30. 11. 87 Official Journal of the European Communities No C 319/61 
Opinion on the proposal for an Eleventh Council Directive based on Article 54 (3) (g) of the 
Treaty concerning Disclosure Requirements in respect of branches opened in a Member State 
by certain types of companies governed by the law of another State 
(87/C 319/18) 
On 11 August 1986 the Council decided to consult 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 preparing 
the Committee's work on the subject, adopted its Opinion on 6 May 1987, in the light of 
the report by Mr Pardon. 
At its 248th plenary session (meeting of 24 September 1987), the Economic and Social 
Committee unanimously adopted the following Opinion: 
1. Introduction 
1. The purpose of the proposal is twofold: 
a) to make it easier for companies to exercise the 
right of establishment in another Member State by 
opening a branch rather than having to set up a 
subsidiary company; 
b) to protect people who deal, via a branch in one 
Member State, with a company whose head office 
is in another State. 
2. A company wishing to operate in a country other 
than that of its head office can either open a branch or 
set up a subsidiary company. 
2.1. A subsidiary company is an independent com­
pany. It has its own legal personality separate from that 
of the parent company, and is the sole guarantor of its 
commitments to its creditors and to third parties. In 
law, the parent company is not liable for the debts 
incurred by the subsidiary company. 
2.2. A branch is a part of another company and has 
no legal personality of its own. It has neither creditors 
nor debtors. People dealing with it are in fact dealing 
with the parent company. It is the parent company 
which is directly liable for the acts of the branch, and 
which assumes sole and direct responsibility for them. a company is governed by the law of one particular 
country. At a later stage, the Commission should check 
on the danger of the implementation of these rules 
producing conflicting laws. If this were so, the case 
would have to be considered for coordinating Member 
States' legislation in this area. 
2.4. After the proposed Directive on cross-border 
company mergers is adopted, the situation will be as 
follows: the single company created by the merger will 
come under the law of the Member State in which its 
new head office is sited, while the company forming 
part of the merger which was based in another Member 
State beforehand will no longer have a legal personality 
of its own and will become a branch of the new com­
pany. 
2.5. According to the Commission, the only Member 
State to require disclosure of the accounts of branches 
of companies from another Member State is Belgium. 
Furthermore, in Belgium this requirement comes under 
accountancy law rather than company law, and only 
applies to companies which exceed more than one of the 
following three limits: 50 employees (annual average); 
annual turnover of 145 million Belgian franks, exclud­
ing VAT; total balance sheet of 70 million Belgian 
franks, except where the number of employees (annual 
average) exceeds 100. 
3. A single internal market is planned for the Euro­
pean Community. In principle, therefore, it should be 
just as easy to open a business (whatever form it takes) 
in another Member State as it is in the Member State 
where the company is registered. 
2.3. The aim is not the coordination of the rules of 
law in force in each Member State by virtue of which The Committee endorses this principle and approves 
the proposal subject to the comments which follow. 
No C 319/62 Official Journal of the European Communities 30. 11. 87 
2. General comments 
4. A more effective right of establishment calls for a 
reduction in administrative formalities and a solution 
of the problems of branch taxation. The Committee 
urges the Commission to achieve these goals. 
5. The proposal does not seek to amend Member 
States' labour legislation. People working in a branch 
of a company whose head office is in another Member 
State come under the labour legislation of the State in 
which the branch is situated. 
5.1. Accordingly, even after the Directive has been 
adopted, the branch will have to keep and present 
appropriate accountancy statements for the infor­
mation of the workers, as required by the labour legis­
lation of the host country. 
5.2. Similarly, the branch will always have to keep 
and present appropriate accountancy statements for 
the implementation of the tax legislation of the host 
country. 
6. The Committee feels that the protection of people 
who deal with a company in another Member State via 
a branch is of vital importance. Adequate information 
must be guaranteed, about both the parent company 
and the branch. 
7. The Committee notes that the disclosure of infor­
mation on companies is governed in each Member State 
according to uniform Community rules. This involves 
the 1st Directive 68/151/EEC on limited liability com­
panies, the 4th Directive 78/660/EEC on annual 
accounts, the 7th Directive 83/349/EEC on consolidated 
accounts, and the 8th Directive 84/253/EEC on the 
approval of persons performing the statutory audits of 
accounting documents. 
