Contract ETD/2006/IM/F2/71. Annexes Part 2

Transcription

1 Contract ETD/2006/IM/F2/71 Feasibility study on an alternative to the capital maintenance regime established by the Second Company Law Directive 77/91/EEC of 13 December 1976 and an examination of the impact on profit distribution of the new EU-accounting regime Annexes Part 2

2 Contract ETD/2006/IM/F2/71 kpmg.com KPMG Feasibility Study on Capital Maintenance Main Report Contact KPMG Deutsche TreuhandGesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft Klingelhöferstraße Berlin Germany Georg Lanfermann T F glanfermann@kpmg.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss Cooperative. Printed in Germany. KPMG and the KPMG logo are registered trademarks of KPMG International. Contract ETD/ 2006 / IM / F2 / 71 Feasibility study on an alternative to the capital maintenance regime established by the Second Company Law Directive 77/91/EEC of 13 December 1976 and an examination of the impact on profit distribution of the new EU-accounting regime Main Report

3 Annexes - Part 2 Contents 1 Legal questionnaires 1 Pages 1.1 EU legal questionnaire Non-EU legal questionnaire Cost questionnaires EU countries France Germany Poland Sweden United Kingdom Non-EU countries USA-Delaware USA-California Canada Australia New Zealand I

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5 1 Legal questionnaires 1.1 EU legal questionnaire General information: 2nd EU Company Law Directive EU-chapters Questionnaire on the legal regime governing capital formation, maintenance and profit distribution of stock corporations in (Country) The primary objective of this questionnaire is to support the interview of specific companies selected for your country. The text elements of your responses will be used to describe the legal environment in your country regarding your capital formation, maintenance and profit distribution procedures for stock corporations. For further information on the general nature of this study project, please refer to the information package provided in connection with this questionnaire. The questionnaire is divided into six sections: - The first section focuses on the rules on capital formation; - The second section deals with the rules on capital maintenance; - The third section addresses the issue of distributions; - The fourth section deals with special capital related rules in the case of crisis and insolvency; - The fifth section is about contractual self-protection of creditors; - The sixth section deals with the principle of equal treatment; - The seventh section shall provide a brief overview on the situation regarding private limited companies. Each section comprises a number of questions to cover the theme of the section. Each question of this questionnaire is divided into three parts. Firstly, you will receive a description of the legal basis of your national provisions as set out by the 2 nd Company Law Directive (CLD) on a specific aspect of the study. Secondly, you are asked to provide a description of the implementation of the provisions of the 2 nd Company Law Directive into your national legislation. This description needs to be complemented by relevant jurisprudence. In a box below, you are also asked to systematically provide us with the relevant national legal provisions and sources of jurisprudence. Thirdly, we will need a description of the complete 1

6 sequence of procedural steps (process) that are necessary under national law to apply these rules from the company s/founder s perspective. You will find a box to be filled in already containing some minimum steps derived from the 2 nd CLD and common national practices. When completing this list, please be aware that your answers will be crucial for us to identify the relevant incremental costs of this process for your national stock corporations. When responding to the questionnaire, please use this word document and fill-in the required answer boxes with your descriptions. In this box please provide information concerning the preparers of responses to this questionnaire in order to be able to contact them in the case of need for clarification: First Name Last Name Initials Telephone Address In the box below please list the relevant national laws, most important jurisprudence and key literature sources of your country that you have applied in responding to this questionnaire: National laws: Jurisprudence: Literature: For your convenience, we have added an English language version of the 2 nd and 4 th Company Law Directive as well as literature sources already identified by us for the five EU Member States that we need to examine. Section 1: Sub-section 1: Capital formation Formation of the stock corporation Question 1: Minimum capital and other means of equity financing a) Second Company Law Directive (2 nd CLD) The 2 nd CLD allows different means of equity financing for the activities of a stock corporation. One of the instruments is the contribution of subscribed capital by shareholders. 2

7 According to the 2 nd CLD, stock corporations are required to have at least a minimum subscribed capital of 25,000 euros (Article 6); however, the founders are entitled to fix a higher subscribed capital in the statutes of the company. Furthermore, they could include an authorized capital in the company s statutes allowing an increase in the subscribed capital under the condition that the board gives its authorisation. Another possibility of equity financing under the 2 nd CLD is the contribution of share premiums. The 2 nd CLD itself only deals with share premiums in the context of capital increases (Article 26). However, many EU Member States already allow share premiums in the formation stage. Further possible means of equity financing during the stage of formation, such as the issue of voluntary reserves, are not regulated by the 2 nd CLD; however, they are allowed under various national laws and/or are used in practice. Concerning the transparency of the company s capital, the 2 nd CLD requires the founders to fix the amount of the subscribed capital and the authorized capital in the statutes (Article 2). With respect to the premiums and other possibilities of financing, the Directive does not contain any requirements regarding transparency. b) Implementation into national law Please describe how these provisions of the 2 nd CLD were implemented into your national law; if appropriate, please refer to additional national provisions and to case law in this context in a clear manner. The description of the national provisions should at least cover the following aspects: aa) The level of minimum subscribed capital, the possibility of fixing a higher subscribed capital. bb) The possibility of fixing authorized capital in the statutes. cc) The possibility of fixing premiums in the stage of formation and, if this is allowed, the treatment of premiums under national law. dd) A description of other forms of equity contributions that exist under national law (e.g. voluntary reserves). ee) The necessary information that must be laid down in the statutes. Your response National legal provisions: Please give references Response prepared by: Initials Jurisprudence: Y / N / NA Please give references 3

