Introduction

I - General themes (Chapter 2 of Consultative Document)

II - Specific topics (Chapter 3 of Consultative Document)

INTRODUCTION

The European Commission has asked the company law department of the Faculty of Law of the Erasmus University in Rotterdam (the Netherlands) to support the High Level Group of Company Law Experts in analysing and summarising the comments the Group has received in response to its Consultation Document on a Modern Regulatory Framework for Company Law in Europe. The team of the Erasmus University was led by Professor Jan Berend Wezeman and included Martijn Bras, Ageeth Klaassen, Michelle Reumers and Maarten Verbrugh.

The team has prepared a number of detailed analyses, summaries, tables and charts for the Group. The summary of responses in this Annex is based on these analyses and summaries. This summary, with further tables and charts (on a no-names basis), can also be accessed at the Erasmus website at www.frg.eur.nl/pri/har/HLGannex.pdf

In total, the team has analysed responses from 119 respondents, excluding responses received on-line (which were analysed directly by the Commission services).

On the whole, respondents tended to support the proposals of the Group put forward in the Consultative Document. The following graph gives an impression of the thrust of the answers of respondents to the questions on the specific subjects raised in the Consultative Documents. Questions 11a, 12b, 14d , 15a, 15b and 16a stand out as questions with a high number of no-answers. Of these, the Group itself had indicated in the Consultative Document to favour a negative answer to questions 11a, 12b, 15b and 16a.

The following gives a summary and short statistical analysis of the various comments made in response to the questions in the Consultative Document.

I - GENERAL THEMES (CHAPTER 2 of the Consultative Document)   1. Facilitating efficient and competitive business in Europe Most respondents to question 1a agree that the European Union, moving forward in the area of company law, should primarily focus on developing company law, which facilitates the efficient and competitive operation of business across the Union, especially by deregulation and by creating more flexibility and permitting more variation. Often the capital rules of the 2^nd Directive are seen as an unnecessary burden. For example: the suggestion is made to regulate the payment of dividend solely by means of a solvency test. Today’s business practice demands a legal framework flexible in form. Nevertheless, many respondents emphasise that the protection of shareholders and creditors remains important, although other ways of protection might be possible. Also the remark that the EU should focus on general framework rules is often made. Several respondents suggest a step-by-step approach, in view of the differences between the Member States, and not a general reform, respecting the different national cultures. These respondents emphasise the principle of subsidiarity, while some others express the need of further consultation with the business community before launching new proposals. A few respondents think that the protection of investors and creditors remains the most important aim of company law. Some respondents express that – apart from cross-border merger and transfer of the seat - there is no real need for further harmonisation, or that - due to the principle of subsidiarity - European company law initiatives should only be pursued where a clear need for community wide action can be demonstrated. A large majority of the respondents think that progress should be made, as a matter of priority, in the areas of cross-border merger and transfer of the seat of the company (question 1b). In relation to this, also de-mergers and similar restructuring operations are sometimes mentioned and the need for efficient reorganisation procedures in order to avoid liquidation. Other often mentioned topics are the need to harmonise insolvency procedures. A part from these topics, the following areas of company law were mentioned where progress should be made as a matter of priority by one or a few of the respondents: information needs of stakeholders/shareholders, including minority protection; public availability of company information across the EU; social law/collective labour law/safety at work; (a uniform structure of) commercial registers; a European private company; integration of participation of workers into company law; provisions on personal liability of the management; capital market law; uniform structure of the powers of representation, especially abolition of any ultra vires doctrines; availability of EU company law instruments (e.g. SE) to companies not residing in the EU; disclosure of payments ("publish what you pay"); creating a company law framework which first and foremost caters for small and medium sized companies ("think small first"); easy dissolution of companies (as in e.g. Denmark); co-ordination of the issue of sanctions in the area of company law, especially by recommendation to favour civil sanctions; requirement for every public company to state its objects; adequate debt/equity leverage; hybrid securities and voting bonds; mutual recognition of companies; environmental regulation; banking law applying to company financing; joint ventures and inter-company agreements; unification of partnership law. Tax rules, especially taxation of cross-border transactions, were mentioned as well.     2. Modern company law making The majority of the respondents to question 2a agree to the concept of making more use of alternatives as indicated by the HLG to primary legislation in directives. Most respondents agree that directives are inflexible and can lead to petrifaction and should therefore be limited to principles with a global focus. The differences between national systems can be respected better in secondary regulation. Others think a pragmatic combination of all ways is preferable, mainly because "comply of explain"-rules can not replace enforcement in full. A few respondents, whilst not against alternatives, do not believe that model laws will prove particularly useful. Some respondents recognise, however, that secondary legislation can lack transparency and democratic legitimacy and should only be used by way of exception and with care. An important group of the respondents – mostly German respondents - think that mainly for these disadvantages, the EU should in principle make use of directives. Some of these respondents think the procedure for modifying directives should be simplified. The areas of corporate governance (e.g. conduct of general meetings) and accounting (and in general: disclosure) are mentioned often as areas of company law, which are particularly suited for an alternative regulatory approach (question 2b). Other areas mentioned by some are the use of IT or other fast changing or newly emerging topics; an optional uniform model law, especially for listed companies (cf. U.S.A); a framework for a whole legal entity (e.g. European Private Company); fundamental organisational rules and rules on share registers; listing rules (and content of prospectuses etc.) or other areas with capital market relevance.   