CELEX: 51991PC0363
Language: en
Date: 1991-10-20
Title: Amended proposal for a COUNCIL DIRECTIVE AMENDING DIRECTIVE 77/91/EEC ON THE FORMATION OF PUBLIC LIMITED LIABILITY COMPANIES AND THE MAINTENANCE AND ALTERATION OF THEIR CAPITAL

COMMISSION OF THE EUROPEAN COMMUNITIES
                                                  final
                                      C0M(91) 363       - SYN 317
                                      Brussels, 20 October 1991
                       Amended proposal for a
                          COUNCIL DIRECTIVE
                 AMENDING DIRECTIVE 77/91/EBC CN THE
           K3RMATICH OF PUHLiq LIMITED LIABTT.TIY COMPANIES
         AND THE MAINTENANCE AND ALTERATICN OP THEIR CAPITAL
      (presented t?y the Commission pursuant to Article 149(3)
                         of the EEC-Treaty)
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                           EXPLANATORY MEMORANDOM
I. Background
The Second Council Directive on company law, Directive  77/91/EEC,1
harmonizes the safeguards required by Member  States of companies in respect
of the formation of public limited liability  companies and the maintenance
and alteration of their capital, with a view  to making such safeguards
equivalent.
With regard to capital, the Directive deals inter alia with the question of
the acquisition by a company of its own shares.
Following its communication of 10 May 19902 on the removal of certain
obstacles to takeover and other general bids the Commission presented to
the Council on 8 January of this year a proposal for a Directive amending
the Second Directive.3
The purpose of that amendment was to extend the Second Directive's
arrangements concerning the acquisition of own shares to cover the
acquisition of a company's shares by its subsidiaries.
The Economie and Social Committee delivered its opinion on 3 July.4
Parliament's opinion was delivered on 10 July.5
The present amended proposal for a Directive, which the Commission has
adopted on the basis of Article 149(3) of the Treaty, is designed to take
account of those opinions.
1 OT L 26, 31.1.1977, p. 1.
2 SBC(90) 901 final, 10.5.1990.
3 QJ C 8, 12.1.1991, p. 5; with explanatory memorandum, 0CM(90) 631.
4 Not yet published.
5 Not yet published.
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II. Cororoentary
Article 24a
This article provides that a subsidiary company may acquire shares in its
parent company only under the same conditions as those uner which the
latter can acquire its own shares.
For the purposes of this rule, the definition of subsidiary company was
based on the criteria applied by other Community instruments, namely
Directive 83/349/EEC on consolidated accounts6 and Directive 88/627/EEC on
the information to be published when a major holding in a listed company is
acquired or disposed of.7
Under Article 24a(2) of the original proposal a company is deemed a
subsidiary of another company (the parent company) if the latter fulfils
one of the following conditions vis^a-vis the former:
(a)       it holds a majority of the voting rights; or
(b)       it has the right to appoint or remove a majority of the directors
           of the company, in which it is at the same time a shareholder; or
(c)       it has the right to control alone a majority of the voting rights
          pursuant to an agreement entered into with other shareholders or to
          a provision in the statutes of the former company.
In the present amended proposal, as in the abovementioned Directives, it is
made clear that even as regards the third criterion, criterion (c), the
parent company must be a shareholder in its subsidiary, that is to say it
must have a participating interest in its capital.
Moreover, at Pari 1 aroent's request, the definition of subsidiary company has
been broadened so as to include companies over which the parent company
exercises indirect control through other subsidiaries. To this end, a new
subparagraph has been added to Article 24a(2) according to which, in
calculating the parent company's rights as regards voting, appointment and
removal, account must also be taken of the rights of any other subsidiary
company and of those of persons acting in their own name but on behalf of
the parent company or of any other subsidiary. This new subparagraph
corresponds to similar provisions in the two Directives referred to above.
6  OJ L 193, 18.7.1983, p. 1.
7  O J L 3 4 8 , 17.12.1988, p. 62.
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In keeping with Parliament's wishes as indicated above, it must also be
ensured that a company does not use a "sub-subsidiary" (a subsidiary of a
subsidiary) to circumvent the safeguards provided for in the Second
Directive in connection with the acquisition of own shares. To that end, a
new paragraph 3 has been added to Article 24a. By virtue of this new
paragraph "sub-subsidiaries" are also deemed subsidiaries of the parent.