8 c) Process Please describe the complete sequence of procedural steps that are necessary under national law to apply these rules from the company s/founder s perspective. The box already contains the minimum steps derived from the 2 nd CLD and common national practices. When completing this list, please be aware that these steps will be crucial for us in identifying the relevant incremental costs of this process for your local stock corporations. Please complete the following list: Step 1 Step 2 Step 3 Step 4 Step 5 Decision of founders on how the company should be financed (amount of subscribed capital, amount of authorized capital, amount of premiums, etc.) Setting the amount of subscribed capital and authorized capital in the statutes Publication of the statutes Question 2: Subscription of the capital a) Second Company Law Directive (2 nd CLD) The 2 nd CLD technically links the formation of the subscribed capital to the issue of shares by stating that a person subscribing a share is obligated to pay in a certain part of the subscribed capital. The 2 nd CLD does not necessarily require that all shares must be subscribed before the company may be registered. The 2 nd CLD also does not establish an exact time limit. Regarding the question of who is able to subscribe shares, Article 18 of the 2 nd CLD prohibits that they can be subscribed by the stock corporation itself or by a third person acting on its behalf. Article 24a of the 2 nd CLD extends this prohibition to subsidiaries (companies in which the issuing company holds a majority of the voting rights or on which it can exercise a dominant influence). Member States need not to apply Article 24a (1) where the subscription is effected on behalf of a person other than the subscribing entity (Article 24a (4)) or where the shares in a public limited company held by another company were acquired before the relationship between the two companies corresponded to the criteria laid down in Article 24a (1) (Article 24a (5)). The issuance of shares at a price lower than the part of the company s capital designated to a respective shareholder (the nominal value or the accountable par) is prohibited by the 2 nd CLD (Article 8 (1)). Member States may only allow those who undertake to place shares in the exercise of their profession to pay less than the total price of the shares for which they are subscribing (Article 8 (2)). This prohibition of Article 8 (1) also affects the design of the shares, as is well established in literature that due to this prohibition, shares may only be issued with a nominal value or par value. This means that every subscriber is committed to raising a certain amount of the capital. Concerning the transparency of the company s subscribed capital, the 2 nd CLD contains an obligation for the founders to fix the amount of the nominal value of the subscribed shares or, alternatively, the number of the shares subscribed without stating the nominal value (Article 4

9 3). Regarding premiums or other forms of equity contributions, the 2 nd CLD does not contain any provisions on transparency. b) Implementation into national law Please describe how these provisions of the 2 nd CLD were implemented into your national law; if appropriate, please refer to additional national provisions and to case law in this context in a clear manner. The description of the implementation into national provisions should at least cover the following aspects: aa) Requirement to subscribe shares All shares/part of shares Time frame bb) Prohibition that shares may be subscribed by the stock corporation itself (Article18, 24a, exceptions of Article 24a (4 and 5)) cc) The principle that shares may not be issued at a price lower than the nominal value or their accountable par Minimum nominal value Exception for professional issuers (Article 8(2)). dd) Designs of shares possible under your national law: i.e. shares with a nominal value or shares with an accountable par or both of them. ee) ff) Necessary information to be fixed in the statutes Rules and principles concerning the injection of premiums in the sense of the Directive. Your response National legal provisions: Please give references Response prepared by: Initials Jurisprudence: Y / N / NA Please give references c) Process Please give a complete description of practical steps necessary under national law to apply these rules from the company s/founder s perspective. The box already contains the minimum steps derived from the 2 nd CLD and common national practices. When completing this list, please be aware that your answers will be crucial for us to identify the relevant incremental costs of this process for your national stock corporations. Please complete the following list: 5

