Proposal for a Directive of the European Parliament and of the Council amending Council Directive 77/91/EEC, as regards the formation of public limited liability companies and the maintenance and alteration of their capital  {SEC(2004) 1342}
Date: 2004-10-29
Institutions: European Commission
Subjects: capital market, company law, protection of shareholders, public limited company, share, shareholder, simplification of formalities, single market

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 29.10.2004 
COM(2004) 730 final 

2004/0256 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL  

amending Council Directive 77/91/EEC, as regards the formation of public limited 
liability companies and the maintenance and alteration of their capital  

(presented by the Commission) 

{SEC(2004) 1342} 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

1.1 

Ground for and objectives of the proposal 

The  Second  Company  Law  Directive1  was  adopted  in  1976  with  a  view  to  co-
ordinate, for the protection of the interests of members and third parties, the national 
provisions applicable to public limited liability companies i.a. in the following areas: 
formation  of  companies,  minimum  share  capital  requirement,  distributions  to 
shareholders, increase in capital, reduction in capital.  

The overall purpose of the Directive is thus to establish the conditions which must be 
satisfied  in  order  to  ensure  that  the  capital  of  the  company  is  maintained  in  the 
interest  of  creditors.  Furthermore,  it  aims  at  protecting  minority  shareholders  and 
states  the  principle  that  all  shareholders  who  are  in  the  same  position  should  be 
treated in the same way.  

The  present  proposal  for  amending  the  Directive  aims  at  facilitating  capital  related 
measures taken in public limited liability companies. This is attempted by enabling 
Member States to eliminate specific reporting requirements under certain conditions, 
to facilitate, under  certain conditions, specific changes  in  share ownership, and last 
not  least,  to  provide  a  basically  harmonised  legal  procedure  for  creditors  under 
certain circumstances in the context of capital reduction.  

By this, companies ought to be enabled, with regard to capital size, capital structure 
and ownership, to react more promptly and in a less costly and protracted manner to 
developments  in  the  markets  that  are  relevant  to  them.  As  a  result,  this  proposed 
modernisation of the Second Directive ought to make a contribution to the promotion 
of business efficiency and competitiveness without reducing the protection offered to 
shareholders  and  creditors,  as  envisaged  in  the  Commission’s  “Communication2  to 
the  Council  and  the  European  Parliament:  Modernising  Company  Law  and 
Enhancing  Corporate  Governance  in  the  European  Union  –  A  Plan  to  Move 
Forward”. 

1.2. 

General context 

In  the  context  of  the  fourth  phase  of  the  Simplification  of  the  Legislation  on  the 
Internal  Market  process  (SLIM)  launched  by  the  Commission  in  October  1998,  a 
Company  Law  Working  Group  issued  in  September  1999  a  Report  on  the 

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Second  Council  Directive  of  13  December  1976  on  co-ordination  of  safeguards  which,  for  the 
protection of the interests of members and others, are required by Member States of companies within 
the meaning of the second paragraph of Article 58 of the Treaty, 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 (77/91/EEC), OJ No L 26, 31.1.1977, p.1., as last amended by the 2003 Act 
of Accession (OJ L 236, volume 46, 23.9.2003). 
Commission document COM(2003) 284 final. 

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simplification  of  the  First  and  Second  Company  Law  Directives3.  This  report 
contained recommendations on the areas in which a simplification could be achieved. 
The main recommendations relating to the Second Directive emphasized i.a. the need 
to  eliminate  under  certain  conditions  reporting  requirements  in  some  cases  (share 
issuance  for  non-cash  consideration;  exclusion  of  pre-emptive  rights),  furthermore 
the  need  to  facilitate  acquisition  by  a  company  of  its  own  shares,  to  facilitate 
financial assistance by a company for acquisition of its shares by a third party, and 
the need to facilitate the streamlining of ownership in a company’s share capital.  

In  its  Report  to  the  European  Parliament  and  the  Council4,  the  Commission  stated 
that  it  supported  the  overall  objective  of  the  main  recommendations  relating  to  the 
Second Directive and that it would examine further how best to amend the Second 
Directive accordingly. 

According to the “Report on a Modern Regulatory Framework for Company Law in 
Europe”  (issued  in  November  2002  by  the  “High  Level  Group  of  Company  Law 
Experts”), most of the SLIM Group proposals were indeed worth implementing. In 
addition,  the  High  Level  Group  formulated  a  few  additional  suggestions  aiming  at 
modernising the Second Directive.  

