Commission report to the Council on Member States' experience in applying the provisions listed in Article 50 of Council Directive 83/349/EEC on consolidated accounts
Date: 1996-03-20
Institutions: European Commission
Subjects: application of EU law, company law, consolidated account, management accounting, opt-out clause

COMMISSION  OF THE  EUROPEAN  COMMUNITIES 

Brussels,  20.03.1996 
COM(96) 94  final 

Commission report to the Council on Member States' experience in applying the 
provisions listed in Article 50 of Council Directive 83/349/EEC on consolidated  accounts 

1. 

Introduction and background 

Article 50  of  the  Seventh  Council  Directive  of  13 June  1993  on  consolidated  accounts 
(83/349/EEC,  OJNoL  193  of  18 July  1983)  requires  the  Commission  to  report  to  the 
Council on Member States' experience of applying the provisions referred  to in that Article. 
The Council is to examine those provisions in the light of the experience acquired, the aims 
of the Directive and the economic and monetary situation at the time and is to amend them 
if necessary.  Austria, Finland and Sweden are not covered by this report because they have 
either  not  yet  transposed  the  provisions  in  question  into  domestic  law  or  have  not  yet 
acquired experience in applying them). 

Article 50 of the Seventh Directive 

" 1. 
Five years  after  the  date  referred  to  in  Article 49(2),  the  Council,  acting  on  a 
proposal  from  the  Commission,  shall  examine  and  if  need  be  revise  Articles  l(l)(d) 
(second  subparagraph),  4(2),  5,  6,  7(1),  12,  43  and  44  in  the  light  of  the  experience 
acquired  in  applying  this  Directive,  the  aims  of  this  Directive  and  the  economic  and 
monetary situation at the time. 

2. 

Paragraph  1  above shall not affect  Article 53(2) of Directive 78/660/EEC." 

The provisions in question are as follows: 

Article  1(1 )(d),  second  subparagraph:  agreement  between  shareholders  regarding 
the transfer of voting rights, which can lead to a consolidation requirement; 

Article 4(2):  exemption  from  the  consolidation  requirement  where  the  parent 
undertaking does not have certain legal forms; 

Article 5:  exemption  of  financial  holding  companies  from  the  consolidation 
requirement; 

Article 6: exemption of small and medium-sized enterprises from the consolidation 
requirement; 

Article 7(1): exemption of intermediate groups from the consolidation requirement; 

Article  12: exemption of horizontal groups from the consolidation  requirement; 

Article 43:  exemption  of  subsidiary  undertakings  from  requirements  arising  from 
the Fourth Directive; 

Article 44:  exemption  of  parent  undertakings  from  requirements  arising  from  the 
Fourth Directive. 

Article 50 provides for the Council to carry out the examination five years after  companies 
first apply the provisions.  According to Article 49(2), the provisions of 

2. 

n 
I 

If 
l 

f I 

J 

financial 

the  Seventh  Directive  are  to  be  applied  for  the  first  time  to  consolidated  accounts  for 
years beginning on  1 January  1990 or during the calendar year  1990.  In fact, the 
provisions  of  the  Seventh  Directive  were  first  applied  in  the  various  Member States  as 
follows: 

- 

- 

Belgium: for the financial year beginning after 31 December  1990; 

Denmark: for the financial year beginning on or after  1 April  1991 ; 

Germany: for thé financial  year beginning after 31 December  1989; 

Greece: for the financial year beginning on or after  1  July  1990; 

Spain: for the financial year beginning on or after 31 December  1991; 

France:  for  the  financial  year  beginning  after  31 December  1985  (companies 
eligible  for  stock-exchange  listing)  or  after  31 December  1989  (companies  not 
eligible for stock-exchange listing); 

Ireland: for the financial year beginning on or after  1 September  1992; 

Italy: for the financial year beginning on or after  1 January  1994; 

Luxembourg: for the financial year beginning on or after  1 January  1990; 

Netherlands: for the financial year beginning on or after  1 January  1990; 

Portugal: for the financial year beginning on or after  1 January  1991 ; 

United Kingdom: for the financial  year beginning on or after 23 December  1989. 

