Source: EURLEX
Language: en
Format: md

### **`COMMISSION OF THE EUROPEAN COMKONITIES`**

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                                                                                 v.

                         C0M(89) 268 final - SYN 218 and 219

                         Brussels, 25 August 1989

                         C0M(89) 268 final - SYN 218

                  Proposal for a

                 COUNCIL REGULATION

           on the Statute for a European company

                        C0M(89) 268 final»- SYN 219

                  Proposal for a

                 COUNCIL DIRECTIVE

        complementing the Statute for a European company

         with regard to the involvement of employees

                In the European company

              (presented by the Commission)

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IntroductIon

The European company (Latin Socletas Europaea, "SE") Is designed to enable

companies governed by the laws of different Member States to choose a

structure for cooperation and restructuring suited to the dimensions of the

large market to be achieved in 1992. It alms to free companies from the

legal and practical constraints arising from the existence of twelve

separate legal systems by offering them an optional structure based on

Community law and independent o.f national laws In so far as these have not

been harmonized. As long ago as 1970, the Commission put forward a proposal

based on Article 235 of the EEC Treaty. This proposal was amended in 1975.

The Council suspended work on It In 1982. It was suggested that this

project should be revived as part of the drive towards completing the

internal market. In June 1987 the European Council In Brussels requested

the institutions concerned "to make swift progress with regard to the

company law adjustments required for the creation of a European company."

On 15 July 1988 the Commission submitted a memorandum describing the main

difficulties and sketching solutions [1] .

The text now proposed is in two parts. It brings together In a Regulation

based on Article 100a all the rules necessary for the creation and

operation of the SE, except those dealing with the involvement of employees

in the SE. The latter rules form the subject of a complementary Directive,

in view of the diversity of national rules and practices on that subject.

The Regulation and the Directive form a composite whole, and must be

applied together.

In order to make the form attractive to small businesses, the minimum

capital requirement has been lowered from ECU 250 000 to ECU 100 000

(Title I).

1 C0M(88)320, 15 July 1988

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                     - 1 a 
Tltle II, on methods of formation, Is based on the 1975 proposal. An SE

may be set up by merger, by the formation of a holding company, or by the

formation of a Joint subsidiary. The procedure for formation by merger Is

based largely on the Third Company Law Directive (78/855/EEC), supplemented

to take account of the cross border aspect of the proposal for a

Tenth directive.

Title 111, on capital, shares and debentures, has been revised in the light

of the Second Directive (77/91/EEC).

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                    - 2 
The structure of the SE Is dealt with in Title IV; here the proposal takes

account of progress In the Council's discussion of the proposal for a

Fifth Directive, and retains the option of either a one-tier board system

or a two-tier system with a management board and a supervisory board.

For the preparation, publication and auditing of annual accounts and

consolidated accounts (Title V), the Statute refers to the accounting

directives, namely the Fourth, Seventh and Eighth Company Law Directives

(78/660/EEC, 83/349/EEC and 84/253/EEC).

The options left to the Member States In the Fourth and Seventh Directives

have been given to the SE. This has been done In order to avoid having to

renegotiate those directives.

The Statute no longer contains any provisions concerning groups (Title VI),

because there is currently no need for specific rules for SEs In this area.

The SE will be treated in the same way as other companies governed by the

legislation of the Member State In which they have their registered office.

The Commission is studying the need for coordination of the laws of the

Member States in this respect.

Winding up and liquidation (Title VII) are matters which have not yet been

harmonized. The proposed regulation restricts the grounds on which an SE

may be wound up, and settles only the questions which are essential for the

protection of the shareholders at this delicate stage of the life of the

company.

Given the complexity of the question of the insolvency of an SE, the

proposal contents Itself with a reference to the law of the Member State In

which the SE has Its registered office.

Title VI11 refers to Title II for cross border mergers and to the laws of

the Member States, as harmonized by the Third Directive, for domestic

mergers.

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                     - 3

As far as tax arrangements are concerned (Title IX), the SE will be subject

to the tax law of the country in which It has Its registered office.

Losses suffered by an SE's permanent establishments abroad can be offset

against Its profits. This provision Is Indispensable In order to overcome

the obstacles which an SE would otherwise encounter In Its business, which

by its nature is cross border business.

To avoid any discrimination against other firms carrying on business across

borders, the same rules will be proposed as a directive for other legal

forms of undertaking.

The involvement of employees in the SE is dealt with by means of a

Directive, which is an Indispensable complement to the regulation. The term

"employees" corresponds to the "workers" referred to in Tltal III of Part

Two of the EEC Treaty. It comprises persons with a contract of service, of

whatever kind, to an employer. It covers the various categories of staff

employed by businesses In the Community. Employees are to play a part In

supervision and In the definition of strategy. Three models of

participation are provided for: participation In determining the membership

of the supervisory board (model 1), participation through a staff

representative body distinct from the governing bodies of the company

(model 2), and a form of participation to be established by collective

agreement (model 3 ) . A Member State may restrict the choice of models open

to SEs having their registered office In its territory. The management or

administrative boards as the case of the founder companies may be and the

representatives of the employees of those companies are to agree on the

choice of a model. If they fall to reach the management Board Is to choose

a model, since these can be no SE without participation, and the models all

confer equivalent rights on the employees. If model 3 Is chosen but no

agreement is reached on the form, a standard model Is to be applied, to be

drawn up by the State and satisfying the information and consultation

requirements laid down In the Statute.

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                  - 4 
         COMMENTARY ON THE ARTICLES OF THE REGULATION

                   Title I

                General provisions

                   Article 2

The Statute provides three ways of forming an SE.

1. Only public limited companies can set up an SE by merger (assets

merger) or by formation of a holding company. This Is because the

necessary exchange of shares will only be possible If both the founders are

pub lie IimI ted companIes.

If private limited companies wish to form an SE they will first have to

become public limited companies In accordance with their domestic law.

2. The scope for setting up an SE by forming a Joint subsidiary is wider.

Participation Is open to all legal bodies governed by public or private

law, whether or not they are In company form and Indeed whether or not they

have legal personality, and regardless of whether they carry on a

commercial activity or Just an activity with an ultimate economic purpose.

This very broad concept Is based on that adopted for the European Economic

Interest Grouping (EEIG). [1 ]

On grounds of legal certainty and for technical reasons It has not been

possible to make provision for the conversion Into an SE of a company

incorporated under national law and having branches In several

  The form created by Regulation (EEC) No 2137/85 of 25 July 1985:

  OJ No L 199, 31.7.1989, p. 1.

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                      - 5 
 Member States. Such a company could set up an SE by merging at least two

 subsidiaries in different Member States.

                     Article 3

 1 and 2. An existing SE may be party to the formation of another SE by

 merger or formation of a holding company or Joint subsidiary.

 3. An SE may also set up one or more subsidiaries, but In order to avoid

 the creation of "cascades" of SEs, an SE which Is Itself a subsidiary of an

 SE cannot create further subsidiary SEs.

                     Article 4

 1. The amended proposal of 1975 [2] would have required a minimum capital

 of ECU 250 000 where an SE was set up by merger or formation of a holding

 company and ECU 100 000 where the new SE was a Joint subsidiary or a

 subsidiary of another SE.

 This distinction has been dropped. The minimum capital for an SE Is now

 ECU 100 000 in all cases. The Intention Is to make It easier for small

 businesses to take advantage of the Statute. There Is also the fact that

 once a subsidiary SE has been set up It will have Its own Independent

 existence; It may be bought or may Itself set up subsidiaries. There will

 then be nothing to distinguish It from other SEs set up by merger or by the

 formation of a holding company.

 The figure of ECU 100 000 Is close to that laid down for domestic public

 limited companies In the laws of most of the Member States under the Second

 Company Law directive. [3] The capital need only be 25% paid up

 (cf. Article 38(2)).

2 Supplement 4/75 - Bulletin of the European Communities.

3 Council Directive 77/91/EEC of 13 December 1976 on the formation of

   pub Iic Iimlted I lab 11l*y companies and the maintenance and alteration of

   their capital: 0J No L 26, 31.1.1977, p. 1.

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                      - 6 
2 and 3. Where an SE Is set up to carry on a regulated activity, It will of

course be subject to the specific requirements governing that activity. An

SE may be a credit institution. In that case the minimum capital is that

required by Article 3 of the proposal for a Second Council Directive on the

taking up and pursuit of the business of credit institutions, submitted on

23 February 1988. [4] The figure given there is ECU 5 million, which may be

reduced to ECU 1 million In certain circumstances.

In the case of insurance undertakings, the text makes reference only to the

laws of the Member State In which the SE has Its registered office, even

though there has already been Community-level harmonization In this field.

The capital required does not correspond In all Member States to the

"solvency margin" referred to in the relevant Directives

(Directive 73/239/EEC [5] . and Directive 79/267/EEC [6] ).

                    Article 5

The registered office of the SE designated in the statutes must be the

place where it has its central administration, that Is to say its

siège réel or real seat. This use of the siège réel concept is Important

in several respects. Firstly, It reflects the dominant thinking In the

Member States. Secondly, It allows the law of one specific Member State to

be applied to the SE, either as the normal rule (where an express reference

is made by the Statute Itself, for example) or In the absence of any other

rule (e.g. Article 7 d ) ( b ) ) .

The transfer of an SE's registered office may be decided in the same way as

an amendment of Its statutes (Article 81(h)).

4 0J No C 84, 31.3.1988, p. 1 .

5 First Council Directive of 24 July 1973 on the taking up and pursuit of

   the business of direct insurance other than life assurance: OJ No L

   228, 16.8.1973, p. 3.

6 First Council Directive of 5 March 1979 on the taking up and pursuit of

   the business of direct life assurance: OJ No L 63, 13.3.1979, p. 1.

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                      - 7 
                    Article 6

This Article defines what "controlled undertaking" and "controlling

undertaking" mean In the Statute. These definitions are needed despite the

fact that the Statute does not lay down any rules dealing specifically with

the management of a group headed by the SE, mainly In order to prevent an

SE from subscribing for or acquiring its own shares through the agency of a

controlled undertaking (Article 48(1) and Article 49(1) and (9)). They are

necessary also in order to determine the law applicable under

Article 114(1) and (2).

The definition is based on Article 8 of Directive 88/627/EEC. [7] The tests

chosen are simple and easy to apply.

                    Article 7

This Article defines the scope of the Statute in relation to the laws of

the Member States. A distinction has to be drawn between the matters which

are regulated by the Statute and those which are not.

1. Where a matter is regulated by the Statute, the Statute should be as

independent as possible of national law so as to ensure that from the

firm's point of view It does represent a simplification and an improvement

over the existing position. The amended proposal of 1975 excluded the law

of the Member States entirely. The Statute which resulted was too

extensive, detailed and Inflexible. The new draft simplifies matters by

   Council Directive of 12 December 1988 on the information to be published

   when a major holding in a listed company is acquired or disposed of:

   OJ No L 348, 17.12.1988, p. 62.

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                    - 8 
referring to the domestic law of the Member State In which the SE has Its

registered office whenever the company law directives have harmonized or

are In the process of harmonizing the national rules (disclosure, accounts,

mergers, etc.). Reference has also had to be made to national law In

fields where Community rules cannot be expected In the near future (groups

of companies, winding up and liquidation, etc).

If a question of law arises on a matter covered by the Statute' but not

expressly determined by It, the national courts will have to fill the gap

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**`by looking`** _**In**_ **`the`** _**first**_ **`place at the general principles upon which the`**

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Statute is based. If the question cannot be settled in that way the

Statute refers to the law applying to public limited companies In the

Member Stats In which the SE has Its registered office.

Thus the demarcation line between the provisions of the Statute and the

ordinary provisions of national law Is clearly marked out. The adoption of

the EEIG Regulation, which takes the same approach, shows that coexistence

of this kind Is possible.

2. Paragraph 2 makes provision for the special situation in the

United Kingdom, where Scottish law is different from that In force

elsewhere.

3. Provision Is then made for matters which are not governed by the

Statute. They are excluded from Its scope, and subject to the law of the

Member States. The law applicable in a particular case Is to be determined

In accordance with the private International law of the forum.

4. The Statute requires Member States to treat SEs In the same way as

public limited companies incorporated under their domestic law. This will

apply for example with regard to the taking up of various kinds of

business, capacity to borrow, the Issuing of securities, and the listing of

such securities on a stock exchange. The only privilege that the Statute

confer? on the SE Is the Community character of Its structure. Companies

In the form of SEs and companies incorporated under domestic law are thus

on an equal footing <~t terms of competition.

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                      - 9 
                    Article 8

 1. An SE Is set up by being entered In a register designated by the law

 of the Member State in which It has Its registered office in accordance

 with Article 3 of the First Company Law Directive. [8] The use made here of

 a system which exists In all Member States makes It unnecessary to

 establish a European commercial register and to confer Jurisdiction on the

 Court of Justice of the European Communities to hear actions In respect of

 the formation of any SE.

 2. Any branch opened by an SE In a Member State other than that In which

 It has Its registered office Is to be registered In that other

 Member State, in order to ensure that shareholders and outsiders are fully

 Informed. The procedure to be followed Is the one laid down for branches

 by Articles 1 to 3 of the amended proposal for an

 Eleventh Company Law Directive,® which Is Itself based on the system

 established for companies by the First Directive.

                    Article 9

 Documents concerning the SE are to be disclosed by the means laid down In

 the laws of each Member State In accordance with Article 3 of the First

 Company Law Directive. That system consists of entry In a register and

 publication in a national gazette. Only then may those documents be relied

 upon against third parties.

8 Council Directive 68/151/EEC of 9 March 1969 on disclosure, validity of

   obligations entered Into, and nullity of companies: OJ No L 65,

   14.03.1968, p. 11.

9 Amended proposal of 5 April 1988 for an Eleventh Council Directive on

   company law concerning disclosure requirements In respect of branches

   opened In a Member State by certain types of companies governed by the

   law of another Member State: OJ No C 105, 21.04.1988, p. t>.

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                    - 10 
                   Article 10

Notice Is to be given In the Official Journal of the European Communities

whenever an SE Is formed or the liquidation of an SE Is terminated. This

type of publicity seems Important given the nature of an SE's business,

which Is by definition transnational. But publication of this notice will

have no legal Implications. The relevant events can be relied upon against

third parties from the date of the notice referred to In Article 9.

                   Article 11

This Article lists the details which must be supplied on an SE's business

documents and those of any branch In another Member State. The list Is

fuller than that In Article 4 of the First Company Law Directive.

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                    - 11 
                   Title II

                   Formation

                   Section I

                    General

                   Article 12

This Article defines the concept of founder companies for the purposes of

Title II. This Is necessary since public limited companies are no longer

the only legal bodies which may participate In forming an SE.

                Articles 13 and 14

These two Articles relating to the Instrument of Incorporation of the SE

and to the experts' report on non-cash consideration refer back, as far as

the conditions to be fulfilled by the latter are concerned, to provisions

of national law.

                   Article 15

The task of ensuring that the rules governing the formation of the SE are

complied with is entrusted to the national authorities which carry out that

task for all other public limited companies. However, the Statute

stipulates that Member States must ensure that such supervision Is

effective and that ft covers the conditions laid down both by the Statute

and by national law.

                  Article 16

This Article defines the date on which the SE begins to exist.

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                    - 12 
                   SECTION 2

                Formation by merger

                   Article 17

The wording of this Article, which describes the merger process, is based

on the Third Company Law Directive (78/855/EEC) and on the proposal for a

Tenth Directive on cross-frontier mergers. The formation of an SE by

merger Is based on an identical legal mechanism to that laid down by the

proposal for a Tenth Directive, since It Involves the merging of two

companies from different Member States. The rights of the employees of the

merging companies are protected In each Member State In accordance with

Directive 77/189/EEC.

                Articles 18 and 19

The draft terms of merger, which are common to all the founder companies,

set out certain details, an exhaustive list of which Is given In the

interests of greater clarity.

The arrangements for publishing the draft terms of merger are the same as

those laid down for domestic mergers.

In view of the cross-frontier nature of the merger, however, more extensive

publication of certain information Is required.

                Articles 20 and 21

The Board of each of the merging companies Is required to draw up a

detailed report to shareholders Justifying the merger. This report Is

examined by experts who are responsible In particular for checking, on

behalf of shareholders, whether the share exchange ratio Is fair and

reasonable.

                   Article 22

A merger has always to be approved by a general meeting of each of the

founder companies. The resolution approving the merger Is subject to the

same conditions as apply In the case of domestic mergers.

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                   - 12 a 
                  Article 23

Claims which originated prior to publication of the draft terms of merger

and which have not yet reached maturity at the time of publication are

governed by those provisions of the national law governing the founder

companies which relate to the arrangements for protecting the interests of

creditors.

                Articles 24 and 25

The provisions relating to the supervision and control of compliance with

merger requirements lay down certain rules for synchronizing supervisory

procedures so as to prevent Irreversible situations. The date on which the

merger takes effect thus follows the completion of all the checks carried

out on the founder companies and Is determined by the law of the Member

State In which the SE Is to have Its registered office.

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                      - 13 
                  Art le les 26 and 27

The merger must be made public before it can become effective against third

parties.

The merger entails the transfer of all the assets and liabilities of the

founder companies to the SE.

                    Article 28

The liability of members of the administrative board or management board

and of the experts of the founder companies Is governed by the law of the

Member State in which the founder company concerned has Its registered

office, subject to the minimum requirements laid down In the Third

Directive being observed.

                    Article 29

This Article limits the grounds on which a merger may be declared nui I and

void to cases where one or other of the supervisory procedures has not been

carrled out.

It also seemed desirable, in order to limit the danger of mergers being

declared null and void, to protect the cross-frontier merger from such a

declaration where it Is not provided for in the law of the State In which

the SE has its registered office, since that company only comes Into

existence when the merger has been completed.

                    Article 30

This Article lays down the rules applicable to the formation of an SE by

merger where one of the founder merging companies holds all or part of the

capi tal of the other.

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                     - 14 
                    SECTION 3

            Formation of an SE holding company

                    Article 31

The economic aim underlying the formation of a holding company Is to enable

the shareholders of the founder companies to participate In the profits of

the holding company; for that reason, an exchange of shares has to take

place. As a result of that exchange, the holding company becomes the sole

holder of all the shares In the founder companies; It Is therefore

appropriate that the application of national provisions providing for the

founder companies to be wound up In such cases should be expressly

excluded.

                   Article 32

The provisions of this Article relating to the formation of an SE holding

company refer to the provisions relating to formation by merger.

                   Article 33

This Article introduces a system for Informing the employees of founder

companies about the Implications of the formation of the holding company.

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                    - 15 
                   SECTION 4

             Formation of a Joint subsidiary

                Articles 34 and 35

The provisions relating to the formation of a Joint subsidiary are worded

so that the decision to set up an SE Is not a matter for the boards of the

founder companies but for their general meetings; the Statute governs the

approval of the formation of a Joint subsidiary only where one of the

parent companies Is an SE.

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                    - 16 
                   SECTION 5

            Formation of a subsidiary by an SE

                Art le les 36 and 37

This is the only case where the formation of an SE does not presuppose the

existence of two companies from different Member States; this requirement

of a foreign element Is nevertheless observed In the formation of the

parent SE.

Unlike national public limited companies, therefore, an SE, acting alone

may set up a subsidiary having the same legal form as the parent company.

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                    - 17 
                   TITLE Ml

Article 38

Paragraph 2

The rule that shares must be 25% paid up represents an average of the rates

In the Member States, and has been taken over from the Second Company Law

Directive (77/91/EEC).

The obligation to transfer in full any consideration other than cash Is a

protection against fictitious consideration, and one of the simplest ways

-f ensuring that a subscriber offering consideration other than cash does

In fact transfer It.

Paragraph 3

Contributions must be realizable. In order to provide security for

creditors, promises to perform work or to supply services which cannot be

converted Into money are not permitted.

Article 39

This Article provides some security for creditors. It accepts, however,

that professional Intermediaries placing shares may buy them below par: the

difference representing payment for their services.

