that Member States may increase or reduce by 
50 % the size criteria used for defining small companies. 
1.6.1. Thus, in Article 11(1) the total balance sheet 
threshold can range between 775 000 ECU and 
2 325 000 ECU, and the net turnover threshold between 
1 600 000 ECU and 4 800 000 ECU. The total balance 
sheet figure which appears in Article 27 can go from 
6 200 000 up to 9 300 000 ECU and the turnover figure 
from 12 800 000 up to 19 200 000 ECU! 
1.6.2. There is therefore a genuine danger that 
companies of the same size will be classified as small 
in one Member State and medium-sized in others, 
resulting in unequal legal obligations and publication 
requirements and thus unequal competition. This is 
already the case in some Member States. 
1.6.3. The Commission seek to justify their pro­
posals by stating that there is widespread demand for 
them and that the exempted areas are relatively unim­
portant or involve income and expenditure which is 
not substantial. The Committee questions how wide a 
cross-section of opinion involving how many interest 
groups was sought before deciding to proceed. Further­
more the Committee would point out that the fourth 
Directive expressly allows certain items which are not 
material not to be disclosed [see for example the last 
sentence of Article 18, the first sentence of Article 29(2) 
and the first sentence of Article 40(2)]. The validity of 
the Commission's argument in this respect is thus again 
open to question. 
1.7. As far as the complete exemption of certain 
small, closely held companies from application of the fourth Directive is concerned, this again seems not to 
accord with the principles set forth in the fourth Direc­
tive nor with the objectives which the Commission are 
seeking to achieve. 
1.7.1. This stipulation applies to companies fulfilling 
the size criteria outlined in Article 11 of the Directive 
and which are closely held in the sense that they do not 
belong to a group, their shares are not freely transfer­
able and they are managed by their shareholders. Thus, 
a large number of companies are to be excluded from 
the process of harmonization on the grounds that they 
are unlikely to participate in intra-Community trade. 
The Committee is opposed to this proposal on two 
accounts. Firstly, in the Committee's opinion, it is inac­
curate to state as does the Commission, that an exemp­
tion for such companies is justified 'from the point of 
view of the internal market programme as firms of this 
type are unlikely to engage in intra-Community trade' 
(p. 5). Secondly and more importantly this stipulation 
is in complete contrast to the line followed to date by 
the Commission, namely that all EEC companies should 
be covered by the harmonization of company law, 
whether or not they engage in cross-border activities. 
Adoption of this proposal would mean that the Com­
munity laws governing the drawing up and publication 
of annual accounts would cease to apply to the majority 
of companies. 
1.7.2. The draft Directive goes even further than this, 
however, in prohibiting the continued application to 
these companies of national laws on the drawing up 
and publication of annual accounts. 
1.8. The Directives in question currently provide a 
number of exemptions and derogations for small 
companies referred to in Article 11 of the Directive. 
These exemptions are however optional, in that the 
Member States are at liberty to decide whether or not 
to enact them in national law. Thus, a number of 
Member States have not availed themselves of the 
option provided by the fourth Directive to dispense 
small companies from the need to publish a profit and 
loss account, in view of the importance they attach to 
this document. 
1.8.1. Finally the Committee would make it clear 
that it regards SME as a highly important sector within 
the European Community providing employment for 
many of its citizens. On many occasions Opinions have 
been adopted calling for steps to be taken to support 
and encourage SME. These Opinions are endorsed by 
the Committee but the current proposal in its present 
form is considered neither to be in the interests of the 
SME themselves nor in the interests of the other socio-
5. 6. 89 Official Journal of the European Communities No C 139/45 
economic interests which the Committee seeks to rep­
resent. The Committee therefore calls upon the Com­
mission to formulate new proposals which take the 
above comments into account. 
2. Specific comments 
Notwithstanding its wish to see the Commission's pro­
posal substantially modified, the Committee wishes to 
make the following specific comments. 
2.1. Article 1 
This Article ought to be reviewed. 1(b) ought to be 
extended so as to cover those who are close relatives 
of persons involved in the management or adminis­
tration but are not themselves so involved. It is also 
pointed out that there is a possibility of abuse in that 
nominee shareholdings could be used to satisfy this 
condition. Abuse could be avoided if reference were 
made to the beneficial owners of the company. Finally 
the words 'proper accounts' are vague and lacking in 
precision and should not be used in a legal instrument. 
