Commission Directive 2006/111/EC of 16 November 2006 on the transparency of financial relations between Member States and public undertakings as well as on financial transparency within certain undertakings (Codified version)   (Text with EEA relevance)
Date: 2006-11-16
Institutions: European Commission
Subjects: State aid, administrative transparency, codification of EU law, economic relations, financial management, public authorities, public finance, public sector

17.11.2006

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COMMISSION DIRECTIVE 2006/111/EC

of 16 November 2006

on the transparency of financial relations between Member States and public undertakings as well
as on financial transparency within certain undertakings

(Text with EEA relevance)

(Codified version)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty
Community, and in particular Article 86(3) thereof,

establishing the European

Whereas:

(1)

(2)

(3)

(4)

(5)

(6)

Commission Directive 80/723/EEC of 25 June 1980 on
the transparency of financial relations between Member
States and public undertakings as well as on financial
transparency within certain undertakings (1) has been
substantially amended several times (2). In the interests
of clarity and rationality the said Directive should be
codified.

Public undertakings play a substantial role in the national
economy of the Member States.

Member States sometimes grant special or exclusive
rights to particular undertakings, or make payments or
give some other kind of compensation to particular
undertakings entrusted with the operation of services of
general economic interest. These undertakings are often
also in competition with other undertakings.

the

rules

Article 295 of the Treaty provides that the Treaty is in
no way to prejudice
in Member States
governing the system of property ownership. There
should be no unjustified discrimination between public
and private undertakings in the application of the rules
on competition. This Directive should apply to both
public and private undertakings.

The Treaty requires the Commission to ensure that
Member States do not grant undertakings, public or
private, aids incompatible with the common market.

the

complexity of

However,
relations
between national public authorities and public under-
takings tends to hinder the performance of this duty.

financial

the

(1) OJ L 195, 29.7.1980, p. 35. Directive as last amended by Directive

2005/81/EC (OJ L 312, 29.11.2005, p. 47).

(2) See Annex I, Part A.

(7)

(8)

(9)

A fair and effective application of the aid rules in the
Treaty to both public and private undertakings will be
possible only if these financial relations are made trans-
parent.

Such transparency applied to public undertakings should
enable a clear distinction to be made between the role of
the State as public authority and its role as proprietor.

the Treaty imposes obligations on
Article 86(1) of
Member States in the case of public undertakings and
undertakings to which Member States grant special or
exclusive rights. Article 86(2) of the Treaty applies to
undertakings entrusted with the operation of services of
general economic interest. Article 86(3) of the Treaty
requires the Commission to ensure the application of
the provisions of that Article and provides it with the
requisite means to this end. In order to ensure the appli-
cation of the provisions of Article 86 of the Treaty the
Commission must have the necessary information. This
entails defining the conditions for ensuring such trans-
parency.

(10)

It should be made clear what is to be understood by the
terms ‘public authorities’ and ‘public undertakings’.

(11)

The Member States have differing administrative terri-
torial
structures. This Directive should cover public
authorities at all levels in each Member State.

(12)

(13)

Public authorities may exercise a dominant influence on
the behaviour of public undertakings not only where
they are the proprietor or have a majority participation
but also by virtue of powers they hold in management or
supervisory bodies as a result either of
the rules
governing the undertaking or of the manner in which
the shareholdings are distributed.

The provision of public funds to public undertakings
may take place either directly or indirectly. Transparency
must be achieved irrespective of the manner in which
such provision of public funds is made. It may also be
necessary to ensure that adequate information is made
available as regards the reasons for such provision of
public funds and their actual use.