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                    - 18 
Article 41

This Article states a general principle deriving from the dual nature of

share capital, which is at the same time the sum of the contributions which

allow the company to be set up and the company's fund for safeguarding

creditors. Shareholders cannot be dispensed from the obligation to furnish

their consideration, except in the event of a reduction In the subscribed

capital.

Article 42

Paragraph 1

Article 38 has already laid down a minimum proportion In which the shares

must be paid up on the formation of the company; the same proportion

applies to an increase in capital.

Paragraph 2

The "requirement of a report on the valuation of any consideration other

than cash represents a safeguard for those subscribing cash and for

creditors. The valuation must be objective, and therefore carried out

outside the company by Independent valuers.

Paragraph 4

An Increase In the subscribed capital can be regarded as an amendment of

the statutes. The requirement of a resolution of the general meeting Is

therefore an indispensable safeguard.

Paragraph 5

The restriction to available reserves Is Intended to ensure that reserves

legally required cannot be capitalized, while anything In excess may be.

Proportionate distribution of new shares protects the existing

shareholders. An exemption has been provided for to allow for distribution

of the new shares to the employees.

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                      19 
Article 43

Paragraph 1

Provision Is made for authorizing an Increase In capital, with a maximum

set by the statutes or the general meeting In the Interests of the

shareholders. But any Increase in the subscribed capital 's not to exceed

one half of the capital already subscribed.

Paragraphs 2 to 4

These paragraphs make It clear that the powers of the management board or

.-,e administrative board are merely delegated powers In relation to the

powers of the general meeting.

Article 44

The principle of a preferential right of subscription Is laid down In order

to provide protection for the existing shareholders when the capItai is to

be Increased by the Issue of new shares for cash. The shareholder Is

entitled not to see his own participation In the SE reduced by the issue of

new shares. But exceptions have to be made In order to prevent this

individual safeguard for the shareholder from damaging the Interests of the

company and making It more difficult to obtain outside finance. Where any

such exception Is to be made the shareholders must have been properly

informed.

Article 45

Paragraph 1

the procedure laid down for reductions of capital Is Intended to ensure

equal treatment of shareholders.

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                     - 20 
Paragraph 2

This paragraph also represents an application of the principle of equal

treatment of shareholders.

Paragraph 3

A reduction of capital may not bring the capital below the prescribed

minimum, except In response to losses. But In that case the capital must

then be brought back to the prescribed minimum or above It.

Paragraph 4

A reduction in capital In response to losses must not make It possible to

circumvent safeguards for creditors. The economic purpose of a reduction

Is to allow the capital to be Increased at the same time or later, so as to

obtain fresh resources for an SE in difficulties. An Increase will be

impossible while the balance sheet shows a loss and the accounting value of

the old shares Is therefore below par.

Article 46

Creditors who dealt with the SE before Its capital was reduced must be

protected. They are generally to be entitled to security; the manner In

which this right Is exercised Is to be governed by the law of the

Member State where the company has its registered office.

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                     - 21 
Article 48

Paragraph 1

An SE may not subscribe for its own shares. This ban extends to

undertakings It controls, as otherwise the major part of a stake held by

the SE In a controlled undertaking could find Its way back Into Its own

capital via a stake held by the controlled undertaking In the parent SE.

This would Indirectly reduce the SE's capital.

Paragraph 2

This paragraph extends the protection of the capital provided by paragraph

1 where the company subscribes for Its own shares through a person acting

on Its behalf.

Paragraph 3

This sanction provides greater flexibility than would nullity of the

subscription, without Introducing Joint and several liability.

Article 49

Acquisition by an SE of its own shares infringes the principle that the

capital must be kept Intact, and Is therefore generally prohibited.

Paragraph 2 sets out certain exceptions, which involve no appreciable

danger to third parties or shareholders. It Is enough that they should be

regulated, and this Is done In paragraphs 3 and 4.

Paragraph S

This ban Is an extension of the rule In paragraph 1. The holder of a right

of usufruct may have voting rights (Article 92(4)), and this extension is

necessary to avoid the danger of abuse which would arise if the company

could exercise voting rights attached to Its own shares.

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                     - 22 
Paragraph 9

In line with paragraph 1, any undertaking coming under the SE's control is

also required to dispose of any shares It holds In the SE.

An SE which acquires its own shares as a result of a universal transfer of

assets does not thereby Infringe the ban In paragraph 1. But the shares

must be disposed of within 18 months.

Paragraph 10

This provision covers distribution to the employees.

Paragraph 11

This provision prevents any abuse of the SE's own shares, and ensures that

the obligation to dispose of or distribute shares will be complied with.

The acquisition by a company of Its own shares can be regarded as repayment

of capital. Such a share therefore has no Intrinsic value in the SE's

capital. It no longer forms part of the net assets; the holding of a stake

in the net assets Is not based on the share, except In a purely formal

sense, but In reality on the contribution made. Consequently, no rights

should attach to a share In the company which Is held as part of the

company's own assets.

Article 50

This provision reflects a fundamental concern for clarity In relations

within companies. The purpose Is to Identify any shareholder able to

exercise influence in the SE.

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                    - 23 
Article 52

Paragraph 1

The ban on fixed interest represents an application of the principle that

there should be no distribution without profit.

Paragraphs 2 and 3

Non-voting shares are permitted under specified conditions.

There can be no other restriction or extension of voting rights. This

would in particular prohibit shares carrying a right to nominate members of

the supervisory board.

Paragraph 5

This represents an application of the principle of equal treatment of

shareholders.

Article 58

Paragraph 1

It is right and proper that the Issue of debentures convertible Into shares

in conjunction with an increase In capital should be governed by the same

rules with regard to the powers of the decision-making bodies Involved and

the same procedure followed as a straightforward Increase In capital.

Paragraph 3

This provision protects the holders of convertible debentures. The

proportion of holders whose rights may be affected Is restricted by the

second sentence.

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                   - 24 
Article 59

In the Interests of the shareholders It Is appropriate to require that any

Issue of debentures carrying the right to a share in profits be decided In

the same way as an amendment to the statutes, and that the shareholders be

given a right of subscription similar to their right In the event of an

Issue of convertible debentures.

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                    - 25 
                   TITLE IV

                 GOVERNING BODIES

                   Article 61

On the question of governing bodies, the Statute is based on national

company law and on the amended proposal for a Fifth Directive on the

structure of public limited companies; [1] It makes provision for a

separation of powers between the general meeting of shareholders, which is

to decide certain major Items of business, and the bodies which are to

manage and represent the SE.

7h3 management and representation of the SE Is to be the function either of

a management board, with a supervisory board monitoring Its activities (the

two-tier board system)» or of a administrative board (the single-tier

system). The SE s founder companies are authorized to choose between the

two systems; detailed rules for each system are spelt out In Section 1 and

Section 2. Section 3 sets out rules common to both systems, while

Section 4 contains detailed rules governing the general meeting.

1 OJ No C 240, 9 September 1983.

```

```
                    - 26 
                   SECTION 1

               Two-tier board system

                  SUB-SECTION 1

                 Management Board

                   Article 62

The most Important characteristic of the two-tier system Is that the

members of the management board are always to be appointed by the

supervisory board; the two bodies are kept separate by a rule preventing

the same person from serving on both at the same time.

                  SUB-SECTION 2

                 Supervisory board

                   Article 63

The members of the supervisory board are to be appointed by the general

meeting and, where the SE uses a model of employee participation which so

requires, by the employees too.

                   Article 64

To be able to perform Its function the supervisory board is to receive a

quarterly report on the company's affairs. The supervisory board must be

able to require the management board to provide Information or a special

report on any matter concerning the company at any time, and must be able

to carry out any enquiries necessary for the performance of its duties.

Any member may also require that Information be given to the supervisory

board as a whole; but In order to avoid duplication such requests must be

made through the chairman of the board.

```

```
                    - 27 
                   Article 65

To ensure that the supervisory board functions properly It Is to be

Convened noj* only at the chairman's Initiative or at the request of the

management board but likewise at the request of any of Its members. Like

the preceding article, this provision Is necessary In order to avoid any

possibility of collusion between the management board and a majority on the

supervisory board.

                   SECTION 2

                Single-tier system

                   Article 66

This Article defines the fundamental characteristics of the single-tier

structure. The administrative board must have at least three members,

appointed by the general meeting and, where the model of participation In

use requires It, by the employees. All the members are to designate one

or more executive members from among Its own members, and to delegate the

management and representation of the company to them; the main function of

the other members Is to supervise the executive members; In order to

strengthen the position of the non-executive members, they are to be more

numerous than the executive members.

                   Article 67

The board Is to meet at least once every quarter to allow the executive

members to report to the whole board, and so to enable the non-executive

members to supervise the management and progress of the company's affairs.

All members of the administrative board have the same rights and

obligations, apart from the actual management of the company; It does not

appear necessary to make provision for an Individual right of access to

Information or of enquiry as In Article 64(3) and (4).

```

```
                    - 28 
                   SECTION 3

      Rules common to the single and two-tier board systems

                   Article 68

The better to ensure that the members of the governing bodies can be held

responsible for their acts It was felt useful to state the principle that

they can be appointed only for a specific period of time, which is not to

exceed six years.

                   Article 69

The functions of the members of the governing bodies are such that they can

properly be carried out only by natural persons. The admission of legal

persons to any of these bodies has therefore to be subject to special

rules, first and foremost the requirement that such a legal person must

appoint a natural person to represent It In the performance of Its duties

on the relevant board.

Paragraph 4 has been Included to allow representation of a minority of

shareholders on the administrative or supervisory board. Particularly

where an SE has been set up as a Joint subsidiary. It may be Important to a

founder company with a minority holding In the capital to have the

assurance that Its Interests will be represented on the board. There would

be no such assurance If the members of the administrative or supervisory

board were elected under the general rules In Article 94(2), according to

which resolutions of the general meeting are to require a majority.

                   Article 70

The main purpose of this Article Is to allow a list of alternate members to

be elected, so that there will be no need to set the expensive election

procedure In motion every time there Is a vacancy on the board.

                  Article 71

This provision deals with the representation of the company in dealings

with third parties, and Is closely based on the rules in the First Company

Law Directive, Directive 68/151/EEC, both as regards the question of

whether those acting for the company are to do so together or may do so

alone and as regards the appointment of persons with general authority to

represent the company.

```

```
                    - 29 
                   Article 72

The supervisory board or non-executive members are confined to supervising

the management of the company. But It does not contradict this principle

to require that development programmes and strategies and other measures of

major importance to the company be decided by the management board or the

executive directors only with the agreement of the supervisory board or of

the administrative board as a whole. Even though authorization for a

particular operation has to be obtained, It is the Management Board or the

executive directors who will take the decision and Implement It.

                   Article 73

This provision Is Intended to prevent members of the governing bodies from

abusing their powers in their personal Interest and to the detriment of the

company. It does not prohibit transactions of the kind at Issue, but seeks

to provide an effective means of control by making them subject to

authorization.

                  Article 74

Every member of a board Is to have the same rights and obUgat Ions even

though certain responsibilities of the board may be entrusted to particular

members. One of the main obligations of board members Is the obligation to

protect confidential Information. This Article also makes It clear that

the fundamental duty of the members of the governing bodies of the company

is to act In the Interests of the company.

                  Article 75

The general rule Is that the power to appoint the members of the

supervisory board or the administrative board Is accompanied by the power

to remove them at will.

```

```
                     - 30 
This Article also lays down a procedure for the removal of members by the

courts, acting on the application of bodies or persons who do not have

power to appoint the members concerned. This exception Is also necessary

where, In accordance with the model of employee Involvement, members of the

board are coopted.

                    Article 76

This provision lays down the basic rules for the quorum and majority

required for board decisions.

                    Article 77

This Article and those following It deal with the liability of the

governing bodies of the SE for loss wrongly caused to the company. There

is to be liability only if the company has suffered damage. Thus there has

to be a causal link between the act done and the damage Itself.

Where the governing body has more than one member, It Is difficult for an

outsider to know which member may have caused the damage; the provision

therefore makes all the members of the relevant body Jointly and severally

liable, whatever the nature of the act.

Under the ordinary principles of civil law a person who has suffered damage

Is required to prove that the person who caused It was at fault. This rule

here would defeat many actions for liability, as It would be very difficult

for an outsider to verify what was done Inside the company. The burden of

proof has therefore been reversed, and the members of the board required to

prove that no fault Is attributable to them personally.

```

```
                   - 31 
                  Article 78

This provision sets out to clarify the procedural rules governing actions

brought on the company's behalf against members of the governing bodies.

An action may be brought by the administrative board or by the supervisory

board; an action must be brought If the general meeting so decides.

The provision also gives minority shareholders and creditors the right to

bring actions on behalf of the SE.

```

```
                    - 32 
                   Article 79

This provision allows the SE to waive Its right to bring an action for

damages, but Imposes certain conditions to ensure that the rights to bring

such actions conferred by the earlier articles do not become Illusory.

                   Article 80

The severity of the rules on liability Is balanced by the Imposition of a

period of limitation, which In view of the cross-border character of the SE

Is set at five years.

```

```
                    - 33 
              SECTION 4: GENERAL MEETING

                   Article 81

A number of major steps require a resolution of the general meeting: the

list given here Is not an exhaustive one.

The Statute draws no distinction between ordinary and extraordinary general

meetings. It does however require a qualified majority rather than a

simple majority in certain cases.

The provisions set out In this Section are Intended to protect the rights

of shareholders at general meetings and to provide safeguards against

certain decisions which may be taken by such meetings.

                   Article 82

In accordance with a principle common to all Member States, a general

meeting must be held at least once a year. This Is made necessary by the

need to approve the annual accounts.

But given the long list of matters necessitating a resolution of the

general meeting, It must be possible to call a general meeting as the

conduct of the company's affairs requires. The management board or the

administrative board must therefore be entitled to call a general meeting

at any time, and this power must not be restricted by the statutes.

                   Article 83

A minority of shareholders as defined in Article 75 must also be able to

require a general meeting.

While shareholders must be prevented from abusing this power, the governing

bodies of the company cannot be allowed to have the last word, so the

shareholders should be authorized to refer the matter to the courts If

their request Is not complied with within one month.

```

```
                    - 34 
                   Article 84

The method of calling the general meeting must be such that news of It can

reach all shareholders.

The minimum Information which must be provided by the notice of the meeting

Is laid down in the Statute. There Is no need to comment on the details

listed, although It Is Important that the shareholder should know whether

he Is being called to an ordinary, extraordinary or special meeting, since

the rules for the quorum and majority will be different depending on the

nature of the meeting.

The laws of all Member States lay down a minimum period between notice and

meeting, but the periods set vary between five days and one month depending

on the Member State.

Shareholders have to be allowed sufficient time to prepare to attend the

general meeting or to arrange to be represented there; It must be borne In

mind that a stead Ily growing number of shareholders may be resident outside

the country where the company has Its registered office, and that short

deadlines would prevent them from attending. Nor would the arrangements

for proxies and for the amendment of the agenda by a minority be able to

function without sufficiently long deadlines. The Statute therefore lays

down a period of one month.

                   Article 85

A minority of shareholders equal to that entitled to call a general meeting

should also be In a position to have one or more additional items Included

on the agenda of a general meeting already called. It may be that for one

and the same meeting various minorities will cause various amendments to be

made to the agenda. As the notice of the meeting Is to be published

one month before the meeting takes place» requests for the Inclusion of

additional Items are to be put forward within seven days of the first

notice; this will enable the company to notify all shareholders of the

amended agenda, through the same channels as those laid down for the

calling of the meeting, not less than seven days before the meeting takes

place.

```

```
                    - 35 
                   Article 86

The Statute prevents attendance at the general meeting being made subject

to conditions other than procedural formalities such as the deposit of

share certificates with a notary, a bank or the company itself,

notification by the shareholder of his Intention to attend the meeting, or

proper recording of registered shares In the company register. The

statutes may not, for example, require possession of a stated number of

shares as a qualification for attendance.

                   Article 87

It often happens that the shareholder Is unable or unwilling to attend the

general meeting, particularly If he Is not resident In the country In which

the company has Its registered office. Representation by proxy Is provided

for in all Member States. The Statute recognizes this right and prohibits

any provision to the contrary In the statutes.

In certain companies It may be useful to restrict the categories of persons

who may be appointed as proxies. These restrictions are to be laid down by

the law of the place where the company has Its registered office or In the

statutes; a shareholder may always appoint another shareholder as his

proxy.

To make It easier to verify the proxy's credentials, he must be nominated

to the company In writing; the company Is to preserve the document for at

least three years, the same period as that laid down for the other

documents relating to the meeting such as the attendance list and the

minutes.

                  Article 88

Article 87 will not be sufficient where bodies such as associations of

shareholders or credit Institutions ask the shareholders to give them

proxies and themselves designate later the persons who are to exercise

them. Additional guarantees are needed here to ensure that the proxy votes

In accordance with the Instructions given.

```

```
                    - 36 
By way of exception the proxy may depart from the shareholder's

 Instructions or the statement made to the shareholder; he must then inform

the shareholder accordingly as soon as possible and provide all necessary

explanations.

                   Article 89

The notice convening the general meeting does not provide the shareholders

with sufficient Information regarding certain particular decisions to be

taken^by It. The Statute therefore provides that certain documents are to

be available to every shareholder, at the latest by the date of dispatch or

publication of the notice. The main such documents are the annual accounts

and the auditors' report; the texts of agreements requiring approval by the

general meeting must also be available.

                   Article 90

It Is not enough to give the shareholders the right to put questions to the

management at the general meeting; the management must also be required to

supply the Information requested.

The Information requested may be refused If it would be likely to cause

harm to the company or If Its disclosure would be Incompatible with a legal

obligation of confidentiality.

Apart from these restrictions on the duty to supply Information, the

statutes may not make provision for any other grounds of refusal.

The board Is responsible for supplying Information. If the board and the

shareholder disagree as to whether Information asked for should be

supplied, the power to settle the matter cannot be left with the general

meeting, where an objective decision cannot be guaranteed. The Regulation

provides for an appeal to the court to check the validity of the refusal.

```

```
                     - 37 
                    Article 91

The Statute here follows a principle common to the laws of ail

Member States by prohibiting the general meeting from taking decisions on

any matters not on the agenda communicated or published in accordance with

Art icles 84 and 85.

But this principle need not apply where all shareholders are present or

represented at the meeting and no shareholder objects.

                    Article 92

The shareholder's voting rights must be proportionate to his stake in the

capital as represented by his shares. Only two exceptions are permitted,

and only if they are provided for in the statutes.

Thus double or multiple voting rights are prohibited.

The Statute itself lays down two cases In which the right to vote may not

be exercised, and refers to the law of the State in which the SE has Its

registered office for certain other cases.

                    Article 93

In the case of certain conflicts of Interest between the company and the

shareholder, the shareholder must be prevented from exercising his voting

rights. The Regulation sets out the circumstances In which this is so.

These prohibitions apply not only to shareholders but to their proxies as

well. They apply to shareholders whether or not they own the shares

carrying the voting rights in question.

                    Article 94

This Article defines the majority needed for resolutions of the general

meeting: as an absolute majority of the votes attached to the capital

represented.

```

```
                       - 38 
The statutes may require larger majorities for all or for certain

resolutions. An exception is made in order to facilitate the appointment

or dismissal of board members.

The Regulation itself also requires higher majorities for certain

résolut ions.

                     Art icle 95

This provision gives the general meeting power to make any amendment to the

statutes, with carefully defIned'except ions.

Where the general meeting empowers the Board to do certain things which

require amendment of the statutes, it must be possible to empower the Board

to amend the statutes accordingly. For example, an authorization to

increase the subscribed capital up to a fixed maximum may include an

authorization to amend the issued capital in the statutes; this may also be

the case where convertible debentures are to be converted.

                     Article 96

The Information which under Article 84(2) must be included In the notice

convening the general meeting is not sufficient where shareholders are

required to decide on an amendment to the statutes. In that case the full

text of the amendments proposed must be included too.

