AMENDED 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 ECUS
Date: 1989-11-29
Institutions: European Commission
Subjects: company law, consolidated account, management, publication of accounts, small and medium-sized enterprises

COMMISSION  OF  THE  EUROPEAN  COMMUNITIES 

COM  (89)  561  final  - SYN 158 

Brussels,29  November  1989 

Amended proposal  for a 

COUNCIL  DIRECTIVE 

amending Directive 78/660/EBC on anmvil accounts and Directive 83/349/EBC 
on consolidated accounts with respect to the exemptions 
for small and medium-sized companies and to the 
drawing up and publication of accounts in ecus 

(presented by the Commission pursuant  to Article 149 (3) 

of the EEC Treaty) 

-e^fiïf 

I.  T?yp1arwt.n-py  iremrvraTYfrim 

1.  This proposal for a Directive based on Article 54 of the Treaty was 
initially presented to the Council on 24 October I960.1 

2.  The Economic and Social Committee and the European Parliament delivered 
their Opinions on 31 March 19892 and 25 Hay 19893 respectively. 

3.  While the Economio and Social Committee asked the Gcranlssion to 
^TTr^^rtjiirA a substantial revision of the proposed amendments to the 
Fourth Directive, Parliament largely approved the proposal for a Directive 
subject to a few modifications.  This amended proposal coincides for the 
most part with Parliament's Opinion, bat on one specific point it draws on 
the Opinion of the Economie and Social Committee.  The amendments concern 
the following points: 

-  in Article 1, with regard to the definition of small closely held 

companies, it 1B stated, in line with Parliament's Opinion, that the 
withholding of consent for a transfer of shares does not affect either 
the preferential purchase right of the company's shareholders or 
members, or the right of the person requesting the transfer to have his 
shares purchased by the company; 

-  in Article 2, in accordance with the Opinion of the Economio and Social 
Committee, the wording is amended so as to enable small companies to 
publish more information than they are required to do by the 

Fourth Directive; 

-  in Articles 4 and 5, in conformity with the Opinion of Parliament, the 

measure of flexibility Member States are allowed in fixing the 
thresholds for small and medium-sized companies is reduced from 50% to 
25%. 

1  OT No C 287, 11.11.1988, p. 5. 
2  ESC 437/89, 31.3.1989. 
3  EP 133.158, 25.5.1989. 

- 3 -

4.  Parliament's proposal that in Article 1(2) "penalties" be replaced by 
"measures" has been rejected so as not to deviate from the terminology used 
in the other company law Directives. 

The Commission has likewise decided not to adopt the wording suggested by 
Parliament for Article 12; without altering the provision's meaning, it 
would have necessitated the amendment of other articles of a g-tm-na-T» legal 
nature. 

Lastly, Parliament declared itself in favour of simply deleting Article 7 
of the original proposal.  The purpose of that provision is to make it 
possible, in the interests of privacy, for companies with single-member 
boards not to provide (fetalis of the director's remuneration, or loans and 
advances granted to him, in the notes on the accounts.  To reflect, at 
least in part, Parliament's Opinion, the amended proposal restricts the 
scope of the exemption to the director's remuneration. 

- 4 -

II. 

Proposal for a 
COUNCIL DIBEGUVE 
amending Directive 78/660/EBC 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 preparation and publication of 
accounts in ecus 

Amended proposal for a 

OTNC'IL DIRECTIVE 
amending Directive 78/660/EBC on 
annual accounts and 
Directive 83/349/EBC on consolidated 
accounts with respect to the 
exemptions for small and 
medium-sized companies and to the 
drawing up and publication of 
accounts in ecus 

THE COONCIL OF THE EUROPEAN 

COMMUNITIES 

unchanged 

THE COUNCIL OF THE EUROPEAN 
COMMUNITIES, 

Having regard to the Treaty 
establishing 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, 

