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Member States shall coordinate their legislation with the Directives provisions. Typically, this is done through passing special laws. For example, in the UK, Directives adopted by the Council become part of the British legislation through their practical application. In happens when the relevant ministry (in this case it is almost invariably the Ministry of Trade and Industry) develops an act that transforms provisions of the Directive into British terms. The act is then sent to the Parliament using the standard procedure. However, as the UK should enforce the Directive, the scale of legislative amendments is restricted.

In France, provisions of Second, Fourth, and Seventh Council Directives were introduced into the effective law by special laws and taken into account when adopting new ones. For example, the draft First Council Directive was taken into consideration when developing the Law on Commercial Partnership of 1966. In 1972, England adopted the Law on European Communities incorporating provisions of the relevant international treaties and acts of direct action into the countrys own legislation. Section IX of the Law brought the British company law in line with the First Council Directive on public liability companies. As a result, the ultra vires doctrine in its conventional meaning (fixation of the principle of special legal competence of companies) was thrown aside.

Taking into account the Second Council Directive, the British Law on Companies set the value of minimum fixed capital of a public limited-liability company at 50 000, envisaged that at least of the shares should be paid at the subscription time, etc.

In spite of the considerable progress so far, researchers note that harmonization by means of Directives cannot provide a complete and universal statute book and an absolutely level playing field.

In order to ensure the harmonization effect (when implementation of the Directives will result in narrowing down the differences in legal rules to minimum), a Directive should be detailed and See, for example, Glotova, 1999.

Policy Paper RECEP Alexander Radygin, Revold Entov UNIFICATION OF CORPORATE LEGISLATION:

WORLD TRENDS, EU LEGISLATION AND RUSSIAS OUTLOOK inflexible. At the same time, excessive attention to detail increases the burden of regulation and inflexibility causes fossilization of the corporate law. Detailed rules might produce the blocking effect as the procedures of introducing changes into an adopted Directive are cumbersome and therefore the risks of the laws coming into collision with business practices are high. Despite a;; the details that the Directives contain the corporate regimes in the EU Member States still differ significantly.

The intensive interpenetration of the national laws and the EU legislation intensified by implementation of the Council Directives complicates considerably interpretation of legal acts. A European rule does not become integrated into national laws of the Member States through its systematic interpretation; the interpretation takes place outside the context of national regulation.

Moreover, when this happens it is necessary to take into consideration provisions of the basic EU Treaties that establish primacy of the EU law over national legislations. Therefore it would be useful to avoid interpretations that divert national laws from the developing principles of the European private law. It is advisable to establish such a procedure of rule-making that would promote making decisions consistent with the general European law culture and, at the same time, eliminated restrictions unacceptable for other law systems (Zekker, 2001).

Overall, harmonization of company laws, rules of accounting and audit is considered as the most important area of establishing a single market of financial services and goods. Harmonization of the company law aims to attain the following key objectives:

- to ensure equal protection for shareholders and all the other persons (parties) related to a company;

- to ensure freedom of establishing an undertaking within the EU and promotion of international cooperation between companies of the EU Member States;

- to stimulate discussions of company law and corporate governance reform.

2.2. Directives concerning company law First Council Directive (68/151 of 9 March 196814) deals with issues that require immediate unification:

- the minimum list of documents and information on company activities to be provided for the shareholders and the public (he EU Member States should take measures to ensure compulsory disclosure by companies of the following information: the charter, the names of the company directors, the amount of the capital subscribed, the balance sheet and the profit and loss account, the winding up of the company, the appointment of liquidators);

- effectiveness of the obligations taken on by the company organs (for contracts signed before the company acquired legal personality the founders should without limit be jointly and severally liable while the PLC should be liable after approval of the contracts by the general meeting of its share holders). The Directive also fixes presumption of fairness: if the third party entering into contract with the company believes that the act is within the objects of the company the contract is considered as effective.

- control over company formation and nullity. Nullity should entail the winding up of the company but should not of itself affect the validity of any commitments entered earlier.

OJ 1968 spec. ed. 41-45.

Policy Paper RECEP Alexander Radygin, Revold Entov UNIFICATION OF CORPORATE LEGISLATION:

WORLD TRENDS, EU LEGISLATION AND RUSSIAS OUTLOOK - Public limited partnerships are also covered by the Directive. Establishing the single EU system of information disclosure is the most important result of the implementation of the Directive by all the EU Member States.

Second Council Directive (76/91 of 13 December 197615) concerns the harmonization rules that regulate the formation of public limited liability companies and maintenance, increase or reduction of their capital. Companies are obliged to disclose the following information: the type and name of the company, the objects of the companies, the place of registration, the amount of the subscribed capital, the classes of the shares, the structure and authority of the companys organs. The minimum amount of the subscribed capital of a public limited liability company should be not less than 25 000 ECU. If shares are issued for a consideration other than cash its valuation should be done by independent experts. The subscribed capital should be formed only by assets capable of economic assessment while undertakings to perform work or supply services should not form part of these assets. The Directive sets some other rules concerning maintenance of the capital. Shares cannot be issued without declaring their nominal value. Rules were set for companies acquiring their own shares. The general meeting of shareholders can delegate the right to increase the subscribed capital to another body empowered to do so for a maximum period of five years. Besides, the Directive gives the shareholders the right buy shares on a pre-emptive basis. The Directive has been implemented by all the EU Member States.Interpretation of the Second Council Directive was studied by the European Court which ruled that Articles 5 and 29 concerning an increase in the capital are provisions of direct action for legislations of all the EU Member States and are applicable not only in the situations of normal functioning of the company but also when it becomes subject to restructuring operations.17 Obviously the decisions aimed to prevent placing newly issued shares without taking into consideration the rights of the shareholders and increasing of the subscribed capital before the scheme of the increase is discussed by the general meeting. Some experts hold an opinion that from the point of view of corporate law the value of the rulings is doubtful as they are based, for the most part, on the concept of corporate democracy that apparently is fortified through saving of companies having certain social and economic importance (Dine, 1998).