                     Art icle 97

Following the example of the laws of most Member States, the Statute

requires a qualified majority for a resolution of the general meeting to

amend the statutes.

```

```
                    - 39 
In a limited liability company a shareholder's only obligation is to pay up

the amount he has agreed to contribute. It follows that an increase in the

obligations of the shareholders cannot be decided simply by the majorities

required for amendment of the statutes. All the shareholders concerned

must approve. An amending resolution must be made public.

                   Article 98

Additional rules are needed where the company has issued different kinds of

shares. If the measures envisaged would also change the relationship

between the classes of share, there must in addition to a resolution of the

general meeting also be a separate vote of each class of shareholder whose

rights are affected by the resolution.

                  Article 99

Minutes are to be drawn up for each session of the general meeting. The

Regulation lays down the minimum information which must be included.

The minutes are addressed primarily to the shareholders. It does not

appear necessary to require that they be registered and published.

                  Article 100

Actions for the annulment of resolutions of the general meeting are of

great importance to the shareholders and to outsiders. Both would wish to

see any such actions brought quickly. Paragraph 3 therefore restricts the

period In which such an action may be brought to three months from the

closure of the general meeting.

```

```
                     - 40

The grounds for annulment are fairly broad: any Infringement of the

Regulation or of the company's statutes is sufficient. This would Include

an infringement of the shareholders' entitlement to Information, to the

extent that It influenced the general meeting. The ordinary grounds of

annulment under general principles of law, such as abuse of a majority

position, might also be Invoked.

Annulment or suspension of a resolution is valid against third parties, and

the court's decision is to be disclosed by registration and publication in

the ordinary way.

A declaration that a resolution is void can be prevented if, on the order

of the court or before the court has delivered Judgement, the general

meeting amends the resolution challenged. The court retains a wide

discretion with regard to the resolutions concerned in this Article.

```

```
                    - 41 
                   TITLE V

          Annual account» and consolidated account»

The Council has adopted three Directives relating to the preparation,

auditing and publication of annual accounts and consolidated accounts.

These are the Fourth Councl I Directive (78/660/EEC) of 25 July 1978 on

annual accounts, the Seventh Council Directive (83/349/EEC) of 13 June 1983

on consolidated accounts and the Eighth Council Directive (84/253/EEC) of

10 April 1984 on the approval of persons responsible for carrying out the

statutory audits of accounting documents. In addition, the Council adopted

on 8 December 1986 a Directive (86/635/EEC) which specifically relates to

the annual accounts and consolidated accounts of banks and other financial

Institutions. The annual accounts and consolidated accounts of Insurance

companies are the subject of a further proposal for a Directive which Is

currently before the Council. The provisions of Title V refer extensively

to this Community legislation.

The SE must comply with the provisions of the Fourth and

Seventh Directives. It will be able to make use of the options which the

above Directives grant Member States.

Those European companies which are credit Institutions or Insurance

companies have to apply the national provisions adopted pursuant to the

Directives on those subjects.

```

```
                    - 42 
                   TITLE VI

                GROUPS OF COMPANIES

                  Article 114

1. The question of rule» dealing specifically with groups arises In

connection with the European Company Statute because two of the ways of

setting up an SE (creation of a holding company or of a Joint subsidiary)

automatically entail the formation of a group of companies. What, then,

are the rules which will govern relations between the SE and Its

subsidiaries?

The aim of the original draft of the European Company Statute was to enable

those setting up an SE to opt for a special group status, which would

facilitate management of the company as a single economic unit, while at

the same time ensuring appropriate protection for the Interests of

third parties (e.g. minority shareholders and creditors).

The Memorandum on the European Company Statute asked, however, whether the

Statute was the proper place to create a body of rules governing groups

(Suppl. 3/88 - Bull. EC, p. 15).

2. At present the laws of Germany and Portugal are the only ones which

recognize the right of a parent company of a group to manage its

subsidiaries In the Interests of the group, and which consequently lay down

specific safeguards for minority shareholders and creditors.

In the 1985 White Paper on the Internal market the Commission stated that

It was considering a proposal to coordinate the national law on the subject

In the light of comparative law studies In progress (point 144).

```

```
                    - 43 
3. If specific rules are included In the Statute at this stage they will

prejudge the outcome of those studies, and will Jeopardize the rapid

adoption of the regulation establishing the Statute.

Debate on the Commission's 1970/75 proposal came to a halt In 1982 because,

before stating a view on the arrangements for groups where one member of

the group Is an SE, delegations wanted to know what the Commission would be

proposing for the harmonization of the Member States' legislation on groups

in general.

Specific rules would certainly be useful to facilitate the management of a

group headed by an SE. But they are not Indispensable. An SE can be

treated as a public limited company governed by the legislation of the

Member State In which It has Its registered office, and Its rights and

obligations can be determined by reference to the rules governing such a

company, whether It Is the parent company or the subsidiary In a group.

On the basis of the rules and principles of private International law

generally accepted In the Member States It can be presumed that the law

applicable to a subsidiary will determine the rights and obligations of a

parent company which Is Itself governed by a different set of national laws

from that applying to the subsidiary.

4. If we follow this approach It should be stated In the regulation

establishing the European Company Statute that where an SE Is a subsidiary

company or, In the language of the Statute, a "controlled undertaking". It

is to be treated like any other public limited company governed by the laws

of the Member State In which It has Its registered office.

On the other hand, If It Is the SE which Is exercising control, the

regulation establishing the Statute does not need to lay down specific

rules, which will be supplied by the law governing the company controlled

by the SE.

```

```
                    - 44 
The rights conferred and the obligations Imposed on a firm as a result of

the control It exercises over another which Is governed by separate

legislation do not however affect any obligations which may be Incumbent on

the controlling undertaking under Its own proper law, for example as

regards the preparation of consolidated accounts.

```

```
                     - 45

                    TITLE VI I

                    Article 115

This Article sets limits to the procedures for the winding up of an SE. In

the interests of legal certainty and the protection of shareholders the

grounds for automatic winding up must be restricted. The Statute

prescribes only the case where the duration of the company laid down In the

statutes expires; this possibility exists In the laws of all

Member States. As the documents are a matter of public record, the

duration of the company is an incontestable fact which can be verified by

anybody.

In allowing the general meeting of shareholders to decide to wind up the

company the Statute .is likewise accepting a rule which is generally

recognized; the mechanisms are governed by Article 116.

Failing a decision of the general meeting, winding up requires a court

decision; such a decision may be granted on a ground contemplated In the

law of the place where the SE has its registered office or In the statutes,

or where no disclosure of annual accounts has taken place, or where the

issued capital has been reduced below the legal minimum.

                   Article 116

On the one hand the Statute limits the grounds for automatic winding up;

but on the other It seeks to facilitate the taking of a decision to wind up

the company by the shareholders, in order as far as possible to avoid the

need for court proceedings. A distinction Is made as regards the majority

needed at the general meeting. Where the ground of winding up Is one

contemplated by law or by the statutes, a simple majority is sufficient.

```

```
                    - 46 
 In all other cases a decision to wind up the company represents an

amendment to the statutes, for which the laws of all Member States require

a qualified majority. It should be emphasized that this rule represents a

minimum requirement, and the statutes may Impose stricter conditions.

                  Article 117

It has already been observed that the power conferred on the courts to

decide that an SE Is to be wound up can only be a residual one; the power

to decide Is to lie In the first place with the shareholders.

As a matter of principle it will be for the Member States to regulate the

procedure to be followed before the court. But it does appear necessary to

make rules on who is entitled to Initiate such proceedings. First and

foremost there would be the governing bodies of the company. The general

meeting, however, would be entitled to decide by Itself to wind up the

company. However, to avoid any abuse of the majority requirements In

Article 116, any shareholder or person showing a legitimate Interest must

also be in a position to refer the matter to the court.

in a case where the Irregularity which forms the ground for winding up can

be remedied, the court must be able to grant the company sufficient time to

do so.

                  Article 118

To ensure that shareholders and third parties are properly protected, there

must be proper disclosure of the decision to wind up the company.

```

```
                    - 47 
                  Article 119

This provision Is Intended to clear up the uncertainty as to whether a

decision to allow a company to continue in business Is possible after the

decision to wind It up has been taken by the general meeting of

shareholders. Clearly the fresh decision must require at least the same

majority as that required for the Initial decision to wind up the company.

But a decision to continue must be ruled out once any distribution has been

made In the course of the liquidation. The general meting may also review

an automatic winding up which takes place because the duration of the

company has expired. The decision to continue will require a change In the

objects of the company and must be disclosed.

The Statute does not deal with the grounds on which a winding-up decision

made by a court may be reviewed.

                  Article 120

Any winding up leads automatically to the liquidation of the assets. Once

the decision to wind up has been taken, the company continues to exist only

for purposes of the liquidation.

Liquidation Is everywhere administered either by one or more liquidators.

Clearly the appointment of liquidators Is of particular Importance to the

shareholders. To safeguard their role In the choice of liquidators, the

Statute lays down a set of rules on the shareholders' powers.

Under this scheme liquidators may be appointed In the first place by the

statutes or by methods set out therein. Such clauses can of course be

amended, even after a decision to wind up the company, but only In the

manner required for the amendment of those documents. Secondly, the

general meeting of shareholders may appoint liquidators, which Is a

```

```
                    - 48 
generally accepted rule. To facilitate a decision the Statute requires a

simple majority of the votes cast. Individual shareholders are protected

against any abuse on the part of the majority by Article 131, which makes

It possible to have a liquidator removed by a court on showing cause. In

the third place. In case the general meeting falls to appoint liquidators,

a power of appointment must be conferred on a court. To speed up the

appointment and to give maximum protection to those concerned, the matter

may be brought before the court not only by the governing bodies of the

company but also by any shareholder, whatever his stake In the capital.

But this power In any event remains a subsidiary one, to be exercised

falling appointment under the statutes or Instrument of Incorporation or by

the general meeting.

The set of rules on the appointment of liquidators would be incomplete

without provision for the case where the statutes are silent and neither

the general meeting nor the court has made an appointment. In that case

the members of the administrative or management body are to be deemed to be

liquidators until the powers already referred to have been exercised.

Finally, the general meeting, or falling that the court, Is to set the

remuneration of the liquidators.

```

```
                     - 49 
                    Article 121

The rules on the appointment of liquidators in Article 120 must be

supplemented by rules on their removal. The fact that a liquidator has

been appointed under the statutes should not prevent his removal by the

general meeting of shareholders, acting by a majority of the votes cast.

This is all the more true of the withdrawal of an appointment originally

made by the general meeting. However, it appears appropriate to give the

court a general power of removal, alongside that of the general meeting,

not only in the interest of those managing the company, but above all In

order to protect Individual shareholders against any negligence on the part

of the majority of shareholders which might allow a liquidator who fails

properly to perform his duties to continue in office. Any removal of a

liquidator is to be disclosed.

                    Article 122

The Regulation adopts the quite general rule that the liquidators may do

anything, even undertaking new transactions, to the extent necessary for

the purposes of the liquidation, which has become the new object of the

company.

The liquidators are to have power to bind the company In dealings with

third parties and in legal proceedings. To ensure protection for third

parties provision is made here for disclosure of the appointment and

termination of office of liquidators and the extent of their power to

represent the company.

                    Article 123

The Regulation requires certain safeguards as regards the civil liability

of liquidators. Firstly, the civil liability of liquidators may In no case

be less strict than that of the members of the single board or management

board. Any reduction in the liability of liquidators as compared with the

```

```
                     - 50 
the liability of the members of the relevant board Is therefore prohibited,

and thus may not be provided for by clauses in the statutes.

                    Article 124

It Is normal practice to draw up a statement of assets and liabilities at

the date on which liquidation begins. The Regulation requires that such a

statement be drawn up, but does not seek to regulate its contents or to

require disclosure. The document must be supplied on request to any

shareholder, member or creditor.

To avoid any misunderstanding in this matter, the Regulation leaves no

doubt that the winding up and liquidation of a company in no way affects

its obligations under the rules on company accounts, which are to apply

subject to the specific requirements of the liquidation.

                    Article 125

The winding up of any company must be disclosed In accordance with

Article 9.

But disclosure of this kind is not sufficient to ensure equivalent

protection of the company's creditors throughout the Community. The

Statute therefore goes on to make the same disclosure requirements apply to

the invitation to creditors to lodge their claims and to the Indication of

the date after which distributions may be made. Any known creditor of the

company is to receive a similar invitation individually. To avoid any

misunderstanding the Regulation makes no provision for a cut off date for

creditors who do not come forward by the date indicated. The date to be

indicated merely represents information supplied to creditors, and In no

way affects their claims on the company in liquidation.

```

```
                     - 51 
                   Article 126

According to a general principle governing liquidation all creditors of the

company must be paid in full before there can be any distribution of the

net assets remaining. The statutes may determine the beneficiaries of any

such distribution. In the absence of such a clause the net assets are to

be distributed among the shareholders. That distribution is to be in

proportion to their holdings in the capital of the company, unless the

statutes provide otherwise. There is a particular problem where the

capital has not been paid up in equal proportions. In that case, in order

to ensure that the shareholders are treated equally, all considerations

paid up are to be repaid, and the net assets remaining are to be

distributed by the proportional rule.

Lastly, no distribution may be made until adequate security has been set

aside for claims which have not yet fallen due, or which are In dispute, or

where the creditor cannot be Identified.

                   Article 127

For the better protection of the shareholders against any failure to comply

with the principles of distribution in Article 126, the liquidators must

draw up a distribution pian after the date Indicated in the invitation to

creditors Issued under Article 125. This document must be brought to the

attention of the general meeting and of any beneficiary designated In the

statutes. The Regulation requires that the general meeting be Informed,

but does not require Its approval.

```

```
                     - 52 
The protection provided takes the form of a right to challenge the plan

before a court, a right held by any shareholder and any beneficiary, but

not by a creditor, who at this stage should already have been paid In full.

In the event of any such challenge it will be for the court in question to

decide whether, and if so to what extent, any partial distribution may be

made pending the final decision.

                    Article 128

The liquidation is terminated once the distribution has been made.

Where after the liquidation has been terminated previously unknown assets

or liabilities of the company come to light, the liquidation may be

reopened, but only by a decision of the court, which must appoint the

liquidators.

The fact that a liquidation has been terminated is subject to a disclosure

requirement.

                 Articles 129 and 130

In all Member States there are special rules governing companies which are

the subject of proceedings for insolvency or suspension of payments, and

the Regulation does not affect those rules.

A draft convention aligning these Insolvency procedures has been drawn up

on the basis of Article 220 of the EEC Treaty. The draft is before the

CouncII.

Decisions taken in the course of proceedings for insolvency or suspension

of payments are subject to a disclosure requirement.

```

```
                    - 53 
                   Title v i n

                Articles 131 and 132

Title VIII allows an SE to merge with other SEs and with public limited

companies Incorporated under national law, either by taking them over or by

forming a new SE Jointly with them. The reverse procedure Is also

authorized: an SE may be taken over by a national public limited company,

and may set up a new national public limited company together with another

such company or with another SE or other SE».

```

```
                    - 54 
                   Title ix

Article 133

It Is In the nature of an SE that It should operate across borders. It Is

primarily a new tool of cross-border cooperation, facilitating links

between companies In different Member States.

It Is essential, therefore, that the SE should be able to overcome the

handicap which this would otherwise Impose on It In terms of taxation.

Where an SE conducts taxable business through permanent establishments

abroad, losses suffered by those establishments would, generally speaking,

not be taken into account for tax purposes In Its country of residence If

profits from foreign business are exempt from tax In that country under

national tax law or bilateral conventions. This rule could result In an SE

being more heavily taxed. To avoid this, paragraph 1 provides that such

losses may be deducted against an SE's profits.

To safeguard the Interests of the Member State of the SE, paragraph 2

provides that subsequent profits made by such permanent establishments are

to be added to the SE's profits, up to the amount of the losses previously

deducted.

Paragraph 4 takes account of the fact that in Member States applying the

Imputation system a tax treatment Identical to that under paragraphs 1 to 3

Is already applled.

```

```
                  - 65 
                 Titles X and XI

To deal with the Involvement of employees In the SE, appropriate provisions

should be adopted by means of a Directive so as to enable Member States to

take account of their national rules and practices when Implementing the

Directive In their national law.

Article 135 does not lay down a rule of law. It merely refers to the

provisions of the Directive dealing with the Involvement of employees In

the SE, which Is complementary to this Regulation.

Article 136 provides that an SE may be formed In any Member State which has

implemented In Its national law the provision» of Directive ... dealing

with the Involvement of employee» In the SE. By so doing It prohibits the

creation of an SE In a State which has not Incorporated those provisions.

Article 137 postpones the applicability of the Regulation so as to make Its

entry Into force coincide with the date by which Member States must

Implement the Directive.

```

```
                    - 56 
         COMMENTARY ON THE ARTICLES OF THE DIRECTIVE

The purpose of the Directive I» to recognize the Involvement of employees

in the company, to make them feel that the business of the firm Is their

business. The three models proposed each provide a structure through which

this involvement can operate.

Article 2 clarifies the concept of employee participation as being not in

the day-to-day running of the firm, which Is the function of management,

but in supervision and strategic development.

Article 3 determines the mechanisms for choosing between the various models

.f participation; It allows a Member State to restrict the choice to two

models or even a single model.

```

```
                    - 57 
There are different possibilities. If only one model Is permitted the SE

will have to adopt that one. Where the choice Is between two or three, the

managements of each of the founder companies are to choose a model, If

possible with the agreement of the representatives of their own employees

provided for by the law or practice of the relevant Member State. If the

management and employee representatives cannot reach agreement on the model

proposed by management, management may decide to propose another model

acceptable to the employees; but It must not be forgotten that the SE

cannot be set up without the approval of the general meeting of

shareholders. It would be unrealistic to give the employees a right of

veto which might prevent formation of the SE, or Induce management to

locate Its registered office In another Member State. If no agreement Is

reached, therefore, the model is to be chosen by management.

If the representatives of the employees of company A and company B disagree

between themselves on the choice of model proposed by management, the

majority will prevail. An SE may never be set up until a model of

participation has been chosen.

After the SE has been formed It may prove necessary to change the model

chosen at the time of formation. Such a change will be possible if there

Is agreement between the management of the SE and the representatives of

Its employees. The agreement is to be approved by the general meeting.

In view of the great flexibility of the Statute, which will allow models of

participation to be adopted which will operate In different ways according

to national traditions, paragraph 4 requires each Member State to determine

the details of the practical application of the participation models which

may be used by SEs having their registered offices In Its territory.

```

```
                     - 58 
Art le le 4 makes provision for a model of employee participation either on

the supervisory board (the two-tier system) or on the administrative board

with a definition of management and supervisory functions (the single-tier

system).

If this model is chosen all the employees of the SE and its various

establishments, In whatever Member State they are employed are to elect

representatives to the supervisory board (or administrative board) of the

SE itself; these board members (at least one-third and not more than

one-half) will sit alongside the shareholders' representatives (at least

one-half and not more than two-thirds).

Pursuant to Article 74 of Council Regulation all board members,

whether they represent employees or shareholders, are to have the same

rights and obligations. However the power to authorize certain operations

(listed In Article 72 of the Regulation) will rest with a majority of the

members. A minority will be Informed and consulted; It will in any event

be able to express its view, even If it is not in a position to decide on

the operation itself. In one Member State the general meeting and the

employees do not designate their representatives directly. Article 4 (II)

takes account of this original system of appointing the Supervisory board.

If this system were adopted by an SE, the shareholders and the employees or

thier representatives would have the same rights to recommend, or to object

to, the appointment by the supervisory board of a new member of that board.

Article 5 makes provision for a model of employee participation through a

body which represents the employees at company level but is separate from

the company supervisory or management structure. If this model is chosen

all employees of the company and Its various establishments. In whatever

Member State they may be employed, are to elect representatives to sit on

this body, where they will enjoy the same rights of Information (cf.