3. Disclosure of information as a regulatory tool Almost all respondents to questions 3a and 3b agree that disclosure requirements can sometimes provide a more efficient regulatory tool than substantive rules, especially in the area of corporate governance, disclosure of structures of groups of companies, conflict of interest, financial affairs, share options/board compensation/payments or other dealings with directors, substantial shareholders and related parties, and the capital structure of listed companies. A few respondents only agree in case of listed companies. Several respondents emphasise, however, that disclosure is only effective as long as there are clear rules concerning the information itself and as long as disclosure is enforceable. Disclosure requirements cannot fully replace regulation. Furthermore, costs and benefits of disclosure have to be carefully balanced and flooding the public with information of no relevance should be prevented. C.f.: "Moreover disclosure leads to an effect like in a football stadium: if everybody gets up, no one has a better view any more". To avoid overload, co-ordination at EU-level for consistency and materiality is important. As for the dividing line between disclosure and more substantive regulation, one of the respondents refers to the ideas as set out in the Final Report of the Company Law Review in the UK (CLR). Also, disclosure requirements based on a definitive code of best practise have proven to be effective in improving corporate governance in the UK. Some respondents think that there are already enough (or to many) disclosure requirements or that disclosure requirements cannot provide an efficient regulatory tool.   4. Distinguishing types of companies A lot of the respondents to questions 4a and 4b express that there are good reasons to distinguish between three kinds of companies: listed companies, public (open) companies and private (closed) companies, since the interests involved are actually different. A large group of others think only a distinction is necessary between listed and non-listed companies. The definition of "listed company", however, needs to be considered carefully as the structure of the securities markets is changing. In general, the respondents feel that the rules applying to private companies can mainly be dealt with at national level and that these rules can be more flexible and less mandatory, especially in the areas of incorporation, corporate governance (e.g. the communication with shareholders, the holding of general meetings and shareholder decision making), the internal organisation of these companies, accounting, alternative dispute resolution. Company law should not impose a corporate governance regime on small companies, which is designed to solve issues that are specific to listed companies, but should recognise the significance of a company’s financial size. Cf. the answer of one of the respondents: "think small first", referring to the Report of the UK Company Law Review. Some respondents believe no new categories should be created but we should use the existing distinction between private and public companies, with additional requirements for listed public companies. Rigid legislative distinctions between types of company based upon size or other criteria can create problems when a company changes from one category to another. They may also prove to be a barrier to growth. Some respondents stress the fact that it is not advisable to create two different legal forms, i.e. one for listed companies and one for closed companies, because the existence of two such forms might discourage closed companies’ access to the market. Company law for listed companies should facilitate the efficient operation of the securities markets in Europe, whilst providing appropriate safeguard for investors (e.g. by means of stricter disclosure rules). A single respondent thinks, however, that the existence of markets suggest that there should be less mandatory legislation for the listed company than for the private company. Another respondent states that it should not be a question of more regulation for listed companies but a question of different regulation which for listed companies would underline the importance of transparency. A few respondents think all companies, listed or not, who make a public call for financial resources, should be governed by the same rules. A few respondents think that it should be left to individual markets to provide further regulatory mechanisms appropriate to a publicly traded company or that basically one type of limited company is sufficient. Others think that only a distinction between private and public companies is necessary, as additional rules of a stock exchange will apply to listed companies. On the other hand, some respondents don’t see the need for distinction between public (open) and private (closed) companies, or think that it is not really a matter to be dealt with at EU level.   5. Increased flexibility vs. tightening of rules In principle, almost all respondents to question 5 agree with the statement of the HLG, that company law should not be burdened with rules to combat fraud and terrorism. A few respondents, however, express that also company law should contribute in these areas, at least if there are no other options. Cf. the work of the FAFT concerning Corporate Vehicles. Also it might be envisaged to generally dematerialise shares, in order to enable Government authorities to know the identity of the shareholders. One respondent suggests that the HLG should consider whether implementation in national requirements of the provisions of the OECD Convention on Combating Bribery and Corruption has been an effective mechanism.   6. Modern technology Almost all respondents to questions 6a and 6b encourage the use of modern information and communication technology, especially for listed companies. Some of the German respondents refer on this topic to the German Corporate Governance Codex. Quite a few respondents think listed companies should be required to maintain a specific section on their website as the single place where they publish all relevant information (if proof can be given of what information was effectively present on the website at any given moment in time). Some of these respondents are nevertheless of the opinion that to file with the relevant national register should remain the primary obligation and that privately-controlled websites cannot replace – at least not for the time being - public registers when it comes to the protection of third parties. Some make the suggestion that a neutral third party should provide the required information on a website. Most respondents, however, are of the opinion that website publication should not be compulsory. It is felt that not everyone has unlimited access to internet; that the legal, practical and technical risks and implications should first be investigated thoroughly; that technology is fast-evolving; that an obligation would lead to a significant increase of costs and risks for companies; that the security aspect of the electronic information published needs special attention since it is open for manipulation; that the idea of two-way links with public registers is questionable as Member States – but also accession countries – will probably have difficulties to offer such online-registers; that public registers have the advantage that once information has been disclosed it cannot be altered by companies; that an obligation to ensure that the information on the website is correct and up to date appears problematic; that it will extend a company’s liability. Furthermore, most respondents think publication on a website cannot replace the official registers; therefore it has to be ensured that information available both in a public register and on a company website are properly synchronised. The view that also non-listed companies are allowed to file and publish information on their website is broadly shared, as long as there is no obligation to do so and this kind of publication does not replace the official registers. A large group of the respondents to questions 6c and 6d believe that a single central electronic filing system within the EU, where all public information on companies can be found, should be facilitated, but is not really feasible in the near future. Some respondents refer to the EDGAR-system in the USA, to the SOPHIE-system in France for listed companies, to the Australian Commercial Register ("Firmenbuch") as models worth copying, or propose to start with setting up, like e.g. Germany, national central electronic registers. One of the difficulties mentioned is the language question, where lessons may be learned from the multilingual Swedish Commercial Register. Other respondents are more optimistic and more strongly support the idea of a single central commercial register for all companies