The Gazette 1974

commerce in the six original Member States insist on

approximation of company law.

And it is for all these reasons that Article 54 para. (3)

lit. (g) of the Treaty of Rome provides for the co-

ordination of "the safeguards which, for the protection

of the interests of members and others, are required by

Member States of companies with a view to making

such safeguards equivalent throughout the Commu-

nity". It is to be stressed that approximation of national

laws is not being treated as an end in itself and that

long-standing legislation on important aspects of com-

mercial life is by no means to be disrupted for the sake

of an academic desire for uniformity. On the contrary,

approximation of company law has an important part

to play in ensuring the effective delivery of the econ-

omic benefits that can flow from Community member-

ship. The sooner we can adjust ourselves to the impor-

tance of adopting a positive approach to this task the

better it will be.

Means of approximation

Approximation is accomplished by directives issued

by the Council of Ministers, the legislator of the Commu-

nity.

Directives are not company laws in the ordinary

sense.

Private parties cannot normally invoke them in

disputes with corporations, or vice versa. Rather, direc-

tives are directed to the Member States who are obliged

to comply with a directive by transforming it into a

national law. Thus,

directives fix Community standards

to which the national statutes must be adapted.

There-

fore, a directive is less rigid than a unitary federal law.

Nor is a directive a uniform company law as used by

the States of Australia, to be introduced in each

Mem-

ber State. The difference is that a directive is binding

only as to the result to be achieved. A directive does not

ask for the introduction of the same wording in the

national acts. It is up to the national legislator how to

implement a directive. Thus, each national legislator

can adapt the law in a way which suits its legal system

and corresponds to tradition. In a word:

approximation

(harmonisation, co-ordination) is not unification, nor

does it mean uniformity.

In instances where there is no need to introduce more

than minimum standards, the directive will leave it to

each Member State whether to maintain or to introduce

stricter requirements. On the other hand, a directive

with its minimum or fixed rules protects against exces-

sive laxity.

The present state of approximation

So far, only one directive on companies has been

enacted. Four others have been formally proposed by

the Commission to the Council of Ministers for adop-

tion. In addition, three or four further draft directives

are being worked on by the staff of the Commission.

The

first companies directive

sets up Community-

wide minimum standards of protection for creditors and

investors, dealing with the disclosure of documents

and particulars to do with a company, and the validity

of obligations entered into by a company, and the

nullity of the company. This proposal was submitted

by the Commission in 1964. In 1968 the Council adopted

the directive.

The

second companies directive

was submitted in

1970. It deals with incorporation requirements, with

safeguards on the maintenance of share capital, and

with increases and decreases of share capital. It fixes a

minimum capital of 25,000 units of account for Sociétés

Anonymes and similar types of companies and contains

strict rules on the purchase by companies of their own

shares. The European Parliament and the Economic

and Social Committee of the European Communities

which represents business, workers' and consumers' inter-

ests welcomed the proposal in their opinions. Since

about one year and a half ago, a group of government

and Commission representatives in the Council of Min-

isters are discussing a version revised by the Commission

on the basis of the opinions just mentioned.

Difficulties have arisen over the Irish and

British

desire to exclude private companies entirely from the

operation of the directive. The private company

not have to include words in its name showing that h

is different from a public one. In the other Memb

[

States this is obligatory for the "Société á responsabihte

limitée" or its equivalent, and those words or a contrac-

tion of them must form part of the company's name-

Could this not be achieved for the private company by

introducing a statutory classification of companies and

by providing that a private company and a public

company are to be separately distinguished by different

designations in their names?

The second point is that under the present laws

private company can be converted into a public

com-

pany simply by altering its articles of association and

that there is no formal procedure under which the

Registrar of Companies verifies that the company now

conforms to the requirements applicable to a public

company. Could this point not be met by providing

that

a private company wishing to become a public com-

pany will in future have to change its articles, chang

its name, and comply with the minimum paid-up

capital requirements applicable to a public company>

and that the Registrar will have to issue a new certi-

ficate of incorporation in the new name, and before

doing so he would check that all the relevant documents

had been received.

These difficulties will doubtless be overcome

soon»

and it is significant in this respect that the Council

Ministers recently fixed December 31st, 1974,

the latest date for the adoption of the second directive-

The

third companies directive

deals with merger®

between public companies taking place within a singl

Member State. The object of this directive is to provide

equivalent guarantees throughout the Community to the

shareholders, workers and creditors of merging com-

panies. An important innovation will be that the work-

ers of the two companies and their representatives m

u s t

be consulted before the general meeting takes a decision

on the merger. The directive will introduce into

national laws a common concept of merger. Under th

directive's definition a merger is the operation

whereby

a company, winding up without liquidation, transfer

to another company all of its assets and liabilities,

111

consideration of which the bidding company assign®

some of its own shares to the shareholders in the com-

pany being wound up. In other words where a merg

takes place, there is only one company which continue®

to exist.

Take-over bids

do not come under the p

°'

posal because in the case of a take-over, the absorber

company continues to exist as a wholly owned subsi-

diary of the bidding company.

Belgium, France, the Netherlands, Britain and I

f e

land all have some form of public or private regulation

of take-overs and other bids with a similar desire

protect investors and sometimes also workers.

Since in Ireland, Britain and the Netherlands opei"

180