Article 64) of the Regulation) and of consultation in the implementation of

the same decisions (listed in Article 72 of the Regulation) as those In the

model defined In Article 4.

```

```
                  - 59 
Article 10 makes It clear that the rights of Information and consultation

conferred on the separate body referred to In Article 5 In no way diminish

the rights enjoyed under the laws of the various Member State» by the

representatives of the employees of the SE's establishment» there:

Betrlebsrate. shop stewards. Conseils d'entreprise and so on are to retain

the rights they exercise on behalf of the employees they represent In the

various establishments of the SE.

Article 6

This article allows other models of participation to be established In the

SE by means of a collective agreement, to be negotiated between the

managements of the founder companies and the representatives of those

companies' employees.

The Commission takes the view, for example, that the three-way model

proposed by Parliament In 1974, and Incorporated In the Commission's

amended proposal of 1975, could be established within the SE by agreement.

Other models would also be possible, as long as the agreement ensured that

the employees or their representatives had the same rights of Information

and consultation as those provided by the other two models provided for In

Articles 4 and 5. Paragraph 3 therefore empowers a "works committee" type

of representation to ask the management for the Information It needs to

perform Its functions, in the same way as the "separate body" representing

the workers may do under Article 5(2)(b). Paragraph 4 covers

confidentiality of Information along the lines laid down In the laws of a

majority of Member States. Paragraph 5 nevertheless allows the management

to withhold certain sensitive Information If the law of the Member State

permits. One might Imagine, for example, that the agreement concluded

would provide for Information and consultation of a general meeting of the

company's employees, as Is done In certain companies. In that case, steps

would have to be taken to prevent Information from being disclosed which

might seriously Jeopardize the Interests of the SE or disrupt Its projects.

```

```
                    - 60 
Paragraph 8 authorizes a Member State which so desires to make provision

for another model, known as a "standard model", In conformity with the most

advanced practice In the country. The standard model would apply In the SE

where the two parties so decided or where no agreement was reached. This

possibility comes close to merely relying on national practice; the

Commission has accepted It only on condition that the SE's employees or

their representatives are guaranteed the rights of information and

consultation referred to In Article 6: that Is to say the quarterly

Information referred to In paragraph 2(a), the Information and consultation

referred to In paragraph 2(b) and, where the employees are represented by a

collegiate body, the right of that body to require the Information

necessary for the performance of Its duties under paragraph 3.

Article 7

All employees of the SE are automatically entitled to vote to elect their

representatives under any of the three models of participation.

Provision must be made to ensure that representatives represent roughly

equal numbers of employees, so that particular groups of employees are not

over-represented, and. In models 2 and 3, that the number of

representatives Is not too great.

In model 1 the proportion between employees' representatives and

shareholders' representatives will determine the number of seats available:

either It will be one-third to one-half of the whole, or the whole board

wl II be co-opted.

In all other respects the rules governing elections will have to be laid

down In the Member States, If this has not already been done.

Article 8

The proportional rule Is to apply before the SE Is formed, too. In order to

prevent all the representatives of the employees of the founder companies,

who may in some companies be very numerous and yet represent only a small

```

```
                    - 61 
proportion of employees, from all having an equal say, together with

management In the choice of the model of participation or the setting-up of

the supervisory board where the number of places is limited to between one
third and one-half vis-à-vis the shareholders' representatives. The

separate body must not comprise a very large number of members either, even

If Article 4 does not stipulate the number, which Is therefore to be laid

down In the statutes In consultation with the representatives of the

employees. The representatives designated In accordance with Article 8

will continue to perform their duties until the new members elected by the

employees of the SE take up their duties.

Article 9 provides that the employees' representatives are to be provided

with premises and other financial and material resources enabling them to

meet, to consult their voters (telephone, telex etc.), to travel and to

obtain expert assistance, In order to be able to perform their duties

properly. Close consultation between the management and employees'

representatives Is the best way of making a reasonable assessment of the

real needs of the employees' representatives.

Article 10 has been commented on In connection with Article 5.

Article 11 is not a further model of participation, as It would be

difficult to ensure that It was equivalent to the other three. It is not

easy to be certain that the same Information and consultation is available

here as with the other three models. It Is nevertheless useful to make

provision for agreements providing for employee participation In the SE's

profits or losses.

```

```
                     - 62 
                   Proposal for a

                 COUNCIL REGULATION

            on the Statute for a European company

THE COUNCIL OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Economic Community,

and in particular Article 100a thereof,

Having regard to the. proposal from the Commission,

In cooperation with the European Parliament,

Having regard to the opinion of the Economic and Social Committee,

Whereas the completion of the internal market within the period set by

Article 8a of the Treaty, and the improvement it must bring about in the

economic and social situation throughout the Community, mean not only that

barriers to trade must be removed, but also that the structures of

production must be adapted to the Community dimension; for this purpose it

is essential that companies whose business is not limited to satisfying

purely local needs should be able to plan and carry out the reorganization

of their business on a Community scale;

Whereas such reorganization presupposes that existing companies from

different Member States have the option of combining their potential by

means of mergers; whereas such operations can be carried out only with due

regard to the competition rules of the Treaty;

```

```
                     - 63 
Whereas restructuring and cooperation operations involving companies from

different Member States give rise to legal and psychological difficulties

and tax problems; whereas the approximation of Member States' company law

by means of directives based on Article 54 of the Treaty can overcome some

of these difficulties; whereas such approximation does not, however, remove

the need for companies governed by different legal systems to choose a form

of company governed by a particular national law;

Whereas the legal framework in which business still has to be carried on in

Europe, being still based entirely on national laws, thus no longer

corresponds to the economic framework in which it must develop if the

objectives set out in Article 8a of the Treaty are to be achieved; whereas

this situation forms a considerable obstacle to the creation of groups

consisting of companies from different Member States.

Whereas it is essential to ensure as far as possible that the economic unit

and the legal unit of business in Europe coincide; whereas for this purpose

provision should be made for creating, side by side with companies governed

by a particular national law, companies formed and carrying on business

under the law created by a Community regulation directly applicable in all

Member States;

Whereas the provisions of such a regulation will permit the creation and

management of companies with a European dimension, free from the obstacles

arising from the disparity and the limited territorial application of

national company laws;

Whereas such a regulation forms part of the national legal systems and

contributes to their approximation, thus constituting a measure relating to

the approximation of the laws of the Member States with a view to the

establishment and functioning of the internal market;

```

```
                     - 64 
Whereas the Statute for a European company (SE) is among the measures to be

adopted by the Council before 1992 listed in the Commission's White Paper

on completing the internal market, approved by the European Council of June

1985 in Milan; whereas the European Council of 1987 in Brussels expressed

the wish to see such a Statute created swiftly;

Whereas since the presentation by the Commission in 1970 of a proposal for

a Regulation on the Statute for a European company, amended In 1975, work

on the approximation of national company law has made substantial progress,

so that on those points where the functioning of a European company does

not need uniform Community rules, reference may be made to the law

governing public companies in the Member State where it has its registered

off ice;

Whereas, without prejudice to any economic needs that may arise in the

future, if the essential objective of the legal rules governing a European

company is to be attained, it must be possible at least to create such a

company as a means of enabling companies from different Member States to

merge or to create a holding company, and of enabling companies and other

legal bodies carrying on an economic activity, and governed by the laws of

different Member States, to form a Joint subsidiary;

Whereas the European company itself must take the form of a public company

limited by shares, this being the form most suited, In terms of both

financing and management, to the needs of a company carrying on business on

a European scale-, whereas In order to ensure that such companies are of

reasonable size, a minimum capital should be set which will provide them

with sufficient assets without making It difficult for small and medium
sized businesses to form a European company;

```

```
                     - 65 
Whereas a European company must be efficiently managed and properly

supervised; whereas it must be borne In mind that there are at present in

the Community two different systems of administration of public companies;

whereas, although a European company should be allowed to choose between

the two systems, the respective responsibilities of those répons lb le for

management and those responsible for supervision should be clearly defined;

Whereas, having regard to the approximation effected by the Fourth Council

Directive 78/660/EEC [1] and the Seventh Council Directive 83/349/EEC [2], as

last amended in both cases by the Act of Accession of Spain and Portugal,

on annual accounts and consolidated accounts, the provisions of those

directives can be made applicable to European companies and such companies

may choose between the options offered by those provisions;

Whereas under the rules and general principles of private International

law, where one undertaking controls another governed by a different legal

system, its ensuing rights and obligations as regards the protection of

minority shareholders and third parties are governed by the law governing

the controlled undertaking, without prejudice to the obligations Imposed on

the controlling undertaking by its own law, for example the requirement to

draw up consolidated a counts-,

1 OJ No L 222, 14.8.1978, p. 11.

2 OJ No L 193, 18.7.1983, p. 1.

```

```
                     - 66 
Whereas, without prejudice to the consequences of any later coordination of

the law of the Member States, specific rules for the European company are

not at present required In this field; whereas the rules and general

principles of private international law should therefore be applied both In

cases where the European company exercises control and in cases where it is

the controlled company;

Whereas the rule thus applicable in the case where the European company Is

controlled by another undertaking should be specified, and for this purpose

reference should be made to the law governing public companies In the State

where the European company has its registered office;

Whereas for purposes of taxation the SE must be made subject to the

legislation of the State In which it is resident; whereas provision should

be made for deduction of losses incurred by the SE's permanent

establishments abroad; whereas in order to avoid any discrimination against

other firms carrying on cross-border business, similar provisions will be

proposed by means of a directive for all other legal forms of business;

Whereas each Member State must be required to apply in respect of

infringements of the provisions of this Regulation the sanctIons applIcable

to public limited companies governed by its law;

Whereas the rules on the involvement of employees in the European company

are contained in Directive ... based on Article 54 of the Treaty, and its

provisions thus form an Indissociable complement to this Regulation and

must be applied concomitantly.

```

```
                     - 67 
Whereas, on matters not covered by this Regulation, the provisions of the

law of the Member States and of Community law are applicable, for example

on:

(I) social security and employment law,

(II) taxation and competition law,

(ill) intellectual property law,

(Iv) Insolvency law;

Whereas the application of this Regulation must be deferred so as to enable

each Member State to incorporate into its national law the provisions of

the above-mentioned Directive and to set up In advance the necessary

machinery for the formation and operation of European companies having

their registered office In Its territory, so that the Regulation and the

Directive may be applied concomitantly,

HAS ADOPTED THIS REGULATION:

```

```
                   - 68 
                   Title I

                General provisions

                  Article 1

           (Form of the European company (SE))

1. Companies may be formed throughout the Community In the form of a

European public limited company (Socletas Europaea, 'SE') on the conditions

and in the manner set out In this Regulation.

2. The capital of the SE shall be divided into shares. The liability of

the shareholders for the debts and obligations of the company shall be

limited to the amount subscribed by them.

```

_**3.**_ **`The SE shall be a commercial company whatever the object of its`**

```
undertaking.

4. The SE shall have legal personality.

                  Article 2

                  (Formation)

1. Public limited companies formed under the law of a Member State and

having their registered office and central administration within the

Community may form an SE by merging or by forming a holding company,

provided at least two of them have their central administration In

different Member States.

2. Companies or firms within the meaning of the second paragraph of

Article 58 of the Treaty and other legal bodies governed by public or

private law which have been formed In accordance with the law of a

Member State and have their registered office and central administration In

the Community may set up an SE by forming a joint subsidiary, provided that

at least two of them have their central administration in different

Member States.

```

```
                     - 69 
                    Article 3

           (Formation with participation of an SE)

1. An SE together with one or more other SEs or together with one or

more limited companies incorporated under the laws of a Member State and

having their registered office and central administration within the

Community may form an SE by merging or by forming a holding company.

2. An SE together with one or more other SEs, or together with one or

more companies or legal bodies within the meaning of Article 2(2), may set

up an SE by forming a Joint subsidiary.

3. An SE may itself form one or more subsidiaries in the form of an SE.

Such a subsidiary may not, however, itself establish a subsidiary in the

form of an SE.

                    Article 4

                  (Minimum capital)

1. Subject to paragraphs 2 and 3, the capital of an SE shall amount to

not less than ECU 100 000.

2. Where an SE carries on the business of a credit Institution It shall

be subject to the minimum capital requirements laid down by the laws of the

Member State in which it has its registered office in accordance with

Article ... of Council Directive ... [1 ]

3. Where an SE carries on the business of an Insurance undertaking It

shall be subject to the minimum capital requirements laid down by the laws

of the Member State In which it has its registered office.

    Second Council Directive on the taking up and pursuit of the business

    of credit institutions.

```

```
                     - 70 
                    Article 5

               (Registered office of SE)

The registered office of an SE shall be situated at the place specified in

its statutes. Such place shall be within the Community. It shall be the

same as the place where the SE has its central administration.

                    Article 6

          (Controlled and controlling undertakings)

1. A "controlled undertaking" means any undertaking in which a natural

or legal person:

(a) has a majority of the shareholders' or members' voting rights;

or

(b) has the right to appoint or remove a majority of the members of the

    administrative, management or supervisory board, and Is at the same

    time a shareholder In, or member of, that undertaking;

or

(c) is a shareholder or member and alone controls, pursuant to an

    agreement entered Into with other shareholders or members of the

    undertaking, a majority of the shareholders' or members' voting

    r Ights.

2. For the purposes of paragraph 1, the controlling undertaking's rights

as regards voting, appointment and removal shall include the rights of any

other controlled undertaking and those of any person or body acting In his

or Its own name but on behalf of the controlling undertaking or of any

other controlled undertaking.

```

```
                     - 71 
                    Article 7

               (Scope of the Regulation)

1. Matters covered by this Regulation, but not expressly mentioned

herein, shall be governed:

(a) by the general principles upon which this Regulation is based;

(b) if those general principles do not provide a solution to the problem,

    by the law applying to public limited companies In the State in which

    the SE has its registered office.

2. Where a State comprises several territorial units, each of which has

its own rules of law applicable to the matters referred to in paragraph 1,

each territorial unit shall be considered a State for the purposes of

identifying the law applicable under paragraph K b ) .

3. In matters which are not covered by this Regulation, Community law

and the law of the Member States shall apply to the SE.

4. In each Member State and subject to the express provisions of this

Regulation, an SE shall have the same rights, powers and obligations as a

public limited company Incorporated under national law.

                    Article 8

                  (Registration)

1. Every SE shall be registered in the State In which it has Its

registered office in a register designated by the law of that State In

accordance with Article 3 of Directive 68/151/EEC [1] .

   OJ No L 65, 14.3.1968, p. 8; English Special Edition 1968(1), p. 41.

```

```
                     - 72 
2. Where an SE has a branch in a Member State other than that In which

it has Its registered office, the branch shall be registered In that other

Member State under the procedures laid down in the laws of that

Member State In accordance with Article of Council Directive 1

                    Article 9

               (Publication of documents)

Publication of the documents and particulars concerning the SE which must

be published under this Regulation shall be effected in the manner laid

down in the laws of each Member State in accordance with Article 3 of

Directive 68/151/EEC.

                    Article 10

                 (Notice In the OJ)

1. Notice that an SE has been formed, stating the number, date and place

of registration and the date and place of publication and the title of the

publication shall be published for information purposes in the Official

Journal of the European Communities after the publication referred to In

Article 9. The same shall be done where a liquidation is terminated.

2. The Member States shall ensure that the particulars referred to in

paragraph 1 are forwarded to the Official Publications Office of the

European Communities within one month of the disclosure referred to in

Article 9.

   Eleventh Council Directive on company law concerning disclosure

    requirements in respect of branches opened in a Member State by

   certain types of companies governed by the law of another State.

```

```
                     - 73 
                    Article 11

                  (Documents of SE)

Letters, order forms and similar documents shall state legibly:

(a) the name of the SE, preceded or followed by the Initiais "SE" unless

those In I ta Is already form part of the name;

(b) the place of the register in which the SE is registered In accordance

    with Article 8(1), and the number of the SE's entry In that register;

(c) the address of the SE's registered office-,

(d) the amount of capital Issued and paid up;

(e) the SE's VAT number;

(f) the fact that the SE Is in liquidation if that Is so.

Any branch of the SE, when registered in accordance with Article 8(2), must

give the above particulars, together with those relating to its own

registration, on the documents referred to in the first paragraph emanating

from that branch.

```

```
                     - 74 
                    Title II

                    Formation

                    SECTION 1

                    General

                    Article 12

                 (Founder companies)

The founder companies of an SE for the purposes of this Title are the

companies, firms and other legal bodies which may form an SE by the means

of formation provided for in Articles 2 and 3.

                    Article 13

       (Instrument of incorporation and statutes of the SE)

The founder companies shall draw up the instrument of Incorporation and the

statutes, if the statutes are a separate instrument, in the forms required

for the formation of public limited companies by the law of the State In

which the SE is to have its registered office.

                    Article 14

                (Experts; verification)

The provisions of national law concerning the examination of consideration

other than cash, adopted in the State In which the SE is to have Its

registered office, pursuant to Article 10 of Directive 77/91/EEC [1], shall

apply.

                   Article 15

               (Supervision of formation)

The procedures for ensuring that the requirements of this Regulation and,

where appropriate, of applicable national law, are complied with in regard

to the formation of an SE and its statutes shall be those provided in

respect of public limited companies under the law of the State In which the

SE is to have its registered office. Member States shall take the measures

necessary to ensure that such procedures are effective.

     0J No L 26, 31.1.1977, p. 1.

```

```
                   - 7 4 a 
                  Article 16

                (Legal personality)

The SE shall have legal personality as from the date set by the law of the

State in which it is to have Its registered office.

```

```
                     - 75 
                    SECTION 2

                 Formation by merger

                    Article 17

                   (Definition)

1. In the formation of an SE by merger, the merging companies shall

be wound up without going into liquidation and transfer to the SE all their

assets and liabilities in exchange for the Issue to their shareholders of

shares in the SE and a cash payment, If any not, exceeding 10% of the

nominal value of the shares so issued or, where there is no nominal value,

of their accounting par value.

2. A company may participate in the formation of an SE by merger even

if it Is in liquidation, provided It has not yet begun to distribute its

assets to the shareholders.

3. The rights of the employees of each of the merging companies shall

be protected In accordance with the provisions of national law giving

effect to Directive 77/187/EEC. [1 ]

                   Article 18

                (Draft terms of merger)

1. The administrative or management board of the founder companies

shall draw up draft terms of merger. The draft terms of merger shall

Include the following particulars:

(a) the type, name and registered office of each of the founder companies

and of the SE;

(b) the share exchange ratio and, where appropriate, the amount of any cash

payment ;

(c) the terms relating to the allotment of shares of the SE;

(d) the date from which the holding of shares of the SE entitles their

holders to participate in profits and any special conditions affecting that

ent itlement;

1 OJ No L 61, 5.3.1977, p. 26.

```

```
                    - 75 a 
(e) the date from which transactions by the founder companies will be

treated for accounting purposes as being those of the SE;

(f) the rights conferred by the SE on the holders of shares to which

special rights are attached and on the holders of securities other than

shares, or the measures proposed concerning them;

(g) any special advantage granted to the experts appointed under

Article 21(1) or to members of the administrative, management, supervisory

or controlling bodies of the founder companies.

2. The draft terms of merger shall be drawn up and certified in due legal

form if the law of the Member State in which any of the founder companies

has its registered office so requires.

```

```
                     - 76 
3. The law of the Member State requiring that the draft terms of merger be

drawn up and certified in due legal form shall determine the person or

authority competent to do so. Where the laws of several Member States in

which the founder companies have their registered offices require the draft

terms of merger to be drawn up and certified in due legal form, this may be

done by any person or authority competent under the law of one of those

Member States.

                    Article 19

          (Publication of the draft terms of merger)

1. For each of the founder companies, the draft terms of merger shall be

made public in the manner prescribed by the laws of each Member State in

accordance with Article 3 of Directive 68/151/EEC at least one month before

the date of the general meeting called to decide thereon.