or only for listed companies. Several suggestions are also made by one of the respondents, referring to the national system linking Italy’s 103 Chambers of Commerce through a high-speed/high-security electronic network and to the project to devise a European Business Register (EBR), financed by the European Commission, as well as to the European Commercial Registers Forum (ECRF). Some respondents are opposed to the idea of creating a central register; they think that this can be left to the member states, that a central register would only lead to multiple notifications, or that a central register is not necessary if there would be a common standard for the national registers. Most respondents agree that the European Union should facilitate or provide for the co-ordination of public company registers in the Member States, e.g. by introducing a uniform standard. However, a few respondents think there is no tasks here for the EU or that links between the filing systems in the member states will be sufficient. The technology is available to link existing registers into a virtual single system from a user perspective. II - SPECIFIC TOPICS (CHAPTER 3 of the Consultative Document)   1. CORPORATE GOVERNANCE 1.1 The role of the European Union in corporate governance for European business A majority (ca. 66%) of the 82 respondents to question 7 agree with the HLG that efforts to improve or strengthen corporate governance are necessary and important for efficient business activities in the EU and for an integrated European securities market. Nevertheless, many respondents are of the opinion that there is no need for legislation or a European Code. A small minority (11% of the 82 respondents) gave a negative response and is of the opinion that corporate governance systems will develop and progress in a natural way under pressure from the financial markets. Two respondents notice that competition among national jurisdictions in this area is preferable to the development of EU-wide standards. 1.2 Better information for shareholders and creditors, in particular better disclosure of corporate governance structures and practices including remuneration of board members That there should be more disclosure on corporate governance structures and practices of companies in Europe, is expressed by a majority (60% of the 80 respondents) to question 8a. Elements to be disclosed are for example: shareholder rights and structures of company organs and defensive instruments, including voting agreements. Transparency is good for the confidence of the shareholders and it is an essential criterion in investment decisions. Several respondents, however, believe that regulation is not needed at European level. Only a small minority (ca. 14%) of respondents believe that more disclosure is not necessary and that this matter can be left to the market. A majority of the 60 respondents to question 8b is of the opinion that more disclosure should only be given by listed companies and not by all "open" or "closed" companies. Only a minority thinks that open or even closed companies should give more disclosure as well. One respondent thinks that disclosure requirements are more needed for mutual and co-operative societies than for listed companies. To question 8c a majority (ca. 64%) of the 64 respondents answers that disclosure should include an indication whether a certain corporate governance code is followed and where and why the code is not complied with. Several respondents prefer a "comply or explain" rule. A number of respondents are of the opinion that a European rule is not required. Only a small minority (ca. 9%) does not agree with the statement in question 8c. Of the 74 respondents to question 8d a large group (ca. 49%) agrees with the idea that remuneration of individual board members should be disclosed, in particular if it is linked to the share price performance. Only 13 respondents (ca. 18%) do not agree. Some believe that the disclosure must be limited to listed companies. More respondents are of the opinion that disclosure should not be regulated at European level. The respondents give less information about how detailed remuneration information should be. Some respondents mention fixed salary, variable income, cash bonus, stock options, fringe benefits, and golden parachutes. Arguments against disclosure are based on of privacy-concerns. 68 respondents answered question 8e; 25% is of the opinion that shareholders have a role in fixing the principles and limits of board remuneration. A large group of the respondents (ca. 47 %) believe, however, that this topic does not fall within the powers and scope of the general meeting. A few respondents suggest that this task must be entrusted to a remuneration-committee. 1.3 Strengthening shareholders’ rights and minority protection, in particular supplementing the right to vote by special investigation procedures Of the 77 respondents to question 9, 34 (ca. 44%) agree that shareholders’ rights and decision-making, including minority protection, should be enhanced by European law, in particular by enabling the general meeting of shareholders, by resolution, or a qualified minority of shareholders to apply to a court or an appropriate administrative body for the ordering of a special investigation. A minority of ca. 23% (18 respondents) does not agree. A number of respondents suggest that the German rule of "Sonderprüfung" can be used as a model for European regulation. All kinds of thresholds are mentioned, e.g. 1%, 5%, 10%, 25 %, a total of the share capital with a market value of Euro 100,000. An alternative for minority shareholders in family companies would be not a specific percentage but the minority shareholding following the biggest shareholder. Two respondents are in favour of enhancing the civil liability of members of the board towards their shareholders. Another remark is that the authority to implement the general principles in the light of the different types of companies and ownership structures should be left to EU members. Several respondents bring up the problem of abuse. A few respondents are of the opinion that there is no need for harmonisation because the special investigation procedures in the individual Member States have proved successful in practice. Other respondents believe that national law should regulate the subject. 1.4 Strengthening the duties of the board, in particular the accountability of directors where the company becomes insolvent A majority (56%) of the 81 respondents to question 10 feel that the European Union should introduce a framework rule which would hold company directors accountable for letting the company continue to do business when it is foreseeable that it can no longer pay its debts. Some respondents of this majority, however, believe that such a wrongful trading rule should be restricted, very general or should (also) be dealt with in insolvency law. An important minority of ca. 40%, however, does not agree. Arguments against a wrongful trading rule are that company law should not deal with insolvency law, that this is not a topic for harmonisation but a topic of national law or that several practical problems would arise. Several respondents state that efficient rules already exist, in e.g. Germany, Sweden, Iceland and Ireland. 