2.2. Article 2 
This Article (together with Article 3) is the logical 
extension of making the exemptions provided for by 
the fourth Directive for small companies mandatory. 
For the reasons stated above the Committee therefore 
cannot accept this proposal in its present form. But 
should the Directive be adopted, the wording of the 
Article must in any case be revised in line with the 
explanatory memorandum since it is manifestly absurd 
for example to prevent companies who for commercial 
reasons wish to do so from publishing more information 
than stipulated. 
2.3. Article 4 
The Committee finds it difficult to see how this Article 
is in the best interest of small businesses. It finds, 
as already stated, that the possibility of increases or 
decreases by approximately up to 50 % flies in the face 
of the Commission's own wish to harmonize. It notes 
that the increase in threshold levels goes substantially 
beyond the approximately 20% warranted by purely 
mathematical adaptations to inflation. Further thought 
must be given to the wide disparity between the upper 
and lower limits of the threshold in view of the possi­bility that this could distort competition and involve 
firms that would not normally be considered small or 
merit special treatment. 
2.4. Article 5 
The same arguments advanced in relation to Article 4 
apply to this Article. 
2.5. Article 7 
The Committee agrees with the Commission that Mem­
ber States may waive the requirement to indicate the 
amount of emoluments for one-person companies. It 
feels however that in this same context of one-person 
companies there is a case for differentiating between 
emoluments and advances and credits which in its 
opinion should be disclosed. 
2.6. Article 8 
Much of the information covered by this Article must 
be obtained by management for their own internal 
purposes. The only relevant question, therefore, is 
should that information be disclosed? If it is available 
and disclosure is in the public interest then it should be 
disclosed. Disclosure should not be regarded as punitive 
and the Article should be reviewed by the Commission 
on that basis. In its present form the Article is quite 
unacceptable. 
2.7. Article 11 
It must be assumed that small companies disclose such 
information as is required by law to be disclosed. That 
being so it would appear to be less costly and more 
convenient both for the companies themselves and for 
members of the public having a legitimate interest if 
accounting documents were to continue to be kept for 
inspection at a register. Furthermore it is not clear, if 
inspection at the registered office of the company is to 
be maintained, how a member of the public can pursue 
the matter if his right to inspect is denied. 
The most fundamental aspect of this Article concerns 
the publication of abridged balance sheets, abridged 
notes on the accounts and the dispensation from publi­
cation of a profit and loss account. The whole Article 
should be reviewed at the same time as Article 8 
reviewed. 
2.8. Articles 13 and 14 
Many Member States do not allow companies to keep 
their accounts in ECU. The present proposal makes this 
possible. The Committee is in favour of this. But the 
text needs to be redrafted to make it clear that the 
No C 139/46 Official Journal of the European Communities 5. 6. 89 
requirement to indicate the exchange rate prevailing on accounts have not been kept in ECU but are converted 
the balance sheet date only apply to the cases where into ECU. 
Done at Brussels, 31 March 1989. 
The Chairman 
of the Economic and Social Committee 
Alberto MASPRONE 
APPENDIX 
to the Opinion of the Economic and Social Committee 
The following members, present or represented, voted in favour of the Opinion: 
Mr/Mrs/Miss: Arets, Aspinall, Ataide, Bento Goncalves, Beretta, Boddy, Campbell, Cavazzuti, Ceballo 
Herrero, Ceyrac, Gavel, Collas, Cortois, Coyle, van Dam, Delhomenie, Etty, Eulen, Forgas, Gomez Martinez, 
Green, Hancock, Houthuys, Jakobsen, Kaaris, Kenna, Laka Martin, Liverani, Moreland, Orsi, Pardon, 
Pearson, Perrin-Pelletier, Poeton, Proumens, Roseingrave, Schade-Poulsen, Schmitz, Schnieders, Schnitker, 
Smith A., Speirs, Staedelin, Straufi, Telles, Tukker, Vallejo Calderon, Vanden Broucke, Velasco Mancebo, 
Yverneau. 
The following members, present or represented, voted against the Opinion: 
Mr/Mrs/Miss: Berger, Boisseree, Bos, Kelly, Low, Lustenhouwer, Margot, Marvier, Muller, Petersen, Rea. 
The following member, present or represented, abstained: 
Mr Mayayo Bello.