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(14)

(15)

(16)

Complex situations linked to the diverse forms of public
and private undertakings granted special or exclusive
rights or entrusted with the operation of services of
general economic interest as well as
the range of
activities that might be carried on by a single undertaking
and the different degrees of market liberalisation in the
various Member States could complicate application of
the competition rules, and particularly Article 86 of the
Treaty. It is therefore necessary for Member States and
the Commission to have detailed data about the internal
and financial and organisational structure of such under-
takings,
separate and reliable accounts
relating to different activities carried on by the same
undertaking.

in particular

should show the distinction between
The accounts
different activities,
the costs and revenues associated
with each activity and the methods of cost and revenue
assignment and allocation. Such separate accounts should
be available in relation to, on the one hand, products and
services in respect of which the Member State has
granted a special or exclusive right or entrusted the
undertaking with the operation of a service of general
economic interest, as well as, on the other hand, for each
other product or service in respect of which the under-
taking is active. The obligation of separation of accounts
should not apply to undertakings whose activities are
limited
general
economic interest and which do not operate activities
outside the scope of these services of general economic
interest. It does not seem necessary to require separation
of accounts within the area of
services of general
economic interest or within the area of the special or
exclusive rights, as far as this is not necessary for the
cost and revenue allocation between these services and
products and those outside the services of general
economic interest or the special or exclusive rights.

to the provision of

services of

interest

Requiring Member States to ensure that
the relevant
undertakings maintain such separate accounts is the
most efficient means by which fair and effective appli-
cation of the rules of competition to such undertakings
In 1996 the Commission adopted a
can be assured.
Communication on services of general
in
Europe (1), which was supplemented by another Commu-
nication in 2001 (2),
emphasised the
importance of such services.
is necessary to take
the sectors concerned,
account of
the importance of
which may involve services of general
the
the relevant undertakings
strong market position that
may have and the vulnerability of emerging competition
in the sectors being liberalised. In accordance with the
principle of proportionality it is necessary and appro-
priate for the achievement of the basic objective of trans-
parency to lay down rules on such separate accounts.
This Directive does not go beyond what is necessary in

in which it
It

interest,

(1) OJ C 281, 26.9.1996, p. 3.
(2) OJ C 17, 19.1.2001, p. 4.

(17)

(18)

(19)

(20)

in accordance
order to achieve the objectives pursued,
with the provisions of the third paragraph of Article 5
of the Treaty.

In certain sectors provisions adopted by the Community
require Member States and certain undertakings
to
maintain separate accounts. It is necessary to ensure an
equal treatment for all economic activities throughout the
Community and to extend the requirement to maintain
separate accounts
to all comparable situations. This
Directive should not amend specific rules established
for the same purpose in other Community provisions
and should not apply to activities of undertakings
covered by those provisions.

Certain undertakings should be excluded from the appli-
cation of this Directive by virtue of the size of their
turnover. This applies
to those public undertakings
whose business is not conducted on such a scale as to
justify the administrative burden of ensuring trans-
parency. In view of the limited potential for an effect
on trade between Member States, it is not necessary, at
this time, to require separate accounts in relation to the
supply of certain categories of services.

This Directive is without prejudice to other provisions of
the Treaty, notably Articles 86(2), 88 and 296, and to
any other rules concerning the provision of information
by Member States to the Commission.

In cases where the compensation for the fulfilment of
services of general economic interest has been fixed for
an appropriate period following an open, transparent and
non-discriminatory procedure it does not seem necessary
to require
to maintain separate
accounts.

such undertakings

(21)

The undertakings in question being in competition with
other undertakings,
information acquired should be
covered by the obligation of professional secrecy.

(22) A reporting system based on ex post facto checks of the
financial
flows between public authorities and public
undertakings operating in the manufacturing sector will
its obligations. That
enable the Commission to fulfil
system of control must cover specific financial
infor-
mation.

(23)

In order to limit the administrative burden on Member
States, the reporting system should make use of both
publicly available data and information available to
majority shareholders. The presentation of consolidated
Incompatible aid to major
reports is to be permitted.
undertakings operating in the manufacturing sector will
have the greatest distortive effect on competition in the
common market. Therefore, such a reporting system may
at present be limited to undertakings with a yearly
turnover of more than EUR 250 million.