1.5 Need for a European corporate governance code or co-ordination of national codes in order to stimulate development of best practice and convergence Against a small minority (ca. 11%) the majority (ca. 66%) of the 83 respondents to question 11a believe there is no need for a voluntary European corporate governance code in addition to or instead of the various national corporate governance codes, because corporate governance questions are strongly determined by socio-economic differences in Member States. Differences in company law are also a reason to be against a European corporate governance code. It should be worked out by or left to the market Two respondents believe it is too early. Many respondents refer to the study of Weil, Gotshal & Manges or mention the OECD-code. The 25 respondents who answered question 11b give examples of what rules and recommendations a European corporate governance code should contain: rules concerning disclosure and communication with shareholders, equitable treatment of shareholders, the function, responsibilities, independence of the directors, non-executives and auditors and the relation between them, disclosure and transparency, company policy on remuneration and information about conflict of interest. A small majority (ca. 51% of 55 respondents) agree that the EU should facilitate the co-ordination of national codes in order to stimulate development of best practices and convergence (question 11c). A minority of 36% believes that this should be left to the market; the market will provide or encourage the co-ordination.   2. SHAREHOLDER INFORMATION, COMMUNICATION AND DECISION-MAKING 2.1 Notice and pre-meeting communication A majority (ca. 70%, versus a minority of 24%) of the 83 respondents think that listed companies should not be required to establish on their website electronic devices (bulletin boards, chat rooms or similar devices) that allow for electronic communication between shareholders and the company and among shareholders prior to general meetings, including with respect to notices of general meetings, submissions of proposals and questions and solicitations of proxies (question 12a). Most respondents, however, feel that this is a matter that should be encouraged as a voluntary action. Generally, the use of chat rooms is not recommended due to the potential for abuse. Some respondents note that establishing communication between shareholders is not a responsibility of the company. None of the 56 respondents to question 12b think that, if listed companies are required to establish electronic devices on their websites, shareholders should be required to communicate by electronic means and thus be compelled to abandon the use of traditional means of communication. It should be an alternative to those interested. To make this a requirement at this moment would inconvenience and disenfranchise a significant amount of shareholders. Only a minority (ca. 38%) of the 77 respondents to question 13a think that there is a need, at the European level, to provide for minimum standards regarding the right for shareholders to ask questions and submit proposals for decision-making at the general meeting. It could encourage greater cross-border share ownership. Some note that all shareholders must have the right to ask questions. Many of these respondents see problems that would arise if a lot of irrelevant questions would be asked and the management would be obliged to answer. Solutions for this might be a maximum amount of questions to be asked be a single shareholder. Others think that minimum standards must be set and not all shareholders should be able to ask questions and submit proposals. Among those against harmonisation (48%), a lot of respondents note that this issue is a matter for national law. Question 13b was answered by ca. 29% of respondents. Some standards that are thought to be sufficient are the following: shareholders should be able to ask 3 questions and have 5 minutes to speak, to submit proposals, the shareholder must own 5% of the shares; the right to put items on the agenda should require no more than an aggregate of 10% of the shares; no minimum for raising questions, not more than 250.000 Euro for submitting proposals, maximum time for submitting proposals should be 4 weeks. 2.2 The meeting, electronic access, proxy voting A large majority (ca. 87% of 74 respondents) think that listed companies should be required to provide facilities for proxy voting by all shareholders (question 14a). However, caution has to be taken. Abuse of a proxy solicitation system by management and opposing shareholders is not unthinkable. Proxy contests can make the system very costly. Many respondents note that this matter should not be regulated on a European level. A majority (ca. 73% of 72 respondents) think that listed companies should be enabled to offer to their shareholders electronic facilities for proxy voting (question 14b). A few respondents even think this should be required. None of the respondents think that shareholders should be compelled to use electronic proxy voting and that traditional proxies should be abolished. Question 14c was answered by 67 respondents, of which ca. 85% agree that companies should be enabled to allow absentee-shareholders to participate in traditional general meetings via electronic means, including via the internet (webcast) and satellite. None think a requirement to do so is appropriate. Of the few respondents against enabling companies to provide these means, most think that the technology at this moment is not advanced enough to make this possible. A majority of 80% of the 70 respondents who answered question 14d think that companies which offer a comprehensive electronic process of information to, communication with and decision-making by shareholders should not be enabled to abandon the traditional type of general meeting. Most think abandoning the traditional type of meeting is premature. Others think the ability to come face-to-face with the management can never be substituted by a virtual meeting. 2.3 Voting by institutional investors A majority of ca. 66% (of 72 respondents) does not think that institutional investors in Europe, or alternatively all shareholders holding a certain percentage of the share capital, should be required to disclose their policy as regards to the investments they make, and as to how they exercise their voting rights (question 15a). Among those who object to this requirement, some respondents do note, however, that institutional investors should have to report to their beneficiaries on the way they exercise their votes. Arguments against the disclosure of policy are that confidentiality of business strategy from a competitive standpoint and equality of shareholders must prevail and that institutional investors should not be burdened with the extra costs. A large majority (ca. 92% of 71 respondents) think that institutional investors should not be required to exercise their voting rights with respect to the shares they hold (question 15b). Some respondents feel that exercising of voting rights should be encouraged but not compelled. Others note that an obligation to vote would distort the voting process, unconsidered votes can be swamped by ‘required’ votes, that it would create a ‘box-ticking compliance culture’, it would lead to an unwanted dominance of institutional investors and to under-informed decision-making. The mere fact that they have fiduciary duties is not sufficient to oblige them to vote.   3. ALTERNATIVES TO CAPITAL FORMATION AND MAINTENANCE RULES 3.1 The functions of legal capital and the competitive effect of the current rules The majority (ca. 68%) of the 65 respondents to question 16a does not think that legal capital effectively protects the interests of creditors and shareholders, and ensures capital adequacy. Many note that legal capital mainly serves as protection for creditors and secondly for shareholders and that it must not be abolished because it gives the best safeguards. Others note that it does not reflect the size of the company. Some respondents think that a more flexible regulation is needed in relation with further issues such as directors’ duties, insolvency law and creditor protection. A few respondents note that legal capital ‘more or less’ serves the four functions. A minority (ca. 25%) of the respondents firmly believes in the current system. A large majority (73%) of the 55 respondents to question 16b think that there are possibilities of reaching the same results by means of other techniques than legal capital. The most popular option is a solvency test and a regulation on the liability/duties of directors. The solvency test should be linked to a declaration of solvency by the directors with appropriate penalties. Other possibilities are: financial reporting and disclosure requirements, equity regulation and a provision of guarantees by shareholders and directors to take over the company’s liability in case of insolvency. Of those (ca. 24%) who do not think that there are other possibilities, most note that the current regime should be maintained and is appropriate. A small majority (ca. 54%) of respondents does not think that European companies are at a disadvantage as against companies in jurisdictions with a more flexible capital regime (question 16c). Half these negative responses are from German respondents. Some respondents note that although the regime is strict, there is no real reason for radical reform. However, some improvements are welcome. Some respondents also think that the strict rules provide a better reputation for European companies. Respondents who do think that European companies are at a disadvantage blame this on the restrictive character and complexity of the system, in particular to issues such as financial assistance for the purchase of own shares, increasing capital by way of contributions in kind, issuing convertible bonds, no par-value shares and the weak protection of creditors. 