- 5 -

Whereas national provisions 
concerning the presentation and 
content of annual accounts and annual 
reports of public and private limited 
companies, concerning the valuation 
methods used therein and concerning 
the publication of such accounts and 
reports have been harmonized by 
Council Directive 76/660/EEC1, as 
last amended by the Act of Accession 
of Spain and Portugal; 

Whereas the administrative burdens on 
small and medium-sized companies 
should be reduced in accordance with 
the Council's resolution of 
3 November 19862 and with the 
Council's resolution of 30 June 1988 
on the improvement of the Easiness 
environment and the promotion of the 
development of enterprises, in 
particular SMEs, in the Community3, 
which calls more especially for a 
substantial alleviation of the 
obligations arising from 
Directive 78/660/EBC; 

1  Otf No L 222, 14.8.1978, p. 11. 
2  OJ No C 287, 14.11.1986, p. 1. 
3  OJ No C 197, 27.7.1988, p. 6. 

Whereas Directive 78/660/EEC allows 
Member States to grant exemptions for 
certain companies of minor economic 
and social importance; whereas 
Member States have made widely 
varying use of this possibility; 
whereas this variation in 
requirements may cause distortions of 
competition between small companies 
in different Member States, depending 
on whether or not the exemptions are 
available there, and undermines the 
objective of ensuring the 
comparability and equivalence of the 
information given in company 
accounts; 

Whereas, in order to simplify and 
harmonize the accounting obligations 
for small companies, the exemptions 
provided for in Directive 78/660/EEC 
in favour of small companies and 
relating to the drawing up, auditing 
and publication of accounts should be 
made mandatory; 

Whereas it is desirable for this 
purpose that some small closely held 
companies should be completely exempt 
from the rules prescribed by 
Directive 78/660/EEC, subject to 
appropriate safeguards for the 
interests of shareholders and third 
parties; whereas an exemption for 
such conpanies is justified fro» tte 
point of view of the single European 
market because they are unlikely to 

I 
\ 
£ 

- 7 

engage in intra-Ctannnunity trade; 

Whereas a certain flexibility in the 

definition of small and medium-sized 

companies is justified by a different 

economic environment in 

Member States; 

Whereas provision should be made for 

Whereas provision should be made for 

exempting companies whose 

exempting  companies whose adminis-

adininistrative or management body 

trative or management body consists 

consists of only one person from the 

of only one person from the require-

requirement of including details of 

ment of including details of the 

the director's remuneration and any 

director's remuneration 

advances or credits granted to him in 

granted to him in the notes on the 

the notes on the accounts; 

accounts; 

Whereas it is also necessary to 

simplify the requirements imposed on 

small companies for drawing up and 

publishing notes on the accounts; 

whereas such companies should be 

exempt from the obligation to supply 

certain items of information that can 

be regarded as less important for the 

smaller company; whereas for the same 

reason such companies should be 

exempt from the requirement to 

present an annual report, provided 

that certain important items of 

information normally given in the 

report are supplied in the notes on 

the accounts; 

8 -

Whereas small and medium-sized 
companies should be allowed to keep 
the accounting documents available to 
the public at the registered office 
of the company without disregarding 
the basic idea that these documents 
should be available to the public 
without restriction; 

Whereas it is important to promote 
European monetary integration by 
allowing companies to draw up and 
publish their accounts in ecus; and 
whereas Council Directives 78/660/EEC 
and 83/349/EBC1, as amended by the 
Act of Accession of Spain and 
Portugal, should be clarified in this 
respect so as to require companies 
availing themselves of this 
possibility to state the method they 
have used for conversion into ecus in 
the notes on the accounts, 

HAS ADOPTED THIS DIRECTIVE: 

1  OJ No L 193, 18.7.1983, p.l 

- 9 -

Section 1: 

unchanged 

Exemptions for small and medium-sized 

companies 

Article 1 

Article 1 

The following Article is inserted in 

Directive 78/660/EBC: 

"Article la 

1.  This Directive shall not apply to 

companies falling within Article 11 

where the following additional 

conditions are fulfilled: 

