Directive 2006/46/EC of the European Parliament and of the Council of 14 June 2006 amending Council Directives 78/660/EEC on the annual accounts of certain types of companies, 83/349/EEC on consolidated accounts, 86/635/EEC on the annual accounts and consolidated accounts of banks and other financial institutions and 91/674/EEC on the annual accounts and consolidated accounts of insurance undertakings   (Text with EEA relevance)
Date: 2006-06-14
Institutions: Council of the European Union, European Parliament
Subjects: bank, consolidated account, insurance company, organisation, publication of accounts, special-status institution

16.8.2006

EN

Official Journal of the European Union

L 224/1

I

(Acts whose publication is obligatory)

DIRECTIVE 2006/46/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of 14 June 2006

amending Council Directives 78/660/EEC on the annual accounts of certain types of companies,
83/349/EEC on consolidated accounts, 86/635/EEC on the annual accounts and consolidated accounts
of banks and other financial institutions and 91/674/EEC on the annual accounts and consolidated
accounts of insurance undertakings

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EURO-
PEAN UNION,

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

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Economic and
Social Committee (1),

Acting in accordance with the procedure laid down in Article 251
of the Treaty (2),

Whereas:

(1)

(2)

On 21 May 2003, the Commission adopted an Action
Plan announcing measures to modernise company law and
enhance corporate governance in the Community. As a
short-term priority, the Community was to confirm the
collective responsibility of board members, increase trans-
parency in transactions with related parties and off-
balance-sheet arrangements and improve disclosure about
corporate governance practices applied in a company.

Pursuant to that Action Plan, members of the administra-
tive, management and supervisory bodies of a company
to be collectively
were, as a minimum requirement,
responsible towards the company for drawing up and
publishing annual accounts and annual reports. The same
approach was also to apply to members of the adminis-
trative, management and supervisory bodies of undertak-
ings drawing up consolidated accounts. Those bodies act

(1) OJ C 294, 25.11.2005, p. 4.
(2) Opinion of the European Parliament of 15 December 2005 (not yet
Journal) and Council Decision of

published in the Official
22 May 2006.

(3)

(4)

(5)

within the competences assigned to them by national law.
This should not prevent Member States from going fur-
ther and providing for direct responsibility towards share-
holders or even other stakeholders. On the other hand,
Member States were to refrain from opting for a system
of responsibility limited to individual board members.
However, this should not preclude the ability of courts or
other enforcement bodies in the Member States to impose
penalties on an individual board member.

Liability for drawing up and publishing annual accounts
and consolidated accounts as well as annual reports
and consolidated annual reports is based on national law.
Appropriate liability rules, as laid down by each Member
State under its national
law or regulations, should be
applicable to members of the administrative, management
and supervisory bodies. Member States should remain free
to determine the extent of the liability.

In order to promote credible financial reporting processes
across the European Union, members of the company
body that is responsible for the preparation of the com-
pany’s financial reports should have the duty to ensure
that the financial information included in a company’s
annual accounts and annual reports gives a true and fair
view.

On 27 September 2004 the Commission adopted a
Communication on preventing and combating financial
and corporate malpractice outlining ‘inter alia’ the Com-
in
mission policy initiatives regarding internal control
companies and responsibility of board members.

L 224/2

EN

Official Journal of the European Union

16.8.2006

(6)

(7)

(8)

(9)

At present Fourth Council Directive 78/660/EEC (1) and
Seventh Council Directive 83/349/EEC (2) only provide for
disclosure of transactions between a company and the
company’s affiliated undertakings. With the objective of
bringing companies whose securities are not admitted to
trading on a regulated market closer to companies apply-
ing the international accounting standards for their con-
solidated accounts, disclosure should be extended to cover
other types of related parties, such as key management
members and spouses of board members, but only where
such transactions are material and not carried out at arm’s
length. Disclosure of material transactions with related
parties that are not carried out under normal market con-
ditions can assist users of annual accounts to assess the
financial position of the company as well as, when the
company belongs to a group, the financial situation of the
group as a whole. Intra-group related party transactions
should be eliminated in the preparation of consolidated
financial statements.