A  proposal  to  amend  the  Second  Directive  along  these  lines  has  therefore  been 
regarded by the Commission as a priority for the short term, in line with Annex 1 of 
the  above  mentioned  Communication,  which  calls  for  the  simplification  of  the 
Second Directive on the basis of the SLIM-recommendations as supplemented in the 
High Level Group’s above mentioned report by means of a Directive (“SLIM-Plus”). 

1.3. 

Existing provisions in the area of the proposal 

With regard to capital related measures of public limited liability companies, which 
this proposal undertakes to simplify, the main requirements are currently set forth by 
the Second Directive as follows: 

- Shares may not be issued at a price lower than their nominal value, or, where there 
is no nominal value, their accountable-par. This prohibition applies to all share issues 
without exception, not just to the initial share issue in the context of the company’s 
incorporation. This does not imply that subsequent share issues cannot be made at a 
nominal or accountable par value lower than that of a previous issue, as long as the 
price  at  which  the  new  shares  are  issued  complies  with  the  above  mentioned 
obligation. 

-  Issuance  of  shares  for  non-cash-consideration  is  subject  to  the  requirement  of  a 
valuation by one or more independent experts; 

-  Streamlining  of  ownership  in  the  company’s  share  capital  is,  if  possible  at  all, 
subject  in  principle  to  ex-ante  authorisation  by  the  statutes,  by  the  instruments  of 
incorporation and/or by the general meeting; 

3 

4 

Recommendations by the Company Law SLIM Working Group on the Simplification of the First and 
second Company Law Directives, September 1999. 
Report from the Commission to the European Parliament and the Council – Results of the fourth phase 
of SLIM, 4 February 2000 (COM (2000) 56). 

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- Acquisition by the company of its own shares is subject in principle to approval by 
the general meeting only for a certain period of time and only for a certain fraction of 
the company’s capital;  

- Financial assistance by the company for the acquisition of its shares by a third party 
is possible only in very limited cases and only up to a certain limit; 

- Exclusion of pre-emptive rights in capital increases for cash consideration is subject 
to approval by the general meeting and to the requirement of a written report by the 
administrative or management body; 

-  For  cases  of  capital  reduction,  it  is  up  to  the  Member  States  to  lay  down  the 
conditions for the exercise of a creditor’s right to obtain adequate security. 

1.4. 

Similarities or differences with existing provisions or acts 

Given  the  similarities  and  differences  between  the  Articles  39a  and  39b  of  the 
present proposal on the one hand, and, on the other hand, the provisions of Directive 
2004/25/EC  on  takeover  bids  that  relate  to  the  so-called  “squeeze-out”  and  “sell-
out”-rights  of  majority  shareholders  and  minority  shareholders,  respectively,  it  is 
clearly stated in the proposal, that the latter take precedence over the former in the 
context of takeover bids within the scope of Directive 2004/25/EC. 

1.5. 

Consistency with other policies 

In  its  Communication  to  the  Council  and  the  European  Parliament  “Modernising 
Company  Law  and  Enhancing  Corporate  Governance  in  the  European  Union  –  A 
Plan to Move Forward” (issued in May 2003)5, the Commission has considered that a 
simplification  of  the  Second  Directive  on  the  basis  of  the  proposals  and 
recommendations  as  mentioned  here  above  in  point  1.2.  would  significantly 
contribute  to  the  promotion  of  business  efficiency  and  competitiveness  without 
reducing the protection for shareholders and creditors.  

Accordingly,  the  above  mentioned  Communication  lists  a  pertinent  proposal  for  a 
Directive  amending  the  Second  Company  Law  Directive  as  one  of  the  most 
important modernisations of company law which should be executed in a short term. 

the  present  proposal  contributes 

Furthermore,  in  its  thrust  to  simplify  and  reduce  administrative  burdens  for 
the 
companies, 
Commission’s February 2003 Framework  for  Action on  “Updating and simplifying 
the  Community  Acquis”6.  This  initiative  is  one  of  the  range  of  actions  in  the 
Commission’s “Better Regulation” initiative of June 20027 which i.a. responds to the 
objective  to  improve  the  regulatory  environment  in  which  businesses  operate  to 
enhance competitiveness as one of the goals set out in the Lisbon Strategy. 

implementation  of 

the 

to 

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See Commission document COM (2003) 284 final. 
COM  (2003)  71;  cf.  also  the  First  and  Second  Progress  Report  thereto:  COM  (2003)  623  and  COM 
(2004) 432 
COM (2002) 278 

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2. 

RESULTS  OF  CONSULTATION  WITH  THE  INTERESTED  PARTIES  AND 
IMPACT ASSESSMENT  

2.1. 