 ---pagebreak---                                             - 5 -
ORIGINAL PROPOSAL                          AMENDED PROPOSAL
THE COUNCIL OF THE EUROPEAN COMMUNITIES,   THE COUNCIL OF THE EUROPEAN (XMMUNITTES,
Having regard to the Treaty estahl 1 shing Unchanged
the European Economic Community, and In
particular Article 54 thereof,
Having regard to the proposal from the     Having regard to the proposal from the
Commission,                                Commission,
In cooperation with the European           In cooperation with the European
Parliament,                                Parliament,1
Having regard to the opinion of the        Having regard to the opinion of the
Economic and Social Committee,             Economic and Social Committee,2
Whereas in order to maintain the           Unchanged
subscribed capital and ensure equal
treatment of shareholders,
Directive 77/91/EEC1 limits the right
of a company to acquire its own shares;
Whereas the restrictions on the            Unchanged
acquisition of own shares apply not only
to acquisitions made by the company
itself but also to those made by a
person acting in his own name but on the
company's behalf;
Whereas a subsidiary company does not      Unchanged
enjoy true Independence in determining
its line of action; whereas in order to
prevent a company from using a
subsidiary to make such acquisitions
without regard to the restrictions
imposed in that respect, the
arrangements concerning the acquisition
by a company of its own shares should be
extended to cover the acquisition of a
company's shares by a subsidiary,
1 OJ L 26, 31.1.1977.                      1 Opinion of 10 July 1991 (not yet
                                              published).
                                           2 Opinion of 3 July 1991 (not yet
                                              published)
 ---pagebreak---                                           - 6 -
HAS ADOPTED THIS DIRECTIVE:              Unchanged
                Article 1                                Article 1
The Directive 77/91/EBC of the Council   Council Directive 77/91/EBC is amended as
is amended as following: a new           follows: (rest unchanged)
Article 24a is added after Article 24.
"Article 24a                             "Article 24a
1. A subsidiary company may acquire      1. Unchanged
shares in its parent company only to the
extent that the latter may acquire its
own shares by virtue of provisions
adopted pursuant to Articles 19 to 24.
For the purposes of those provisions,
acquisitions of shares in the parent
company by its subsidiaries shall be
deemed to have been made by the parent
company.
2. For the purposes of paragraph 1,      2. Unchanged
"subsidiary company" means any company
in which another company (the parent
company):
(a) holds a majority of shareholders' or Unchanged
    members' voting rights; or
(b) has the right to appoint or remove a Unchanged
    majority of the members of the
    administrative, management or
    supervisory body and is at the same
    time a shareholder in or member of
    that company; or
(c) has the right to control alone a     is a shareholder in or member of that
    majority of shareholders' or         oompany and controls alone a majority of
    members' voting rights pursuant to   shareholders' or members' voting rights
    an agreement entered into with other pursuant to an agreement entered into
    shareholders in or members of that   with other shareholders in or members of
    Cîompany or to a provision in its    that company or to a provision in its
    statutes."                           statutes."
 ---pagebreak---                                           - 7 -
                                         For the purposes of this paragraph, the
                                         parent company's rights as regards
                                         voting, appointment and removal shall
                                         include the rights of any other
                                         subsidiary company and those of any
                                         person acting in his own name but on
                                         behalf of the parent company or of any
                                         other subsidiary company.
                                         5. For the purposes of paragraph 1.
                                         where a subsidiary of the parent company
                                         Itself has subsidiaries, the latter shall
                                         also be deemed subsidiaries of the parent
                                         company.
               Article 2                                 Article 2
1. Member States shall adopt before ...  Unchanged
the laws, regulations and administrative
provisions necessary to comply with this
Directive. They shall forthwith inform
the Commission thereof.
2. The date of entry into force which    Unchanged
Member States lay down for these
provisions shall be not later than ...
3. Member States shall œmmunicate to     Unchanged
the Commission the text of the main
provisions of national law which they
adopt in the field covered by this
Directive.
4. When Member States adopt the          Unchanged
provisions, the latter shall contain a
reference to this Directive or shall be
accompanied by such a reference at the
time of their official publication. The
methods of making such a reference shall
be laid down by the Member States.
               Article 3                                 Article 3
This Directive is addressed to the       Unchanged
Member States.
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                                                              COM(91) 363 final
                                                      DOCUMENTS
EN                                                                             08
                                Catalogue number : CB-CO-91-423-EN-C
                                                             ISBN 92-77-76031-1
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