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EU Company Law Directives

Simplification of Capital Maintenance Rules - 2^nd Company Law Directive

On 29 October 2004 the European Commission published its proposal for a directive of the European Parliament and of the Council to amend Council Directive 77/91/EEC as regards the formation of public limited liability companies and the maintenance and alteration of their capital (The Second Company Law Directive). The proposals were agreed and Directive 2006/68/EC was published in the Official Journal on 25 September 2006 with an implementation date of 15 April 2008.

The overall objective behind the proposals is to improve the efficiency and competitiveness of companies by making it easier for them to react more promptly and at less cost to developments in the markets relevant to them by simplifying some of the provisions in the Second Directive.

The Directive contains 4 main provisions:

• An option to relax the requirements concerning the valuation of non-cash consideration for an allotment of shares;

• An option to relax the requirements concerning the buyback of shares by a company;

• An option to relax the prohibition on financial assistance

• A requirement for creditors to demonstrate that their claim is at stake when objecting to a reduction in company’s capital

After consulting on the implementation of the directive, BERR intends to produce regulations implementing the requirement for creditors to demonstrate that their claim is at stake when objecting to a reduction in company’s capital to come into force from April 2008, and to consult more widely on the provisions relating to the buyback of shares in autumn 2008.

BERR lead: Julie Ford – tel: 020 7215 2162
Email julie.ford@berr.gsi.gov.uk

Company Disclosures - 4^thand 7^th Company Law (Accounting) Directives

On 27 October 2004 the European Commission published its proposal for a Directive of the European Parliament and of the Council to amend Council Directives 78/660/EEC and 83/349/EEC concerning the annual accounts and consolidated accounts of certain types of companies. The proposals were agreed and Directive 2006/46/EC was published in the Official Journal on 16 August with an implementation date of 5 September 2008.

The UK consultation on the implementation of the measures in the Directive opened on 5th March 2007 and closed on 1 June 2007. Legislation implementing the Directive will be introduced with the secondary legislation implementing the accounting provisions under section 15 of the Companies Act 2006. The government response to the consultation was published on 19 July 2007 and is available from the consultations website.

BERR lead: Julie Ford – tel: 020 7215 2162

Email julie.ford@berr.gsi.gov.uk

The Companies (Cross-Border Mergers) Regulations 2007

The Cross-Border Mergers Directive has been implemented in the UK in October 2007, via the Companies (Cross-Border Mergers) Regulations 2007. These Regulations will come into effect on 15 December 2007.

The Cross-Border Mergers Directive was agreed in 2005 and required Member States to put in place a legal framework enabling public and private companies to engage in cross border mergers. Member States have until 15 December 2007 to implement the Directive into national law.

These Regulations:

• were implemented in the UK on 16 October 2007 and will come into force on 15 December 2007 and allow public and private companies in the UK to engage in cross border mergers;
• establish a legal framework to enable cross-border mergers between companies with share capital from member states in the European Economic Area;
• remove legislation and administrative difficulties that UK limited liability companies may encounter when merging in the EEA;
• increase choice to UK companies seeking to merge with companies in the EEA and;
• establish the process to be completed where employee participation arrangements exist in one or more companies wishing to merge.

The Regulations implementing this Directive can be viewed at http://www.opsi.gov.uk/si/si2007/20072974.htm (web version - html).The Explanatory Memorandum can be viewed at http://www.opsi.gov.uk/si/si2007/em/uksiem_20072974_en.pdf

Guidance Notes for companies, employees & stakeholders on using the Cross-Border Mergers Regulations 2007 can be found at

 (174KB)

Companies House guidance on the Companies (Cross-Border Mergers) Regulations can be found at http://www.companieshouse.gov.uk

Background

On 5 March 2007, the Government launched a public consultation on the implementation of the Cross-Border Mergers Directive. This consultation closed on 1 June 2007. The Government's response to the consultation was published on 31 August 2007

Government response to the consultation on the Cross-Border Mergers Directive  (77KB)

Further information about the Directive is available on the Commission's website on EU company law and corporate governance.