Collection and use of expertise 

The main provisions contained in the proposal are inspired by the recommendations 
made by a Company Law Working Group in September 1999, in the context of the 
fourth phase of the Simplification of the Legislation on the Internal Market (SLIM) 
process launched by the Commission in October 1998. This Group met three times in 
1999 and was composed of Member States officials, company law practitioners and 
academics. 

The  SLIM-Group  recommendations  concerning  the  Second  Directive  and  their 
practical  implications  have  been  subsequently  discussed  with  Member  States 
company  law  experts  in  meetings  in  June  2000  and  March  2001.  From  these 
discussions,  it  appeared  that  the  main  recommendations  relating  to  the  Second 
Directive  were  supported,  pending,  however,  a  number  of  technical  issues  to  be 
considered in more depth. 

On the occasion of the creation of the “High Level Group of Company Law Experts” 
by  the  Commission  in  September  2001,  it  was  felt  appropriate  to  include  into  the 
Group’s mandate the task to further consider the possible simplification of corporate 
rules in the light of the SLIM-report on the Second Directive. 

2.2. 

Consultations 

Following an extended public consultation which it held i.a. on possible approaches 
towards  reform  of  the  European  capital  regime  (launched  in  the  second  quarter  of 
2002),  the  “High  Level  Group”  confirmed  in  its  “Report  on  a  Modern  Regulatory 
Framework for Company Law in Europe” (issued in November 2002), that most of 
the SLIM Group proposals, as modified to some extent by the “High Level Group”, 
were indeed worth implementing. 

The  Commission’s  approach  towards  simplification  of  the  Second  Directive,  as 
inspired  by  the  afore  mentioned  expert  groups  and  by  the  above  mentioned 
consultation,  and  as  subsequently  set  forth  in  the  above  mentioned  Commission 
Communication, has been strongly re-confirmed by a large majority of respondents 
to the public consultation of this Communication.  

2.3. 

Impact assessment (see also Annex 1) 

The  Second  Directive  applies  to  public  limited  liability  companies  throughout  the 
EU.  Two  of  the  proposed  amendments  relate  to  listed  companies  only  (Article  39a 
and  b;  Article  29(5a)).  No  distinction  is  currently  made  as  regards  the  sectors  of 
business, the sizes of business or the geographical areas of the Community. 

With  regard  to  some  of  the  amended  or  newly  inserted  provisions,  such  as  Article 
39a and b, as well as Article 32(1), the proposal contains provisions that have to be 
transposed by the Member States into their national law on a compulsory basis. With 
regard  to  other  provisions,  existing  options  for  transposition  by  Member  States  are 

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modified, such as Article 19(1) and Article 29(5a), or newly created, such as Articles 
10a and 10b and Article 23(1) in connection with Articles 23a and 23b. 

Apart from general implementing measures, Member States will, in some instances, 
also  have  to  take  special  implementing  measures,  especially  with  regard  to  certain 
safeguard procedures, under the amended provisions of the Directive. 

Public  limited  liability  companies  will  then  be  able  to  avail  themselves  of  the 
simplifications  that  are  envisaged  with  this  proposal,  while  –  where  necessary  – 
being obliged to comply with the safeguards which are introduced in the interest of 
shareholders and third parties. 

By availing themselves of the simplifications for capital related measures, which this 
proposal  aims  to  bring  about,  companies  ought  to  be  in  a  position  to  react  more 
promptly and in a less costly and protracted manner to developments in the markets 
that  are  relevant  to  them.  As  a  result,  this  proposed  modernisation  of  the  Second 
Directive ought to make a contribution to the promotion of business efficiency and 
competitiveness  without  reducing  the  protection  offered  to  shareholders  and 
creditors, as envisaged in the Commission’s “Communication8 to the Council and the 
European  Parliament:  Modernising  Company  Law  and  Enhancing  Corporate 
Governance in the European Union – A Plan to Move Forward”. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

3.1. 

Legal basis 

The proposed Directive is drafted on the legal basis of Article 44(1) of the Treaty. 

3.2. 

Principle of proportionality and subsidiarity 

The  proposed  simplifications  for  public  limited  liability  companies  necessitate 
Community  action  in  that  they  touch  on  a  series  of  provisions  of  Community  law 
which  up  until  now  exclude  or  limit  the  use  of  these  proposed  simplifications  by 
public limited liability companies. The proposal is therefore in compliance with the 
principle of subsidiarity as laid down in Article 5 of the Treaty.  

Furthermore,  and  in  compliance  with  the  principle  of  proportionality,  the  present 
proposal  tries  to  limit  legislative  action  to  the  minimum  which  is  considered 
necessary to bring about the intended simplifications.  

3.3. 

