The Gazette 1974

On being asked whether this provision produced

direct effects which could be invoked in national pro-

ceedings, the Court held that the terms of Article 92 (1),

which contained the declaration of incompatibility,

were intended to take effect in the legal systems of

Member States only when they had been put in concrete

form by acts having general application of the Commis-

sion or Council, as provided for in subsequent articles

of the Treaty.

Here, in contrast to the foregoing examples, was a

situation where the incompatibility of the aids with the

Common Market depended on an elaborate assessment

of the many conditions and exemptions mentioned in

Article 92. Moreover, it is only after reading the whole

of the section on aids that it becomes clear that it is

for the Commission or Council to adopt legislation or

make decisions providing for the abolition or the sup-

pression of such aid schemes and the laying down the

time table for such action.

That is to say we have an example of a Treaty pro-

vision where the interdiction was not of itself suffi-

ciently precise and where its operation required the

intervention of a Community institution.

The situation, of course, may be very different if there

has been intervention by, say, the Commission. It would

then be for the national Judge to read the relevant

regulation together with the Treaty in order to decide

whether there was a prohibition sufficiently precise for

him to see whether or not there had been non-

compliance.

[to be continued]

Creating a Common Market for Companies

Part II

By DR. IVO E. SCHWARTZ, LL.M.

Part II of a lecture delivered by Dr. Schwartz, who is Director for Approximation

of Laws: Companies

and

Firms, Public Contracts,

Intellectual

Property, Fair Competition, General Matters, Commission of the Euro-

pean Communities,

Brussels. The lecture was given in Wexford on

9 March 1974.

Continued from

July-August

"Gazette

" pp. 178-181.

A truly European industry must depend on a Euro-

pean capital market, and funds will only be tempted

across national boundaries on a larger scale if the

methods of presentation of the financial state and per-

formance of companies are more strictly comparable.

Thus the demand for European methods of accounting

is a strong one. In a common market with characteristics

similar to those existing in a national market it is also

nccessary to establish throughout the Community equi-

valent legal requirements as regards the extent of the

financial information that should be made available to

the public by companies that are in competition with

one another and have the same legal form.

Moreover, insufficient disclosure requirements in some

of the Member States do not favour rationalisation and

will not strengthen the competitiveness of the com-

panies concerned in those countries.

The Fourth Directive

Thus the Fourth Company Directive regarding the

annual accounts of limited liability companies is of

considerable importance. The proposal dates from 1971

but has been amended in February 1974 to take into

account the situation in the new Member States and

the opinions delivered by the European Parliament and

the Economic and Social Committee which highly

welcomed the Commission's proposal.

The main changes include a clear statement that

accounts shall give "a true and fair view" of the com-

pany's assets, liabilities, financial position and results—

a principle on which British and Irish accountants had

strongly insisted.

It implies that limited companies would be legally

obliged to provide additional information, over and

above the minimum laid down in the Directive, if the

figures provided did not amount to a "true and fair

view".

Greater flexibility would also now be allowed in the

lay-out of accounts. Additions have been made to the

general principles of valuation listed in the Directive,

so as to take account of current practice in the United

Kingdom and Eire. The amended version also offers a

much-wider scope for using new valuation methods,

such as those allowing for the effects of inflation.

Following the British example, the Commission also

wants now information on net turnover to be accom-

panied by an indication of the contribution of the

company's different commercial and industrial activities

to the turnover and to the year's results.

The amended Directive is thus largely an amalgam of

both continental and British and Irish best accounting

practices.

However, it maintains the earlier Directive's insis-

tence on a strictly schematised presentation of accounts,

as against the flexible current British and Irish approach.

It remains to be seen when the Council's heavily

charged groups of government representatives will find

time to start the discussion of the Commission's pro-

posal.

The 31st of December 1975 has been fixed by the

Council as deadline for the adoption of the Directive.

When a company belongs to a group, only the pre-

sentation of consolidated accounts can give a true and

fair, as well as a complete view of the situation of the

companies concerned. Therefore the Commission has

committed itself to submit a proposal for a Directive on

consolidated accounts of groups of companies not later

than next year. At the same time, we are working on

199