10 Step 1 Step 2 Step 3 Determination of nominal value/par value shares Monitoring that only founders subscribe shares (if not they cannot be founders), the corporation cannot subscribe shares Monitoring that shares are not issued at a price lower than the nominal value ( 1); same for par value shares Step 4 Setting the nominal amount ( 8 II AktG), the amount advanced ( 9 AktG) (+ if necessary the classes of shares ( 11 AktG) of the nominal value shares or/and the quantity, the amount advanced (+ if necessary classes of shares) of the par value shares issues in the statutes Step 5 Step 6 Step 7 Step 8 Determination of bearer shares or name shares ( 10 AktG) Setting the amount of nominal value shares / par value shares each founder has subscribed in the statutes ( 23 II AktG) Publication of the statutes With subscription of shares obligation to pay contributions Question 3: Contributions, injection of contributions, valuation process a) Second Company Law Directive (2 nd CLD) The 2 nd CLD sets a framework of what can be injected as subscribed capital and how it can be injected into the company and how the value of the contributions is to be ensured. The 2 nd CLD states that subscribed capital may only be contributed via assets capable of economic assessment ; the performance of work or supply of services is explicitly not allowed (Article 7). Furthermore, the 2 nd CLD promulgates that the subscribers of the shares have to pay in a certain amount of the contribution. The 2 nd CLD differentiates between contributions in cash and contributions in kind (Article 9). Contributions in cash must be paid in to an extent that at least 25 percent of the nominal value is available at the time the company is incorporated or authorized to commence business (Article 9(1)). However, Member States may derogate from this provision to the extent that such derogation is necessary for the adoption of provisions designed to encourage employees to invest (Article 41 (1)). Regarding contributions in kind the full consideration must be paid in within five years (Article 9 (2)). In both cases shareholders may not be released from the obligation to pay in their contributions (Article 12). The 2 nd CLD provides special rules with respect to the valuation of contributions in kind. In this case the Directive requires a report by an independent expert appointed or approved by an administrative or judicial authority (Article 10 (1)). The expert s report has to contain at least a description of each of the assets comprising the consideration as well as of the methods of valuation used. It must state whether the values established correspond to at least the number and nominal value or the accountable par, and where appropriate, to the premium on the shares to be issued (Article 10 (2)). The expert s report has to be published (Article 10 (3)). Exceptions from this duty to establish a report are possible under the conditions of Article 10(4). Regarding the paying in of premiums, the 2 nd CLD only contains a specific provision in the context of capital increases (Article 26); only Article 10 (3) contains a rule concerning premiums. Regarding other equity financing forms, the 2 nd CLD does not contain any rules. 6

11 The 2 nd CLD was amended by Directive 2006/68/EC of 6 September 2006, which will have to be implemented by 15 April According to the new text, Member States may decide not to apply the requirement for an expert report on the valuation in the following cases: a. If transferable securities or money market instruments are contributed as contributions in kind and the securities are valued at the weighted average price at which they have been traded during a sufficient period, to be determined by national law, preceding the effectuation of the contribution; b. If assets are contributed that have already been subject to a fair value opinion by a recognized independent expert under the condition that the opinion is not older than six months and the valuation has been performed in accordance with generally accepted valuation standards; c. If assets are contributed whose individual value is directly derived from the statutory accounts of the previous financial year and if the accounts have been subject to an audit in accordance with the 8th Directive. b) Implementation into national law Please describe how these provisions of the 2 nd CLD were implemented into your national law; if appropriate, please refer to additional national provisions and to case law in this context. The description of the national provisions should at least cover the following aspects: aa) Assets capable of economic assessment Contributions in cash (different modalities) Contributions in kind (different forms) Services No release from the obligation bb) Amount to be paid in Contributions in cash Contributions in kind cc) Valuation of contributions in kind Who can be appointed as an independent expert? Who appoints the independent experts? Which methods of valuation are allowed? Publication of the report Is it possible to waive the report according to Article 10 (4)? On average, how much time does the valuation process take? dd) Further national rules linked to the injection of contributions Freedom of decision making of the board etc. Special report by founders, examination by court, notary etc. ee) Incorrect financing What are the consequences of a contribution that does not have the full value / has no value? 7

12 Liability of founders/shareholders with respect to compliance with legal requirements for making contributions ff) Treatment of premiums under the national law, for example with respect to the full paying in. Please state if the amendments of the 2 nd CLD by Directive 2006/68/EC have already been implemented into national law or if any proposals in this context are being considered. If yes, please describe the new rules adopted into your national law / the proposed rules being considered. Your response National legal provisions: Please give references Response prepared by: Initials Jurisprudence: Y / N / NA Please give references c) Process Please describe the complete sequence of practical steps that are necessary under national law to apply these rules from the company s/founder s perspective. The box already contains the minimum steps derived from the 2 nd CLD and common national practices. When completing this list, please be aware that your answers will be crucial for us to identify the relevant incremental costs of this process for your national stock corporations. Please complete the following list: Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Monitoring if assets to be contributed are capable of economic assessment (services are excluded) Monitoring if the designated amount has been fully paid (contributions in cash 25% of their nominal value / contributions in kind % of their value within the first 5 years) in the correct time frame (to allow registration) In the cases of contributions in kind declaration of the reasons and verification by auditors (contributions in cash should be the normal case) Performance of the valuation process (value, methods of valuation) with respect to contributions in kind Publication of the report ( register court ) Setting the nominal value of the shares or the number of shares to be issued for consideration other than in cash in the statutes and the nature of the consideration and the name of the person providing the consideration in the statutes Publication of the statutes 8