(a)  the company is not affiliated 

unchanged 

with other undertakings within the 

meaning of Article 41 of 

Directive 83/349/EEC and is not 

linked to another undertaking by 

virtue of a participating interest; 

(b)  the shareholders or members of 

unchanged 

the company are the same persons as 

the members of its administrative or 

management body and are natural 

persons; 

(c)  the shares of the company are 

(c)  the shares of the company are 

registered and under its statutes or  registered and under its statutes or 

instrument of incorporation may not 

instrument of incorporation may not 

be transferred without the company's  be transferred without the company's 

consent; 

consent and always provided that the 

- 10 -

shareholders or members of the 
oompajiy havp a preferential, right Of 
purchase and that, should consent be 
withheld, the person requesting the 
transfer has a right to have his 
shares purchased by the company: 

(d)  the exemption is disclosed in 
accordance with Article 3 of 
Directive 68/151/EEC. 

unchanged 

2.  The Member States shall provide 
appropriate penalties for failure by 
such companies to keep proper 
accounts. 

unchanged 

unchanged 

3.  When Member States require such 
companies to present their annual 
accounts to the shareholders or 
members of the company using a 
layout, such layout may not go beyond 
that which is prescribed by this 
Directive for companies falling 
within Article 11." 

Article 2 

Article 8 

Article 2(6) of Directive 78/660/EEC 
is replaced by the following: 

unchanged 

"6.  Except in relation to companies 
falling within Article 11, the 
Member States may authorize or 
require the disclosure in the annual 
accounts of other information as well 
as that which must be disclosed in 
accordance with this Directive. " 

"6.  The Member States may authorize 
or require the disclosure in the 
annual accounts of other information 
as well as that which must be 
disclosed in accordance with this 
Directive.  However, thft PTfifi1M'MtY 
of requiring *t\" Hj«n1 narra 

- 11 -

nf nthgr infnrmatlcm  in thg annna.1 

accounts sha.11 not apply to 

(Companies fa.11 ^^g within 
Article 11." 

Article 5 

Article g 

The last sentence of Article 4(1) of 
Directive 78/660/EEC is replaced by 
the following: 

unchanged 

"Except in relation to companies 
falling within Article 11, such 
subdivision or new items may be 
required by the Member States. " 

•t^K-jHBUKJMBàlii^^HBlL 

Article 4 

Article 11 of Directive 78/660/EBC 
is replaced by the following: 

unchanged 

'Article 11 

1.  Companies which on their balance 
sheet dates do not exceed the limits 
of two of the following three 
criteria: 

- balance sheet total: EOCJ 1 550 000, 
ECU 3 200 000, 
- net turnover: 
- average number of employees during 
the financial year: 
may draw up abridged balance sheets 
showing only those items preceded by 
letters and Roman numerals in 
Articles 9 and 10, disclosing 

50 

- 12 -

separately the information required 
in brackets in D(II) under 'Assets' 
and C under  'T.iahll 11 ties' in 
Article 9 and in D(II) in Article 10, 
but in total for each. 

Article 15(3)(a) and (4) shall not 

apply to abridged balance sheets. 

2.  However, Member States may 
simultaneously and in like  m 
proportions increase or decrease by 
up to 50% the thresholds ooncerning 
the balance sheet total and the net 
turnover referred to in paragraph 1. 
As to the average number of employees 
referred to in paragraph 1, 
Member States may adopt a lower 
figure with a minimum number of 25. " 

2.  However, Member States may 
simultaneously and in like 
proportions increase or decrease by 
up to 25% the thresholds concerning 
the balance sheet total and the net 
turnover referred to in paragraph 1. 
As to the average number of 
employees referred to in 
paragraph 1, Member States may adopt 
a lower figure with a minimum number 
of 25." 