3.2 Three approaches to the reform of legal capital in Europe Of the 57 respondents to question 17a a large majority thinks a new approach to the reform of legal capital in the EU is needed. Ca. 10% of the respondents mention that there is no need for a new approach on a European level. As to question 17b, a large group (ca. 45%) of those who think a new approach is needed, opt for the evolutionary approach 1: the SLIM-approach. They argue that the other approaches are too radical and not pragmatic. Advantages of the SLIM proposals as they are and as they might become, mentioned by respondents, are the possibility of no par-value shares, a solvency test, eased formalities, personal liability of directors a reduction of mandatory valuations, the extension of the period in which own shares can be purchased (licensed up to 5 years), purchasing own shares for more than 10 %, the possibility to exclude pre-emptive rights for a period of 5 years and a reduction of reporting obligations. After the SLIM-approach, the revolutionary approach that rebuilds the US capital regime from a European point of view (the third approach in the Consultative Document), is favoured by 26% of respondents. The supporters of this approach argue that a tailored approach can eliminate legal capital and can combine the best aspects of the different systems. Finally, ca. 9% of the respondents favour the revolutionary US-approach (the second approach in the Consultative Document). It provides a helpful basis for further analyses, but should not be adopted wholesale. A small group of the respondents (ca. 10%) mentioned other approaches or did not clarify their favourite approach. 3.3 Specific topics Many respondents to questions 18a-18e were of the opinion that minimum capital should be kept, whereby the level should strike a balance between an appropriate impediment to set up a company on the one hand, and not setting the barrier too high on the other hand. Some would favour a minimum capital, which would be linked to the kind of activity of the company. Often respondents made a distinction between SME and other companies. Most respondents (of the ones that responded) think that "wrongful trading" is an effective instrument for creditor protection and about half consider that subordination is not an effective and desirable way of enhancing creditor protection. Almost half (ca. 45%) of the 67 respondents to question 18a see the minimum capital requirement as an appropriate impediment to starting up a company, whereas 21 respondents (ca. 31%) do not agree. According to several respondents, the level is too low to be an impediment. Some respondents made a distinction between SME and other (listed or open) companies, whereby the impediment exists for SME; some answered that there should be no impediment at all. Of the 66 respondents to question 18b, almost half would not abolish the minimum capital requirement or impose a stricter minimum capital requirement than the one presently in force. Some respondents are in favour of abolishing (ca. 18%) or lowering the level of minimum capital, whereas ca. 15% feels for stricter requirements. Some of the other comments (positive, negative or other) to this question were: the level should be re-examined at least every ten years, one should distinguish between regulated and financial companies and other companies, the question of abolition or relaxation should take other forms of creditor protection into consideration (e.g. directors liability, insolvency law, etc.), the new Basel II standard shows that the legal capital should be much higher in most companies, no (additional) minimum capital for SME, effective rules on debt/equity should be in force, abolition with additional maintenance rules in place. The majority (ca. 60%) of the 62 respondents to question 18c considers that "wrongful trading" is an effective instrument for creditor protection, only 15% disagreed. More than once the effectiveness is made dependent on the enforcement, with sometimes a reference to the difficulty of the burden of proof. And more than once the national situation was explained. Some (German respondents) were of the opinion that it should not be used outside insolvency law. Other comments (positive, negative or other) to this question were: the triggering effect should not be too late, if it does not require a proof of intent, it depends if it is applied to a financial sector, it should be compatible with the legal system, next to other instruments, it leads to endless debates on their application, it might lead to the management staying in charge too long, the experience is rather mixed, comes into play rather late in the life of a company, states should fix the rules, it has proved beneficial, the procedure is more difficult for smaller structures, it should be linked to the degree of guilt, it should not be harmonised, if introduced then it should look at the possibility of reorganisation rather than liquidation, it has a deterrent effect, the UK concept of fraudulent trading (sic) provides further safeguards, it is expensive. About half of the 51 respondents to question 18d consider that subordination is not an effective and desirable way of enhancing creditor protection, while 21 respondents (ca. 41%) think it is. Some respondents stress the need of full disclosure, and some fear a deterrent effect on insiders to finance the company. Other comments (positive, negative or other) to this question were: it should not depend on the identity of the creditor but on the nature of the claim, it should be dealt with in insolvency law, any distinction should be left to the choice of the parties or to the member states, "capital-replacing-loans" (German case law) seem to have worked well, it would deter shareholders loans for troubled companies. Question 18e (are there any other possibilities worth considering to protect creditors) was answered by 26 respondents. The comments made include: creditor protection would be improved by a shift of the burden of proof to show that the value attributed to contributions reflect the real value; Belgium has introduced the rule whereby the founders of the company can be held liable –jointly and severally- for "manifest under-capitalisation" for a two years period; disclosure should be improved; there is a case for allowing other forms of consideration for capital, including the provision of services and for simplifying the rules dealing with acquisitions of own shares; the prohibition of financial assistance could be changed; it may be appropriate to extend the scope of share capital, for example to cover services; alongside a claim for damage, a responsibility of criminal law should be envisaged; compulsory indemnity insurance, to be held by directors; new directors should: a) make a standard solemn oath that they understand their duties and responsibility, or b) take a test of their