13 Question 4: Accounting for formation expenses a) Fourth Company Law Directive (4 th CLD) The 4 th CLD gives individual EU Member States an option to allow the capitalisation of formation expenses under assets (Article 34, 10 B). If the formation expenses are presented under assets, they need to be written off over a maximum period of five years. Furthermore, Article 34 restricts the possibility of distributing profits as long as the formation expenses have not been completely written off. During this depreciation period, the distribution shall only be allowed if the amount of the reserves available and profits brought forward are at least equal to the amount of expenses not yet written off. Finally, the amounts entered under formation expenses must be explained in the notes to the financial statements. b) Implementation into national law Please describe how these 4 th CLD requirements for the capitalisation of formation expenses are implemented in your national law. aa) Firstly, please state: Whether it is allowed in your country to capitalise formation expenses bb) If this capitalisation is allowed in your country, please describe in particular: The definition of formation expenses that can be capitalised The time period for the depreciation of the formation expenses The way your national legislator restricts profit distributions during the depreciation period. The information in the notes required to describe the formation expenses. Sub-section 2: Capital increases Question 5: Increase in subscribed capital and other forms of equity financing a) Second Company Law Directive (2 nd CLD) After the formation of the company, one usual way of providing additional outside capital to the company is to increase the subscribed capital. According to the 2 nd CLD an increase in capital depends on at least a simple majority of the shareholders authorizing it (Article 25 (1), Article 40); a derogation from this provision is possible under Article 41 (1). The Directive also allows that the statutes or the shareholders authorize the board within a maximum period of five years to increase the capital up to an amount to be fixed by law (Article 25 ( 2) authorized capital). In all cases the decision and the increase in the subscribed capital must be published (Article 25 (1)). The rules do not only apply to the issuance of shares but also to the 9

14 issuance of securities that are convertible into shares or that carry the right to subscribe shares (Article 25 (4)). Besides this, the Directive allows contributions of premiums (Article 26). b) Implementation into national law Please describe how these provisions of the 2 nd Company Law Directive were implemented into your national law; if appropriate, please refer to additional national provisions and to case law in this context in a clear manner. The description of the national provisions should at least cover the following aspects: aa) Ordinary capital increase Resolution by shareholders Majority Different classes of shares Exception (Article 41 para. 1) Publication bb) Authorized capital Decision in the statutes/resolution by shareholders Different classes of shares Maximum amount to be fixed by law Empowered company body Power of the body (maximum period) Publication cc) Other kinds of capital increase that exis under national law Increases by capitalization of reserves (see Article 15 (3)) Others if they exist (e.g. capital increases to serve stock options) dd) Securities that are convertible into shares/securities or that carry the right to subscribe shares ee) Contribution of premiums Your response National legal provisions: Please give references Response prepared by: Initials Jurisprudence: Y / N / NA Please give references c) Process Please give a complete description of practical steps necessary under national law to apply these rules from the company s/founder s perspective. The box already contains the minimum steps derived from the 2 nd CLD and common national practices. When completing this list, 10

15 please be aware that your answers will be crucial for us to identify the relevant incremental costs of this process for your national stock corporations. Please complete the following list: Ordinary capital increase Step 1 Proposal of the board on how the company should be financed (amount of subscribed capital, amount of premiums) Step 2 Invitation to shareholders meeting Step 3 Resolution by shareholders on capital increase and alteration of articles of association by a majority of ¾ of the represented authorised capital ( 182 AktG) Step 4 Resolution by shareholders on pre-emption rights in case of cash consideration, resolution for each class of shares or possible resolution that bank should offer shares ( 182 AktG) Step 5 Amending statutes to raise the amount of subscribed capital Step 6 if considerations other than cash - these have to be approved by experts /legal authorities Step 7 Registration (Anmeldung) of the decision and the expert report Step 8 Preemption Rights for Shareholder ( 186 AktG) Step 9 Application of shares ( 185 AktG) Step 10 Provision of minimum deposit (considerations)( 188 AktG) Step 11 Publication/Registration (Eintragung) of the capital increase ( 189 AktG) Step 12 Emission of shares ( 191 AktG) Conditional increase Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 capital Only for certain purposes Resolution by shareholders meeting on conditional capital increase ( AktG) Publication of the Resolution ( 195 AktG) Resolution by shareholders meeting (concession of subscription rights and conversion rights 198 II + with 192 V AktG, 196 AktG) Declaration of acquisition by the beneficiaries ( 198 AktG) Emission of shares ( 199 AktG) Publication of the emission ( 201 AktG) Authorized capital increase Step 1 Step 2 Step 3 Step 4 Proposal of the founders/board on how the company should be financed (amount of subscribed capital, amount of premiums) Resolution by shareholders meeting to authorise the Managing Board (if not already laid down in the statutes 202 AktG) Publication of the amended Statutes ( 202 AktG) Decision of the managing board ( 202 and 204 AktG) under agreement of the board of directors 11