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(24)

This Directive should be without prejudice to the obli-
gations of the Member States relating to the time-limits
for transposition into national law of the Directives set
out in Annex I, Part B,

(ii) control the majority of the votes attaching to shares

issued by the undertakings; or

HAS ADOPTED THIS DIRECTIVE:

Article 1

1.
The Member States shall ensure that financial relations
between public authorities and public undertakings are trans-
parent as provided in this Directive, so that
the following
emerge clearly:

(a) public funds made available directly by public authorities to

the public undertakings concerned;

(b) public funds made available by public authorities through
the intermediary of public undertakings or financial
insti-
tutions;

(c)

the use to which these public funds are actually put.

(iii) can appoint more than half of the members of the
undertaking's administrative, managerial or supervisory
body;

(c)

‘public undertakings operating in the manufacturing sector’
means all undertakings whose principal area of activity,
defined as being at least 50 % of total annual turnover, is
in manufacturing. These undertakings are those whose
operations fall under Section D — Manufacturing being
subsection DA up to and including subsection DN of the
NACE (Rev.1) classification (1);

(d) ‘undertaking required to maintain separate accounts’ means
any undertaking that enjoys a special or exclusive right
granted by a Member State pursuant to Article 86(1) of
the Treaty or is entrusted with the operation of a service
of general economic interest pursuant to Article 86(2) of
the Treaty, that receives public service compensation in any
form whatsoever in relation to such service and that carries
on other activities;

2. Without prejudice to specific provisions laid down by the
Community the Member States shall ensure that the financial
and organisational structure of any undertaking required to
maintain separate
correctly reflected in the
is
separate accounts, so that the following emerge clearly:

accounts

(a)

the costs and revenues associated with different activities;

(b) full details of the methods by which costs and revenues are

assigned or allocated to different activities.

(e)

(f)

Article 2

For the purpose of this Directive:

‘different activities’ means, on the one hand, all products or
services in respect of which a special or exclusive right is
granted to an undertaking or all
services of general
economic interest with which an undertaking is entrusted
and, on the other hand, each other separate product or
service in respect of which the undertaking is active;

‘exclusive rights’ means rights that are granted by a Member
State to one undertaking through any legislative, regulatory
to
or administrative instrument,
provide a service or undertake an activity within a given
geographical area;

reserving it

the right

(a)

‘public authorities’ means all public authorities,
including
the State and regional, local and all other territorial autho-
rities;

(g)

‘special rights’ means rights that are granted by a Member
State to a limited number of undertakings, through any
legislative, regulatory or administrative instrument, which,
within a given geographical area:

(b) ‘public undertakings’ means any undertaking over which the
indirectly a
it,
the rules which

public authorities may exercise directly or
influence by virtue of
dominant
financial participation therein, or
their
govern it.

their ownership of

A dominant influence on the part of the public authorities
shall be presumed when these authorities, directly or
indirectly in relation to an undertaking:

(i) limits to two or more the number of such under-
takings, authorised to provide a service or undertake
an activity, otherwise than according to objective,
proportional and non-discriminatory criteria; or

(ii) designates, otherwise than according to such criteria,
several competing undertakings, as being authorised
to provide a service or undertake an activity; or

(i) hold the major part of the undertaking’s subscribed

capital; or

(1) OJ L 83, 3.4.1993, p. 1.

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(iii) confers on any undertaking or undertakings, otherwise
than according to such criteria, any legal or regulatory
advantages which substantially affect the ability of any
other undertaking to provide the same service or to
operate the same activity in the same geographical
area under substantially equivalent conditions.