understanding of their duties and responsibility; the ‘New Money’ rules applied in the UK seem to work reasonable well; directors accountability rule should not only be triggered when the company is insolvent, but should be replaced by an "early intervention approach"; the formation of a rule based on the English common law rule of "doubtful solvency"; one could oblige companies to make a financial plan, whereby failing to do so could be the basis for a personal liability in case of insolvency; the financial early warning system in case of the loss of half of the guaranteed capital could be strengthened, if it is applied earlier; disqualification for a certain period, also as founder; one should think about introducing a common regulation on "lifting the corporate veil". Of the 73 respondents to question 19a ca. 43% agree that other forms of consideration, such as services, should be allowed as valid forms of consideration for capital, whereas ca. 37% do not. The advocates as well as the opponents often observe that allowing services as a valid form of consideration for capital would probably lead to valuation problems. Some of the advocates state that other forms of consideration for capital should be allowed, provided proper creditor protection and valuation procedures are introduced, or provided there are measures to protect minority shareholders. Some respondents to this question argue that other forms of consideration for capital should (at least) be allowed for private companies, provided that a clear creditor protection procedure and evaluation procedure are considered. Some of the opponents state that claims for services to be rendered are not enforceable and that future services, as opposed to services rendered, should therefore not be allowed as consideration for capital. Others mention that capital paid for by services and the like should not compete with the registered capital. Furthermore respondents notice that there might be accounting difficulties in case the services will be activated. A majority (ca. 56%) of the 70 respondents to question 19b believe that the prohibition of financial assistance for the acquisition of own shares should be eliminated or at least that financial assistance should be allowed if it complies with the general rules for distributions to shareholders. Ca. 26% (18 respondents) don’t agree. Advocates propose that financial assistance for the acquisition of own shares should be allowed, provided that creditor protection and evaluation procedures are introduced, or that the prohibition should be eliminated, subject to a solvency test where such assistance is given. Moreover, a few respondents refer to the exemption model for private companies under UK law, that is the so-called "whitewash procedure". Some of the opponents believe that, although the prohibition should not be eliminated, it deserves further investigation whether financial assistance should be allowed if it complies with general rules for distributions to shareholders. Furthermore some respondents compare financial assistance for the acquisition of own shares with the repurchase of own shares by the company itself, and believe that the rules governing such assistance should be configured accordingly.   4. THE FUNCTIONING OF GROUPS AND COMPANIES 4.1 The existence of groups of companies as a useful and legitimate economic reality Groups of companies appear to be frequent in most – if not all – Member-States. Only 2 of the 68 respondents to question 20a gave a negative answer. These negative answers state that groups of companies are not frequent in their respective countries. Most of the 62 respondents to question 20b state long lists of advantages of groups. Disadvantages and risks are also stated, but the lists are shorter. All the other responses varied. Frequently mentioned advantages are amongst others: (increased) possibilities to allocate risks, to obtain better financing conditions and tax advantages, to foster synergies and to increase management efficiency and flexibility. Group structures also facilitate restructuring of businesses, and the applicability of the principle of limited liability encourages risk taking. Another frequently mentioned advantage is the possibility to maintain minority shareholders in subsidiaries, because this will strengthen the business’ capital base. Frequently mentioned disadvantages or risks are: minority and creditor protection problems, creditor reliance problems, lack of transparency (in relation to intra-group dealing), problems arising from conflicts of interests between the (boards of the) subsidiaries and the (board of) the parent, complex and laborious management, audit problems and the lessening of competition, violation of fair competition rules, some companies may be sacrificed for the greater good of other companies in the group, problems regarding the distribution of responsibility among directors and statutory auditors within the group, and cascades.   4.2 Transparency of group relations Half of the 72 respondents to question 21a do not feel that the 7^th Company law Directive should be supplemented by rules that require greater transparency of group relations and possible risks arising from them both to the subsidiary and to the parent, while ca. 44% of the respondents do. Some of the adversaries argue that the risks arising for the subsidiary should be dealt with in the accounts of that subsidiary rather than in the consolidated accounts. Any additional requirements in this regard may therefore more appropriately be included in the 4^th Company Law Directive. Others argue that supplementation is not warranted, because the IAS (or IFRS) will be implemented for listed companies (see especially IAS 24). Member-States may allow or require other companies to also use IAS. More generally it is sometimes stated that if enhanced transparency is required, details should be a matter for the accountancy standard bodies rather than be dealt with by further regulation at EU level. If rules enhancing transparency were to be implemented they should – according to the 40 respondents that answered question 21b – include information on: the group structure, ownership, the managing system, the activities of the subsidiary and the group strategy behind it, intra-group transactions, related party transactions, cross guarantees and liabilities, siphoning of risks, interlocking directorships, remunerations to management, audit and compliance procedures, intra-group competition rules, conditions of trading, etc. Also reference is made to IAS 24 and IAS 34. It is furthermore stated that information rights of the supervisory board and the shareholders of the parents should be enlarged to activities at least in consolidated subsidiaries. Question 21c was answered by 43 respondents; ca. 33% of these respondents is of the opinion that enhanced transparency rules should not be applied to listed companies, while ca. 30% do agree to the implementation of such rules for listed companies. The reason mostly stated for non-implementation of enhanced transparency rules for listed companies is that the IAS will be implemented in 2005, which will suffice in this regard. See especially IAS 14, 24 and 34. Some respondents remark that full transparency should relate to all companies, whether listed or not, because these rules not only benefit shareholders but also creditors. Almost half of the 45 respondents to question 21d is of the opinion that special transparency rules for banks and other financial institutions are not needed. Arguments mentioned by the adversaries are amongst others that the Insurance Group Directive 98/78 already regulates the matter, that the Directive on the supervision of financial conglomerates will enter into force by the end of 2002 and that rules should be framed as to render special rules unnecessary. 