European Company Law and Corporate Governance - a DTI Consultation Paper

Directive Proposals on Company Reporting, Capital Maintenance and Transfer of the Registered Office of a Company

This consultative document seeks your views on three legislative measures which form part of the European Commission’s Action Plan on Company Law and Corporate Governance (CLAP)1. Each of the three proposals is dealt with in self-contained sections. This opening section:

• helps you identify which, if any, of the proposals are of interest to you or
  your organisation and to which you might wish to respond;
• explains how the proposals fit into the EU’s framework for company law and
  corporate governance.

Two of the measures we are consulting on have already been formally proposed by the European Commission:

• Draft Directive amending the Fourth and Seventh Accounting Directives (covering an annual corporate governance statement, increased disclosure of off-balance sheet arrangements, and related party transactions)
• Draft Directive amending the Second Company Law Directive (Capital Maintenance).

Negotiations on these proposals started in December 2004 and January 2005 respectively.

Through the public consultations on the content of the Action Plan in 2002 and the pre-proposal consultation on amending the Fourth and Seventh Accounting Directives between April and June 2004, many UK stakeholders will have helped shape the proposals which have now emerged from the Commission. The DTI worked closely with the Commission and a number of stakeholders at these stages. As negotiations on these proposals are expected to move ahead at a steady pace through the next few months, early responses on these proposals would be particularly welcome.

The Action Plan can be found at the Commission’s website: http://www.europa.eu.int/eur-lex/en/com/cnc/2003/com2003_0284en01.pdf

In relation to the Second Company Law Directive on Capital Maintenance, we are seeking views both on the current Commission proposal and on possible further, more radical reform of the Directive. The Commission will be launching a study later this year to review the capital maintenance regime and the feasibility of allowing Member States to introduce alternative approaches, such as a solvency based approach. It would be helpful to have stakeholder views to feed into that process.

The third proposal we are consulting on, a draft Directive on Transfer of Registered Office, has not yet been adopted by the Commission but is expected to be so in March or April 2005. The Commission, however, consulted on the issue in March 2004 outlining its proposed approach. Accordingly, this consultation is based on the content of the Commission’s consultation document. This allows us to receive feedback from a wide range of stakeholders before negotiations on this proposal begin.

If the proposal, when published, does not differ significantly from the outline presented in this document, there will be no further public consultation. If, however, the actual proposal differs significantly from our expectations, we will issue a further public consultation on the proposal itself.