(a) public undertakings, as regards services the supply of which
is not liable to affect trade between Member States to an
appreciable extent;

Article 3

(b) central banks;

The transparency referred to in Article 1(1) shall apply in
particular
relations
financial
following aspects of
between public authorities and public undertakings:

to the

(c) public credit institutions, as regards deposits of public funds
authorities on normal

placed with them by public
commercial terms;

(a)

the setting-off of operating losses;

(b) the provision of capital;

(c) non-refundable grants, or loans on privileged terms;

(d) the granting of financial advantages by forgoing profits or

the recovery of sums due;

(e)

the forgoing of a normal return on public funds used;

the two financial years preceding that

(d) public undertakings whose total annual net turnover over
the period of
in
which the funds referred to in Article 1(1) are made
available or used has been less than EUR 40 million.
However, for public credit institutions the corresponding
threshold shall be a balance sheet total of EUR 800 million.

As far as the transparency referred to in Article 1(2) is

2.
concerned, this Directive shall not apply:

(f) compensation for financial burdens imposed by the public

authorities.

(a)

to undertakings, as regards services the supply of which is
not
trade between Member States to an
appreciable extent;

liable to affect

Article 4

To ensure the transparency referred to in Article 1(2), the
1.
Member States shall take the measures necessary to ensure that
for any undertaking required to maintain separate accounts:

(a)

the internal accounts corresponding to different activities
are separate;

(b) to undertakings whose total annual net turnover over the
period of the two financial years preceding any given year
in which it enjoys a special or exclusive right granted by a
Member State pursuant to Article 86(1) of the Treaty, or in
which it is entrusted with the operation of a service of
general economic interest pursuant to Article 86(2) of the
Treaty is less than EUR 40 million; however, for public
credit institutions the corresponding threshold shall be a
balance sheet total of EUR 800 million;

(b) all costs and revenues are correctly assigned or allocated on
the basis of consistently applied and objectively justifiable
cost accounting principles;

(c)

(c)

the cost accounting principles according to which separate
accounts are maintained are clearly established.

Paragraph 1 shall only apply to activities which are not
2.
covered by specific provisions laid down by the Community
and shall not affect any obligations of Member States or under-
takings arising from the Treaty or from such specific provisions.

Article 5

1.
As far as the transparency referred to in Article 1(1) is
concerned, this Directive shall not apply to financial relations
between the public authorities and:

services

to undertakings which have been entrusted with the
operation of
interest
pursuant to Article 86(2) of the Treaty if the compensation
in any form whatsoever, was fixed for an
they receive,
appropriate period following an open,
transparent and
non-discriminating procedure.

economic

general

of

Article 6

1. Member States shall ensure that information concerning
the financial relations referred to in Article 1(1) be kept at the
disposal of the Commission for five years from the end of the
financial year in which the public funds were made available to
the public undertakings concerned. However, where the same
funds are used during a later financial year, the five-year time
limit shall run from the end of that financial year.

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2. Member States shall ensure that information concerning
structure of undertakings
the financial and organisational
referred to in Article 1(2) be kept at
the
the disposal of
Commission for five years from the end of the financial year
to which the information refers.

(a)

the provision of any share capital or quasi-capital funds
similar in nature to equity, specifying the terms of its or
their provision (whether ordinary, preference, deferred or
convertible shares and interest
the dividend or
conversion rights attaching thereto);

rates;

3. Member States shall, where the Commission considers it
necessary so to request, supply to it the information referred to
in paragraphs 1 and 2, together with any necessary background
information, notably the objectives pursued.

Article 7

The Commission shall not disclose such information supplied to
to Article 6(3) as is of a kind covered by the
it pursuant
obligation of professional secrecy.

(b) non-refundable grants, or grants which are only refundable

in certain circumstances;

(c)

including over-
the award to the enterprise of any loans,
drafts and advances on capital
injections, with a specifi-
cation of interest rates and the terms of the loan and its
security,
if any, given to the lender by the enterprise
receiving the loan;

(d) guarantees given to the enterprise by public authorities in
respect of loan finance (specifying terms and any charges
paid by enterprises for these guarantees);

The first paragraph shall not prevent publication of general
information or surveys which do not contain information
relating to particular public undertakings
to which this
Directive applies.