Choice of instruments 

In  order  to  bring  about  these  intended  simplifications,  it  is  indispensable  for  the 
Community legislator to introduce changes to the Second Company Law Directive. 
This  can  only  be  done  with  a  proposal  for  a  Directive  amending  the  Second 
Company Law Directive. 

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Commission document COM(2003) 284 final. 

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4. 

BUDGETARY IMPLICATION  

Any budgetary implications are not foreseen. 

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2004/0256 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL  

amending Council Directive 77/91/EEC, as regards the formation of public limited 
liability companies and the maintenance and alteration of their capital  

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
44(1) thereof, 

Having regard to the proposal from the Commission9, 

Having regard to the opinion of the European Economic and Social Committee10, 

Acting in accordance with the procedure referred to in Article 251 of the Treaty11, 

Whereas: 

(1) 

(2) 

The Second  Council Directive 77/91/EEC of 13 December 1976 on co-ordination of 
safeguards  which,  for  the  protection  of  the  interests  of  members  and  others,  are 
required by Member States of companies within the meaning of the second paragraph 
of  Article  58  of  the  Treaty,  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  equivalent12,  sets  out  the  requirements  for  several  capital-related 
measures taken by those companies. 

In  its  Communication  to  the  Council  and  the  European  Parliament  “Modernising 
Company Law and Enhancing Corporate Governance in the European Union – A Plan 
to  Move  Forward”  of  21  May  200313  the  Commission  draws  the  conclusion  that  a 
simplification  of  the  Directive  77/91/EEC  would  significantly  contribute  to  the 
promotion of business efficiency and competitiveness without reducing the protection 
offered to shareholders and creditors.  

(3)  Member States should have the possibility to enable public limited liability companies 
to  attract  considerations  other  than  in  cash  to  their  capital  without  them  having  to 
resort to a special expert valuation in cases in which there is a clear point of reference 

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13 

OJ C […] […], p.[…] 
OJ C […] […], p.[…] 
OJ C […] […], p.[…] 
OJ L 26, 31.1.1977, p. 1, as last amended by the Act of Accession of 2003. 
COM(2003) 284 final. 

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(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

for the valuation of such consideration. Nonetheless, the right of minority shareholders 
to require such valuation should be guaranteed. 

Public limited liability companies should be allowed to acquire their own shares up to 
the  limit  of  the  company’s  distributable  reserves  and  the  period  for  which  such  an 
acquisition  can  be  authorised  by  the  general  meeting  should  be  increased  so  as  to 
enhance  flexibility  and  reduce  administrative  burden  for  companies  which  have  to 
react promptly to market developments affecting their share price. 

Public  limited  liability  companies  should  be  able  to  grant  financial  assistance  with  a 
view to the acquisition of their shares by a third party up to the limit of the company’s 
distributable  reserves  so  as  to  increase  flexibility  with  regard  to  changes  in  the 
ownership  structure  of  the  share  capital  of  companies.  This  possibility  should  be 
subject  to  safeguards  imposed  by  the  Directive’s  objective  of  protection  of  both 
shareholders and third parties. 

Public limited liability companies should be able to increase, under certain conditions, 
their capital without having to meet reporting requirements linked to the restriction or 
withdrawal  of  pre-emption  rights  of  shareholders  so  as  to  reduce  the  administrative 
burden  for  listed  companies  which  want  to  be  able  to  embark  on  prompt  capital 
increases.  

Creditors  should  be  able  to  resort,  under  certain  conditions,  to  judicial  or 
administrative  proceedings  where  their  claims  are  at  stake  as  a  consequence  of  a 
reduction  in  the  capital  of  a  public  limited  liability  company  so  as  to  enhance 
standardized creditor protection in all Member States.  

Shareholders  holding  a  large  majority  of  a  public  limited  liability  company’s  capital 
should have the right to acquire the remaining shares for adequate compensation, so as 
to  enable  a  streamlined  and  more  viable  share  ownership  in  listed  companies. 
Likewise,  in  such  a  situation,  the  remaining  shareholders  should  be  able  to  require 
such  acquisition.  Nonetheless,  the  rules  applicable  according  to  the  Directive 
2004/25/EC14  of  the  European  Parliament  and  of  the  Council  of  21  April  2004  on 
takeover bids should not be affected by those rights. 