33,3% of the respondents answered question 21d in the affirmative. These respondents mainly argue that special rules are necessary because financial institutions fulfil a public function. Rules should be implemented with respect to capital requirements, special qualifications for directors, holding company issues, risk analysis, etc. 4.3 Problems for the creation and functioning of groups of companies: tensions between the interests of the group and its parts Ca. 59% of all respondents answered question 22; 40% of these respondents belief in the need of a "safe harbour" (which allows those concerned with the management of the companies within a group to adopt a co-ordinated group policy provided that creditors are protected and there is a fair balance of advantage for shareholders over time). A smaller minority (ca. 26%) argues that there is no need for such a "safe harbour". Some advocates argue that European legislation will lead to harmonisation, which will in turn allow for the creation of cross-border groups of companies. One respondent argues that at EU level only general principles should be implemented, which then can be filled in by the Member States. Some German respondents argue that the German "Konzernrecht" in this regard has proven to be so successful and that EU rules could be modelled after the German rules, while others prefer the French solution or refer to the proposals from the Forum Europaeum on Corporate Group Law. Opponents argue that rules at EU level are not necessary. Member States should deal with this problem. Also a general principle is not necessary, because this would leave the present situation – e.g. different rules in each Member State – in tact. 4.4 Pyramids Ca. 49% of all 58 respondents answered question 23a. Ca. 47% of these respondents state that pyramids are not frequent in their country (A, DE, DK, F, IR, IS, NL, PL, SC, SE, SU & UK). Ca. 40% answered the question in the affirmative (B, DE, EL, IT & UK). Some answers are contradictory. 10 respondents for example state that in Germany pyramids are frequent, while 6 others say they are not. But respondents seem to agree that in Italy pyramids are frequent. 42% of the respondents answered question 23b; 30% of these respondents find pyramids useful, 38% find them harmful, 8% find them indifferent and 16% state that the answer to the question depends on the way pyramids are organised and managed. The respondents that find them useful state for example that pyramids can be advantageous because they allow integration into a group of a company with minority shareholders, which helps to finance activities. Pyramids may also be helpful for supervisory reasons, as they avoid the whole group from becoming subject to supervisory measures outside the EU, and they have for a long time ensured a high rate of development. Ca. 25% of all the respondents answered question 23c. Respondents considering pyramids to be harmful mention, amongst others, the following risks: lack of transparency, maximising control with a minimal investment, asymmetrical risk-sharing, the cascade-effect e.g. the transfer of legal capital from parent to subsidiary and then to the subsidiary of the subsidiary and problems with creditor and minority shareholder protection. Some respondents argue that the problems presented by pyramids are similar to those presented by groups. 55 Respondents answered question 23d. 40% of these respondents is of the opinion that specific measures beyond group transparency are not desirable for pyramids. It can be argued that special rules can be omitted if potential investors will be able to ascertain whether special rights are attached to a particular class of shares, which could affect their investment. Ca. 34% of the 19 respondents to this question believes special rules beyond transparency are necessary for pyramids. Among the proposed measures are: provisions avoiding company directors from mala gestio, provisions ensuring the independence of directors and cumulative voting for directors, and provisions providing a minimum disclosure of indirect holdings through pyramids and circular and cross-shareholdings.   5. CORPORATE RESTRUCTURING AND MOBILITY On questions 24a – 29, a vast majority answered positive. In general, respondents are in favour of freedom of cross border mobility (transfer of seat, mergers, etc.) and relaxation of (unnecessary) requirements, but without loosing sight of the position of the shareholders and creditors (and in question 24, workers). According to a few responses, there should be no distinction between national and international transactions. Some stressed the subsidiarity principle, but overall a task for the EU was envisaged, either for minimum standards in the EU, or for harmonisation on specific topics. Often reference was made to national laws, and often with further explanations. 5.1 Change of corporate seat, or domicile 57% (68 respondents) answered question 24a. Of these 67% (46 respondents) answered positive, ca. 13% negative (9 respondents) and 19% (13 respondents) gave an answer other than yes or no. The majority (of the ones that responded) is in favour of the incorporation doctrine, which is more than 5 times the negative response. Of the positive answers, many argued for a (general) freedom of mobility across borders and abolition of barriers. Some negative respondents saw the question in light of the different legal systems. More than once reference was made to an international transfer of seat without losing legal personality and to the 14^th Directive. And more than once, case law of the ECJ (Centros, Überseering) was given, with sometimes the advise to wait for a judgement of the ECJ on this question. Some other comments (positive, negative or other) were: most cases of cross border transfer of seat are "smelly", the two systems are influenced by the available remedies, one should also look at competition law and civil law in general, the topic should also address transfer of registered office, the real seat is not easy to determine, uniform approach is needed to protect shareholders and creditors. Ca. 40% (48 respondents) answered question 24b. Of these, 77% (37 respondents) answered positive, ca. 19 % negative (9 respondents) and 4% (2 respondents) gave an answer other than yes or no. A big majority (of the ones that responded) agrees that the Member States should be free to apply mandatory requirements, which is more than 4 times the negative response. Of the positive answers, many agreed with the proposition of the HLG, since there are no minimum common standards (e.g. shareholders rights, creditor protection, workers participation, tax) in the EU, which could lead to abuse of freedom of establishment or circumvention of rules. There was a call for uniform mandatory rules. Many respondents mentioned social laws and workers participation as examples of mandatory rules. Some respondents feared new barriers, uncertainty or discrimination. Some other comments (positive, negative or other) were: a European judicial institution should review these rules, reference was made to the Dutch law on "pseudo-foreign companies", several actions should no longer fall under company law, but under torts etc., a race to the bottom is feared if no mandatory rules would apply, a proportionality test should be introduced, the UK ‘over sea companies’ seem to work well, (partly) replace articles of company, conflicting rules might then be applicable, wait for decision ECJ. The question on the connecting factor is not always answered. Answers were: an activity of the company, permanent operational presence, where management team de facto runs day-by-day operation, registered in their territory. Ca. 29% (35 respondents) answered question 24b. Of these, 77% (27 respondents) answered positive, 17% negative (6 respondents) and ca. 6 % (2 respondents) gave an answer other than yes or no. A big majority (of the ones that responded) found that other Member States should be bound to recognise such provisions. Most respondents (ca. 71%) did not answer this question. The responses differ widely and not always seem to answer the question. 