Article 5 

Article g 

Article 27 of Directive 78/660/EEC is  unchanged 
replaced by the following: 

"Article 27 

1.  Member States shall permit 
companies falling within Article 11, 
and may permit other companies which 
on their balance sheet dates do not 
exceed the limits of two of the 
following three criteria: 

- 13 

- balance sheet total: ECU 6 200 000, 
ECU 12 800 000, 
- net turnover: 

- average number of employees during 

the financial year: 

250 

to adopt layouts different from those 
prescribed in Articles 23 to 26 
within the following limits: 

(a) in Article 23: l to 5 inclusive 
may be combined under one item called 
'Gross profit or loss' ; 
(b) in Article 24: A(l), A(2) and 
B(l) to B(4) inclusive may be 
combined under one item called 'Gross 
profit or loss'; 
(c) in Article 25: (l), (2), (3) and 
(6) may be combined under one item 
called  'Gross profit or loss' ; 
(d) in Article 26: A(l), B(l) and 
B(2) may be combined under one item 
called  'Gross profit or loss'. 

Article 12 shall apply. 

2.  However, for the application of 
this Directive, Member States may 
simultaneously and in like 
proportions increase by up to 50% the 
thresholds concerning the balance 
sheet total and the net turnover 
referred to in paragraph 1. " 

2.  However, for the application of 
this Directive, Member States may 
simultaneously and in like 
proportions increase by up to 25& 
the thresholds concerning the 
balance sheet total and the net 
turnover referred to in 
paragraph 1." 

- 14 -

Article 6 

Article 6 

Article 30 of Directive 78/660/EEC 
is replaced by the following: 

unchanged 

"Article 3Q 

Member States shall permit companies 
falling within Article 11, and may 
permit other companies, to show taxes 
on the profit or loss on ordinary 
activities and taxes on the 
extraordinary profit or loss in tot$ 
as one item in the profit and loss 
account before  'Other taxes not shown 
under the above items'.  In that 
case,  'profit or loss on ordinary 
activities after taxation' shall be 
omitted from the layouts prescribed 
in Articles 23 to 26. 

Where this waiver is applied, 
companies other than those falling 
within Article 11 must disclose in 
the notes on the accounts the extent 
to which the taxes on the profit or 
loss affect the profit or loss on 
ordinary activities and the 
'Extraordinary profit or loss"." 

- 15 -

Article 7 

Article 7 

The following paragraph is added to 
Article 43 of Directive 78/660/EEC: 

unchanged 

"3.  Member States may waive the 
requirement to provide the 
information referred to in 
paragraph 1(12) and (13) for 
companies whose administrative or 
management body consists of only one 
person." 

"3.  Member States may waive the 
requirement to provide the 
information referred to in 
paragraph  l£l2l  for companies whose 
administrative or management body 
consists of only one person." 

Article 8 

Article S 

Article 44 of Directive 78/660/EBC is  unchanged 
replaced by the following: 

unchanged 

"Article 44 
1.  Companies falling within 
Article 11 may draw up abridged notes 
on their accounts without the 
information referred to in 
Article 43(1) (5) to (13).  However, 
the notes must disclose the 
information referred to in 
Article 43(1)(6)  isx total for all the 
items oonofsmfld * 

- 16 -

unchanged 

2.  The companies referred to in 
paragraph 1 shall also be exempt from 
the obligation to disclose in the 
notes on the accounts the information 
referred to in Article 15(3)(a) and 
(4), Articles 18, 21 and 29(2), 
Article 34(2),  Article 40(2) , and 
the second subparagraph of 
Article 42. 

3.  Article 12 shall apply." 

unchanged 

Article 9 

Article 9 

The introductory phrase of 
Article 45(1) of Directive 78/660/EBC 
is replaced by'the following: 

unchanged 

"1.  Member States shall permit 
companies falling within Article 11 
and may permit other companies to 
treat the disclosures prescribed in 
Article 43(1)(2) in such a way as:" 

Article 1Q 

Article 10 

The following paragraph is added to 
Article 46 of Directive 78/660/EBC: 

unchanged 

"3.  Companies falling within 
Article 11 shall not be required to 
prepare an annual report, provided 
that the information referred to in 
paragraph 2(a) and (d) is given in 
the notes on the accounts." 