The Commission wrote to the Member States on 4 August  1994 asking them to report to it 
on  their  experience  in  applying  the  provisions  in  question.  At  its  meeting  on  6  and 
for  Accounting  Directives  discussed 
7 December  1994, 
Member States' experience in applying those provisions. 

the  Contact  Committee 

II. 

Detailed description of the provisions of the Seventh Directive in question and 
the outcome of the discussions 

Article l(l)(d), second subparagraph 

According  to  this  provision,  a  parent  undertaking  must  draw  up  consolidated  accounts 
where, on the basis of an agreement  with other  shareholders, it alone controls  a majority  of 
the  voting  rights  in  a  given  subsidiary.  Member  States  are  permitted  to  adopt  more 
detailed  provisions  governing  the  form  and  content  of  such  agreements  (Member  States' 
option). 

3 

Comments 

France  is  the  only  Member State  to  have  made  use  of  this  option.  Such  agreements 
concluded in France may not be directed against the company's interests. 

None  of  the  Member States 
abovementioned provision. 

Articled) 

is  experiencing  problems 

in  connection  with  the 

A consolidation requirement exists in principle where at least one undertaking in a group 
has the  legal  form  of  a company  limited  by  shares.  According  to  the  abovementioned 
provision,  however,  Member States  have  the  option  of  waiving  the  consolidation 
requirement  where  the  parent  undertaking  does  not  have  the  legal  form  of  a  company 
limited by shares. 

Comments 

This option has been used without qualification by Greece, Ireland, Italy, Luxembourg, the 
Netherlands, Portugal and the United Kingdom. 

In  France  the  list  of  undertakings  not  exempt  from  the  consolidation  requirement 
comprises,  in  addition  to  companies  limited  by  shares,  those  with  the  form  of  a 
"société commerciale". 
In  Germany  very  large  enterprises  (turnover  of  at  least 
DM 250 million, balance-sheet total  of at least DM 125 million and workforce  of  at least 
5 000)  are  subject  to  the  consolidation  requirement  irrespective  of  their  legal  form. 
Belgium, Denmark and Spain have not made use of this option. 

None  of  the  Member States 
abovementioned provision. 

Article 5 

is  experiencing  problems 

in  connection  with  the 

This  (extensive)  Article  gives  Member States  the  option  of  exempting  financial  holding 
companies from the consolidation requirement where they  satisfy  certain conditions  (e.g. 
they do not intervene in the management of subsidiary undertakings, they do not exercise 
certain voting rights attaching to participating interests). 

Comments 

This option has been used only by Luxembourg and Greece. 

None  of  the  Mehiber States 
abovementioned Article. 

Article 6 

is  experiencing  problems 

in  connection  with  the 

This Article gives Member States the option of exempting groups of undertakings from the 
consolidation requirement where they do not exceed two of the three size  criteria referred 

to in Article 27 of Directive 78/660/EEC (medium-sized enterprises).  For a limited period, 
furthermore, the size criteria laid down in Article 27 may be exceeded (Article 6(5)). 

Comments 

All  the  Member States  have  made  use  of  this  option.  With the  exception  of  Denmark, 
Ireland,  the  Netherlands,  Portugal  and  the  United Kingdom,  all  the  Member States  are 
permitting  the  size  criteria  to  be  exceeded  temporarily  under  Article 6(5). 
In  the 
Netherlands  only  those  groups  of  undertakings  are  exempt  from  the  consolidation 
requirement that do not exceed two  of the three size  criteria referred  to  in Article 11  of 
Directive 78/660/EEC (small enterprises). 

None  of  the  Member States 
abovementioned Article. 

Article 7(1) 

is  experiencing  problems 

in  connection  with  the 

Subject to certain conditions, this paragraph exempts parent undertakings  which are also 
subsidiary  undertakings  (intermediate  groups) from the  consolidation  requirement  where 
the parent undertaking: 

holds all of the shares in the exempted undertaking, or 

holds 90% or more of the shares in the exempted undertaking  and the remaining 
shareholders have approved the exemption. 