Definitions of a related party as set out in the interna-
tional accounting standards adopted by the Commission
in accordance with Regulation (EC) No 1606/2002
the Council of
of
19 July 2002 on the application of international account-
ing standards (3) should apply to Directives 78/660/EEC
and 83/349/EEC.

the European Parliament and of

Off-balance-sheet arrangements may expose a company to
risks and benefits which are material for an assessment of
the financial position of the company and, when the com-
pany belongs to a group, the financial position of the
group as a whole.

Such off-balance-sheet arrangements could be any trans-
actions or agreements which companies may have with
entities, even unincorporated ones, that are not included
in the balance sheet. Such off-balance-sheet arrangements
may be associated with the creation or use of one or more
Special Purpose Entities (SPEs) and offshore activities
designed to address,
legal, tax or
accounting objectives. Examples of such off-balance-sheet
arrangements include risk and benefit-sharing arrange-
ments or obligations arising from a contract such as debt

inter alia, economic,

(1) OJ L 222, 14.8.1978, p. 11. Directive as last amended by Directive
2006/43/EC of the European Parliament and of the Council (OJ L 157,
9.6.2006, p. 87).

(2) OJ L 193, 18.7.1983, p. 1. Directive as

last amended by

Directive 2006/43/EC.
(3) OJ L 243, 11.9.2002, p. 1.

factoring, combined sale and repurchase agreements, con-
signment stock arrangements, take or pay arrangements,
securitisation arranged through separate companies and
unincorporated entities, pledged assets, operating leasing
arrangements, outsourcing and the like. Appropriate dis-
closure of the material risks and benefits of such arrange-
ments that are not included in the balance sheet should
be set out in the notes to the accounts or the consoli-
dated accounts.

(10)

Companies whose securities are admitted to trading on a
regulated market and which have their registered office in
the Community should be obliged to disclose an annual
corporate governance statement as a specific and clearly
identifiable section of the annual report. That statement
should at least provide shareholders with easily accessible
key information about the corporate governance practices
actually applied, including a description of the main fea-
tures of any existing risk management systems and inter-
nal controls in relation to the financial reporting process.
The corporate governance statement should make clear
whether the company applies any provisions on corpo-
rate governance other than those provided for in national
law, regardless of whether those provisions are directly
laid down in a corporate governance code to which the
company is subject or in any corporate governance code
which the company may have decided to apply. Further-
more, where relevant, companies may also provide an
analysis of environmental and social aspects necessary for
an understanding of the company’s development, perfor-
mance and position. There is no need to impose the
requirement of a separate corporate governance statement
on undertakings drawing up a consolidated annual report.
However, the information concerning the group’s risk
management system and internal control system should
be presented.

(11)

The various measures adopted under this Directive should
not necessarily apply to the same types of companies or
undertakings. Member States should be able to exempt
small companies, as described in Article 11 of Directive
78/660/EEC, from the requirements concerning related
parties and off-balance-sheet arrangements under this
Directive. Companies which already disclose information
about transactions with related parties in their accounts
pursuant to international accounting standards as adopted
in the European Union should not be required to disclose
further information under this Directive, as the applica-
tion of the international accounting standards already
results in a true and fair view of such a company. The

16.8.2006

EN

Official Journal of the European Union

L 224/3

provisions of this Directive concerning the corporate gov-
ernancestatement should apply to all companies, includ-
ing banks,
insurance and reinsurance undertakings
and companies which have issued securities other than
shares admitted to trading on a regulated market insofar
as they are not exempted by Member States. The provi-
sions of this Directive concerning duties and liabilities of
board members as well as penalties should apply to all
companies to which Council Directives 78/660/EEC,
86/635/EEC (1) and 91/674/EEC (2) apply and to all under-
takings which draw up consolidated accounts in accor-
dance with Directive 83/349/EEC.

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Amendments to Directive 78/660/EEC

Directive 78/660/EEC is hereby amended as follows:

1.

in Article 11, the first paragraph shall be amended as follows:

(12) At present Directive 78/660/EEC makes provision for
examination every five years of, inter alia, the maximum
thresholds for balance sheet and net turnover which Mem-
ber States may apply in determining which companies
may be exempted from certain disclosure requirements. In
addition to those five-yearly examinations, an additional
one-off increase in those balance sheet and net turnover
thresholds may also be appropriate. There is no obliga-
tion on Member States to make use of those increased
thresholds.