Third Council Directive (78/855 of 9 November 1978 18) regulates mergers of public limited liability companies. Two possible methods are envisaged: merger by acquisition (the operation whereby all the assets and liabilities of the company being acquired are transferred to the acquiring company) and merger by the formation of a new company (the operation whereby several companies are wound up without going into liquidation and transfer to a company they set up all their assets and liabilities). The shareholders are entitled to get equivalent stakes in the company formed as a result of the merger. The necessary valuations should be performed by an independent expert.

To protect the rights of the shareholders and creditors a merger shall be announced, in due time, by each of the merging companies; each class of the shares issued by the companies should be approved at a general meeting. Protection of the rights of employees should be regulated in accordance with Directive 77/187 as part of the EU legislation on social security and employment.

OJ 1977 L 26/1.

The Directive concerns public companies. However, some countries (Belgium, Netherlands) extended it to cover close companies which brings about differences in national regulations (Dorresteijn et al., 1994, p. 46).

Karella v. Minister for Industry and the Organization for the Restructuring of Enterprises (1991 OJ C166/12, judgement of 30 May 1991) and Syndesmos EEC, Vasco et al v. Greec et al (ECR 1-2111, judgement of 24 March 1992).

OJ 1978 L 295/36.

Policy Paper RECEP Alexander Radygin, Revold Entov UNIFICATION OF CORPORATE LEGISLATION:

WORLD TRENDS, EU LEGISLATION AND RUSSIAS OUTLOOK Fourth Council Directive (78/660 of 25 July 197819) regulates drawing up of annual accounts of PLCs and limited liability partnerships. It comprises detailed rules of keeping accounts by companies divided into 3 types (large, medium-sized and small). Changes and amendments have been introduced in this Directive and Seventh Directive to ease the situation for small companies but including partnerships that fall under the provisions of the said Directives.20 The Directive has been implemented by all the EU Member States although there is a growing doubt about the concept of true and fair view having the same meaning in all the countries.

Sixth Council Directive (82/891 of 17 December 198221) concerns the division of public limited liability companies. The EU Member States are not obliged to implement this form of restructuring.

However, if they use it the process should be in line with the provisions of the Directive. The company should wind up without going into liquidation. Allocation of the assets and liabilities to be transferred to each of the recipient companies should be subject to specific rules aimed to protect the rights of the shareholders and creditors. In case of any growth of the company capital the shareholders should have the right to buy shares on a pre-emptive basis. The Directive has been implemented by all the EU Member States.

Seventh Council Directive (83/349 of 13 June 198322) defines conditions for the preparation of consolidated accounts by companies having subsidiaries (groups of companies). These conditions differ from those laid down by the Fourth Directive.

Consolidated accounts should be drawn by the parent undertaking if it:

- has a majority of the shareholders rights in a subsidiary undertaking;

- has the right to appoint or remove a majority of the members of the administrative, management or supervisory body of a subsidiary body;

- has the right to exercise a dominant influence over a subsidiary undertaking under a contract or a provision in its memorandum or articles of association.

Consolidated accounts eliminated duplication of the assets and liabilities related to commercial transactions within the group of companies. By the end of the 1990s the Directive was implemented by France, the UK, Germany, Greece, Luxembourg, and the Netherlands.

Eighth Council Directive (84/253 of 10 April 198423) sets rules on approval of physical persons and legal entities responsible for carrying out statutory audits of the annual accounts of companies.

Under the Directive, each Member State has to ensure that the auditors are independent and fit to carry out statutory audits. Besides, the Directive defines educational and training requirements to be met by the auditors.

OJ 1978 L 222/11.

Directive 90/605/EEC (OJ 1990 L 317/60), Directive 90/604/EEC (OJ 1990 L 317/57) etc. Directive 90/605/EEC is designed to prevent a situation where partnerships are set up in order to avoid implementation of the above directives.

Under the Directive public limited-liability companies are requested to provide name, head office and legal status of any enterprise of which the said public limited liability company is a full member. Besides, the document envisages obligatory keeping of accounts of every partnership member that should be subject to auditing and publishing its results.

Directive SI/1992/2452 aims to ease the burden born by small and medium-sized companies because of the excessively stringent accounting rules. After the changes and amendments have been introduced, Article 53 (2) of Fourth Directive reads: The Member States may permit companies which on their balance sheet dates do not exceed the limits of two of the three following criteria: balance sheet total ECU 250 000 (ECU 200 000 before); net turnover: ECU 5 mln (ECU mln before); average number of employees during the financial year: 50, - to draw up abridged balance sheets OJ 1982 L 378/47.

OJ 1983 L 193/1.

OJ 1984 L126/20.

Policy Paper RECEP Alexander Radygin, Revold Entov UNIFICATION OF CORPORATE LEGISLATION:

WORLD TRENDS, EU LEGISLATION AND RUSSIAS OUTLOOK Eleventh Council Directive (89/666/ EEC of 21 December 198924) sets disclosure requirements separately in respect of branches opened by companies in a member State and in a non-member country. The Directive concedes that a branch can not be by itself recognized as legal entity and thus requires:

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