The Gazette 1989

GAZETTE

SEPTEMBER

1989

2. An EEIG must have a minimum

of two members from separate

Member States, who must be

carrying on a business within

the Community.

3. The members of an EEIG have

unlimited joint and several

liability.

4. Unlike a company, an EEIG may

have no more than 500

employees.

5. An EEIG cannot hold a con-

trolling interest in a member or

in another undertaking, or

exercise powers of control over

another undertaking.

6. An EEIG cannot be a member of

another EEIG.

7. An EEIG may not invite invest-

ments from the public.

8. There is no obligation on an

EEIG to hold annual general

meetings or make annual

returns.

9. An EEIG requires no Memor-

andum and Articles

Association, merely a contract

for the f o rma t i on of the

grouping, registration of which

signals the formal creation of

the EEIG as an autonomous

legal body.

10. The members of an EEIG, who

have to have been engaged in

an economic activity prior to its

creation, must fall within three

categories i.e.

a) natural persons engaged in

business including the provision

of professional services;

b) companies or firms within

the meaning of Article 58 of the

Treaty of Rome;

c) charitable bodies carrying on

a business.

11. As mentioned above, an EEIG

may not be formed for the

purpose of making a profit for

itself. However, there is no pro-

hibition on making a profit as a

consequence of its lawful

activities.

E) Commercial base and

taxation of the EEIG

1. There is considerable flexibility

in the financing of an EEIG. It

need not be set up with capital.

Instead, the financing can be by

way of cash in the form of a

cash advance, regular sub-

scriptions, in kind, or by way of

services.

2. There is nothing to prevent an

EEIG from borrowing from a

bank or issuing medium-term

notes, but it is prohibited from

raising capital by issuing bonds

or other securities for sale to

the public.

3. If expenditure exceeds income,

the proportion which each

member will contribute will be

determined by the contract for

the formation of an EEIG. In the

absence of such agreement, the

Regulation provides that mem-

bers shall contribute in equal

shares.

4. The profits of an EEIG are

deemed the profits of the

members and are apportioned

among them in the proportions

laid down in the contract or,

failing that, in equal shares. The

Regulation has adopted the

principle of tax transparency i.e.

all profits (or losses) are even-

tually returned to the members.

5. It follows from the above that

profits or losses are taxable in

the hands of the members only.

In all other respects, national

tax laws will apply, particularly

as regards what profits shall be

subject to Irish taxation and the

basis on which they will be

apportioned to the members.

6. National law will govern matters

concerning insolvency. The only

specific restriction the Regula-

tion places on the application of

national law is that commence-

ment of proceedings against an

EEIG shall not by itself cause

commencement of proceedings

against the members. The

reasoning is that there should

be a common pool of assets for

the benefit of all creditors.

Territorial insolvency laws could

stand in the way of this.

F) Formalities in setting up an

EEIG

1. The formalities involved in

setting up an EEIG are quite

straight-forward and are based

on two requirements:

a) The conclusion of a written

contract.

b) Registration in the Member

State in which the EEIG has its

official address.

2. The minimum contents of the

contract which must be filed at

the Registry are:

a) Name of the EEIG, preceded

or followed by the word "EEIG".

b) Official address.

c) Objects.

d) Name, business name,

address etc. of each member.

e) Duration of EEIG unless

indefinite.

3. Notice of the formation of the

EEIG must be published in the

Official Journal of the European

Communities.

4. As a safeguard to third parties,