(a)

(b)

indent

in the first
total:
EUR 3 650 000’ shall be replaced by the words ‘balance
sheet total: EUR 4 400 000’;

the words ‘balance sheet

second indent

in the
turnover:
EUR 7 300 000’ shall be replaced by the words ‘net
turnover: EUR 8 800 000’;

the words

‘net

(13)

Since the objectives of this Directive, namely facilitating
cross-border investments and improving EU-wide compa-
rability and public confidence in financial statements and
reports through enhanced and consistent specific disclo-
sures, cannot be sufficiently achieved by the Member
States and can therefore, by reason of the scale and the
effects of this Directive, be better achieved at Community
level, the Community may adopt measures, in accordance
with the principle of subsidiarity as set out in Article 5 of
the Treaty. In accordance with the principle of propor-
tionality, as set out in that Article, this Directive does not
go beyond what is necessary in order to achieve those
objectives.

(14)

This Directive respects
rights and
observes the principles recognised in particular by the
Charter of the Fundamental Rights of the European Union.

the fundamental

2.

in Article 11, third paragraph, the words ‘the Directive set-
ting those amounts in consequence of the review provided
for in Article 53(2)’ shall be replaced by ‘any Directive set-
ting those amounts’;

3.

in Article 27, the first paragraph shall be amended as follows:

(a)

(b)

indent

total:
in the first
EUR 14 600 000’ shall be replaced by the words ‘bal-
ance sheet total: EUR 17 500 000’;

the words ‘balance sheet

second indent

in the
turnover:
EUR 29 200 000’ shall be replaced by the words ‘net
turnover: EUR 35 000 000’;

the words

‘net

(15)

In accordance with paragraph 34 of the Interinstitutional
agreement on better law-making (3), Member States are
encouraged to draw up, for themselves and in the inter-
ests of the Community, their own tables illustrating, as far
as possible, the correlation between this Directive and the
transposition measures, and to make them public.

4.

in Article 27, third paragraph, the words ‘the Directive set-
ting those amounts in consequence of the review provided
for in Article 53(2)’ shall be replaced by ‘any Directive set-
ting those amounts’;

5.

in Article 42a, the following paragraph shall be added:

(16) Directives
and
accordingly,

78/660/EEC,

91/674/EEC should

83/349/EEC,
therefore

86/635/EEC
amended

be

(1) OJ L 372, 31.12.1986, p. 1. Directive as last amended by Directive
2003/51/EC of the European Parliament and of the Council (OJ L 178,
17.7.2003, p. 16).

(2) OJ L 374, 31.12.1991, p. 7. Directive as amended by Directive

2003/51/EC.

(3) OJ C 321, 31.12.2003, p. 1.

‘(5a)
By way of derogation from the provisions of para-
graphs 3 and 4, Member States may, in accordance with
international accounting standards as adopted by Commis-
sion Regulation (EC) No 1725/2003 of 29 September 2003
adopting certain international accounting standards in accor-
dance with Regulation (EC) No 1606/2002 of the European
Parliament and of the Council (*), as amended until 5 Sep-
tember 2006, permit or require valuation of financial instru-
ments, together with the associated disclosure requirements

L 224/4

EN

Official Journal of the European Union

16.8.2006

which are provided for in international accounting standards
adopted in accordance with Regulation (EC) No 1606/2002
of
the Council of
19 July 2002 on the application of international accounting
standards (**).

the European Parliament and of

(*) OJ L 261, 13.10.2003, p. 1. Regulation as last amended
by Regulation (EC) No 108/2006 (OJ L 24, 27.1.2006,
p. 1).

(**) OJ L 243, 11.9.2002, p. 1.’

Member States may exempt transactions entered into
between two or more members of a group provided
that subsidiaries which are party to the transaction are
wholly owned by such a member.

“Related party” has the same meaning as in interna-
tional accounting standards adopted in accordance with
Regulation (EC) No 1606/2002.’