16 Step 5 Step 6 Step 7 Step 8 Capital increase from the company s own resources Step 1 Step 2 Step 3 Resolution by shareholders on pre-emption rights in case of cash consideration or possible resolution that bank should offer shares Amending statutes to raise the amount of subscribed capital Publication of the decision Steps 6 12 are the same as for the ordinary capital increase Resolution by shareholders meeting on capital increase by conversion of reserves ( 207 AktG) Publication of capital increase within the next 8 months ( 209 AktG) and in certain cases publication of the balance ( 210) Emission of shares ( 214 AktG); an application is not necessary Question 6: Subscription of new shares a) Second Company Law Directive (2 nd CLD) Regarding the subscription of new shares resulting from a capital increase, the 2 nd CLD reiterates the principles of 2 nd CLD used during the formation of a stock corporation. The shares must have a nominal value or accountable par and may not be issued under this value/par. The same applies to the prohibition of the company subscribing shares (Article 18, 24 a). With respect to the amount of the capital to be subscribed, the 2 nd Company Law Directive is based on the principle that the capital must be fully subscribed. An exception applies if the provisions of the issue provide that the capital can be increased only to the amount of the subscriptions received (Article 28). The amount of the nominal value of the subscribed shares (or the number of the shares subscribed without stating the nominal value) after the capital increase must be made disclosed. b) Implementation into national law Please describe how these provisions of the 2 nd Company Law Directive were implemented into your national law; if appropriate, please refer to additional national provisions and to case law in this context in a clear manner. The description of the national provisions should at least cover the following aspects: 12 aa) Requirement for subscribing shares All shares/part of shares Time frame? bb) Prohibition that shares may be subscribed by the stock corporation itself (Article18, 24a)

17 cc) Application of the principle that shares may not be issued at a price lower than the nominal value or their accountable par (if possible, make reference to information provided under question 2) dd) Necessary information that must be amended in the statutes Your response National legal provisions: Please give references Response prepared by: Initials Jurisprudence: Y / N / NA Please give references c) Process Please give a complete description of practical steps necessary under national law to apply these rules from the company s/founder s perspective. The box already contains the minimum steps derived from the 2 nd CLD and common national practices. When completing this list, please be aware that your answers will be crucial for us to identify the relevant incremental costs of this process for your national stock corporations. Please complete the following list: Step 1 Decision by the company if all shares are to be subscribed (decision for all classes of shares) Step 2 Determination of nominal value/par value (min. 1) Step 3 Step 4 Step 5 Monitoring of subscription (no subscription by the company, subscription of all shares (Payment of all contributions (25% of contributions in cash / 100% of contributions in kind + verification), time frame (possible after decision by shareholders meeting, has to be finished before realisation will be announced) Monitoring that shares are not issued under the nominal value/ accountable par (min 1) Correction of the statutes Question 7: Contributions, performance of contributions, process of evaluation a) Second Company Law Directive (2 nd CLD) Regarding the contributions and their having been paid in at the stage of a capital increase, the 2 nd CLD, to a large extent, refers to the rules that are applicable during the stage of formation. Capital increases in subscribed capital can again only be made with assets capable of economic assessment. The performance of work or the supply of services is not allowed. 13

18 Furthermore, the 2 nd CLD states that the subscribers of shares have to pay in 25 percent of a contribution of cash, and the full consideration of a contribution in kind has to be paid in within 5 years (Articles 26, 27). With regard to the paying in of considerations in cash, Member States can make use of the derogation of Article 41. (1). For contributions in kind, a report by an independent expert is necessary (Article 27. (2)) if any of the exceptions (Article 27 (3 and 4)) applies. Premiums need to be fully paid in (Article 26). Regarding other forms of equity financing, the 2 nd CLD does not contain any provisions. b) Implementation into national law Please describe how these provisions of the 2 nd CLD were implemented into your national law; if appropriate, please refer to additional national provisions and to case law in this context in a clear manner. The description of the national provisions should refer to information given in question 2 and should at least cover the following aspects: aa) Assets capable of economic assessment (if possible, reference to information given in question 3) bb) Amount to be paid in (if possible, reference to information given in question 3) cc) Valuation of contributions in kind (if possible, reference to information given in question 3) Exceptions of Article 27 (3 and 4) dd) Incorrect financing (if possible, reference to information given in question 3) ee) Treatment of premiums or other forms of equity contributions under national law Your response National legal provisions: Please give references Response prepared by: Initials Jurisprudence: Y / N / NA Please give references c) Process Please give a complete description of practical steps necessary under national law to apply these rules from the company s/founder s perspective. The box already contains the minimum steps derived from the 2 nd CLD and common national practices. When completing this list, please be aware that your answers will be crucial for us to identify the relevant incremental costs of this process for your national stock corporations. Please complete the following list: Step 1 Monitoring if assets to be contributed are capable of economic assessment 14