- 17 -

Article 11 

Article 11 

Article 47 of Directive 78/660/EEC 
is amended as follows: 

unchanged 

1.  Paragraph 2 is replaced by the 

following: 

"2.  Notwithstanding paragraph 1, 

companies falling within Article 11 

may publish: 

(a)  abridged balance sheets in 
accordance with Article 11, 
(b)  abridged notes on the accounts 
in accordance with Article 44; 
Article 12 shall  apply. 
Such companies shall not be required 
to publish their profit and loss 
account." 

2.  The following paragraph 4 is 
added: 
'4.  Notwithstanding the first 
subparagraph of paragraph 1, 
Member States shall permit companies 
falling within Article 11 and may 
permit companies falling within 
Article 27 to make the accounting 
documents which must be published in 
accordance with the present Directive 
available to the public at the 
company's registered office.  It must 
be possible for anyone to obtain a 
copy of these documents upon request, 
InohTdlng by mail.  The price of such 
a copy must not exceed its 
administrative cost. 

- 18 -

Member States shall provide that the 
place where the public can obtain 
these documents is published by means 
of a reference, in accordance with 
Article 3(4) of Directive 68/151/EEC. 
Member States shall also provide 
appropriate sanctions for failure by 
companies to publish these documents 
in accordance with the present 
paragraph. 

This paragraph shall not apply to 
companies having made a public issue 
of securities." 

Article 12 

Article 18 

Article 51(2) of Directive 78/60/EBC 
is replaced by the following: 

unchanged 

"2.  Companies falling within 
Article 11 shall be exempt from the 
requirement referred to in 
paragraph 1. 
Article 12 shall apply." 

- 19 -

unchanged 

Section 2: 
Drawing up and publication of 
accounts in ecus 

Article 13 

unchanged 

The following section 11a is inserted 
in Directive 78/660/EBC: 

Article lg 

"Section 11a 
Drawing up and publication of 
accounts in ecus 
Article 51a 

Companies may draw up and publish 
their accounts in ecus at the 
exchange rate prevailing on the 
balance sheet date.  The method used 
for conversion into ecus shall be 
described in the notes on the 
accounts." 

Article 14 

unchanged 

The following section 5a is inserted 
in Directive 83/349/EEC: 

Article 14 

"Section 5a 
Drawing up and pnfrMmTlOD, <?f 
nnngnHHAted accounts in ecus 
Article 58a 

Consolidated accounts may be drawn up 
and published in ecus at the exchange 
rate prevailing on the balance sheet 
date.  The method used for conversion 
into ecus shall be described in the 
notes on the consolidated accounts." 

Section 3: 

Final  positions 

-  20 -

unchanged 

Article  15 

Article  15 

1.  The  Member  States  shall  bring 

into  force  the  laws, regulations  and 

administrative  provisions  necessary 

to  comply  with  this  Directive  by  1 

January  1990.  They  shall  forthwith 

inform  the Commission  thereof. 

2. 

A  Member  State  may  provide  that 

the  provisions  of  this  Directive 

shall  first  apply  to  accounts  for 

financial 

years  beginning  on  1 

January  1992  or  during  the  calendar 

year 1992. 

3. 

The 

Member 

States 

shall 

communicate  to  the  Commission  the 

texts  of  the  main  provisions  of 

national  law which  they  adopt  in the 

field covered by  this Directive. 

4.  The  provisions  adopted  pursuant 

to  the  first  paragraph  shall  make 

express reference  to this Directive. 

Article  16 

Article  16 

This  Directive  Is  addressed  to  the 

Unchanged 

Member  States 

-  2-»-

KSN 0254-1475 

COM(89) 561 final 

DOCUMENTS 

EN 

10 

Catalogue number : CB-CO-89-522-EN-C 

ISBN 92-77-54742-1 

Office for Official Publications of the European Communities 
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