7.

the following Article shall be inserted:

6.

in Article 43(1), the following points shall be inserted:

‘Article 46a

‘(7a) the nature and business purpose of the company’s
arrangements that are not included in the balance sheet
and the financial impact on the company of those
arrangements, provided that the risks or benefits aris-
ing from such arrangements are material and in so far
as the disclosure of such risks or benefits is necessary
for assessing the financial position of the company.

1.
A company whose securities are admitted to trading
on a regulated market within the meaning of Article 4(1),
point (14) of Directive 2004/39/EC of the European Parlia-
ment and of the Council of 21 April 2004 on markets in
financial instruments (*) shall include a corporate governance
statement in its annual report. That statement shall be
included as a specific section of the annual report and shall
contain at least the following information:

Member States may permit the companies referred to in
Article 27 to limit the information required to be dis-
closed by this point to the nature and business pur-
pose of such arrangements;

(7b) transactions which have been entered into with related
parties by the company, including the amount of such
transactions, the nature of the related party relation-
ship and other information about the transactions nec-
essary for an understanding of the financial position of
the company, if such transactions are material and have
not been concluded under normal market conditions.
Information about
transactions may be
individual
aggregated according to their nature except where sepa-
rate information is necessary for an understanding of
the effects of related party transactions on the finan-
cial position of the company.

Member States may permit the companies referred to in
Article 27 to omit the disclosures prescribed in this
point unless those companies are of a type referred
to in Article 1(1) of Directive 77/91/EEC, in which case
Member States may limit disclosure to, as a minimum,
transactions entered into directly or indirectly between:

(i)

the company and its major shareholders,

and

(a) a reference to:

(i)

the corporate governance code to which the com-
pany is subject,

and/or

(ii)

the corporate governance code which the company
may have voluntarily decided to apply,

and/or

(iii) all relevant information about the corporate gover-
nance practices applied beyond the requirements
under national law.

Where points (i) and (ii) apply, the company shall also
indicate where the relevant texts are publicly available;
where point (iii) applies, the company shall make its
corporate governance practices publicly available;

(b)

to the extent to which a company, in accordance with
national law, departs from a corporate governance code
referred to under points (a)(i) or (ii), an explanation by
the company as to which parts of the corporate gover-
nance code it departs from and the reasons for doing
so. Where the company has decided not to apply any
provisions of a corporate governance code referred to
under points (a)(i) or (ii), it shall explain its reasons for
doing so;

(ii)

the company and the members of the administra-
tive, management and supervisory bodies.

(c) a description of the main features of the company’s
internal control and risk management systems in rela-
tion to the financial reporting process;

16.8.2006

EN

Official Journal of the European Union

L 224/5

(d)

the information required by Article 10(1), points (c), (d),
(f), (h) and (i) of Directive 2004/25/EC of the European
Parliament and of the Council of 21 April 2004 on take-
over bids (**), where the company is subject to that
Directive;

with the requirements of this Directive and, where appli-
cable,
in accordance with the international accounting
standards adopted in accordance with Regulation (EC)
No 1606/2002. Such bodies shall act within the compe-
tences assigned to them by national law.

(e) unless the information is already fully provided for in
national laws or regulations, the operation of the share-
holder meeting and its key powers, and a description of
shareholders’ rights and how they can be exercised;

Article 50c

(f)

the composition and operation of the administrative,
and their
and supervisory bodies
management
committees.

2. Member States may permit the information required
by this Article to be set out in a separate report published
together with the annual report in the manner set out in
Article 47 or by means of a reference in the annual report
where such document is publicly available on the compa-
ny’s website. In the event of a separate report, the corporate
governance statement may contain a reference to the annual
report where the information required in paragraph 1,
point (d) is made available. Article 51(1), second subpara-
graph shall apply to the provisions of paragraph 1, points (c)
and (d) of this Article. For the remaining information, the
statutory auditor shall check that the corporate governance
statement has been produced.