19 Step 2 Step 3 Step 4 Step 5 Monitoring if the designated amount is paid in the foreseen time frame (contributions in cash 25% if their nominal value / contributions in kind 100% of their value).all contributions have to be paid before the capital increase is announced. Performance of valuation process with respect to contributions in kind (value, methods of valuation) Publication of report Alteration of the statutes Question 8: Pre-emption rights a) The Second Company Law Directive (2 nd CLD) Under the condition that the capital is increased by considerations in cash, shareholders are granted pre-emption rights in proportion to the capital represented by their shares (Article 29(1)) so that a watering down of their investment is avoided. The offer regarding the preemption rights and the period during which these rights must be exercised are subject to publication (Article 29 (3)). However, exceptions to this principle can apply if shares are concerned that carry a limited right to participate in distributions or if different classes of shares exist (Article 29 (2 and 3)). A restriction or withdrawal of the pre-emption right is only possible if the general meeting approves it by no less than 2/3 of the votes (Article 29 (4), Article 40) and the board presents a report to the annual general meeting indicating the reasons for this restriction/withdrawal. Furthermore, individual EU Member States can allow that the statutes or the annual general meeting delegate the power to withdraw the preemption rights from the company body that is empowered to decide on an increase in subscribed capital within the limits of the authorized capital (Article 29 (5)). The decision to withdraw the pre-emption rights must be published (Article 29 (4)). If the new shares are taken over by a bank or other financial institutions that offer the shares in a second step to the shareholders, the 2 nd CLD stipulates that this procedure is sufficient to respect the preemption right (Article 29 (7)). These provisions are not only applicable to shares, but also to the issuance of securities that are convertible into shares or that carry the right to subscribe for shares (Article 29 (6)). A derogation from the requirements of Article 29 is only possible if it is necessary for encouraging employees to invest in formation capital (Article 41 (1)). b) Implementation into national law Please describe how these provisions of the 2 nd CLD were implemented into your national law; if appropriate, please refer to additional national provisions and to case law in this context. The description of the national provisions should refer to information given in question 2 and should at least cover the following aspects: aa) Right of pre-emption Content Exceptions Offer of pre-emption rights Publication of offer/time frame 15

20 bb) Withdrawal or reduction of right of pre-emption by the shareholders meeting Resolution by shareholders (majority) Report by the board Transparency obligations cc) Withdrawal or reduction of right of pre-emption by authorized body Decision by founders / shareholders Report Transparency obligations dd) Treatment of securities to be converted into shares ee) Derogations (Article 41 (1)) Your response National legal provisions: Please give references Response prepared by: Initials Jurisprudence: Y / N / NA Please give references c) Process Please give a complete description of practical steps necessary under national law to apply these rules from the company s/founder s perspective. The box already contains the minimum steps derived from the 2 nd CLD and common national practices. When completing this list, please be aware that your answers are crucial for us to identify the relevant incremental costs of this process for your national stock corporations. Please complete the following list: In case of preemption right Applicable only for ordinary capital increase and authorised capitals increase Step 1 Proposal of board that pre-emption right should be offered Step 2 Offer of pre-emption rights to shareholders (term of acceptance = 2 weeks). The new shares can also be offered via financial institutions to shareholders. Step 3 Publication of offer Step 4 In case of withdrawal of preemption rights by shareholder resolution Step 1 Proposal of board that pre-emption right should be withdrawn and publication of the withdrawal Step 2 Invitation to shareholders meeting 16

21 Step 3 Step 4 Step 5 In case of withdrawal of preemption rights by authorization Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Resolution by shareholders (of at least ¾ of the authorised capital) Statutes can afford further requirements Transparency Obligations Proposal of founders/board that pre-emption right should be withdrawn and publication of the withdrawal Invitation of founders / shareholders meeting Statutes can afford further requirements Resolution by founders/shareholders (of at least ¾ of the authorised capital) Authorization by board Report Transparency obligations Sub-section 3: Subsequent formations Question 9: Subsequent formations a) Second Company Law Directive (2 nd CLD) The 2 nd CLD contains rules dealing with subsequent formations (Article 11) that should guarantee a protection from bypassing the capital formation rules. According to the 2 nd CLD, the acquisition of an asset by the company, which is owned by a founder, requires a valuation by an expert according to Article 10. Furthermore, the Directive requires an authorisation for the acquisition by the shareholders meeting if the acquisition takes place within 2 years after incorporation and the consideration covers at least 10% of the subscribed capital. Member States may extend the provisions to shareholders or third persons (Article 11 (1)). In any case the provisions on subsequent formations shall not be applicable to acquisitions effected in the normal course of the company s business, to acquisitions effected at the instance or under the supervision of an administrative or judicial authority, or to stock exchange acquisitions (Article 11 (2)). b) Implementation into national law Please describe how these provisions of the 2 nd Company Law Directive were implemented into your national law; if appropriate, please refer to additional national provisions and to case law in this context. The description of the national provisions should refer to information given in question 2 and should at least focus on the following issues: aa) Concerned persons 17

