Brussels, 29th October 2004
Company law: Commission proposes to simplify the formation, maintenance and alteration of companies’ capital
The European Commission has presented a proposal for a Directive to make it easier for public limited liability companies to take certain measures affecting the size, structure and ownership of their capital. The proposal would amend the parts of the 1976 Second Company Law Directive covering the formation, maintenance and alteration of capital. This proposal is part of the Commission’s Action Plan on Company Law and Corporate Governance, announced in May 2003 (see IP/03/716 and MEMO/03/112) and will be submitted for adoption under the 'co-decision' procedure to the EU's Council of Ministers and the European Parliament.
Internal Market Commissioner Frits Bolkestein said "To maximise the efficiency and competitiveness of European business, we need to simplify and improve EU rules on companies’ capital while maintaining strong safeguards for creditors and investors, especially minority shareholders.”
Stakeholders find some aspects of the current legal capital regime under the Second Company Law Directive too inflexible and costly. To remedy this, the new proposal would enable Member States, under certain conditions, to eliminate specific financial reporting requirements and to facilitate specific changes in share ownership. It would also bring into line across the EU the basic elements of legal procedures for creditors when capital is reduced.
Among the changes would be:
These modifications should enable companies to react more promptly and efficiently to market developments. Strong provision for protecting shareholders’ interests is made in the proposed amendments.
The Second Company Law Directive dates from 1976. It co-ordinates national
provisions on the formation of public limited liability companies, minimum share
capital requirements, distributions to shareholders and increases and reductions
in capital. The Directive establishes the conditions to ensure that the capital
of the company is maintained in the interest of creditors. Furthermore, it
protects minority shareholders and states the principle that all shareholders
who are in the same position should be treated equally.