In order to ensure that market abuse is prevented, the Member States should take into 
account,  for  the  purpose  of  implementation  of  this  Directive,  the  dispositions  of 
Directive  2003/6/EC15  of  the  European  Parliament  and  of  the  Council  of  28  January 
2003 on insider dealing and market manipulation (market abuse) and of Commission 
Directive  2004/72/EC16  of  29  April  2004  implementing  Directive  2003/6/EC  of  the 
European  Parliament  and  of  the  Council  as  regards  accepted  market  practices,  the 
definition of inside information in relation to derivatives on commodities, the drawing 
up of lists of insiders, the notification of managers’ transactions and the notification of 
suspicious transactions, as well as of Commission Regulation (EC) No 2273/200317 of 
22  December  2003  implementing  Directive  2003/6/EC  of  the  European  Parliament 

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17 

OJ L 142, 30.4.2004, p.12 
OJ L 96, 12.4.2003, p.16 
OJ L 162, 30.4.2004, p.70  
OJ L 336, 23.12.2003, p.33 

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and of the Council as regards exemptions for buy-back programmes and stabilisation 
of financial instruments. 

(10)  Directive 77/91/EEC should be therefore amended accordingly, 

HAVE ADOPTED THIS DIRECTIVE: 

Directive 77/91/EEC is hereby amended as follows:  

Article 1 

(1) 

The following Articles 10a and 10b are inserted: 

"Article 10a 

1.  Member States may decide not to apply Article 10(1), (2) and (3) where, upon 
a  decision  of  the  administrative  or  the  management  body,  transferable 
securities  as  defined  in  Article  4(1)(18)  of  Directive  2004/39/EC*  are 
contributed as consideration other than in cash, and those securities are valued 
at the weighted average price at which they have been traded on one or more 
regulated  market(s)  as  defined  in  Article  4(1)(14)  of  that  Directive  in  the  3 
months preceding the effectuation of the respective consideration other than in 
cash. 

*OJ L 145, 30.4.2004, p.1 

However,  where  that  price  has  been  affected  by  exceptional  occurrences  that 
would  significantly  change  the  value  of  the  asset  at  the  effective  date  of  its 
contribution, Articles 10(1), (2) and (3) shall apply. 

2.  Member States may decide not to apply Article 10(1), (2) and (3) where, upon 
a decision of the administrative or the management body, assets are contributed 
as  consideration  other  than  in  cash  which  have  already  been  subject  to  a  fair 
value  opinion  by  a  recognized  independent  expert  and  where  the  following 
conditions are fulfilled: 

(a) 

(b) 

(c) 

the  recognized  expert  who  has  carried  out  the  valuation  is  sufficiently 
trained  and  experienced  in  valuation  of  the  kind  of  assets  to  be 
contributed; 

the fair value is determined for a date not more than 3 months before the 
effective date of the asset’s contribution; 

the valuation has been performed in accordance with generally accepted 
valuation  standards  and  principles  in  the  Member  State,  which  are 
applicable to the kind of assets to be contributed. 

In  the  case  of  new  qualifying  circumstances,  that  would  significantly  change  the 
value  of  the  asset  at  the  effective  date  of  its  contribution,  a  re-valuation  has  to  be 
made  on  the  initiative  and  under  the  responsibility  of  the  administrative  or 
management  body.  That  body  shall  inform  shareholders  whether  any  such  new 

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qualifying circumstances have occurred. 

In  any  event,  shareholders  holding  an  aggregate  percentage  of  at  least  5%  of  the 
company's subscribed capital may require a re-valuation of the asset concerned, and 
may demand a valuation by an independent expert, in which case Article 10(1), (2) 
and (3) shall apply.  

3.  Member States may decide not to apply Article 10(1), (2) and (3) where, upon 
a decision of the administrative or the management body, assets are contributed 
as consideration other than in cash whose value is derived by individual asset 
from  the  statutory  accounts  of  the  previous  financial  year  provided  that  the 
statutory accounts have been drawn up in accordance with the requirements of 
Directive  78/660/EEC  and  have  been  subject  to  an  audit  in  accordance  with 
Directive 84/253/EEC. 

In  the  case  of  new  qualifying  circumstances,  that  would  significantly  change 
the value of the asset contributed at the effective date of its contribution, a re-
valuation  has  to  be  made  on  the  initiative  and  under  the  responsibility  of  the 
administrative  or  management  body.  That  body  shall  inform  shareholders 
whether any such new qualifying circumstances have occurred. 

In  any  event,  shareholders  holding  an  aggregate  percentage  of  at  least  5%  of 
the  company's  subscribed  capital  may  require  a  re-valuation  of  the  asset 
concerned,  and  may  demand  a  valuation  by  an  independent  expert,  in  which 
case Article 10(1), (2) and (3) shall apply.  