22 bb) 10 percent of the subscribed capital cc) Shareholders resolution dd) Delay of two years ee) Valuation by an expert ff) Shareholders resolution (majority etc.) gg) Transparency hh) Exceptions ii) Consequences of incorrect subsequent formations Your response National legal provisions: Please give references Response prepared by: Initials Jurisprudence: Y / N / NA Please give references c) Process Please give a complete description of practical steps necessary under national law to apply these rules from the company s/founder s perspective. The box already contains the minimum steps derived from the 2 nd CLD and common national practices. When completing this list, please be aware that your answers will be crucial for us to identify the relevant incremental costs of this process for your national stock corporations. Please complete the following list: Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Monitoring of acquisitions Valuation by an expert Publication of report Calling a shareholders meeting Resolution of shareholders Transparency Section 2: Capital Maintenance Question 10: Limitation of distributions a) Second Company Law Directive (2 nd CLD) It follows from the provisions of the 2 nd CLF that a reflux of the subscribed capital to shareholders is not allowed unless one of the exceptions (e. g capital decrease, acquisition of own shares) is applicable. Furthermore, the provisions stating that the amount of the 18

23 distribution may not be higher than the profits (Article 15 (1c)) and the principle of equal treatment (Article 42) are interpreted in several Member States in the way that distribution of funds of the company to shareholders, even though they do not consist of subscribed capital, are not allowed if they are not performed via a distribution. b) Implementation into national law Please describe how these provisions of the 2 nd CLD have been implemented into your national law; please refer to additional national provisions and to case law, if necessary, in this context. The description of the national provisions should focus on the following issues: aa) No reflux of the subscribed capital to shareholders if none of the exceptions apply bb) No reflux of other funds of the company to shareholders if not via a distribution cc) Sanctions in case of violation of these principles Your response National legal provisions: Please give references Response prepared by: Initials Jurisprudence: Y / N / NA Please give references c) Process Please give a complete description of practical steps that are necessary under national law to apply these rules from the company s/founder s perspective. The box already contains the minimum steps derived from the 2 nd CLD and common national practices. When completing this list, please be aware that your answers will be crucial for us to identify the relevant incremental costs of this process for your national stock corporations. Please complete the following list: Step 1 Step 2 Monitoring of distributions made Question 11: Acquisition of own shares a) Second Company Law Directive (2 nd CLD) The 2 nd CLD requires that where the laws of a Member State permit a company to acquire its own shares, they shall make such acquisitions subject to certain conditions (Article 19 (1)). As a prerequisite for acquiring own shares, the 2 nd CLD asks for an authorisation by the shareholders meeting (Article 19 (1 a)) which has to determine the terms and conditions, the maximum number of shares to be acquired, the period for which the authorisation is given (no 19

