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Corporate Governance and Company Law News

Topics: 14th company law directive impact assessments, European Private Company, Corporate Governance Advisory Group, Volkswagen Law after the ECJ Judgment, Number of SEs

14th company law directive impact assessments

In December, the European Commission published its impact assessments on the Directive on the crossborder transfer of the registered office (14th company law directive). On the basis of the document Commissioner McCreevy has decided there is no need for action at EU level on this issue. DG Internal Market and Services has therefore stopped work in this area. According to the Commission document, the main reason for this halt is the fact that the Commission would consider a legislative intervention as not proportionate since the main objectives of the 14th company law directive could already be met on the base of the existing law. (p.39). The main objectives of the 14th company law directive would be, according to the document, to improve the efficiency and competitive position of existing European Companies, as well as to guarantee the effective protection of the interests of the main stakeholders ( see pp 5, 27, 51); it should be underlined that the Commission also counts company employees as stakeholders. From the point of the Commission the abovementioned objectives are already addressed by the crossborder merger directive, the EU simplification programme, the SE and also by the coming statute on the European Private Company (p. 39). In addition, the Commission refers to the pending Cartesio case (C-210/06) which might soon clarify the question of the transfer of company seat.

The 14th company law directive would also have to deal with employee rights. One particularly important aspect would be the protection of existing employee board-level participation rights. In the Commission document, a number of possibilities are presented concerning how the directive could deal with employee board-level participation rights. The option favoured by the Commission would ensure that, in the event of seat transfer, employee participation rights would not be lost or diminished (p. 49). This solution seems at first glance to be acceptable from the employee point of view.

The critical point is the future development of ECJ case law. If the ECJ comes to the conclusion in the Cartesio case that the EC treaty also contains the freedom to transfer the company seat, existing employee participation rights could be affected. If the Commission takes the abovementioned policy options seriously – namely the protection of employee stakeholders – it must undertake a legislative intervention in this case; there is no other way of guaranteeing legal certainty for employee stakeholders.


European Private Company

The European Commission has published a summary report on the 2007 consultation on the European Private Company Statute. Part of the consultation concerned the question of the employee board-level participation provisions of a future European Company Statute. In the meantime, the Commission has indicated its intention to propose an EPC Statute in mid-2008.

In the context of employee board-level participation rights the summary report comes to the following conclusion: ‘Respondents to this question support in equal numbers a uniform EU standard on employee participation and a reference to the national legislation of the law of the Member State in which the SPE has its seat. Respondents who support a uniform EU standard see in it the advantage of homogeneous rules throughout the European Union. Respondents who favour a reference to the national law of the Member State in which the SPE has its seat consider it often as the only feasible solution. In their view, seeking a uniform EU standard for employee participation risks blocking progress towards the creation of an SPE statute altogether. Many respondents consider the participation rules in the SE statute as being too complex for SMEs’ (p.13).

The ETUC is on the opinion that an EPC statute should always envisage participation rights for workers. Such a statute should not lead to a situation in which already existing European standards on information, consultation and board-level-participation will be undermined. Moreover, the ETUC makes aware on the fact that most of EU member states providing for board level representation of workers applicable in companies with less than 500 employees. Accordingly, seize of a company gives no reason to abstain from board level interest representation in a company statute supposed to be attractive for SME´s.


Corporate Governance Advisory Group

On 4 December 2007 the Advisory Group on Corporate Governance and Company Law held its 8th Meeting. The main subjects were the Commission initiative on simplification of company law and the European Private Company. Commission Services presented the preliminary results of the public consultation in the field of simplification of company law; about 70% of the replies were in favour of the Commission's proposal to modify Art. 7 of the European Company Statute. At present, this provision foresees that the registered office and the de facto head office of a company have to be situated in the same member state; abolition would open the door to using SEs as letterbox companies. The ‘problem of the co-existence of systems applying co-determination and those that do not apply it’ was also discussed in the advisory group.

The Volkswagen Law after the ECJ Judgment

In the follow-up to the ECJ Volkswagen decision of May 2007 (C-112/05) the German government has decided to modify the Volkswagen law in order to comply with the guidelines of the ECJ judgment. Besides the provision of the Volkswagen law which was considered by the ECJ as an impediment to market freedom, this law also contains important provisions on the influence of employee representatives on board decisions. In the context of the revision of the Volkswagen law the German Ministry of Justice has now declared that it will maintain the latter provision regarding employee influence. In particular, according to § 4 II Volkswagengesetz any relocations needs the agreement by a two third majority in the supervisory board. Consequently, taking in account the parity composition of the German supervisory boards in big companies (>2000 employees) no decisions can be taken without, at least, a partly agreement by the worker representatives (in the original wording: ‘Die Errichtung und die Verlegung von Produktionsstätten bedürfen der Zustimmung des Aufsichtsrats. Der Beschluss bedarf der Mehrheit von zwei Dritteln der Mitglieder des Aufsichtsrats.’)

Number of European Companies (SE)

As of end February 2008, the SEEurope factsheets provided information on a total of 137 registered (plus 18 interested) SEs. For more information on existing SEs, please visit the SE section of the worker-participation website:


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