Article 10b 

1.  Where  consideration  other  than  in  cash  as  referred  to  in  Article  10a  occurs 
without  an  expert's  report,  the  persons,  companies  and  firms  referred  to  in 
Article 3(i) or the administrative or the management body shall, in addition to 
the requirements set out in Article 3(h), submit to the register for publication a 
declaration containing the following: 

(a) 

a description of the consideration other than in cash at issue;  

(b) 

its estimated value and the source of this valuation; 

(c) 

a  statement  whether  the  values  arrived  at  correspond  at  least  to  the 
number  and  nominal  value  or,  where  there  is  no  nominal  value,  to  the 
accountable par and, where appropriate, to the premium on the shares to 
be issued for them; 

(d) 

if  appropriate,  a  statement  as  to  whether  new  qualifying  circumstances 
with regard to the original valuation have occurred.  

That  declaration  shall  be  published  in  accordance  with  Article  3  of  Directive 
68/151/EEC. 

2. 

Each  Member  State  shall  designate  an  independent  administrative  or  judicial 
authority which is responsible for examining the legality of the considerations 

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other  than  in  cash  made  in  accordance  with  Article  10a  and  the  declaration 
referred to in paragraph 1.” 

(2) 

In Article 11(1) the first subparagraph is amended as follows:  

(a) 

The word “Article 10” is replaced by “Article 10 (1), (2) and (3)”. 

(b) 

The following sentence is added: 

“Articles 10a and 10b shall apply mutatis mutandis.”  

(3) 

In Article 19, paragraph 1 is replaced by the following: 

“1.  Where the laws of a Member State permit a company to acquire its own shares, 
either itself or through a person acting in his own name but on the company's behalf, 
they shall make such acquisitions subject to the following conditions: 

(a) 

authorization  must  be  given  by  the  general  meeting,  which  shall 
determine the terms and conditions of such acquisitions, and in particular 
the maximum number of shares to be acquired, the duration of the period 
for which the authorization is given and which may not exceed 5 years, 
and,  in  the  case  of  acquisition  for  value,  the  maximum  and  minimum 
consideration. Members of the administrative or management body must 
satisfy  themselves  that,  at  the  time  when  each  authorized  acquisition  is 
effected, the conditions referred to in subparagraphs (b), (c) and (d) are 
respected; 

(b) 

the  acquisitions,  including  shares  previously  acquired  by  the  company 
and held by it, and shares acquired by a person acting in his own name 
but on the company's behalf, may not have the effect of reducing the net 
assets below the amount mentioned in Article 15(1)(a);  

(c) 

only fully paid-up shares may be included in the transaction; 

(d) 

the principle of equal treatment of shareholders shall apply; in particular, 
acquisition  and  sale  by  a  company  of  its  own  shares  on  a  regulated 
market  as  defined  in  Art.  4(1)(14)  of  Directive  2004/39/EC  shall  be 
considered fulfilling that principle. 

Member  States  may  also  subject  acquisitions  within  the  meaning  of  the  first 
subparagraph to the condition that the nominal value or, in the absence thereof, the 
accountable par of the acquired shares, including shares previously acquired by the 
company and held by it, and shares acquired by a person acting in his own name but 
on the company's behalf, may not exceed 10 % of the subscribed capital.”  

(4) 

In Article 23, paragraph 1 is replaced by the following: 

"1. A company may not advance funds, nor make loans, nor provide security, with a 
view  to  the  acquisition  of  its  shares  by  a  third  party,  unless  such  transactions  in 
national  legislation  are  subject  to  the  conditions  set  out  in  the  second  to  fifth 
subparagraphs.  

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The transactions must take place on the initiative and under the responsibility of the 
administrative or management body at fair market conditions, especially with regard 
to interest received by the company from the third party and with regard to security 
provided to the company by the third party for the loans and advances referred to in 
paragraph 1. The credit standing of the third party must have been duly investigated 
and the company must be able to maintain its liquidity and solvency for the next five 
years.  The  latter  must  be  credibly  demonstrated  by  a  detailed  cash  flow  analysis 
based on the information at the time of the approval of the transaction.  

The transactions must be submitted by the administrative or management body to the 
general  meeting  for  ex  ante-approval,  whereby  the  general  meeting  shall  act  in 
accordance with the rules for a quorum and a majority laid down in Article 40. The 
administrative  or  management  body  must  present  a  written  report  to  the  general 
meeting,  indicating  the  reasons  for  the  transaction,  the  interest  of  the  company  in 
effectuating such a transaction, the conditions at which the transaction is effectuated, 
the  risks  involved  in  the  transaction  for  the  liquidity  and  solvency  of  the  company 
and  the  price  at  which  the  third  party  is  to  acquire  the  shares.  This  report  shall  be 
submitted  to  the  register  for  publication  in  accordance  with  Article  3  of  Directive 
68/151/EEC. 