3. Member States may exempt companies which have
only issued securities other than shares admitted to trading
on a regulated market, within the meaning of Article 4(1),
point (14) of Directive 2004/39/EC, from the application of
the provisions of paragraph 1, points (a), (b), (e) and (f),
unless such companies have issued shares which are traded
in a multilateral trading facility, within the meaning of
Article 4(1), point (15) of Directive 2004/39/EC.

(*) OJ L 145, 30.4.2004, p. 1.
(**) OJ L 142, 30.4.2004, p. 12.’

8.

the following Section shall be inserted:

Member States shall ensure that their laws, regulations and
administrative provisions on liability apply to the members
of the administrative, management and supervisory bodies
referred to in Article 50b, at least towards the company, for
breach of the duty referred to in Article 50b.’

9. Article 53a shall be replaced by the following:

‘Article 53a

Member States shall not make available the exemptions
set out in Articles 11, 27, 43(1), points (7a) and (7b), 46,
47 and 51 in the case of companies whose securities are
admitted to trading on a regulated market within the mean-
ing of Article 4(1), point (14) of Directive 2004/39/EC.’

10. the following Article shall be inserted:

‘Article 60a

Member States shall lay down the rules on penalties appli-
cable to infringements of the national provisions adopted
pursuant to this Directive and shall take all the measures
necessary to ensure that they are implemented. The penal-
ties provided for must be effective, proportionate and
dissuasive.’

11. Article 61a shall be replaced by the following:

‘SECTION 10A

Duty and liability for drawing up and publishing the
annual accounts and the annual report

‘Article 61a

Article 50b

Member States shall ensure that the members of the admin-
istrative, management and supervisory bodies of the com-
pany have collectively the duty to ensure that the annual
accounts, the annual report and, when provided separately,
the corporate governance statement to be provided pursu-
ant to Article 46a are drawn up and published in accordance

Not later than 1 July 2007, the Commission shall review
the provisions in Articles 42a to 42f, Article 43(1)(10)
and (14), Article 44(1), Article 46(2)(f) and Article 59(2)(a)
and (b) in the light of the experience acquired in applying
provisions on fair value accounting, with particular regard
to IAS 39 as endorsed in accordance with Regulation (EC)
No 1606/2002, and taking account of international devel-
opments in the field of accounting and, if appropriate, sub-
mit a proposal to the European Parliament and the Council
with a view to amending the abovementioned Articles.’

L 224/6

EN

Official Journal of the European Union

16.8.2006

Article 2

Amendments to Directive 83/349/EEC

Article 47 of that Directive, the information provided
under the first subparagraph shall also form part of that
separate report. Article 37(1), second subparagraph of
this Directive shall apply.

Directive 83/349/EEC is hereby amended as follows:

(*) OJ L 145, 30.4.2004, p. 1.’

3. The following Section shall be inserted:

1.

In Article 34, the following points shall be inserted:

‘(7a) The nature and business purpose of any arrangements
that are not included in the consolidated balance sheet,
and the financial impact of those arrangements, pro-
vided that the risks or benefits arising from such
arrangements are material and in so far as the disclo-
sure of such risks or benefits is necessary for assessing
the financial position of the undertakings included in
the consolidation taken as a whole.

(7b) The transactions, save for intra-group transactions,
entered into by the parent undertaking, or by other
undertakings included in the consolidation, with related
parties, including the amounts of such transactions, the
nature of the related party relationship as well as other
information about the transactions necessary for an
understanding of the financial position of the under-
takings included in the consolidation taken as a whole,
if such transactions are material and have not been con-
cluded under normal market conditions. Information
about
transactions may be aggregated
according to their nature except where separate infor-
mation is necessary for an understanding of the effects
of the related party transactions on the financial posi-
tion of the undertakings included in the consolidation
taken as a whole.’

individual

2.

In Article 36(2), the following point shall be added:

‘(f) a description of the main features of the group’s inter-
nal control and risk management systems in relation to
the process for preparing consolidated accounts, where
an undertaking has its securities admitted to trading on
a regulated market within the meaning of Article 4(1),
point (14) of Directive 2004/39/EC of the European
Parliament and of the Council of 21 April 2004 on mar-
kets in financial instruments (*). In the event that the
consolidated annual report and the annual report are
presented as a single report, this information must be
included in the section of the report containing the cor-
porate governance statement as provided for by
Article 46a of Directive 78/660/EEC.