BERR lead: Maureen Beresford– tel: 020 7215 3342

mailto:maureen.beresford@berr.gsi.gov.uk

Audit Directive

Directive 2006/43/EC on Statutory Audits of Annual and Consolidated Accounts

The  Audit Directive updates provisions of the earlier 8th Company Law Directive and introduces new provisions on public oversight, third country auditors and various other matters. The Directive was published on 9 June 2006 and came into force on 29 June 2006.
A copy of the DTI consultation document on the negotiation of the proposal, including a copy of the Commission proposals, the summary of consultees’ responses and the Government response (URN 05/1005 & 04/1382) can be viewed or obtained by clicking on the REPORTS and PUBLICATIONS link at the top right hand corner of this page. Further information about the Directive is available on the Commission's website on EU company law and Corporate Governance (please see the link on the right of this page).

The Department has held two public consultations on the implementation of the Audit Directive on 5 March 2007 and 19 July 2007. We have now published a summary of the comments on the Draft Audit Directive Regulations in the second consultation and the Government's conclusions.

The EU Audit Directive is implemented in relation to companies through Parts 16 and 42 of the Companies Act 2006, as amended by the Statutory Auditors and Third Country Auditors Regulations 2007 (SI 2008 / 3494) and other related regulations. Links to these Regulations are available at Regulations and Commencement Orders - made or laid in draft. This amended regulatory framework is applicable to company reporting periods beginning on or after 6 April.

Other regulations implementing the Audit Directive are due to be made by other Government and regulatory bodies:

- Her Majesty's Treasury has completed its consultation on implementation of the Audit Directive for Building Societies and Friendly Societies. The consultation also covers the implementation of Directive 2006/46/EC which amends the 4th and 7th Company Law (Accounting) Directives. Regulations will be made to commence for reporting periods beginning on or after 29 June.

- The Financial Services Authority's consultation on the implementation of certain requirements on listed companies, through the listing rules, has been completed. The amended rules are due to commence for reporting periods beginning on or after 29 June.

- The Professional Oversight Board of the Financial Reporting Council has made regulations for commencement on 6 April as part of the implementation of the Companies Act. These regulations on transparency reports, the register of auditors and examination requirements also implement parts of the Audit Directive.

Third country auditors
Discussions are ongoing on the decision due to be taken by the European Commission, in agreement with Member States, in relation to the regulation of third country auditors. The Commission's draft decision  is now available on its website. Following the adoption of a decision, BERR, the Professional Oversight Board and the FSA will finalise plans for the regulation of third country auditors operating in the UK.

BERR lead: Jim Bellingham- tel: 020 7215 3858

mailto:jim.bellingham@berr.gsi.gov.uk

Alternative contact: Paul Smith- tel: 020 7215 4164

pauld.smith@berr.gsi.gov.uk

Cross Border Transfer of Registered Office of Company Directive

No formal proposal for a Directive on cross-border transfer of registered office has been made by the Commission. The possible need, scope and contents of such a Directive form part of the Commission’s consultation on the EU Company Law Action Plan referred to above. The Directive, if brought forward, would provide a legal framework for companies registered in the EU to transfer their registered office from one Member States to another.

A copy of the DTI consultation document including an outline of the Commission proposals, the summary of consultees’ responses and the Government response (URN 05/544 & 05/1615) can all be viewed by clicking on the REPORTS and PUBLICATIONS link at the top right hand corner of this page.

BERR lead: Maureen Beresford – tel: 020 7215 3342

mailto:maureen.beresford@berr.gsi.gov.uk

Shareholders’ Rights Directive

A directive proposal was made by the Commission in January 2006 and is now to be considered by the European Parliament and Council. The Directive is intended to help facilitate the exercise of basic shareholders’ rights and solve problems in the cross-border exercise of such rights, particularly voting rights. The UK public consultation on the directive was published on 26 October 2006 and closed on 22 January 2007.

The consultation and the government's response can be viewed by clicking on the Consultations link at the top right hand corner of this page. The final Directive will be published once the translation into EU languages has been officially cleared, the adopted text of the Directive, approved by the Council was published on 15 February 2007. Further information about the Directive proposal is available on the Commission's website on EU company law and corporate governance (please see the link on the right of this page).

BERR lead: David Styles - tel: 020 7215 0211

Email david.styles@berri.gsi.gov.uk