2. For each of the founder companies, the publication of the draft terms of

merger referred to in paragraph 1, effected In accordance with Article 3(4)

of Directive 68/151/EEC shall contain at least the following particulars:

(a) the type, name and registered office of the founder companies;

(b) the register in which the documents and particulars referred to in

Article 3(2) of Directive 68/151/EEC are filed In respect of each founder

company, and the number of the entry In that register.

(c) the conditions which determine, in accordance with Article 25, the date

on which the merger and formation shall take effect.

3. The publication shall also specify the arrangements made in accordance

with the provisions of national law giving effect to Articles 13, 14, and

15 of Directive 78/855/EEC [1] and with Article 23 of this Regulation for the

exercise of the rights of the creditors of the founder companies.

     OJ No L 295, 20.10.1978, p. 36.

```

```
                    - 7 6 a 
                    Article 20

                  (Board's report)

The administrative or management board of each of the merging companies

shall draw up a detailed written report explaining and justifying the draft

terms of merger from the legal and economic point of view and, In

particular, the share exchange ratio.

The report shall also indicate any special valuation difficulties which

have ar isen.

                    Article 21

          (Supervision of the conduct of the merger)

1. One or more experts, acting on behalf of each founder company but

independent of them, appointed or approved by a judicial or administrative

authority In the Member State in which the company concerned has Its

registered office, shall examine the draft terms of merger and to draw up a

written report for the shareholders.

```

```
                     - 77 
2. In the report referred to in paragraph 1 the experts must state

whether, in the their opinion, the share exchange ratio is fair and

reasonable. The statement must at least:

 (a) indicate the method(s) used In arriving at the proposed share

     exchange ratio;

 (b) .state whether the method(s) used are adequate in the

      circumstances, the values arrived at using each method and an

     opinion on the relative Importance attributed to such methods in

     arriving at the value decided on.

The report shall also indicate any special valuation difficulties which

have arisen.

3. Each expert shall be entitled to obtain from the merging companies

all relevant Information and documents and to carry out all necessary

investigations.

4. Where the laws of all the Member States in which the founder

companies have their registered office make provision for one or more

independent experts to be appointed for all the founder companies such

appointment may be made, at the joint request of those companies, by a

judicial or administrative authority in any of the Member States. In such

cases the law of the Member State of the appointing authority shall

determine the content of the expert's report.

                   Article 22

         (Approval of the merger by general meetings)

1. The draft terms of merger and the Instrument of incorporation of

the SE and, If the statutes are a separate Instrument, Its statutes shall

be approved by the general meeting of each of the founder companies. The

resolution of the general meeting approving the merger shall be subject to

the provisions giving effect to Article 7 of Directive 78/855/EEC in the

case of domestic mergers.

2. For each of the founder companies, the provisions of national law

adopted in accordance with Article 11 of Directive 78/855/EEC shall apply

to the information to be provided to shareholders before the date of the

general meeting called to approve the merger.

```

```
                    - 77 a 
                   Article 23

               (Protection of creditors)

The following provisions of the national law to which the founder companies

are subject shall apply:

(a) the provisions relating to the protection of the interests of

     creditors and debenture holders of the companies In the case of a

     domestIc merger ;

(b) the provisions relating to the protection of the interests of

     holders of securities, other than shares, which carry special

     rights, provided that where the SE Is being formed by the merger

     of public limited companies

```

```
                     - 78 
      the law of the State in which each of the companies has Its

      registered office shall determine whether a meeting of the holders

     of such securities may approve a change In their rights;

      the law of the State in which the SE Is to have its registered

     office shall determine whether the holders of such securities are

     entitled to require the SE to redeem their securities.

                   Article 24

           (Supervision of the legality of mergers)

1. Where the laws of a Member State governing one or more founder

companies provide for judicial or administrative preventative supervision

of the legality of mergers those laws shall apply to those companies.

2. Where the laws of a Member State governing one or more founder

companies do not provide for Judicial or administrative preventative

supervision of the legality of mergers, or where such supervision does not

extend to all the legal acts required for a merger, the national provisions

giving effect to Article 16 of Directive 78/855/EEC shall apply to the

company or companies concerned. Where those laws provide for a merger

contract to be concluded following the decisions of the general meeting

held concerning the merger, that contract shall be concluded by all the

companies involved In the operation. Article 18(3) shall apply.

3. Where the laws of the State In which the SE Is to have its

registered office and the laws governing one or more of the founder

companies provide for judicial or administrative preventative supervision

ofthe legality of mergers, such supervision shall be carried out first in

resepct of the SE. The supervision may be carried out In respect of the

founder companies only when it can be shown that such supervision has been

carried out in respect of the SE In accordance with Article 15.

4. Where the laws governing one or more of the founder companies

taking part in the merger provide for judicial or administrative

preventative supervision of the legality of mergers whereas the laws

governing one or more of the other founder companies taking part In the

```

```
                   - 78 a 
merger do not, such supervision shall be carried out on the basis of the

documents drawn up and certified in due legal form referred to In Article

16 of Directive 78/855/EEC.

                   Article 25

                 (Effective date)

The date on which the merger and the simultaneous formation of the SE takes

effect shall be determined by the law of the State In which the SE has Its

registered office. That date must be after all necessary supervision has

been carried out and, where appropriate, the certified documents referred

to in Article 24 have been drawn up for each of the founder companies.

```

```
                     - 79 
                    Article 26

                    (Publicity)

For each of the founder companies, the merger must be publicized In the

manner prescribed by national law, In accordance with Article 3 of

Directive 68/151/EEC.

                    Article 27

                (Effects of the merger)

      A merger shall have the following consequences Ipso Jure and

simultaneously:

(a) the transfer, both as between the founder companies and the SE and

      as regards third parties, of all the assets and liabilities of the

      founder companies to the SE;

(b) the shareholders of the founder companies become shareholders of

      the SE:

(c) the founder companies cease to exist.

                   Article 28

              (Liability of board members)

The liability of members of the administrative or the management board of

founder companies and of such companies' experts shall be governed by the

provisions of national law giving effect to Articles 20 and 21 of Directive

78/855/EEC In the State in which the founder company concerned has Its

registered office or, where appropriate, by this Regulation.

However, in the case of an appointment under Article 21(4), the liability

of the expert or experts shall be governed by the law of the Member State

of the judicial or administrative authority which appointed them.

```

```
                    - 79 a 
                   Article 29

                    (Nullity)

The question of the nullity of a merger that has taken effect pursuant to

Article 25 shall be governed by the national law of the company concerned

but a merger may be declared null and void only where there has been no

Judicial or administrative preventative supervision of Its legality or

where there is no certified documentation where such supervision or the

drawing up of such documentation Is laid down by the laws of the Member

State governing the relevant company. However, where the laws of the

State in which the SE has its registered office do not provide for a merger

to be declared null and void on such grounds, no such nullity may be

declared.

```

```
                     -80 
                    Article 30

      (Merger: Shareholdings between fellow founder companies)

Articles 17-29 shall also apply where one of the founder companies holds

all or part of the shares of another founder company. In such a case,

shares in founder companies which come Into the possession of the SE as

part of the assets of a founder company shall be cancelled.

                    SECTION 3

            Formation of an SE holding company

                    Article 31

                   (Definition)

1. If an SE is formed as a holding company, all the shares of the

founder companies shall be transferred to the SE in exchange for shares of

the SE.

2. The founder companies shall continue to exist. Any provisions of

the laws of the States in which the founder companies have their registered

office, requiring that a company be wound up if all its shares come to be

held by one person shall not apply.

                    Article 32

               (Draft terms of formation)

1. The administrative or management board of the founder companies

shall draw up draft terms for the formation of an SE holding company

containing the particulars referred to in Article 18(1)(a), (b) and (c) and

Article 21 and shall prepare the report provided for in Article 20.

2. The provisions of Article 21 shall apply to the supervision of

the formation of the holding company in respect of each founder company.

3. The provisions of Article 22 shall apply to the approval of the

formation of the holding company by the general meeting of each of the

founder companies.

```

```
                    - 80 a 
4. The provisions of Article 28 on the liability of board members

shalI apply.

5. The formation of an SE holding company may be declared null and

void only for failure to supervise the formation of the holding company in

accordance with Article 29.

6. For the purposes of applying the provisions of Section 2 on

formation by merger, merger shall be read as formation of an SE holding

company.

                   Article 33

              (Matters affecting employees)

The administrative or management board of each of the founder companies

shall discuss with the representatives of Its employees the legal, economic

and employment Implications of the formation of an SE holding company for

the employees and any measures proposed to deal with them.

```

```
                     - 81 
                    SECTION 4

             Formation of a joint subsidiary

                   Article 34

               (Draft terms of formation)

If a joint subsidiary Is formed In the form of an SE, the administrative or

the management board of each of the founder companies shall draw up draft

terms for the formation of the subsidiary Including the following

part iculars:

(a) the type, name and registered office of the founder companies and

     of the proposed SE;

(b) the size of the shareholdings of the founder companies in the SE;

(c) the economic reasons for the formation.

                   Article 35

              (Approval of the formation)

1. The draft terms of formation and the instrument of incorporation

of the SE and its statutes, if the statutes are a separate instrument, its

statutes shall be approved by each of the founder companies in accordance

with the law which governs it.

2. Founder companies incorporated under national law shall be subject

to all the provisions governing their participation in the formation of a

subsidiary in the form of a public limited company under national law.

3. Where a founder company Itself has the form of an SE, the

following provisions shall apply:

(a) the instrument of Incorporation and the statutes shall be

     authorized in accordance with Article 72 of this Regulation;

(b) if the decision on the participation of the SE in the formation of

     the subsidiary falls within the matters to be decided by the

     general meeting, the instrument of incorporation and the statutes

     must also be approved by the general meeting.

```

```
                   - 81 a 
                   SECTION 5

            Formation of a subsidiary by an SE

                  Article 36

              (Draft terms of formation)

If an SE forms a subsidiary in the form of an SE, the administrative or

management board shall draw up draft terms for the formation of the

subsidiary. Those draft terms shall include the following particulars:

```

```
                    - 82 
(a) the name and registered office of the founder company and the

     instrument of Incorporation of the subsidary or its statutes, If

     the statutes are a separate instrument;

(b) the economic reasons for the formation.

                  Article 37

              (Approval of the formation)

The instrument of incorporation of the subsidiary or Its statutes, If the

statutes are a separate instrument, shall be approved In accordance with

Article 35 (3).

```

```
                     - 83 
                    Title I 11

              Capital - Shares - Debentures

                   Article 38

                 (Capital of the SE)

1. The capital of the SE shall be denominated in ecu.

2. The capital of the SE shall be divided into shares denominated In ecu.

Shares Issued for a consideration must be paid up at the time the company

is registered in the Register referred to in Article 8(1) to the extent of

not less than 25% of their nominal value. However, where shares are Issued

for a consideration other than cash at the time the company Is registered,

that consideration must be transferred to the company In full within five

years of the date on which the company was incorporated or acquired legal

personality.

3. The subscribed capital may be formed only of assets capable of

economic assessment. However, an undertaking to perform work or to supply

services may not form part of these assets.

                   Article 39

1. Shares may not be issued at a price lower than their nominal value.

2. Professional intermediaries who undertake to place shares may be

charged less than the total price of the shares for which they subscribe in

the course of such a transaction.

                   Article 40

All shareholders in like circumstances shall be treated In a like manner.

```

```
                     - 84 
                    Article 41

Subject to the provisions relating to the reduction of subscribed capital,

the shareholders not may be released from the obligation to pay up their

contrI but ions.

                    Article 42

                 (Increase in cap!tal)

1. The capital of the SE may be increased by the subscription of new

capital. An increase in capital shall require amendment of the statutes.

Shares issued for a consideration in the course of an Increase In

subscribed capital must be paid up to not less than 25% of their nominal

value. Where provision is made for an issue premium, it must be paid In

full.

2. Where all or part of the consideration for the Increase in capital is

In a form other than cash, a report on the valuation of the consideration

shall be submitted to the general meeting. The report shall be prepared

and signed by one or more experts Independent of the SE and appointed or

approved by the court within whose Jurisdiction the registered office of

the SE is situated.

3. The expert's report shall be published in accordance with Article 9.

4. Any increase in subscribed capital must be decided upon by the general

meeting. Both this decision and the increase In the subscribed capital

shall be published In accordance with Article 9.

5. Where the capital is Increased by the capitalization of available

reserves, the new shares shall be distributed amongst the shareholders In

proportion to their existing shareholdings.

However, in Its decision on the increase In capital, the general meeting

may decide that some or all of the new shares shall be distributed amongst

the employees of the SE.

```

```
                     - 85 
                    Article 43

         (Authorization of future increase In capital)

1. The statutes or instrument of Incorporation or the general meeting,

the decision of which must be published in accordance with Article 9, may

authorize an increase in the subscribed capital, provided that such

increase shall not exceed one-half of the capital already subscribed.

2. Where appropriate, the increase In the subscribed capital up to the

maximum authorized under paragraph 1 shall be decided by the administrative

or the management board. The power of such body In this respect shall be

for a maximum period of five years, and may be renewed one or more times by

the general meeting, each time for a period not exceeding five years.

3. The administrative or the management board must register decisions

authorizing a future increase in capital.

The administrative or the management board must register, and publicize In

accordance with Article 9, all issues of shares up to the maximum

authorised capital limits and the consideration furnished for those shares.

In addition, the board shall report each year in the notes on the accounts

on the use it has made of the authorization.

4. Where the authorized capital has been fully subscribed or where the

period referred to In paragraph 2 has elapsed with only part of the

authorized capital having been subscribed, the administrative or the

management board shall amend the statutes to indicate the new total

capital.

Where the authorization to increase capital has not been used, the

administrative or the management board shall decide to delete the

authorization clause referred to in paragraph 1. The board shall register

such decisions.

```

```
                     - 86 
5. Where an increase in capital Is not fully subscribed, the capital

shall be increased by the amount of the subscriptions received only If the

conditions of the Issue so provide.

                    Article 44

            (Subscription rights of shareholders)

1. Whenever capital Is increased by consideration In cash, the shares

must be offered on a pre-emptive basis to shareholders In proportion to the

capital represented by their shares.

2. Any offer of subscription on a pre-emptive basis and the period within

which this right must be exercised shall be published in accordance with

Article 9. However, it may be provided that such publication is not

required where all the shares of the SE are registered. In such case, all

the shareholders must be informed in writing. The right of pre-emption must

be exercised within a period which shall not be less than 14 days from the

date of publication of the offer or from the date of dispatch of the

letters to the shareholders.

3. The right of pre-emption may not be restricted or withdrawn by the

statutes or the instrument of incorporation. This may, however, be done by

decision of the general meeting. The administrative or the management board

shall be required to present to such a meeting a written report indicating

the reasons for restriction or withdrawal of the right of pre-emption and

justifying the proposed Issue price. The decision shall require at least a

two-thirds majority of the votes attaching to the securitlesrepresented or

to the subscribed capital represented. The decision shall be published In

accordance with Article 9.

4. The statutes, the instrument of incorporation, or the general meeting,

acting In accordance with the rules for a quorum, a majority and

publication set out in paragraph 3, may give the power to restrict or

withdraw the right of pre-emption to the administrative or the management

board which is empowered to decide on an increase In subscribed capital

within the limits of the authorised capital. This power may not be granted

for a longer period than the power for which provision is made In Article

43 (2).

```

```
                     - 87 
5. Shareholders may obtain copies of the reports referred to In

paragraph 3 free of charge from the day on which notice of the general

meeting is given. A statement to that effect shall be made In the notice

convening the general meeting.

                    Article 45

                (Reduction of capital)

1. Any reduction in the subscribed capital, except under a court order,

must be subject at least to a decision of the general meeting acting in

accordance with the rules for a quorum and a majority laid down In Article

44 (3). Such decision shall be published in accordance with Article 9.

The notice convening the general meeting must specify at least the purpose

of the reduction and the way In which it Is to be carried out.

2. Where there are several classes of shares, the decision of the

general meeting concerning a reduction in the subscribed capital shall be

subject to a separate vote, at least for each class of shareholders whose

rights are affected by the transaction.

3. A reduction of capital shall be effected by reducing the nominal value

of the shares. However, the nominal subscribed capital may not be reduced

to an amount less than the minimum capital. Only where losses have been

incurred may the general meeting decide to reduce the capital below the

minimum capital, and in that case it shall at the same time decide to

Increase the capital to an amount equal to or higher than the minimum

capital.

4. Where the subscribed capital is reduced in order to adjust It to the

diminished value of the company following losses, and, as a result of the

reduction, assets exceed liabilities, the difference shall be entered in a

reserve. This reserve may not be used for the distribution of dividends or

for the granting of other benefits to shareholders.

```

```
                    - 88 
                   Article 46

    (Protection of creditors In the event of reduction of capital)

1. In the event of a reduction in the subscribed capital, 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.

The conditions for the exercise of this right shall be governed by the law

of the State where the company has its registered office.

2. The reduction shall be void or no payment may be made for the benefit

of the shareholders until the creditors have obtained satisfaction or the

court within whose Jurisdiction the registered office of the SE is

situated, has decided that their application should not be acceded to.

3. Paragraphs 1 and 2 shall apply where the reduction in the subscribed

capital is brought about by the total or partial waiving of the payment of

the balance of the shareholders' contributions.

   They shall not apply to reductions in the subscribed capital for the

purpose of adjusting It to the real value of the company following losses.

                  Article 47

The subscribed capital may not be reduced to an amount less than the

minimum capital laid down In accordance with Article 4. However, such a

reduction may be made If it Is also provided that the decision to reduce

the subscribed capital may take effect only when the subscribed capital Is

increased to an amount at least equal to the prescribed minimum.

                  Article 48

                  (Own shares)

1. The subscription for shares of the SE by the SE Itself, third parties

acting on its behalf or undertakings controlled by it within the meaning of

Article 6 or in which it holds a majority of the shares Is prohibited.

```

```
                     - 89 
2. If shares of the SE have been subscribed for by a person acting In his

own name, but on behalf of the SE, the subscriber shall be deemed to have

subscribed for them for his own account.

3. The founder companies of the SE by which or In name of which the

statutes or the instrument of Incorporation of the SE were signed or in the

case of an increase in the subscribed capital, the members of the

administrative or the management board, shall be liable to pay for shares

subscribed in contravention of this Article.

                    Article 49

1. The acquisition of shares of the SE by the SE Itself, third parties

acting on its behalf or undertakings controlled by It within the meaning of

Article 6 or in which It holds a majority of the shares Is prohibited.

2. Paragraph 1 shall not apply to

(a) the acquisition by the SE or third parties acting on its behalf of

   shares of the SE for the purpose of distributing them to the employees

   of the SE;

(b) shares acquired in carrying out a decision to reduce capital;

(c) shares acquired as a result of a universal transfer of assets;

(d) fully paid-up shares acquired free of charge or by banks and other

   financial institutions as purchasing commission;

(e) shares acquired by virtue of a legal obligation or resulting from a

   court ruling for the protection of minority shareholders, in the

   event, particularly, of a merger, a change in the company's object or

   form, transfer abroad of the registered office, or the introduction of

   restrictions on the transfer of shares;

(f) shares acquired from a shareholder in the event of failure to pay them

   UP;

(g) shares acquired in order to indemnity minority shareholders in

   controlled companies;

(h) fully paid-up shares acquired under a sale enforced by a court order

   for the payment of a debt owed to the company by the owner of the

   shares.

```

```
                     - 90 
3. Shares acquired in the cases listed in paragraph 2(c) to (h) above

must, however, be disposed of within not more than three years of their

acquisition unless the nominal value of the shares acquired, including

shares the SE may have acquired directly or indirectly, does not exceed 10%

of the subscribed capital.

4. If the shares are not disposed of within the period laid down in

paragraph 3 they must be cancelled.

5. The SE may not accept its own shares as security or acquire any rights

of usufruct or other beneficial rights over them.