The aggregate financial assistance granted to third parties must not have the effect of 
reducing the net assets below the amount specified in Article 15(1)(a). 

Where  own  shares  of  the  company  within  the  meaning  of  Article  19(1)  or  shares 
issued in the course of an increase in subscribed capital are acquired by a third party 
from  the  company,  that  acquisition  must  be  made  at  a  fair  price,  in  order  to  avoid 
dilution of existing shareholdings.” 

(5) 

The following Articles 23a and 23b are inserted: 

“Article 23a 

A  shareholder  shall  have  the  right  to  contest  the  general  meeting’s  approval  of  a 
transaction referred to in Article 23(1) by applying to the appropriate administrative 
or judicial authority to decide on the legality of that transaction. 

Article 23b 

In cases where individual members of the administrative or management body of the 
company  being  party  to  a  transaction  referred  to  in  Article  23(1),  or  of  the 
administrative  or  management  body  of  a  parent  undertaking  within  the  meaning  of 
Article  1  of  Council  Directive  83/349/EEC*  or  such  parent  undertaking  itself,  or 
individuals acting in their own name, but on behalf of the members of such bodies or 
on behalf of such undertaking, are counterparts to such a transaction, Member States 
shall ensure through adequate safeguards that such transaction does not conflict with 
the company’s best interest.” 

* OJ L 193, 18.7.1983, p. 1.  

(6) 

In Article 27(2) the second subparagraph is replaced by the following: 

“Article 10(2) and (3) and Article 10a and 10b shall apply.” 

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(7) 

In Article 29 the following paragraph 5a is inserted:  

“5a.  Where an administrative or management body of a listed company is given the 
power to restrict or withdraw the right of pre-emption in accordance with paragraph 
5,  under  the  additional  condition,  that  the  shares  for  a  future  increase  in  the 
subscribed  capital  must  be  issued  at  the  market  price  which,  at  the  time  of  issue, 
prevails on one or more regulated market(s) within the meaning of Article 4(1)(14) 
of Directive 2004/39/EC, the administrative or management body is exempted from 
having to present to the general meeting a written report as required under paragraph 
4  of  this  Article.  Shareholders  may,  however,  request  the  administrative  or 
management body to indicate the reasons for the restriction or withdrawal of the right 
of pre-emption.” 

(8) 

In Article 32, paragraph 1 is replaced by the following: 

“1. In the event of a reduction in the subscribed capital, at least the creditors whose 
claims antedate the publication of the decision to make the reduction shall be entitled 
at least to have the right to obtain security for claims which have not fallen due by 
the date of that publication. Member States may not set aside such a right unless the 
creditor has adequate safeguards, or unless the latter is not necessary in view of the 
assets of the company. 

Member  States  shall  lay  down  the  conditions  for  the  exercise  of  the  right  provided 
for  in  the  first  subparagraph.  In  any  event,  Member  States  shall  ensure  that  the 
creditors  are  authorized  to  apply  to  the  appropriate  administrative  or  judicial 
authority  for  adequate  safeguards  provided  that  they  can  credibly  demonstrate  that 
due to the reduction in subscribed capital the satisfaction of their claims is at stake, 
and that no adequate safeguards have been obtained from the company." 

(9) 

The following Articles 39a and 39b are inserted: 

“Article 39a 

1.  Member  States  shall  ensure  that  a  shareholder  who  holds  at  least  90%  of  the 
subscribed capital of a listed company, hereinafter referred to as the “majority 
shareholder”,  shall  be  able  to  require  all  the  holders  of  the  remaining  shares, 
hereinafter referred to as “minority shareholders”, to sell him those shares at a 
fair price. However, Member States may set a higher threshold provided that it 
the  company. 
does  not  exceed  95%  of 

the  subscribed  capital  of 

A  company  is  considered  to  be  a  listed  company  within  the  meaning  of  this 
provision  if  its  shares  are  traded  on  a  regulated  market  as  defined  in  Article 
4(1)(14) of Directive 2004/39/EC. 

2.  Member States shall ensure that it is possible to determine when the threshold 

is reached. 

3.  Where the company has issued more than one class of shares, Member States 
may  provide  that  the  right  to  require  the  minority  shareholder  to  sell  as 
provided for in paragraph 1 shall apply only in the class in which the thresholds 
referred to in that paragraph are reached. 

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4.  Member  States  shall  ensure  that  each  minority  shareholder  concerned  may 

demand an appraisal of the fair price.  