(e) dividends paid out and profits retained;

Article 8

1. Member States whose public undertakings operate in the
manufacturing sector shall supply the financial information as
set out in paragraphs 2 and 3 to the Commission on an annual
basis within the timetable contained in paragraph 5.

2.
The financial information required for each public under-
taking operating in the manufacturing sector and in accordance
with paragraph 4 shall be the annual
report and annual
in accordance with the definition of Council
accounts,
Directive 78/660/EEC (1). The annual accounts and annual
report include the balance sheet and profit/loss account, expla-
natory notes, together with accounting policies, statements by
directors, segmental and activity reports. Moreover, notices of
information
shareholders' meetings and any other pertinent
shall be provided.

(f) any other forms of State intervention,

in particular, the
forgoing of sums due to the State by a public undertaking,
including inter alia the repayment of loans, grants, payment
of corporate or social taxes or any similar charges.

The share capital referred to in (a) shall include share capital
contributed by the State directly and any share capital received
contributed by a public holding company or other public
undertaking, including financial institutions, whether inside or
outside the same group, to a given public undertaking. The
relationship between the provider of
the finance and the
recipient shall always be specified.

4.
The information required by paragraphs 2 and 3 shall be
provided for all public undertakings whose turnover for the
most recent financial year was more than EUR 250 million.

The reports required shall be provided for each individual public
undertaking separately, as well as for the holding or subholding
company which consolidates several public undertakings in so
far as the consolidated sales of
the holding or subholding
company lead to its being classified as ‘manufacturing’.

The information required above shall be supplied separately for
each public undertaking including those located in other
Member States, and shall include, where appropriate, details of
all intra- and inter-group transactions between different public
undertakings, as well as transactions conducted directly between
public undertakings and the State.

The following details,

in so far as not disclosed in the
3.
annual report and annual accounts of each public undertaking,
shall be provided in addition to the information referred to in
paragraph 2:

(1) OJ L 222, 14.8.1978, p. 11.

Certain public enterprises split their activities into several legally
distinct undertakings. For such enterprises the Commission is
willing to accept one consolidated report. The consolidation
should reflect the economic reality of a group of enterprises
operating in the same or closely related sectors. Consolidated
reports from diverse, and purely financial, holdings shall not be
sufficient.

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The information required under paragraphs 2 and 3 shall

5.
be supplied to the Commission on an annual basis.

The information shall be provided within 15 working days of
the date of publication of the annual report of the public under-
taking concerned. In any case, and specifically for undertakings
which do not publish an annual report, the required infor-
mation shall be
than nine months
submitted not
following the end of the undertaking's financial year.

later

In order to assess the number of companies covered by
6.
supply to the
reporting system, Member States
this
Commission a list of the companies covered by this Article
and their turnover. The list is to be updated by 31 March of
each year.

shall

7. Member States will
additional
complete a thorough appraisal of the data submitted.

furnish the Commission with any
it deems necessary in order to

information that

Article 10

Directive 80/723/EEC, as amended by the Directives listed in
Annex I, Part A, is repealed, without prejudice to the obligations
of the Member States relating to the time-limits for transpo-
sition into national law of the Directives set out in Annex I,
Part B.

References to the repealed Directive shall be construed as
references to this Directive and shall be read in accordance
with the correlation table in Annex II.

Article 11

This Directive shall enter into force on 20 December 2006.

Article 12

This Directive is addressed to the Member States.

Done at Brussels, 16 November 2006.

Article 9

The Commission shall regularly inform the Member States of
the results of the operation of this Directive.