6. An SE may not advance funds, nor make loans, nor provide security,

with a view to the acquisition of Its shares by a third party.

7. Paragraph 6 shall not apply to transactions concluded by banks and

other financial institutions In the normal course of business, nor to

transactions effected with a view to the acquisition of shares by or for

the employees of the SE or a controlled company. However, these

transactions may not have the effect of reducing the net assets of the SE

below the amount of its subscribed capital plus the reserves which by law

or under the statutes may not be distributed.

8. Shares acquired in contravention of paragraph 1 shall be disposed of

within six months of their acquisition.

9. If an undertaking comes under the control of the SE or if a majority

of Its shares are acquired by such an SE, and it holds shares in the SE,

the undertaking shall dispose of the shares in the SE within 18 months from

the date of its coming under the control of the SE or from the date when

the SE acquired a majority of its shares.

If an SE acquires its own shares by way of universal transfer of assets or

If an undertaking which is controlled by the SE or the majority of those

shares are held by the SE acquires shares of the SE In this manner, such

shares shall be disposed of within the same period.

10. Shares acquired by the SE pursuant to paragraph 2(a) shall, if they

have not been distributed to the employees within 12 months of being

acquired, be disposed of within the following six months.

```

```
                     - 91 
 11. No rights may be exercised in respect of the shares referred to In

 paragraphs 8, 9 and 10 until they have been disposed of or distributed to

 the employees.

                    Article 50

                (Disclosure of holdings)

Holdings of the SE in other companies shall be disclosed in accordance with

 the provisions of national law giving effect to Directive 88/627/EEC. [1 ]

                    Article 51

               (Indivisibility of shares)

The rights attached to a share shall be Indivisible. Where a share Is

owned jointly by more than one person, the rights attached to it may be

exercised only through a common representative.

                    Article 52

               (Rights conferred by shares)

1. Shares may carry different rights in respect of the distribution of

the profits and assets of the company. Payment of fixed Interest may be

neither made nor promised to shareholders.

2. Non-voting shares shall may be Issued subject to the following

condit ions:

(a) their total nominal value shall not exceed one half of the capital;

(b) they must carry all the rights of a shareholder other than the right

   to vote, except that the right to subscribe for new shares may be

   limited by the statutes or by resolution of the general meeting to

   non-voting shares. In addition they must confer special advantages;

(c) they shall not be Included In computing a quorum or majority required

   by this Regulation or the statutes of the company.

The above shall be without prejudice to paragraph 5.

1 OJ No L 348, 17.12.1988, p. 62.

```

```
                     - 92 
3. Any other restriction or extension of voting rights, such as shares

carrying multiple voting rights, Is prohibited.

4. Shares carrying the same rights shall form a class.

5. Where there are several classes of shares, any decision of the general

meeting which adversely affects the rights of a particular class of

shareholders shall be subject to a separate vote at least for each class

of shareholder whose rights are affected by the transaction. The provisions

governing an amendment of the statutes shall apply as regards the convening

of meetings and the required quorum and majority to the holders of the

shares of the class concerned.

                    Article 53

           (Issue of bearer and registered shares)

1. Shares shall be in either bearer or registered form. The statutes may

entitle shareholders to request conversion of their bearer shares into

registered shares or vice versa.

2. An SE which issues registered shares shall keep an alphabetical

register of all shareholders, together with their addresses and the number

and class of shares they hold. The register shall be open for public

Inspection on request at the registered office of the SE.

                   Article 54

              (Issue and transfer of shares)

The laws of the State In which the SE has its registered office shall

govern the issue, replacement and cancellation of share certificates,

and the transfer of shares.

```

```
                    - 93 
                    Article 55

          (Publication requirements for obtaining stock

          exchange listing and for offering securities

                   to the pub Iic)

 1. The provisions of national law giving effect to

 Directive 80/390/EEC, [1] shall apply to the listing particulars to be

 published for the admission of securities of the SE to official stock

 exchange 11stIng.

 2. The provisions of national law giving effect to Directive

 89/298/EEC [2] shall apply to the prospectus to be published where

 securities are offered to the public.

                    Article 56

                 (Issue of debentures)

 The SE may issue debentures.

                    Article 57

               (Body of debenture holders)

 The laws of the State in which the SE has Its registered office shall

 apply to the body of debenture holders.

                    Article 58

             (Debentures convertible into shares)

 1. Articles 43, and 44 shall apply to the Issue of debentures

 convertible Into shares.

 2. The laws of the State In which the SE has Its registered office shall

 apply to the conditions and procedure for the exercise of conversion or

 subscription rights.

1 OJNOL 100, 17.4.1980, p. 1.
2 QJNoL 124, 5.5.1989, p. 8.

```

```
                 - 94 
3. As long as convertible debentures are outstanding, the SE may not

decide on any amendment of the statutes affecting the rights of the holders

of such debentures except where less Kece than 5% of the convertible 4,

debentures is still outstanding and their holders have the opportunity to

exercise their conversion or subscription rights In good time before the

amendment takes effect or if the body of convertible debenture holders has

approved the proposed amendment. In the latter case, a higher percentage

may be stipulated in thé loan conditions.

4. Where conversion or subscription rights attached to convertible

debentures have been fully exercised or have been exercised only in part

but the period in which they may be exercised has expired the management or

the administrative board shall alter the statutes to show the new amount of

capital. Where subscription or conversion rights are not exercised within

the prescribed period, the management or the administrative board, shall

delete from the statutes the clause concerning the issue of convertible

debentures.

Such amendments to the statutes shall be published in accordance with

Article 9.

                  Article 59

              (Participating debentures)

1. The general meeting may, by a resolution which meets the requirements

for altering the statutes, decide to issue debentures carrying the right to

share in profits. Such debentures shall be issued for cash and shall carry

rights determined wholly or partly by reference to the profits of the SE.

2. Article 58(3) shall apply, mutatis mutandis, to participating

debentures.

                  Article 60

                (Other securities)

The SE shall not issue to persons who are not shareholders of the SE other

securities carrying a right to participate in the profits or assets of the

SE.

```

```
                    - 95 
                   Title IV

                 Governing bodies

                   Article 61

The statutes of the SE shall provide for the company to have as its

governing bodies the general meeting of shareholders and either a

management board and a supervisory board (two-tier system) or an

administrative board (one-tier system).

                   SECTION 1

                 Two-tier system

                  SUB-SECTION 1

                 Management board

                   Article 62

(Functions of the management board; Appointment of members)

1. The SE shall be managed and represented by a management board under

the supervision of a supervisory board.

2. The members of the management board shall be appointed by the

supervisory board, which may remove them at any time.

3. No person may at the same time be a member of the management board and

the supervisory board of the same SE.

4. The number of members of the management board shall be laid down In

the statutes of the SE.

5. The rules of procedure of the management board shall be adopted by the

supervisory board, after obtaining the views of the management board.

```

```
                     - 96 
                   SUB-SECTION 2

                 Supervisory board

                   Article 63

     (Functions of the supervisory board; Appointment of members)

1. The supervisory board may not participate In the management of the

company nor represent it In dealings with third parties. However, it shall

represent the company In its relations with members of the

management board.

2. Subject to the measures adopted to give effect to Article 4 of the

Council Directive [completing the Statute In respect of the

involvement of employees In SEs] members of the supervisory board shall be

appointed by the general meeting.

                   Article 64

                (Right to Information)

1. At least once every three months, the management board shall report

to the supervisory board on the management and progress of the company's

affairs, including undertakings controlled by It, and on the company's

situation and prospects.

2. The management board shall inform the chairman of the

supervisory board without delay of all matters of importance, including any

event occurlng In the company or In undertakings controlled by It which may

have an appreciable effect on the SE.

```

```
                     - 97 
3. The supervisory board may at any time require the management board to

provide Information or a special report on any matter concerning the

company or undertakings controlled by It.

4. The supervisory board shall be entitled to undertake all

Investigations necessary for the performance of Its duties. It may appoint

one or more of its members to pursue such investigations on its behalf and

may call In the help of experts.

5. Any member of the supervisory board may, through the chairman of that

board, require the management board to provide the supervisory board with

any information necessary for the performance of Its duties.

6. Each member of the supervisory board shall be entitled to examine all

reports, documents and information and the results of enquiries and

inspections obtained under the preceding paragraphs.

                   Article 65

          (Rules of procedure, calling of meetings)

1. The supervisory board shall adopt its rules of procedure and shall

elect a chairman and one or more vice-chairmen from among Its members.

2. The chairman may call a meeting of the supervisory board on his own

initiative and shall do so at the request of a member of the

supervisory board or of a member of the management board.

                    SECTION 2

                 The one-tier system

```

```
                     - 98 
                    Article 66

        (The administrative board; Appointment of members)

1. The SE shall be managed and represented by an administrative board.

The board shall be composed of at least three members. It shall adopt its

rules of procedure and shall elect a chairman and one or more vice-chairmen

from among Its members.

2. The management of the SE shall be delegated by the administrative

board to one or more of it members. The executive members shall be fewer

In number than the other members of the board. The delegation of

management responsibilities to an executive member of the administrative

board may be revoked by the board at any time.

3. Subject to the measures adopted to give effect to Article 4 of Council

Directive ...[completing the Statute in respect of the involvement of

employees in SEs] members of the administrative board shall be appointed by

the general meeting.

                    Article 67

                (Right to information)

1. The administrative board shall meet at least once every three months

to discuss the management and progress of the company's affairs, including

undertakings controlled by It and the company's situation and prospects.

2. Each member shall inform the chairman of the administrative board

without delay of all matters of importance, Including any event occurlng In

the company or in undertakings controlled by it which may have an

appreciable effect on the SE.

```

```
                    - 99 
3. Any member of the administrative board may request the chairman to

call a meeting of that board to discuss particular aspects of the company,

if the request has not been complied with within 15 days, a meeting of the

administrative board may be called by one third of Its members.

4. Each member of the administrative board shall be entitled to examine

all reports, documents and information supplied to the board concerning the

matters referred to in paragraphs 1 and 3.

                   SECTION 3

      Rules common to the one-tier and two-tier board systems

                   Article 68

                 (Term of office)

1. Members of the governing bodies shall be appointed for a period laid

down In tha statutes not AYCAAdlnn down In the statutes not exceeding «IY six vsars.  years.

However, the first members of the supervisory board or of the

administrative board, who are to be appointed by the shareholders shall be

appointed by the Instrument of incorporation of the SE for a period not

exceeding three years.

2. Board members may be reappointed.

                   Article 69

              (Conditions of membership)

1. Where the statutes of the SE allow a legal person or company to be a

member of a board, that legal person or company shall designate a natural

person to represent It In the performance of Its duties on the board. The

representative shall be subject to the same conditions and obligations as

if he were personally a member. Publication under Article 9 shall refer

both to the representative and to the legal person or company represented.

The legal person or company shall be jointly and severally liable without

limitation for obligations arising from the acts of its representative.

```

```
                   - 100 
2. No person may be a board member who

   under the law applicable to him, or

   as a result of a judicial or administrative decision delivered or

   recognized In a Member State,

is disqualified from serving on an administrative, supervisory or

management board.

3. The statutes may lay down special conditions of eligibility for

members representing the shareholders.

4. Notwithstanding the rule laid down in Article 94(2), the statutes of

the SE may provide voting procedures for the appointment of members of the

administrative or the supervisory board by the general meeting such that

one or more members and their alternates may be appointed by a minority of

the shareholders.

                  Article 70

                  (Vacancies)

The statutes of the SE may provide for the appointment of alternate members

to vacancies. Such appointments may be terminated at any time by the

appointment of a full member.

```

```
                   - 101 
                   Article 71

              (Power of representation)

1. Where the management board, Is composed of more than one member, or

where the management of the company is delegated to more than one member of

the administrative board those members have authority to represent the

company collectively only in dealings with third parties. However, the

statutes of the SE may provide that a member of the relevant board shall

have authority to represent the SE alone or together with one or more other

members of the board or together with a person who has been given general

authority to represent the company under paragraph 2.

2. The administrative board or, as the case may be, the management board

with the approval of the supervisory board, may confer a general authority

to represent the company on one or more persons. Such authority may be

revoked at any time, in the same way, by the board which granted It.

3. Acts performed by those having authority to represent the company

under paragraphs 1 and 2 shall bind the company vis-à-vis third parties,

even where the acts in question are not in accordance with the objects of

the company, providing they do not exceed the powers conferred by this

Régulât Ion.

```

```
                   - 102 
                   Article 72

          (Operations requiring prior authorization)

1. The Implementation of decisions on

(a) the closure or transfer of establishments or of substantial parts

   thereof,

(b) substantial reduction, extension or alteration of the activities of

   the SE,

(c) substantial organizational changes within the SE,

(d) the establishment of cooperation with other undertakings which Is both

   long-term and of importance to the activities of the SE, or the

   termination thereof.

(e) the setting up of a subsidiary or of a holding company.

may be effected by the management board only following prior authorization

of the supervisory board or by the administrative board as a whole.

Implementation may not be delegated to the executive members of the

administrative board.

Acts done In breach of the above provisions may not be relied upon against

third parties, unless the SE can prove that the third party was aware of

the breach.

2. The statutes of the SE may provide that paragraph 1 shall also apply

to other types of decisions.

                  Article 73

               (Conflicts of interest)

1. Any transaction in which a board member has an Interest conflicting

with the Interests of the SE shall require the prior authorization of the

supervisory board or the administrative board.

```

```
                   - 103 
2. The statutes of the SE may provide that paragraph 1 shall not apply to

routine transactions concluded on normal terms and conditions.

3. A member to whom paragraph 1 applies shall be entitled to be heard

before a decision on the authorization is made but may not take part In the

deliberations of the relevant board when it makes its decision.

4. Authorizations given under paragraph 1 during any financial year shall

be communicated to the shareholders not later than at the first general

meeting following the end of the financial year In question.

5. Failure to obtain authorization may not be relied upon against third

parties, unless the SE can prove that the third party was aware of the need

for, and lack of, such authorization.

                   Art le le 74

               (Rights and obligations)

1. Each member of a board of the SE shall have the same rights and

obligations, without prejudice to

(a) any internal allocation of responsibilities between the members of the

   board, and the provisions of the board's rules of procedure governing

   the taking of decisions in the event of a tied vote;

(b) the provisions concerning the delegation of management responslbl It les

   to executive members.

2. All board members shall carry out their functions in the Interests of

the SE, having regard in particular to the interests of the shareholders

and the employees.

3. All board members shall exercise a proper discretion In respect of

information of a confidential nature concerning the SE. This duty shall

continue to apply even after they have ceased to hold office.

```

```
                     - 104 
                    Article 75

                 (Removal of members)

1. Members of the supervisory board or the administrative board may be

dismissed at any time by the same body, persons or groups of persons who

under this Regulation or the statutes of the SE have the power to appoint

them.

2. In addition, members of the supervisory board or the administrative

board may be dismissed on proper grounds by the court within whose

juridiction the registered office of the SE Is situated in proceedings

brought by the general meeting of the shareholders, the representatives of

the employees, the supervisory board or the administrative board. Such

proceedings may also be brought by one or more shareholders who together

hold 10% of the capital of the SE.

                    Article 76

                 (Quorum, majority)

1. Unless the statutes of the SE require a higher quorum, a board shall

not conduct business validly unless at least half of its members take part

In the deliberat ions.

2. Members who are absent may take part in decisions by authorizing a

member who is present to represent them. No member may represent more than

one absent member.

3. Unless the statutes of the SE provide for a larger majority, decisions

shall be taken by a majority of the members present or represented.

```

```
                     - 105 
4. Under terms laid down In the statutes of the SE a board may also take

decisions by procedures under which the members vote In writing, by telex,

telegram or telephone or by any other means of telecommunication, provided

that all members are Informed of the proposed voting procedure and no

member objects to the use of that procedure.

                    Article 77

                  (Civil liability)

1. Members of the administrative board, the management board or the

supervisory board, shall be liable to the SE for any damage sustained by

the company as a result of wrongful acts committed In carrying out their

dut les.

2. Where the board concerned is composed of more than one member, all the

members shall be jointly and severally liable without limit. However, a

member may be relieved of liability If he can prove that no fault is

attributable to him personally. Such relief may not be claimed by a member

on the sole ground that the act giving rise to liability did not come

within the sphere of responsibilities delegated to him.

                   Article 78

           (Proceedings on behalf of the company)

1. The administrative board or the supervisory board, may Institute

proceedings on the company's behalf to establish liability.

2. Such proceedings must be brought if the general meeting so decides.

The general meeting may appoint a special representative for this purpose.

For such a decision the statutes may not prescribe a majority greater than

an absolute majority of the votes attached to the capital represented.

```

```
     A - 106 
##### **`SucW`**

3. Proceedings on behalf of the company may also be brought by one or ^
## **r ^**

more shareholders who together hold 10% of the capital of the SE.

4. Such proceedings may be brought by any creditor of the SE who can show

that he cannot obtain satisfaction of his claim on the company.

                    Article 79

        (Waiver of proceedings on behalf of the company)

1. The SE may waive its right to institute proceedings on the company's

behalf to establish liability. Such a waiver shall require an express

resolution of the general meeting taken In the knowledge of the wrongful

act giving rise to damage for the company. However, such a resolution may

not be passed if it Is opposed by shareholders whose holdings amount to the

figure referred to in Article 75.

2. Paragraph 1 shall also apply to any compromise relating to such

proceedings agreed between the company and a board member.

                    Article 80

                (Limitation of actions)

No proceedings on the company's behalf to establish liability may be

instituted more than five years after the act giving rise to damage.

```

```
                   - 107 
                   Section 4

                 General meeting

                   Article 81

                  (Competence)

The following matters shall be resolved by the general meeting:

a) increases or reductions In subscribed or authorized capital;

b) issues of debentures convertible Into shares or carrying subscription

    rights and of debentures carrying the right to share In the profits;

c) the appointment or removal of members of the administrative board or

   of the supervisory board, who represent the shareholders;

d) the Institution of proceedings on the company's behalf for negligence

   or misconduct by board members;

e) the appointment or dismissal of auditors;

f) approval of the annual accounts;

g) appropriation of the profit or loss for the year-,

h) amendment of the statutes;

i) winding up and appointment of liquidators;

j) transformation';

k) merger of the SE with another company;

```

```
I) transfers of assets.

```

```
 - 108 
Article 82

```

```
              (Holding of general meeting)

1. A general meeting shall be held at least once a year. However, the

    first general meeting may be held at any time In the 18 months

    following the Incorporation of the SE.

2. A general meeting may be called at any time by the management board

    or the administrative board.

                    Article 83

          (Meeting called by minority shareholders)

1. It shall be provided that one or more shareholders who satisfy the

    conditions set out In Article 75 may request the SE to call the

    general meeting and to settle the agenda therefor.

2. If, following a request made under paragraph 1, no action has been

    taken within a month, the court within whose juridiction the

    registered office of the SE is situated may order the calling of a

    general meeting or authorize either the shareholders who have

    requested It or their representative to call the meeting.

                   Article 84

              (Methods of calling meetings)

1. a) The general meeting shall be called by a notice published either in

    the national gazette specified in the legislation of the State of the

    registered office In accordance with Article 3 (4) of Directive

   68/151/EEC or In one or more large-circulation newspapers.

```

```
                     - 109 
  b) However, where all the shares in an SE are registered or where all

    its shareholders are known, the general meeting may be called by any

    means of communication addressed to all the shareholders.

2. The notice calling the general meeting shall contain the following

    particulars, at least:

a) the name and the registered office of the SE;

b) the place and date of the meeting;

c) the type of general meeting (ordinary, extraordinary or special);

d) a statement of the formalities, if any, prescribed by the statutes

    for attendance at the general meeting and for the exercise of the

    r ight to vote-,

e) any provisions of the statutes which require the shareholder, where

    he appoints an agent, to appoint a person who falls within certain

    specified categories of persons.

f) the agenda showing the subjects to be discussed and the proposals for

    résolut ions.