The appraisal of whether the price is fair shall be carried out by an independent 
administrative  or  judicial  authority  or  by  an  independent  expert  appointed  or 
approved by such an authority. Such experts may be natural persons as well as 
legal  persons  and  companies  or  firms  under  the  laws  of  each  Member  State. 
The demand for such an appraisal shall be exercised within three months after 
the minority  shareholder was required to sell  and the  price was announced in 
accordance with paragraph 1. 

5. 

This Article is without prejudice to Article 15 of Directive 2004/25/EC* 

* OJ L 142, 30.4.2004, p. 12. 

Article 39b 

1.  Member  States  shall  ensure  that  minority  shareholders  in  a  listed  company 
shall be able to require, jointly or individually, the majority shareholder to buy 
from them their shares in that company at a fair price.  

2.  Member  States  shall  ensure  that  in  cases  where  there  is  no  agreement  on  the 
fair  price  between  the  prospective  parties  of  the  transaction  mentioned  in 
paragraph 1, the price is examined by an independent administrative or judicial 
authority  or  by  an  independent  expert  appointed  or  approved  by  such  an 
authority.  Such  experts  may  be  natural  persons  as  well  as  legal  persons  and 
companies or firms under the laws of each Member State. 

3. 

The  provisions  of  Article  39a(1)  second  and  third  sentence,  (2)  and  (3)  shall 
apply mutatis mutandis. 

4.  Member  States  shall  ensure  an  adequate  procedure  which  guarantees  a  fair 

treatment of all minority shareholders. 

5. 

This Article is without prejudice to Article 16 of Directive 2004/25/EC.”  

(10) 

In Article 41 paragraph 1 is replaced by the following: 

“1.Member  States  may  derogate  from  Article  9(1),  Article  19(1)(a),  first  sentence, 
and from Articles 25, 26 and 29 to the extent that such derogations are necessary for 
the adoption or application of provisions designed to encourage the participation of 
employees,  or  other  groups  of  persons  defined  by  national  law,  in  the  capital  of 
undertakings.” 

Article 2 

1. 

Member  States  shall  bring  into  force  the  laws,  regulations  and  administrative 
provisions  necessary  to  comply  with  this  Directive  by  31  December  2006  at  the 
latest.  They  shall  forthwith  communicate  to  the  Commission  the  text  of  those 
provisions and a correlation table between those provisions and this Directive. 

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When  Member  States  adopt  those  provisions,  they  shall  contain  a  reference  to  this 
Directive  or  be  accompanied  by  such  a  reference  on  the  occasion  of  their  official 
publication. Member States shall determine how such reference is to be made. 

2. 

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.  

This Directive shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

Article 3 

Article 4 

This Directive is addressed to the Member States. 

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President 

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Annex 1: Preliminary Impact Assessment Statement 

1. 

PROBLEM IDENTIFICATION 

Describe the problem that the policy/proposal is expected to tackle:  

Unnecessarily heavy procedures entailed in certain instruments, which public limited 
liability companies have at their disposal for purposes of capital formation and alteration. 

Indicate potentially unsustainable trends associated with the problem,  

- Economically: Too little flexibility and too high cost for companies which, for financing 
reasons, have to promptly react to capital market developments 

- Socially: n.a. 

- Environmentally: n.a. 

Indicate the potential inconsistencies between the three dimensions or with other policies 
n.a. 

2. 

OBJECTIVE OF THE PROPOSAL 

What is the overall policy objective in terms of expected impacts?  
Saving cost and time for companies embarking on certain capital related measures 

3. 

POLICY OPTIONS 

What is the basic approach suggested to reach the objective? A moderately deregulatory 
approach. 

What policy instruments have been considered? Modification of the current 2nd Company 
Law Directive. 

In what way do the options identified respect the subsidiarity and proportionality principles? 
In that they strictly limit themselves to a mere simplification of the 2nd Directive itself, 
which is a main instrument of harmonisation of Company Law in the European Union .  

Which options can be excluded at this an early stage? Changes to the capital maintenance 
regime of the 2nd Directive that would be inconsistent with the minority shareholder and 
creditor protection objectives of this directive. 

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4. 

IMPACTS – POSITIVE AND NEGATIVE 

On  a  preliminary  basis  please  indicate  the  expected  positive  and  negative  impacts  of  the 
selected options, particularly in terms of economic, social and environmental consequences? 
Positive:  Reduce  cost  and  administrative  burden  for  public  limited  liability  companies 
through  introduction  of  lighter  procedures  for  the  above  mentioned  categories  of 
transactions. 

Negative: not perceived 

Please  indicate  who  is  affected  and  possible  severe  impacts  on  a  particular  social  group, 
economic sector or region (inside or outside the EU), in the short term; in the medium and 
long term? n.a. 

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