If a Member State permits the information required
by paragraph 1 of Article 46a of Directive 78/660/EEC
to be set out in a separate report published together
with the annual report in the manner prescribed by

‘SECTION 3A

Duty and liability for drawing up and publishing the
consolidated accounts and the consolidated annual
report

Article 36a

Member States shall ensure that the members of the admin-
istrative, management and supervisory bodies of undertak-
ings drawing up the consolidated accounts and the
consolidated annual report have collectively the duty to
ensure that the consolidated accounts, the consolidated
annual report and, when provided separately, the corporate
governance statement to be provided pursuant to Article 46a
of Directive 78/660/EEC are drawn up and published in
accordance with the requirements of this Directive and,
where applicable,
in accordance with the international
accounting standards adopted in accordance with Regula-
tion (EC) No 1606/2002 of the European Parliament and of
the Council of 19 July 2002 on the application of interna-
tional accounting standards (*). Such bodies shall act within
the competences assigned to them by national law.

Article 36b

Member States shall ensure that their laws, regulations and
administrative provisions on liability apply to the members
of the administrative, management and supervisory bodies
referred to in Article 36a, at least towards the undertaking
drawing up the consolidated accounts, for breach of the duty
referred to in Article 36a.

(*) OJ L 243, 11.9.2002, p. 1.’

4.

In Article 41, the following paragraph shall be inserted:

“Related party” has the same meaning as in interna-
‘1a.
tional accounting standards adopted in accordance with
Regulation (EC) No 1606/2002.’

5.

the following Article shall be inserted:

‘Article 48

Member States shall lay down the rules on penalties appli-
cable to infringements of the national provisions adopted
pursuant to this Directive and shall take all the measures
necessary to ensure that they are implemented. The penal-
ties provided for must be effective, proportionate and
dissuasive.’

16.8.2006

EN

Official Journal of the European Union

L 224/7

Article 3

Amendment to Directive 86/635/EEC

Article 5

Transposition

The first sentence of Article 1(1) of Directive 86/635/EEC shall
be replaced by the following:

‘Articles 2, 3, 4(1), (3) to (6), Articles 6, 7, 13, 14, 15(3) and (4),
Articles 16 to 21, 29 to 35, 37 to 41, 42 first sentence, 42a
to 42f, 45(1), 46(1) and (2), 46a, Articles 48 to 50, 50a, 50b,
50c, 51(1) and 51a, 56 to 59, 60a, 61 and 61a of Directive
78/660/EEC shall apply to the institutions mentioned in Article 2
of this Directive, except where this Directive provides otherwise.’

Article 4

Amendment to Directive 91/674/EEC

1. Member States shall bring into force the laws, regulations
and administrative provisions necessary to comply with this
Directive by 5 September 2008 at the latest.

When Member States adopt these measures, they shall contain a
reference to this Directive or shall be accompanied by such a ref-
erence on the occasion of their official publication. The methods
of making such reference shall be laid down by Member States.

2. Member States shall communicate to the Commission the
text of the main provisions of national law which they adopt in
the field covered by this Directive.

Article 6

Entry into force

This Directive shall enter into force on the 20th day following
its publication in the Official Journal of the European Union.

The first sentence of Article 1(1) of Directive 91/674/EEC shall
be replaced by the following:

Article 7

Addressees

‘Articles 2, 3, 4(1), (3) to (6), Articles 6, 7, 13, 14, 15(3) and (4),
Articles 16 to 21, 29 to 35, 37 to 41, 42, 42a to 42f, 43 (1),
points 1 to 7b and 9 to 14, 45(1), 46(1) and (2), 46a, 48 to 50,
50a, 50b, 50c, 51(1), 51a, 56 to 59, 60a, 61 and 61a of Direc-
tive 78/660/EEC shall apply to the undertakings mentioned in
Article 2 of this Directive, except where this Directive provides
otherwise.’

This Directive is addressed to the Member States.

Done at Strasbourg, 14 June 2006.

For the European Parliament
The President
J. BORRELL FONTELLES

For the Council
The President
H. WINKLER