24 more than 18 months) and, in the case of acquisition for value, the maximum and minimum consideration. Furthermore own shares can only be bought back if the nominal value/accountable par of the acquired shares does not exceed 10% of the subscribed capital. The acquisitions of the own shares may only be performed with the net assets and only fully paid up shares may be acquired (Article 19 (1 b, c and d)). Beyond this, Member States may also allow the acquisition of own shares if necessary to prevent serious and imminent harm to the company or if they are needed for distributing to employees (Article 19 (2 and 3)). Furthermore, they may decide not to apply Article 19 under certain circumstances, such as when shares are acquired as a result of a universal transfer of assets (Article 20 (1)). The shares acquired in the cases listed in Article 20 (1 b) to g)) must be disposed of within not less than three years after their acquisition unless the nominal value or accountable par of the shares acquired does not exceed 10% of the subscribed capital (Article 20 (2)). If the shares are not disposed of in this period, they must be cancelled. Member States may make this cancellation subject to a corresponding reduction in the subscribed capital (Article 20 (3)). Article 41 (1 and 2) allow Member States further derogations. Section 1 authorizes a derogation from Article 19 (1 a) first sentence and b)) if it is necessary for the adoption of provisions designed to encourage the participation of employees. Paragraph 2 allows a derogation from Article 19 (1 a) in the first sentence with respect to companies that are incorporated under a special law and that issue both capital shares and workers shares. Shares acquired in contravention to Article 19 and 20 CLD must be disposed of within one year of the acquisition (Article 21 (1)). Should they not be disposed of, they must be cancelled. Also in this case, Member States may make this cancellation subject to a corresponding reduction in subscribed capital. If a Member State allows the acquisition of own shares, the holding of theses shares must be subject to further conditions (Article 22 (1)): it must be ensured that the own shares carry no rights to vote and that a reserve, unavailable for distribution, is included in the liabilities. Furthermore, the annual report must contain the following information regarding own shares (Article 22 (2)): the reasons for acquisitions made during the financial year, the number and nominal value/accountable par of the shares acquired and disposed of during the financial year and the proportion of the subscribed capital that they represent, in case of an acquisition or disposal of for value, the consideration for the shares and the number and nominal value /accountable par of all the shares acquired by the company and the proportion of the subscribed capital that they represent. To avoid circumventions, Article 24 of the 2 nd CLD prescribes that the acceptance of the companies own shares as security by the company itself must be treated as an acquisition according to the purposes of Article 19, 20 (1), 22 and 23; exceptions are only possible for transactions concluded by banks and by other financial institutions in the normal course of business (Article 24a (2)). Furthermore, Article 24a of the 2 nd CLD extends the provisions dealing with the acquisition and the holding of own shares to companies in which the issuing company holds a majority of the voting rights or on which it can exercise a dominant influence. Member States may use the exceptions contained in sections 4 to 6. According to the recently amended text of the 2 nd Company Law Directive (see Directive 2006/68/EC of 6 September 2006), which must be implemented by 15 April 2008, Member States may, under certain conditions, allow a deregulation of the provisions dealing with the acquisition of own shares. Member States should have the option of deleting the current rule of the Second Company Law Directive that only allows the acquisition of a company s own 20

25 shares up to a proportion of 10% of the capital (Article 19 (1)). In the event that a Member State has opted for this possibility, the acquisition of a company s own shares shall only be possible as long as the company s net assets are not affected. Furthermore, the proposal intends (also in cases where the Member State opted not to delete the 10% threshold) that only fully paid up shares may be included in the transaction and the general principle of equal treatment shall apply. In addition, Member States may, in this case, subject the acquisition of own shares to any or all of the following conditions: That the acquired own shares do not exceed a limit determined by Member States, That the authority of the company to acquire own shares, the maximum numbers of shares to be acquired, the duration of the period for which the authority is granted or the maximum or minimum consideration is laid down in the statutes or instruments of incorporation, That the company complies with certain reporting and notification requirements, That certain companies, as determined by Member States, are required to cancel the acquired shares provided that an amount equal to the nominal par of the shares cancelled must be included in a reserve that cannot be distributed to the shareholders, except in the event of a reduction in the subscribed capital; it may be used only for the purpose of increasing the subscribed capital by capitalizing the reserves, That the acquisition shall not prejudice the satisfaction of creditor s claims. b) Implementation into national law Please describe how these provisions of the 2 nd Company Law Directive were implemented into your national law; if appropriate, please refer, to additional national provisions and to case law in this context in a clear manner. The description of the national provisions should at east encompass the following issues: aa) Possibility of acquiring own shares bb) Conditions regarding acquisition of own shares Shareholders resolution (majority, time frame, content) Amount of own shares that can be acquired Guarantee that net assets are not affected Fully paid up shares cc) Exceptions possible for Member States Serious and immanent harm (Article 19 (2)) Employees (Article 19 (3)) Others (Articles 20 (1) and 41 (1 and 2)) Duty to dispose of shares (Article 20 (2)) and consequences of not selling (Article 20 (3)) dd) Shares acquired in contravention to Articles 19 and 20 (Article 21) ee) Holding of shares (Article 22) 21

26 Voting rights Inclusion of a reserve in the liabilities Information in the annual report ff) Acceptance of own shares as securities gg) Application of Article 24a if exceptions have not been chosen by Member State hh) Conditions regarding the reselling of own shares (equal treatment) Please also state if the recent amendments of the 2 nd Company Law Directive have already been implemented into national law or if there is any proposal for doing so in this context. If so, please describe the new rules in your national law. Your response National legal provisions: Please give references Response prepared by: Initials Jurisprudence: Y / N / NA Please give references c) Process Please give a complete description of practical steps necessary under national law to apply these rules from the company s/founder s perspective. The box already contains the minimum steps derived from the 2 nd CLD and common national practices. When completing this list, please be aware that your answers will be crucial for us to identify the relevant incremental costs of this process for your national stock corporations. Please complete the following list: In case of acquisition of own shares Step 1 Proposal of board to acquire own shares Step 2 Calling a shareholders meeting Step 3 Resolution by shareholders on acquisitions of own shares Step 4 Monitoring of provisions (amount of nominal value, net assets, fully paid in etc) Step 5 Information in the annual accounts 22