6 Reporting requirements in the case
of mergers and divisions
| (29986)
13548/08
+ ADDs 1-2
COM(08) 576
| Draft Directive amending Council Directives 77/91/EEC, 78/855/EEC and 82/891/EEC and Directive 2005/56/EC as regards reporting and documentation requirements in the case of merger and divisions
|
| Legal base | Article 44(2) EC; co-decision; QMV
|
| Department | Business Innovation and Skills
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| Basis of consideration | Minister's letter of 24 June 2009
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| Previous Committee Report | HC 16-xxxii (2007-08), chapter 6 (22 October 2008)
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| To be discussed in Council | Unknown
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| Committee's assessment | Legally and politically important
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| Committee's decision | Cleared (decision reported on 22 October 2008)
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Background
6.1 In 2006 the Commission launched a broad simplification programme
with a view to measuring administrative costs and reducing administrative
burdens on companies in the areas of company law, accounting and
auditing. This initiative is a key part of the better regulation
agenda aimed at removing burdens that unnecessarily hamper economic
activity within the EU. The programme, which aims to reduce administrative
burdens in the three areas mentioned by 25% by the year 2012,
was formally endorsed by the spring European Council in March
2007. In 2007 the Commission adopted a Communication setting out
proposals for simplifying regulation in these areas. The simplification
measures set out in the proposed Directive were identified during
consultations on the July 2007 Communication.
The document
6.2 This proposal for an amending Directive contains measures
designed to simplify or reduce reporting requirements in the case
of company mergers and de-mergers/divisions. They would amend
the third company law Directive on company mergers (78/855/EEC)
and the sixth company law Directive on company divisions (82/891/EEC).
These Directives currently contain a number of detailed reporting
requirements that companies involved in mergers and de-mergers/divisions
have to comply with and which impose considerable costs and administrative
burdens. Furthermore, the means provided for in the Directives
to inform shareholders about the details of the transaction were
designed 30 years ago and do not take account of technological
change. Finally, changes in Directives over time have led to inconsistencies
and the proposed Directive tries to address some of these inconsistencies.
The proposal is an important part of the first stage of the EU
simplification programme.
6.3 The proposed Directive focuses on the reports
required in the case of a company merger or division: a management
report, an independent expert's report and a supplementary accounting
statement. In some cases it relaxes the requirement for these
reports and it also aligns reporting requirements (where this
is not already the case) between relevant provisions in the Capital
Maintenance and Cross-Border Mergers Directives. Specific measures
for reducing administrative burdens in the proposed Directive
include:
- Abolition of the requirement
for a management report explaining the terms of the merger and
a supplementary accounting statement if all shareholders agree
they are unnecessary, and abolition of the requirement for companies
to draw up a supplementary accounting statement in cases where
an issuer of listed securities publishes half-yearly financial
statements, in accordance with the rules of the Transparency Directive.
- Simplification of reporting requirements in the
case of mergers and divisions between parent and subsidiary companies.
- An option for companies to use their websites
for the publication of the draft terms of mergers and divisions
and of other documents that have to be made available to shareholders
and creditors in the process.
- For the purposes of consistency the application
of standardised creditor protection requirements in the second
company law Directive in the case of a merger or division.
- To exempt companies from the requirement in the
second company law Directive for an independent expert's report
— in cases where an independent expert's report has been
produced for a merger or division — or to provide that both
reports may be drawn up by the same expert.
6.4 In his original Explanatory Memorandum on the
proposal the then Minister for Business (Mr Ian Pearson) emphasised
that the Directives to be amended by the proposal, had limited
application in the United Kingdom which preferred to take the
alternative takeover route to merger clearance via the Takeover
Panel. Its limited likely impact notwithstanding, the Minister
welcomed this simplification proposal on the grounds that it reduced
administrative and financial burdens without compromising the
substance of existing accountability requirements. We agreed with
the Government's assessment and accordingly cleared the document
from scrutiny in October of last year.
The Minister's Letter
6.5 The new Minister for Business and Regulatory
Reform (Mr Ian Lucas) has now written to update us on the progress
of the proposed amending measure. In his letter of 24 June 2009
he writes as follows:
"The proposals stem from the Commission's simplification
programme adopted in 2006 to help reduce the administrative burdens
that can hamper the economic activities of European business.
They relax some reporting requirements in the case of company
mergers and divisions, and aligns them where this is not already
the case with relevant provisions in the 2nd (Capital maintenance)
and Cross-Border Mergers Directives.
"When the plenary voted on the proposals on
22 April 2009 it adopted 30 amendments to the proposal for a directive.
Although large in number the amendments contain a lot of repetition
as they amend 4 company law directives covering domestic mergers
and divisions, cross border mergers and capital maintenance. A
number are technical nature clarifying the use of terminology
and timing of reports. The changes cover:
- a Member State option to designate internet sites
(other than central platforms) such as a trade association or
chamber of commerce for publication of information regarding company
mergers and divisions
- proposals to enable Member States to put in place
arrangements for shareholders of companies being acquired during
a merger to sell their shares to the acquiring company at a fair
market price
- Confirmation that member states should adopt
appropriate measures to ensure security of internets sites and
authenticity of documents published, and for companies to make
copies of reports available at the registered office
- alignment of requirements for a draft terms of
merger in the case of a domestic and cross border merger
- confirmation that modifications are intended
to be implemented without prejudice to systems of protection of
the interests of creditors, employees and public authorities e.g.
tax authorities
- clarity on timing of reports
- a requirement for member states to provide transposition
details
"The department for Business Innovation and
Skills (BIS) has been involved in discussions concerning the amendments
are content that the changes add clarity and flexibility and do
not impose additional burdens on business.
"The amendments adopted correspond to what was
agreed between the European Parliament, Council and Commission
and ought therefore to be acceptable to the Council. Consequently
once the legal linguists have scrutinised the text on 25th
June 2009, the Council should be in a position to adopt the legislative
act. …"
Conclusion
6.6 We thank the Minister for his update on this
simplification proposal by the Commission. Like the Government
we regard the proposed amendments as essentially technical in
nature. We see no need for further questions to the Minister.
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