7.1. Under the proposal, Member States must require 
disclosure of certain information (listed in Article 2) in 
the Member State where the branch is situated, accord­
ing to the law of this State and Directive 68/151/ 
EEC. Member States must require disclosure of the 
information in Article 2 (1). Under Article 2 (2) they 
may also require the deposit of a signature; they are 
not allowed to require anything further. 7.2. Effectively, Member States are being instructed 
to require uniform disclosure of the information listed 
in Article 2 (1). In the Committee's view, to this should 
be added information on the declaration of nullity of 
the company by the courts, the winding-up of the 
company, the appointment of liquidators, their respect­
ive powers, and the termination of the liquidation. 
7.3. The Committee considers that it is up to the 
Commission to see that this information is published 
promptly in the Member State where the branch is 
situated. 
8. The proposal requires the disclosure, in the Mem­
ber State where the branch is situated, of the parent 
company's annual accounts and annual report. These 
documents must have been drawn up and audited in 
accordance with the law of the Member State by which 
the company is governed, in compliance with Directives 
78/660/EEC and 84/253/EEC. 
The Committee approves this requirement. 
8.1. Under the proposal, the Member State in which 
the branch is situated may stipulate that the annual 
accounts and annual report be published in its official 
language and that their translation be certified. 
The Committee approves the fact that translation is 
not compulsory, and that Member States are fee to 
decide on this in the light of their own socio-economic 
circumstances. 
9. To prevent formalities being duplicated when sev­
eral branches are opened in a single Member State, or, 
if the Member State prefers, in the same administrative 
district, these branches should be considered as a single 
group, on the understanding that this would not prevent 
the publication, at the level chosen, of the information 
required on each branch. 
10. The proposal does not allow Member States to 
require disclosure of the accounts of a branch set up in 
a Member State. 
10.1. From a legal viewpoint, disclosure of these 
accounts is pointless. The shareholder, like any con­
tracting party, deals only with one legal entity: the 
parent company. The creditor has one single debtor: 
this same company. 
30. 11. 87 Official Journal of the European Communities No C 319/63 
10.2. From the social viewpoint, employees are infor­
med on the position of the branch in which they work 
in accordance with the labour legislation of that coun­
try. In the Committee's view, the proposal would not 
affect this legislation. 
10.2.1. Similarly, the tax authorities will continue to 
receive all the information needed to implement the tax 
legislation of the branch's host country. Lastly, the 
proposal does not prevent Member States from requir­
ing economic information. 
11. The socio-economic influence of a branch may 
be comparable to that of a subsidiary company. To 
take account of the socio-economic characteristics of 
the various Member States, the Commission should, 
pending further coordination, allow Member States to 
require disclosure of the accounts of branches or groups 
of branches which have considerable economic and 
social influence. The Directive would have to set objec­
tive criteria for this. The same requirement should apply 
to branches which are as important as companies whose 
head office is in the Member State concerned. 
3. Specific comments 
12. Article 1 
12.1. Consideration should be given to the case for 
redefining the term 'branch', perhaps in line with the 
definition used in Directive 77/780/EEC on the taking 
up and pursuit of the business of credit institutions. 
12.2. Reference could also be made to the Court of 
Justice's judgement of 22 November 1978 (Case 33/78). 
12.3. Specification is needed that this definition of 
branch is not the same as the tax law concept of 
'permanent establishment'. 
13. Article 3 (2) 
13.1. The Committee endorses the proposed text on 
Done at Brussels, 24 September 1987. condition that the parent undertaking guarantees the 
commitments of the subsidiary. 
14. Article 7 (2) 
14.1. Consistent with its comments on Article 3 (2) 
above, the Committee accepts the publication of the 
consolidated accounts of the parent undertaking of a 
subsidiary with a branch in a given Member State on 
condition that the parent undertaking guarantees the 
commitments of the subsidiary. If this condition is not 
met, Article 7 (2) is unacceptable: the publication of the 
accounts of the parent undertaking is meaningless if the 
undertaking does not provide a legal guarantee of the 
commitments of the subsidiary, and interested third 
parties have no reliable information on the latter's 
solvency. 
14.2. Article 7 (2) should therefore be reworded as 
follows: 
'2. Where the company produces consolidated 
accounts and a consolidated annual report instead 
of annual accounts and an annual report, and if the 
parent undertaking guarantees the commitments of 
its subsidiary, ...' 
15. Mticle 9 
15.1. The Commission must ensure that the laws, 
regulations and administrative provisions adopted by 
the Member States to implement the Directive are 
applied properly and promptly. 
16. Article 11 
16.1. This Article states that Member States need 
not apply the provisions of Articles 3 and 7 to the 
branches of 'banks, other financial institutions and 
insurance companies'. 
16.2. It might be useful to define these three terms, 
perhaps by a reference to existing Directives on these 
types of undertaking. 
The Chairman 
of the Economic and Social Committee 
Alfons MARGOT