3. The period between the date of first publication of the notice in

    accordance with paragraph 1 (a), or the date of dispatch of the first

    communication as mentioned in paragraph K b ), and the date of the

   opening of the general meeting shall be not less than 30 days.

                   Article 85

1. One or more shareholders who satisfy the requirements laid down In

   Article 75 may request that one or more additional items be included

   on the agenda of a general meeting of which notice has already been

   given.

```

```
                  - 110 
2. Requests for Inclusion of additional agenda Items shall be sent to

    the SE within seven days of the first publication of the notice

    calling the general meeting in accordance with Article 84 (1)(a) or

    the dispatch of the first communication calling the general meeting

    by the means mentioned in Article 84 (1)(b).

3. Items whose inclusion in the agenda has been requested under

    paragraph 2, shall be communicated or published In the same way as

    the notice of meeting, not less than seven days before the meeting.

                    Article 86

             (Attendance at general meeting)

Every shareholder who has complied with the formalities prescribed by the

statutes shall be entitled to attend the general meeting. However, the

statutes may prohibit shareholders having no voting rights from attending

the meetIng.

                    Article 87

                    (Proxies)

1. Every shareholder shall be entitled to appoint a person to represent

    him at the general meeting.

2. The law of the Member State where the registered office of the SE is

    situated or the statutes may restrict the choice of representative to

    one or more specified categories of persons, but a shareholder may

    not be prevented from appointing another shareholder to represent

    him.

3. The appointment shall be made in writing and shall be retained for

    the period mentioned in Article 99 (4).

```

```
                    - 111 
                    Article 88

1. Where the proxies appointed are persons acting In a professional

    capacity, the provisions of Article 87 and the following provisions

    shalI apply:

a) the appointment shall relate to only one meeting, but It shall be

    valid for successive meetings with the same agenda, without prejudice

    to paragraph 2;

b) the appointment shall be revocable;

c) all the shareholders whose names and addresses are known shall be

    Invited, either In writing or by publication in one or more large
    circulation newspapers, to appoint the person in question as their

    proxy;

d) the invitation to appoint the person in question as a proxy shall

    contain at least the following information:

    the agenda showing the subjects for discussion and the proposals for

    résolut Ions-,

    an indication that the documents mentioned in Article 89 are

    available to shareholders who ask for them;

    a request for instructions concerning the exercise of the right to

    vote in respect of each item on the agenda;

    a statement of the way in which the proxy will exercise the right to

    vote In the absence of any Instructions from the shareholder;

e) the right to vote shall be exercised in accordance with the

    shareholders' instructions, or in the absence of such Instructions in

    accordance with the statement made to the shareholder. However, the

    proxy may depart from the shareholders' Instructions or the statement

   made to the shareholder by reason of circumstances unknown when the

    instructions were given or the invitation to appoint a proxy issued,

   where voting In accordance with instructions or the statement would

   be liable to prejudice the shareholder's Interests. The proxy shall

    forthwith inform the shareholder and explain the reasons for his

   act ion.

```

```
                     - 112 
2. Notwithstanding paragraph 1(a), a proxy may be appointed for a

specified period not exceeding 15 months. In this case the Information

indicated in paragraph 1 (d) shall be given to all the shareholders

referred to In paragraph 1(c) before any general meeting.

                    Article 89

               (Avallablity of accounts)

The annual accounts and, where appropriate, the consolidated accounts, the

proposed appropriation of profits or treatment of loss where It does not

appear in the annual accounts, the annual report and the opinion of the

persons responsible for auditing the accounts shall be available to every

shareholder at the latest from the date of dispatch or publication of the

notice of general meeting called to adopt the annual accounts and to decide

on the appropriât Ion. of profits or treatment of loss. Every shareholder

shall be able to obtain a copy of these documents free of charge upon

request. From the same date, the report of the persons responsible for

auditing the accounts shall be available to any shareholder wishing to

consult It at the registered office of the SE.

                   Article 90

                (Right to Information)

1. Every shareholder who so requests at a general meeting shall be

entitled to obtain Information on the affairs of the company arising from

Items on the agenda or concerning matters on which the general meeting may

take a decision in accordance with Article 91(2).

```

```
                     - 113 
2. The management board or the executive members of the administrative

board shall supply this information.

3. The communication of Information may be refused only where:

    (a) It would be likely to be seriously prejudicial to the company

         or a controlled company, or

    (b) Its disclosure would be incompatible with a legal obligation

         of confident la IIty.

4. A shareholder to whom Information is refused may require that his

question and the grounds for refusal shall be entered in the minutes of the

general meeting.

5. A shareholder to whom information is refused may challenge the

validity of the refusal In the court within whose Jurisdiction the

registered of'fice of the SE Is situated. Application to the court shall be

made within two weeks of the closure of the general meeting.

                    Article 91

                 (Decisions-, Agenda)

1. The general meeting shall not pass any resolution concerning Items

which have not been communicated or published in accordance with Article

84(2)(f) or Article 85(3).

2. Paragraph 1 shall not apply when all the shareholders are present in

person or by proxy at the general meeting and no shareholder objects to the

matter in question being discussed.

                      Article 92

                  (Voting rights)

1. A shareholder's voting rights shall be proportionate to the fraction

of the subscribed capital which his shares represent.

```

```
                     - 114 
2. The statutes may authorize:

    a) restriction or exclusion of voting rights In respect of shares

      which carry special advantages;

    b) restriction of votes In respect of shares allotted to the same

      shareholder, provided the restriction applies at least to all

      shareholders of the same class.

3. The right to vote may not be exercised:

    a) where a call made by the company has not been paid;

    b) on shares held by the SE Itself or by one of its subsidiaries.

4. The law of the State where the registered office of the SE Is

situated shall govern the exercise of voting rights In cases of succession,

usufruct, pledge of shares, or failure to notify substantial holdings.

                    Article 93

                (Conflict of interest)

Neither a shareholder nor his representative shall exercise the right to

vote attached to his shares or to shares belonging to third persons where

the subject matter of the resolution relates to:

    a) the assertion of claims by the SE against that shareholder;

    b) the commencement of legal proceedings to establish the liability

     of that shareholder to the company in accordance with Article 78;

   c) waiver of the right to bring proceedings to establish the

     liability of that shareholder to the company in accordance with

     Article 79.

```

```
                    - 115 
                    Article 94

                 (Required majority)

1. Resolutions of the general meeting shall require at least an absolute

majority of the votes attached to the subscribed capital present or

represented unless a greater majority Is prescribed by this Regulation.

2. However, as regards the appointment or dismissal of members of the

administrative board, the management board or the supervisory board the

statutes may not require a majority greater than that mentioned in

paragraph 1.

                   Article 95

                (Amendment of statutes)

1. A resolution of the general meeting shall be required for any

amendment of the statutes of the instrument of incorporation.

2. However, the statutes may provide that the administrative board or

the management board may amend the statutes or the instrument of

incorporation where the amendment merely Implements a resolution already

passed by the general meeting, or by the board itself by virtue of an

authorization given by the general meeting, by the statutes, or by the

instrument of Incorporation.

                   Article 96

1. The complete text of the amendment of the statutes or of the

Instrument of Incorporation which Is to be put before the general meeting

shall be set out In the notice of meeting.

2. However, the statutes may provide that the complete text of the

amendment mentioned In paragraph 1 may be obtained by any shareholder free

of charge upon request.

```

```
                     - 116 
                    Article 97

1. A majority of not less than two thirds of votes attached to

subscribed capital represented at the meeting shall be required for the

passing by the general meeting of resolutions amending the statutes or the

instrument of Incorporation.

2. However, the statutes may provide that where at least one-half of the

subscribed capital is represented, a simple majority of the votes in

paragraph 1 shall suffice.

3. Resolutions of the general meeting which would have the effect of

Increasing the liabilities of the shareholders shall require in any event

the approval of all the shareholders involved.

4. A resolution amending the statutes or the Instrument of incorporation

shall be made public accordance with Article 9.

                    Article 98

         (Separate vote of each class of shareholder)

1. Where there are several classes of shares, any resolution of the

general meeting shall require a separate vote at least for each class of

shareholders whose rights are affected by the resolution.

2. Where a resolution of the general meeting requires the majority of

votes specified In Article 97 (1) and (2), that majority shall also be

required for the separate vote of each class of shareholders whose rights

are affected by the resolution.

```

```
                     - 117 
                    Article 99

                    (Minutes)

1. Minutes shall be drawn up for every meeting of the general meeting.

2. The minutes shall contain the following particulars, at least:

    a) the place and date of the meeting;

    b) the resolutions passed;

    c) the result of the voting.

3. There shall be annexed to the minutes:

    a) the attendance list;

    b) the documents relating to the calling of the general meeting.

4. The minutes and the documents annexed thereto shall be retained for

at least three years. A copy of the minutes and the documents annexed

thereto may be obtained by any shareholder, free of charge, upon request.

                   Article 100

         (Appeal against resolutions of general meeting)

1. Resolutions of the general meeting may be declared Invalid as

Infringing the provisions of this Regulation or of the company's statutes,

in the following manner.

2. An action for such a declaration may be brought by any shareholder or

any person'having a legitimate interest, provided he can show that he has

an interest In having the Infringed provision observed and that the

resolution of the general meeting may have been altered or influenced by

the Infringement.

```

```
                  - 118 
3. The action for such a declaration shall be brought within three

months of the closure of the general meeting, before the court within whose

jurisdiction the registered office of the SE is situated . It shall be

taken against the SE.

4. The procedure In the action for such a declaration shall be governed

by the law of the place where the SE has its registered office.

5. The decision declaring the resolution void shall be published in

accordance with Article 9.

6. The declaration that a resolution is void may no longer be made by

the court if that resolution has been replaced by another taken in

conformity with this Regulation and the statutes of the SE. The court may,

on Its own Initiative, grant the time necessary to enable the general

meeting to pass such a new resolution.

```

```
                    - 119 
                    Title V

          Annual accounts and consolidated accounts

                    SECTION 1

                  Annual accounts

                   SUB-SECTION 1

             Preparation of annual accounts

                   Article 101

1. The SE shall draw up annual accounts comprising the balance sheet,

the profit and loss account and the notes on the accounts. These documents

shall constitute a composite whole.

2. The annual accounts of the SE shall be drawn up in accordance with

the provisions of Directive 78/660/EEC subject to paragraph 3 of this

Article.

3.(a) Articles 1, 2(5), final sentence, 2(6), 4(1), final sentence,

4(2), final sentence,4 (3)(b), final sentence, 4(4), final sentence, 5,

43(2), 45(1)(b), final sentence, 54, 55 and 62 of Directive 78/660/EEC

shalI not apply.

(b) For the purpose of drawing up the annual accounts, the provisions

of Articles 2, 3, 4, 6 and 7 of Directive 78/660/EEC shall apply. The SE

may avail Itself of the option provided for in Article 6 of that Directive.

```

```
                      -120
(c) For the presentation of the balance sheet, the SE may choose between

the layouts prescribed by Articles 9 and 10 of Directive 78/660/EEC. It may

avail Itself of the options provided for in Articles 9, 10, 11, 18, final

sentence, 20(2) and 21, final sentence, of that Directive.

(d) For the presentation of the profit and loss account, the SE may

choose between the layouts prescribed by Articles 23 to 26 of Directive

78/660/EEC. It may avail Itself of the options provided for In Articles 27

and 30 of that Directive.

(e) The Items shown In the annual accounts shall be valued in

accordance with the principles laid down in Article 31 of Directive

78/660/EEC. They shall be valued on the basis of the principle of purchase

price or production cost according to the provisions of Articles 34 to 42

of that Directive.

However, the SE may choose to apply one of the three alternative valuation

methods provided for In Article 33 of that Directive. If the SE avails

itself of that possibility, it shall ensure that the method applied is

consistent with the principles laid down in that Article. Details of the

method applied shall be given In the annex thereto.

The SE may avail itself of the options provided for in Articles 34(1), 36,

37(1) and (2), 39(1)(c) and (2) and 40(1) of that Directive.

(f) In addition to the Information required under other provisions of

Directive 78/660/EEC, the notes on the accounts must include the

information provided for in Article 43 of that Directive at least. The SE

may avail Itself of the options provided for in Articles 44 and 45(1) and

(2) of that Directive.

```

```
                     - 121 
                   SUB-SECTION 2

             Preparation of the annual rapport

                   Article 102

1. The SE shall draw up an annual report which must include at least a

fair review of the development of the company's business and of its

posit ion.

2. The annual report shall also include the Information provided for

In Article 46 of Directive 78/660/EEC.

                   SUB-SECTION 3

                    AudItIng

                   Article 103

1. The annual accounts of the SE shall be audited by one or more

persons authorized to do so In a Member State in accordance with the

provisions of Directive 84/253/EEC [1] . Those persons shall also verify that

the annual report is consistent with the annual accounts for the same

financial year.

2. If the SE meets the criteria laid down In Article 11 of

Directive 78/660/EEC, it shall not be required to have Its accounts

audited. In such cases, members of administrative board or the management

board shall be subject to the sanctions applicable to public limited

liability companies In the State In which the SE has Its registered office

where the annual accounts or annual reports are not drawn up in accordance

with the provisions of this section.

     OJ No L 126, 12.5.1984, p. 20.

```

```
                     - 122 
                   SUB-SECTION 4

                    Pub 11 cat ion

                    Article 104

1. The annual accounts, duly approved, and the annual report and audit

report shall be published as laid down in accordance with Article 3 of

Directive 68/151/EEC by the laws of the Member State in which the SE has

Its registered office.

2. The SE may avail itself of the options provided for in Article 47

of Directive 78/660/EEC.

3. Articles 48, 49 and 50 of Directive 78/660/EEC shall apply to the

SE.

                   SUB-SECTION 5

                  Final provisions

                   Article 105

Articles 56 to 61 of Directive 78/660/EEC shall apply to the SE. The SE

may avail itself of the options provided for in those Articles.

```

```
                     - 123 
                    SECTION 2

                Consolidated accounts

                   SUB-SECTION 1

      Conditions for the preparation of consolidated accounts

                   Article 106

1. Where the SE is a parent undertaking within the meaning of

Article 1(1) and (2) of Directive 83/349/EEC, It shall be required to draw

up consolidated accounts and a consolidated annual report in accordance

with the provisions of that Directive.

2. Articles 1(1)(c) last sentence, Kd)(bb), last sentence, 1(d),

second and third subparagraphs, 4 and 5 of Directive 83/349/EEC shall not

apply.

3. The SE may avail Itself of the options provided for in Articles 1,

6, 12 and 15 of Directive 83/349/EEC.

                   Article 107

1. Where the SE Is a parent undertaking within the meaning of Article

1(1) and (2) of Directive 83/349/EEC and Is at the same time a subsidiary

undertaking of a parent undertaking governed by the law of a Member State,

It shall be exempt from the obligation to draw up consolidated accounts

subject to the conditions laid down in Articles 7 and 8 of that Directive.

Article 10 of that Directive shall apply.

2. Articles 7(1)(b), second subparagraph, 8(1), last sentence, 8(2)

and (3), and 9 of that Directive shall not apply.

3. The exemption provided for In paragraph 1 shall not apply where the

securities of the SE have been admitted to official listing on a stock

exchange established In a Member State.

```

```
                     - 124 
                   Article 108

1. Where the SE is a parent undertaking within the meaning of Article

1(1) and (2) of Directive 83/349/EEC and is at the same time a subsidiary

undertaking of a parent undertaking which is not governed by the law of a

Member state, It shall be exempt from the obligation to draw up

consolidated accounts subject to the conditions laid down In Article 11 of

that Directive.

2. Articles 8 (1), second sentence, 8(2) and (3), and 10 of that

Directive shall not apply.

3. The exemption provided for in paragraph 1 shall not apply where the

securities of the SE have been admitted to official listing on a stock

exchange established in a Member State.

                   SUB-SECTION 2

           The preparation of consolidated accounts

                   Article 109

1. The consolidated accounts shall comprise the consolidated balance

sheet, the consolidated profit and loss account and the notes on the

accounts. These documents shall constitute a composite whole.

2. The consolidated accounts shall be drawn up in accordance with the

provisions of Directive 83/349/EEC subject to paragraph 3 of this Article.

3. (a) Articles 16(5), final sentence, 16(6), 33(2)(c), first sentence,

33(3), final sentence, 34, point 12, final sentence, and point 13, final

sentence, 35(1)(b), second sentence, 40, 41(5) and 48 of Directive

83/349/EEC shall not apply.

(b) The SE may avail Itself of the options provided for in Articles

17(2), 19(1)(b), 20, 26(1)(c), final sentence, 26(2), 27(2), 28, second

sentence, 29(2)(a), second sentence, 29(5), final sentence, 30(2), 32,

33(2) (d) and 35(1) of Directive 83/349/EEC.

```

```
                     - 125 
                   SUB-SECTION 3

         Preparation of the consolidated annual report

                   Article 110

1. The consolidated annual report shall include at least a fair review

of the development of the company's business and the position of the

undertakings included in the consolidation taken as a whole.

2. The consolidated annual report shall also include the Information

provided for In Article 36 of Directive 83/349/EEC. The SE may avail Itself

of the option provided for in the final sentence of paragraph 2(d) of that

Article.

                   SUB-SECTION 4

           Auditing of the consolidated accounts

                   Article 111

The consolidated accounts shall be audited by one or more persons

authorized to do so in a Member State in accordance with the provisions of

Directive 84/253/EEC. Those persons shall also verify that the consolidated

annual report is consistent with the consolidated accounts for the

financial year in question.

                   SUB-SECTION 5

                   Pub 11 cat ion

                   Article 112

1. The consolidated accounts, duly approved, and the consolidated

annual report, together with the audit report, shall be published as laid

down In accordance with Article 3 of Directive 68/151/EEC by the laws of

the Member State in which the SE has its registered office.

2. Article 38 (3), (4) and (6) of Directive 83/349/EEC shall not

apply.

3. The management board and the executive members of the

administrative board shall be liable to the sanctions provided for [...] if

the consolidated accounts and consolidated annual report are not published.

```

```
                    - 126 
                    SECTION 3

              Banks and Insurance companies

                   Article 113

1. SEs which are credit or financial Institutions shall comply, as

regards the drawing up, auditing and publication of annual accounts and

consolidated accounts, with the rules laid down pursuant to Directive

86/635/EEC [1] by the national law of the State In which the SE has Its

registered off Ice.

2. SEs which are insurance companies shall comply, as regards the

drawing up, auditing and publication of annual accounts and consolidated

accounts, with the rules laid down, pursuant to Directive [... which,

supplementing Directive 78/660/EEC, harmonizes the provisions governing the

annual accounts and the consolidated accounts of insurance companies, by

the national law of the State in which the company has its registered

office].

     OJ NO L 372, 31.A2.1986, p. 1.

```

```
                   - 127 
                   Title VI

                Groups of companies

                  Article 114

1. Where an undertaking controls an SE, that undertaking's consequent

rights and obligations relating to the protection of minority shareholders

and third parties shall be those defined by tee law governing public

limited companies In the State where the SE has Its registered office.

2. Paragraph 1 shall not affect the obligations Imposed on the

controlling undertaking by the legal system which governs It.

```

```
                     - 128 
                    Title viI

    Winding up, liquidation, insolvency and suspension of payments

                    SECTION 1

                   Winding up

                   Article 115

An SE may be wound up:

1. upon the expiry of the duration laid down for It in the statutes or the

instrument of Incorporation,

2. by resolution of the general meeting of shareholders, or

3. by decision of the court of the place where the SE has Its registered

office :

(a) where the subscribed capital of the company has been reduced below the

  minimum capital provided for in Article 4;

(b) where the disclosure of annual accounts has not taken place in the

  SE's last three financial years;

(c) on any ground laid down in the law of the place where the SE has its

  registered office or provided for In the statutes or the Instrument of

   Incorporation.

```

```
                     - 129 
                    Article 116

        (Winding up by resolution of the general meeting)

1. A resolution of the general meeting of shareholders to wind up the SE

on any ground laid down by the statutes or instrument of incorporation

shall require at least a simple majority of the votes attached to the

subscribed capital represented.

