Company laws of member nations of the European Union need to be harmonised for the free movement of capital and establishment of perfect uniform internal market.
In European economic integration, the concept of harmonisation had played a crucial role, more so in corporate law and business law. This is certainly founded in the increasing integrally growing economies within the Union, and in the connections between companies and groups. Company laws of member nations have been more of national or territorial in character, in the terms of incorporation and rights of shareholders and duties of directors. For the free movement of capital and establishment and to bring in uniformity, harmonisation of European Company law is essential. Harmonisation shall give a secured legal atmosphere to the European shareholders and citizens in getting full benefit of the internal market.
Under European Union law, the goals of harmonisation are achieved by the way of Directives which is a legislative act of the European Union. Directive requires member states to achieve a particular result without dictating the means of achieving it. Corporate and capital market law, accompanied by accounting and bank contract law have instrumental in harmonisation of the European Civil law.
The legal base for harmonisation of company law is Article 44 par. 2 (g) of the EC Treaty whereby the Community legislator is under a duty to coordinate “to the necessary extent the safeguards which, for the protection of the interests of members and others, are required by member states of companies or firms with a view to making such safeguards equivalent throughout the Community.”
The corporate and business law harmonisation projects already passed by the EC to mention briefly are beginning with the 1st Directive on Publicity of 1968 to the 3rd Directive on Domestic Mergers and to the 4th, 7th, and 8th, Directives on Accounting of the years 1978 to 1984, the line of increasing harmonisation extends via the 6th Directive of 1982, the 11th Directive on Branches of 1989 and the 12th Directive on the Single- Member Private Limited –Liability of 1989. All these projects were successfully launched by the EU Commission and were, or presently are, being transformed to national laws by the member states.
EU Regulation on the application of international accounting standards was passed in July 2002 wherein stock exchange listed companies are obliged to draw up consolidated annual statements in accordance with the IAS – (International Accounting Standards; in future: IFRS – International Financial Reporting Standards) provisions as far as the business year beginning on or after January 1, 2005 is concerned. This ensures that the accounting information given by the companies has a high degree of transparency and comparability useful for the capital market‘s efficiency.
Due to deficit of harmonisation in the area of European Company law, the EU Commission set up a High Level Group of Company Law Experts in September 2001 to advice the Commission around the adoption of EU law on takeover bids and the priorities for modernisation of Company law in the EU. The report submitted in 2002 claimed that any European Company Law regulation aimed at creating a level playing field for takeover bids should be guided by two guiding principles- shareholder’s decision making process and proportionality between risk- bearing capital and control.
A substantial step on the way towards a level playing field for takeover bids can be seen in judgments by the European Court of Justice which to a great extent eliminated the “Golden Shares”. The ECJ ruled that specific provisions in Portuguese and in French as well as in Spanish and in British law guaranteeing the state influence on privatised companies constitute a restriction on the free movement of capital between member states and on the freedom of establishments.
On 11 July 2007, The European Parliament and The Council adopted directive on the exercise of certain rights of shareholders in listed companies.
Now the SE regulation has come in to force, the question must again be asked whether the European Company is suitable as an organisational form for small and medium sized companies After the SE, there must now be energetic concentration on the preparatory work for the European Private Company (EPC). While the creation of the European Company significantly simplifies access for major companies and groups to the entire internal market, the SMEs business will continue to be confronted by immaterial restrictions on establishment posed by unfamiliar legal norms in other states.
The future of Company Law harmonisation is quite satisfactory. It cannot however be excluded that the evolution of the case-law of the European Court of Justice might bring new surprises which may change the present outlook and perspective around this harmonisation as this can also be construed as a conjectural affair. Interestingly, harmonisation of European Company Law, in a political and historical perspective, is a remarkable accomplishment, firstly, because legally as well as technically the directives are of good quality. Secondly, the directives meant a convergence not only in the substantive law, but also in general legal thinking and terminology. However, there remains the possibility of a further substantive harmonisation for the private company, limited perhaps to some topical issues when levels of protection are substantially different between the member states.
Harmonisation shall give a secured legal atmosphere to the European shareholders and citizens in getting full benefit of the internal market.
While the creation of the European Company significantly simplifies access for major companies and groups to the entire internal market, the SMEs business will continue to be confronted by immaterial restrictions on establishment posed by unfamiliar legal norms in other states.
A substantial step on the way towards a level playing field for takeover bids can be seen in judgments by the European Court of Justice which to a great extent eliminated the “Golden Shares”.
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