For the Commission

Neelie KROES
Member of the Commission

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ANNEX I

PART A

REPEALED DIRECTIVE WITH ITS SUCCESSIVE AMENDMENTS

(referred to in Article 10)

Commission Directive 80/723/EEC

(OJ L 195, 29.7.1980, p. 35)

Commission Directive 85/413/EEC

(OJ L 229, 28.8.1985, p. 20)

Commission Directive 93/84/EEC

(OJ L 254, 12.10.1993, p. 16)

Commission Directive 2000/52/EC

(OJ L 193, 29.7.2000, p. 75)

Commission Directive 2005/81/EC

(OJ L 312, 29.11.2005, p. 47)

PART B

LIST OF TIME LIMITS FOR TRANSPOSITION INTO NATIONAL LAW

(referred to in Article 10)

Directive

Time limit for transposition

80/723/EEC

85/413/EEC

93/84/EEC

2000/52/EC

2005/81/EC

31 December 1981

1 January 1986

1 November 1993

31 July 2001

19 December 2006

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ANNEX II

CORRELATION TABLE

Directive 80/723/EEC

This Directive

Article 1

Article 1

Article 2(1), introductory sentence

Article 2, introductory sentence

Article 2(1), point (a)

Article 2(1), point (b)

Article 2, point (a)

Article 2, point (b), first subparagraph

Article 2(1), points (c) to (f)

Article 2, points (c) to (f)

Article 2(1), point (g), introductory words

Article 2, point (g), introductory words

Article 2(1), point (g), first indent

Article 2, point (g)(i)

Article 2(1), point (g), second indent

Article 2, point (g)(ii)

Article 2(1), point (g), third indent

Article 2, point (g)(iii)

Article 2(2), introductory sentence

Article 2, point
sentence

(b), second subparagraph,

introductory

Article 2(2), point (a)

Article 2(2), point (b)

Article 2(2), point (c)

Article 3

Article 3a

Article 4

Article 5

Article 5a(1)

Article 2, point (b), second subparagraph, point (i)

Article 2, point (b), second subparagraph, point (ii)

Article 2, point (b), second subparagraph, point (iii)

Article 3

Article 4

Article 5

Article 6

Article 8(1)

Article 5a(2), first subparagraph, introductory sentence

Article 8(2), first subparagraph

Article 5a(2), first subparagraph, point (i)

Article 8(2), first subparagraph

Article 5a(2), second subparagraph,

introductory sentence Article 8(3), first subparagraph, introductory sentence

Article 5a(2), second subparagraph, point (ii)

Article 8(3), first subparagraph, point (a)

Article 5a(2), second subparagraph, point (iii)

Article 8(3), first subparagraph, point (b)

Article 5a(2), second subparagraph, point (iv)

Article 8(3), first subparagraph, point (c)

Article 5a(2), second subparagraph, point (v)

Article 8(3), first subparagraph, point (d)

Article 5a(2), second subparagraph, point (vi)

Article 8(3), first subparagraph, point (e)

Article 5a(2), second subparagraph, point (vii)

Article 8(3), first subparagraph, point (f)

Article 5a(3), first subparagraph

Article 8(4), first subparagraph

Article 5a(3), second subparagraph, first sentence

Article 8(4), second subparagraph

Article 5a(3), second subparagraph, second sentence

Article 8(3), second subparagraph, first sentence

Article 5a(3), second subparagraph, third sentence

Article 8(3), second subparagraph, second sentence

Article 5a(3), second subparagraph, last sentence

Article 8(2), second subparagraph

Article 5a(3), third subparagraph

Article 8(4), third subparagraph

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Directive 80/723/EEC

This Directive

Article 5a(4), first subparagraph

Article 8(5), first subparagraph

Article 5a(4), second subparagraph

Article 8(5), second subparagraph

Article 5a(4), third subparagraph

Article 5a(5)

Article 5a(6)

Article 6(1)

Article 6(2)

Article 7

Article 8

—

—

Article 9

—

—

Article 8(6)

—

Article 8(7)

Article 7, first paragraph

Article 7, second paragraph

Article 9

—

Article 10

Article 11

Article 12

Annex I

Annex II