2. In all other cases a resolution of the general meeting of shareholders

to wind up the SE shall require at least a two-thirds majority of the votes

attached to the subscribed capital represented. The statutes may, however,

lay down that, when at least half the subscribed capital is represented,

the simple majority referred to In paragraph 1 is sufficient.

                   Article 117

               (Winding up by the court)

1. Winding-up proceedings may be brought in the court of the place where

the SE has its registered office by the administrative board, the

management board or the supervisory board of the SE, by any shareholder, or

by any person with a legitimate Interest.

2. Where the SE Is able to remove the ground for winding up, the court may

grant it a period of time sufficient to allow it to do so.

                   Article 118

               (Publication of winding up)

The winding up shall be published In the manner referred to In Article 9.

```

```
                     - 130 
                    Article 119

            (Wound-up SE to continue in existence)

1. Where an SE is to be wound up as a result of a resolution to that

effect of the general meeting of shareholders or upon the expiry of Its

prescribed duration, the general meeting of shareholders may resolve that

it is to continue In existence as long as there has been no distribution on

the basis of liquidation in accordance with Article 126.

2. The resolution that the company is to continue in existence shall be

passed In accordance with Article 116(2), and published in the manner

referred to In Article 9.

                    SECTION 2

                    Liquidât Ion

                    Article 120

               (Appointment of liquidators)

1. The winding up of an SE shall entail the liquidation of its assets.

The liquidation shall be carried out by one or more liquidators.

2. Liquidators shall be appointed :

(a) by the statutes or Instrument of incorporation, or In the manner laid

   down therein; or

(b) by a resolution of the general meeting of shareholders acting by the

   simple majority of the votes specified In Article 116(1); or

(c) failing an appointment pursuant to (a) or (b), by the court In whose

   Jurisdiction the registered office of the SE is situated on the

  application of any shareholder or of the administrative board, the

  management board or the supervisory board.

3. In the absence of an appointment pursuant to paragraph 2, the duties of

liquidator shall be performed by the administrative board or the management

board.

```

```
                     - 131 
4. The general meeting shall determine the remuneration of the

liquidators. Where the liquidators are appointed by a court in whose

juridiction the registered office of the SE is situated, the court shall

determine their remuneration.

                   Article 121

                (Removal of liquidators)

The liquidators may be removed before the termination of the liquidation:

(a) where they were appointed in accordance with Article 120(2), (a) and

   (b) or where Article 120(3) applies, by a decision of the general

   meeting acting by the simple majority of the votes specified In Article

   116(1),

(b) Irrespective of the manner of appointment, by a court In whose

   jurisdiction the registered office of the SE is situated, on petition

  of any person having a legitimate interest in the matter and showing a

   proper ground.

                   Article 122

                (Powers of liquidators)

1. The liquidators may take all appropriate steps to liquidate the SE and,

In particular, shall terminate transactions pending, collect debts, convert

remaining assets Into cash where this is necessary for their realisation

and to pay the sums owing to creditors. The liquidators may undertake new

transactions to the extent necessary for the purposes of the liquidation.

2. The liquidators shall have the power to bind the SE In dealings with

third parties and to take legal proceedings on Its behalf.

The appointment, termination of office and Identity of liquidators shall be

published in the manner referred to in ArtIcle 9. It must appear from the

disclosure whether the liquidators may represent the company alone or must

act Jointly.

```

`-` _'22_ `-`

```
                    Article 123

                (LlablIity of IIquldators)

The rules on the civil liability of members of the administrative board or

of the management board of an SE shall also apply to the civil liability of

 liquidators for wrongful acts committed in carrying out their duties.

                    Article 124

                 (Accounting documents)

1. The liquidators shall draw up a statement of the assets and liabilities

of the SE on the date the winding up commenced. Any shareholder or

creditor of the SE shall be entitled to obtain a copy of this statement

```

_**free**_ **`of charge, upon request.`**

```
2. The liquidators shall report on their activities to the general meeting

each year.

3. The rules concerning the drawing up, auditing and publication of annual

accounts or consolidated accounts and the approval of persons responsible

for carrying out the statutory audits of those accounts shall apply

mutat is mutandis.

                    Article 125

             (Information supplied to creditors)

The notice of the winding up of the company provided for In Article 118

shall Invite creditors to lodge their claims, and shall Indicate the date

after which dlstrIbutIons on the basis of liquidation will be made.

An invitation to lodge claims shall also be sent In writing to any creditor

known to the company.

```

```
                     - 133 
                    Article 126

                   (Distribution)

1. No distribution on the basis of liquidation may be made to the

beneficiaries designated In the statutes or the Instrument of

Incorporation, or falling any such designation to the shareholders, until

all creditors of the company have been paid in full and the tlme-llmlts

indicated In Articles 125 and 127(2) have expired.

2. After the creditors have been paid in full, and anything due to the

beneficiaries referred to In paragraph 1 has been distributed, the net

assets of the SE shall, except where otherwise stated In the statutes or

the instrument of incorporation, be distributed among the shareholders In

proportion to the nomlnai value of their shares.

3. Where the shares Issued by the SE have not all been paid up in the same

proportion, the amounts paid up shall be repaid. In that case only the

remaining net assets shall be distributed In accordance with paragraph 2.

If the net assets are not sufficient to repay the amounts paid up, the

shareholders shall bear the loss in proportion to the nominal value of

their shares.

4. Where a claim on an SE has not yet fallen due or Is in dispute or where

the creditor is not known, the net assets may be distributed only If

adequate security Is set aside for the creditor or If the assets remaining,

after a partial distribution represent sufficient security.

```

```
                       - 134 
                     Article 127

                   (Dlstr ibut ion plan)

1. The liquidator or liquidators shall draw up a plan for the distribution

of the net assets of the company pursuant to Article 126 after the date

indicated In Article 125.

2. This plan shall be brought to the attention of the general meeting and

of any beneficiary designated in the statutes or instrument of

Incorporation. Any shareholder and any beneficiary may challenge the plan

In the court of the place where the SE has Its registered office within

three months of the date on which it was brought to the attention of the

general meeting or of that beneficiary. No distribution may be made until

that period has expired.

3. Where there is a challenge it shall be for the court to decide whether

and to what extent any partial distributions may be made in the course of

the proceedings before the court takes its decision.

                     Article 128

                (Termination of liquidation)

1. The liquidation shall be terminated when the distribution Is complete.

2. Where, after the liquidation is terminated, further assets or

liabilities of the SE come to light which were previously unknown, or

further liquidation measures prove necessary, a court in whose jurisdiction

the registered office of the SE Is situated shall, on the application of

any shareholder or creditor, renew the mandate of the former liquidators or

appoint other liquidators.

3. Termination of liquidation and removal of the SE from the register

referred to In Article 8(1) shall be published in the manner referred to In

Article 9.

4. Following the liquidation, the books and records relating to the

liquidation shall be lodged at the register referred to in paragraph 3.

Any Interested party may examine such books and records.

```

```
                     - 135 
                     SECTION 3

            Insolvency and suspension of payments

                    Article 129

In respect of Insolvency and suspension of payments the SE shall be subject

to the law of the place where It has its registered office.

                    Article 130

1. The opening of insolvency or suspension of payments proceedings shall

be notified for entry In the register by the person appointed to conduct

the proceedings. The entry In the register shall show the following:

(a) the nature of the proceedings, the date of the order, and the court

   making It;

(b) the date on which payments were suspended, if the court order provides

   for this;

(c) the name and address of the administrator, trustee, receiver,

   liquidator or any other person having power to conduct the proceedings,

   or of each of them where there are more than one;

^d) any other information considered necessary.

2 Where a court finally dismisses an application, for the opening of the

proceedings referred to In paragraph 1 owing to want of sufficient assets,

it shall, either of its own motion or on application by any Interested

party, order its decision to be noted in the register.

3. Particulars registered pursuant to paragraphs 1 and 2 shall be

published In the manner referred to in Article 9.

```

```
                     - 136 
                    Title VI I I

                     Mergers

                    Article 131

                  (Types of merger)

An SE may merge with other SEs or with other public limited companies

incorporated under the law of one of the Member States in the following

ways:

(a) by forming a new SE;

(b) by the SE taking over one or more public limited companies;

(c) by a public limited company taking over the SE;

(d) by forming a new public limited company.

                    Article 132

                  (Applicable law)

1. Where the companies participating in the merger have their

registered offices in the same Member State, the provisions of national law

giving effect to Directive 78/855/EEC shall apply.

2. Where the companies participating in the merger have their

registered offices in different Member States, the provisions of Title M

shall apply mutat is mutandis.

```

```
                     - 137 
                     Title IX

                Permanent establishments

                    Article 133

1. Where an SE has one or more permanent establishments In a

Member State or a non-member State, and the aggregation of the profits and

losses for tax purposes of all such permanent establishments results In a

net loss, that loss may be set against the profits of the SE in the State

where it Is resident for tax purposes.

2. Subsequent profits of the permanent establishments of the SE in

another State shall constitute taxable income of the SE in the State In

which it Is resident for tax purposes, up to the amount of the losses

imputed in accordance with paragraph 1.

3. Where a permanent establishment is situated in a Member State, the

imputable losses under paragraph 1 and the taxable profits under paragraph

2 shall be determined by the laws of that Member State.

4. Member States shall be free not to apply the provisions of this Article

If they avoid double taxation by allowing the SE to set the tax already

paid by its permanent establishments against the tax due from It In respect

of the profits realised by those permanent establishments.

```

```
                      - 138 
                      Title X

                     SanctIons

                    Article 134

The provisions of national law applicable to the infringement of the rules

relating to public limited companies shall apply to the infringement of any

of the provisions of this Regulation.

```

```
                     - 139 
                     Title XI

                  Final provisions

                    Article 135

The involvement of employees in the SE shall be defined In accordance with

the provisions adopted to give effect to Directive .... by the Member

State where the SE has Its registered office.

                    Article 136

An SE may be formed In any Member State which has implemented In national

law the provisions of Directive [.... on the involvement of employees in

the SE].

                    Art icle 137

This regulation shall enter into force on 1 January 1992.

This regulation shall be binding in its entirety and directly applicable In

a I I Member States.

Done at Brussels, For the Commission

```

```
                     - 140 
                  Proposal for a

                 COUNCIL DIRECTIVE

       complementing the Statute for a European company with

         regard to the involvement of employees In the

                  European company

THE COUNCIL OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Economic Community,

and In particular Article 54 thereof,

Having regard to the proposal from the Commission,

In cooperation with the European Parliament,

Having regard to the opinion of the Economic and Social Committee,

Whereas, in order to attain the objectives set out in Article 8a of the

Treaty, Council Regulation No establishes a Statute for a European

company (SE);

Whereas, In order to promote the economic and social objectives of the

Community, arrangements should be made for employees to participate in the

supervision and strategic development of the SE;

Whereas the great diversity of rules and practices existing In the Member

States as regards the manner In which employees' representatives

participate in supervision of the decisions of the governing bodies of

public limited companies makes it Impossible to lay down uniform rules on

the involvement of employees in the SE;

```

```
                     - 141 
Whereas the laws of the Member States should therefore be coordinated with

a view to making equivalent the safeguards required for the protection of

the Interests of members and third persons, of public limited companies In

each Member State, with due regard to the specific characteristics of the

operation of such companies having their registered office In its

territory; whereas such coordination must take account of the fact that an

SE Is created by a restructuring or cooperation operation Involving

companies governed by the law of at least two Member States;

Whereas account should be taken of the specific characteristics of the laws

of the Member States by establishing for the SE a framework comprising

several models of participation, and authorizing, first, Member States to

choose the model or models best corresponding to their national traditions,

and, secondly, the management or the administrative board, as the case may

be, and the representatives of the employees of the SE or of Its founder

companies to choose the model most suited to their social environment;

Whereas the provisions of this Directive form an indissociable complement

to the provisions of Regulation ... and it Is therefore necessary to ensure

that the two sets of provisions are applied concomitantly,

HAS ADOPTED THIS DIRECTIVE:

```

```
                     - 142

                    Article 1

The coord InatIon measures prescribed by this Directive shall apply to the

laws, regulations and administrative provisions in the Member States

concerning the Involvement of employees in the SE.

These measures are an essential supplement to Regulation ... on the Statute

for a European company.

             Title 1: Models of participation

                    Article 2

Member States shall take the necessary measures to enable employees of the

SE to participate in the supervision and strategic development of the SE In

accordance with the provisions of this Directive.

                    Article 3

1. Subject to the application of paragraph 5, the participation of SE

employees prescribed by Article 2 shall be determined In accordance with

one of the models set out in Articles 4, 5 and 6 by means of an agreement

concluded between the management boards and the administrative boards of

the founder companies and the representatives of the employees of those

companies provided for by the laws and practices of the Member States.

Where no agreement can be reached the management and administrative boards

shall choose the model applicable to the SE.

```

```
                    - 143 
2. An SE may not be formed unless one of the models referred to In

Articles 4, 5 and 6 has been chosen.

3. Subject to the application of paragraph 5, the chosen model may be

replaced by another model In Articles 4, 5 and 6 by an agreement concluded

between the management or the administrative board and the representatives

of the employees of the SE. This agreement must be submitted for the

approval of the general meeting.

4. Each Member State shall determine the manner in which the

participation models shall be applied for SEs having their registered

office In Its territory.

5. A Member State may restrict the choice of the models referred to in

Articles 4, 5 and 6 or make only one of these models compulsory for SEs

having their registered office In Its territory.

       Section 1: Supervisory Board or Administrative Board

                    Article 4

The appointment of members of the supervisory board or the administrative

board, as the case may be, shall be governed by the following rules:

    (I) at least one-third and not more than one-half of them shall

        be appointed by the employees of the SE or their

        representatives in that company, or

    (II) they shall be co-opted by the board. However, the general

        meeting of shareholders or the representatives of the

        employees may, on specific grounds, object to the appointment

        of a particular candidate. In such cases the appointment may

        not be made until an independent body established under

        public law has declared the objection Inadmissible.

```

```
                     - 144 
               Section 2: Separate body

                    Article 5

1. A separate body shall represent the employees of the SE. The number

of members of that body and the detailed rules governing their election or

appointment shall be laid down in the statutes in consultation with the

representatives of the employees of the founder companies In accordance

with the laws or practices of the Member States.

2. The body representing the employees shall have the right:

    (a) at least once every three months, to be Informed by the

        management board or the administrative board of the progress

        of the company's business, including that of undertakings

        controlled by It, and of Its prospects;

    (b) where it is necessary for the performance of its duties, to

        require from the management board or the administrative board

        a report concerning certain of the company's business or any

         information or documents;

    (c) to be Informed and consulted by the management board or the

        administrative board before any decision referred to in

        Article 72 of Regulation Is implemented.

3. Article 74(3) of that Regulation shall apply to members of the

separate body.

```

```
                    - 145 
                Section 3: Other models

                    Article 6

1. Models other than those referred to In Articles 4 and 5 may be

established by means of an agreement concluded between the management

boards and the administrative boards of the founder companies and the

employees or their representatives in those companies.

2. The agreement reached shall provide at least for the employees of the

SE or their representatives:

(a) once every three months, to be Informed of the progress of the

    company's business, Including that of undertakings controlled by It,

    and of Its prospects;

(b) to be Informed and consulted before any decision referred to In

    Article 72 of Regulation is implemented.

3. Where the agreement provides for a collegiate body representing the

employees, that body may require the management board or the administrative

board to provide the Information necessary for the performance of Its

dut les.

4. The agreement sha11 provide that the employee's representatives must

observe the necessary discretion in relation to any confidential

information they hold on the SE. They shall be bound by this obligation

even after their duties have ceased.

5. If the law of the State where the SE has Its registered office so

permits, the agreement may permit the management board or the

administrative board of the SE to withhold from the employees or their

representatives any Information the disclosure of which might seriously

Jeopardize the interests of the SE or disrupt its projects.

6. The parties to the negotiations may be assisted by experts of their

choice at the expense of the founder companies.

```

```
                     - 146 
7. The agreement may be concluded for a fixed period and re-negotlated

upon expiry of that period. However, the agreement concluded shall remain

in force until the entry Into force of the new agreement.

8. Where the two parties to the negotiations so decide, or where no

agreement such as is mentioned in paragraph 1 can be reached, a standard

model, provided by the law of the State where the SE has Its registered

office, shall apply to the SE. This model shall be In conformity with the

most advanced national practices and shall ensure for the employees at

least the rights of Information and consultation provided for by this

article.

                    Sect Ion 4:

     Election of the representatives of the employees of the SE

                    Article 7

The representatives of the employees of the SE shall be elected In

accordance with systems which take into account, in an appropriate manner,

the number of staff they represent.

All employees must be able to participate In the vote.

The election shall be conducted in accordance with the laws or practices of

the Member States.

                    Article 8

The first members of the supervisory board or the administrative board to

be appointed by the employees and the first members of the separate body

representing the employees shall be appointed by the representatives of the

employees of the founder companies in proportion to the number of. employees

they represent and in accordance with the laws or practices of the

Member States. Those first members shall remain in office until such time

as the requirements for electing the representatives of the employees of

the SE are satIsfled.

```

```
                     - 147 
                    Section 5

                    Article 9

1. The management board or the administrative board of the SE shall

provide the representatives of the employees with such financial and

material resources as enable them to meet and perform their duties in an

approprI ate manner.

2. The practical arrangements for making available such financial and

material resources shall be settled in consultation with the

representatives of the employees of the SE.

                    Sect Ion 6:

     Representation of employees In the establishments of the SE

                    Article 10

Save as otherwise provided in this Directive, the status and duties of the

representatives of the employees or of the body which represents them, for

which provision Is made in the establishments of the SE, shall be

determined by the laws or practices of the Member States.

           Title 2: Employee participation In the

          capital or In the profit or loss of the SE

                    Section 1

                    Article 11

Employee participation in the capital or in the profits or losses of the SE

may be organised by means of a collective agreement negotiated and

concluded by the management boards and the administrative boards of the

founder companies, or of the SE when constituted, and the employees or

their representatives who are duly authorised to negotiate In those

compan i es.

```

```
                     - 148 
                  Final provisions

                    Article 12

1. Member States shall bring into force the laws, regulations and

administrative provisions necessary to comply with this Directive by 1

January 1992. They shall Immediately communicate the measures taken to the

Commission.

The provisions adopted pursuant to the first sub-paragraph shall make

express reference to this Directive.

2. Member States shall communicate to the Commission the main provisions

of domestic law which they adopt in the field covered by this Directive.

                    Article 13

This Directive is addressed to the Member States.

Done at Brussels, For the Council

```

```
ANNEX - CALENDAR FOR THE REGULATION AND THE DIRECTIVE

```

```
TRANSMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT

AND THE ECONOMIC AND SOCIAL COMMITTEE

OPINION OF THE EUROPEAN PARLIAMENT ON FIRST

READING AND OF THE ECONOMIC AND SOCIAL COMMITTEE

COMMON POSITION OF THE COUNCIL

OPINION OF PARLIAMENT ON SECOND READING

ADOPTION BY COUNCIL

APPLICATION OF THE REGULATION

NOTIFICATION OF THE DIRECTIVE TO THE

TO THE MEMBER STATES

IMPLEMENTATION OF THE DIRECTIVE

IN NATIONAL LAW

```

```
 AUGUST 1989

 DECEMBER 1989

 MARCH 1990

 JULY 1990

 OCTOBER 1990

 1 JANUARY 1992

 NOVEMBER 1990

1 JANUARY 1992

```

**ISSN 0254-1475**

#### **COM<89) 268 final**

# **DOCUMENTS**

### **EN 05 06** **25.8.1989** **Catalogue number : CB-CO-89-367-EN-C** **ISBN 92-77-52575-4**

**Office for Official Publications of the European Communities**

**L-2985** **Luxembourg**