In so far as the laws of a Member State prescribe consolidation in this case at the time of 
the adoption of the Directive, that Member State need not apply this provision for ten years 
as from 1990. 

Comments 

None of the Member States has experienced problems in transposing the  abovementioned 
exemption provision.  No Member State has used the option of deferring the exemption for 
ten years. 

ArtkkH 

This  Article  permits  Member States  to  impose  a  consolidation  requirement  on  an 
undertaking where 

(a) 

that undertaking and one or more other undertakings with which it is not connected 
are  managed  on  a  unified  basis  pursuant  to  a  contract  concluded  with  that 
undertaking  or provisions  in the  memorandum  or articles  of  association  of  those 
undertakings, 

or 

x 

(b) 

the  administrative,  management  or  supervisory  bodies  of  that  undertaking  and  of 
one or more other undertakings with which it is not connected consist for the  major 
part of the same persons. 

The circumstances referred to here are those of a horizontal group. 

Comments 

Only  Belgium,  Greece  and  the  Netherlands  have  made  use  of  this  option. 
In  Italy  a 
consolidation  requirement  is  imposed  in  such  a  case  where  banks  are  involved. 
Consolidation  is required  in France  in such cases in the insurance  sphere.  In the view of 
the Belgian delegation, problems may arise where, in addition to horizontal  consolidation, 
vertical consolidation comes into consideration. 

None  of  the  Member States  has  so  far  experienced  problems  in  connection  with  the 
abovementioned Article. 

Article 43 

This  Article  gives  Member States  the  option  of  not  applying  to  subsidiary  undertakings 
governed  by  its  laws  the  provisions  of  Directive 78/660/EEC  (balance-sheet Directive) 
concerning  the  content,  auditing  and  publication  of  annual  accounts  where  the  parent 
undertaking  is subject  to the  law of a Member State and various conditions  set out  in the 
Article  are  met. 
In  particular,  the  subsidiary  undertaking  must  be  included  in  the 
consolidated accounts and the parent undertaking must have declared that it guarantees the 
commitments entered into by the subsidiary undertaking. 

Comments 

Only Ireland, Luxembourg and the Netherlands have made use of this option.  None of the 
Member States is experiencing problems in connection with the abovementioned Article. 

Article 44 

This  Article  gives  Member States  the  option  of  not  applying  to  parent  undertakings 
governed by their laws the provisions of Directive 78/660/EEC concerning the auditing and 
publication of the profit-and-loss account where certain conditions set out in the Article are 
met.  In particular, the parent undertaking's individual accounts must have been included in 
the consolidated accounts to be drawn up by it. 

Comment? 

Use  may  be  made  of  this  exemption  in  Ireland,  Luxembourg,  the  Netherlands  and  the 
United Kingdom. 

None  of 
abovementioned Article. 

the  Member States 

is  experiencing  problems 

in  connection  with 

the 

m.  Conclusions 

The  negotiations  leading  to  the  adoption  of  Directive 83/349/EEC  could  not  have  been 
successful  if the Council  had  not undertaken to review the Member State  options  referred 
to  in Article 50 after five years and to amend  them  if necessary.  It was  feared  that  those 
options might  materially  undermine  some of the  Directive's  objectives,  notably  regarding 
the equivalence  and  comparability  of  consolidated  accounts, and  so  give rise to  practical 
problems. 

In the Commission's view, those fears have not been realized. 

The  Commission  has  examined  the  application  or  non-application  of  the  options  in 
individual  countries  in  close  cooperation  with  the  Member States.  It  has  concluded  that 
these options have not given rise to problems in any Member State.  In particular, there are 
no indications  that they  are  impairing  the  equivalence  and  comparability  of  consolidated 
accounts. 

The Commission  therefore  proposes  that the Council  should  not amend  the provisions  in 
question on the basis of Article 50 of Directive 83/349/EEC. 

} 

ISSN 0254-1475 

COM(96) 94  final 

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ISBN 92-78-01291-2 

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