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Brussels, 14 March 2006

Company law: Commission welcomes European Parliament agreement on Directive to simplify the formation, maintenance and alteration of companies’ capital

The European Commission has welcomed the European Parliament's agreement at first reading on the Commission's proposal for a Directive (see IP/04/1334) to make it easier for public limited liability companies to take certain measures affecting the size, structure and ownership of their capital. The proposed Directive amends the parts of the 1976 Second Company Law Directive covering the formation, maintenance and alteration of capital.

Internal Market and Services Commissioner Charlie McCreevy said: “Today's vote is an important step towards our aim of maximising the efficiency and competitiveness of European business. The Directive will simplify EU rules to allow companies to adjust their capital size and ownership structure more easily, enabling them to react more promptly and efficiently to market developments while maintaining the protection offered to shareholders and creditors.”

The proposed Directive is part of the Commission's contribution to the twin objectives of "Growth and Jobs" and “Better Regulation”. The Second Company Law Directive established a system giving minimum guarantees for shareholders and creditors where public limited companies are set up or alter their share capital. A number of elements of this system were identified as too inflexible and costly and, therefore, modifications were recommended notably by the Simpler Legislation for the Internal Market (SLIM) group in 1999 and by the Group of High Level Company Law Experts in 2002.

The proposed Directive will implement a number of these recommendations, including the acquisition of shares through contributions in kind and the acquisition by a company of its own shares. Also, the current rules on financial assistance that a company can give for the acquisition of its shares by a third party will be relaxed.

In parallel to the adoption of the Directive, the Commission is preparing a study that will examine the feasibility of an alternative system to that of the Second Company Law Directive, in order to explore further ways of increasing the flexibility of public limited liability companies.


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.

The full text of the proposed Directive and a working document with further detailed information are available at:

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