5.2 Third Directive Mergers – position of the acquiring company Ca. 54% (64 respondents) answered question 25a. Of these, 28% (18 respondents) answered positive, ca. 47% negative (30 respondents) and 25% (16 respondents) gave an answer other than yes or no. A minority (of the ones that responded) found that the EU requirements for special provisions governing merger decisions in acquiring companies should be removed, which is 1.6 times less as the negative response. Most negative responses replied that this protection of shareholders was needed and a few also spoke about the protection of creditors. Some respondents did not answer the question in full, but merely replied that unnecessary provisions should be abolished. The difference between a merger and a takeover bid is stressed more than once. Other comments (positive, negative or other) were: the 3^rd Directive already provides for relaxation, except in a ‘reverse takeover’; the questionnaire does not take up the rule of Article 8, 3^rd Directive (max. 10% in cash), it should be examined; often it is possible to change the acquiring company for the acquired company. Ca. 39% (46 respondents) answered question 25b. Of these, ca. 30% answered positive (14 respondents: 5 for a simple yes, 2 for a yes for all mergers and 7 for a yes for all international mergers), ca. 28% negative (13 respondents) and ca.41% (19 respondents) gave an answer other than yes or no. Of the one-third positive responses, the majority found that the relaxation should be mandatory for an international merger (7), a minority for all mergers (2) and a big number found that Member States should be bound to accept such relaxations in an international merger (5). Around one-third of the respondents did not find that Member States of an acquired company should be bound to accept any such relaxation in respect of an acquiring company in an international merger, or that the relaxation should be made mandatory for all international mergers, or even for all mergers. A big number (especially compared with other questions) gave an answer other than yes or no. Many stress the necessity of a uniform regulation and the need to facilitate international mergers, some do not want to make a distinction between national and cross-border mergers. Other comments (positive, negative or other) were: Member States should be free to decide on domestic mergers, the scope of the 3^rd Directive should be extended to international mergers, if the 10^th Directive is adopted, then application of national laws is prevented, relaxation should be standardised to avoid distortion of competition, uniformity is needed for the internal market. 5.3 Third Directive – acquisition of a wholly owned subsidiary Ca. 49% (58 respondents) answered question 26a. Of these, ca. 85% (49 respondents) answered positive, ca. 7% negative (4 respondents) and 8% (5 respondents) gave an answer other than yes or no. A big majority (of the ones that responded) found that Member States should be permitted to relax the directive requirements in the case of acquisitions of 100%-subsidiaries, which is more than 12 times the negative response. An argument often mentioned is that no minorities are affected. Some argue that one still has to consider the position of stakeholders. Ca. 39% (46 respondents) answered question 26b. Of these, ca. 85% (39 respondents) answered positive, ca. 11 % negative (5 respondents) and 4% (2 respondents) gave an answer other than yes or no. A big majority (of the ones that responded) found that the Member State of the acquired subsidiary should be required to accept such relaxation by the Member State of the holding company in an international merger, which is almost eight times the negative answer. Examples of comments given are: what about reciprocity, co-ordination is necessary, it is of no concern to the acquired company state, if it does not lead to tax avoidance and reduction of the position of the third party. Ca. 26% (31 respondents) answered question 26c. Of these, ca. 65% (20 respondents) answered positive, 29% negative (9 respondents) and 7 % (2 respondents) gave an answer other than yes or no. A majority (of the ones that responded) found such requirements should be removed in all cases (13 respondents), international not, or in all such international cases (4 respondents). Most respondents (74%) did not answer this question. 5.4 Creditor protection in restructuring Ca. 50% (60 respondents) answered question 27a. Of these, ca. 53% (32 respondents) answered positive, ca. 32% negative (19 respondents) and 15% (9 respondents) gave an answer other than yes or no. A (slight) majority (of the ones that responded) found that the creditor protection requirements for reductions of capital, mergers and transfers of registered office should be aligned as proposed by the HLG. Some others simply state that this is not necessary, or should be left to the Member States. Other comments (positive, negative or other) were: it may well be that an international merger affects the creditor’s position more severely than a national one, a mixed (administrative and judicial) control is proposed, one only has to apply the 2^nd Directive to all capital reorganisations, there should be a solvency test, insolvency law should be taken into account, Article 32, 2^nd Directive should be clarified. Ca. 25% (30 respondents) answered question 27b. Of these, 60% (18 respondents) answered positive, 3% negative (1 respondents) and ca. 37% (11 respondents) gave an answer other than yes or no. A big majority (of the ones that responded) found that such alignment should be confined to international mergers and transfers of corporate domicile (2 respondents), or that it should apply to all EU restructuring provisions (16 respondents). Most respondents (ca. 75%) did not answer this question. Comments (positive, negative or other) were: yes, for the sake of equity and certainty, to avoid forum shopping, there is no reason to distinguish between national and international restructurings, etc. 5.5 Squeeze-outs and sell-outs Ca. 62% (74 respondents) answered question 28a. Of these, ca. 87% (64 respondents) answered positive, ca. 9% negative (7 respondents) and 4% (3 respondents) gave an answer other than yes or no. A big majority (of the ones that responded) found that Member States should be required to introduce provisions enabling a majority shareholder (the majority to be set at not less than 90% nor more than 95%) in a company to buy out the minority for a fairly appraised price. Many respondents referred to the laws of their country, which enables squeeze-outs, with sometimes a different threshold. Overall, a practical need was found to be served with the rule. Some respondents only favoured a squeeze-out for listed (and de-listed) companies. A few responded that this should not be regulated at EU-level. Other comments (positive, negative or other) were: it applies since 2002 in Germany and a quorum of 95% seems fair, one should consider a "Reversed Triangular Takeover", the proposed threshold differs significantly from the one in the UK, is there a need to express the maximum of 95%?, in France the price is decided by a multi-criteria test, we favour 90% to create a level playing field, consider a lower threshold where consideration in shares is offered, the market price of the last three month should be taken, valuation should be done by an expert and in case of unlisted companies by the tribunal, the price should not be higher than the takeover price, one-person company may not be valid in all Member States, Member States should be allowed to introduce lower thresholds, anti-embarrassment rules should be established in case of non-quoted companies, etc. Ca. 57% (68 respondents) answered question 28b. Of these, ca. 68% (46 respondents) answered positive, ca. 29% negative (20 respondents) and 3% (2 respondents) gave an answer other than yes or no. A majority (of the ones that responded) found that minority shareholders should have a corresponding right to be bought out where the 90-95% threshold has been reached. Other comments (positive, negative or other) were: minorities already have the right to sell their shares, the UK Company Law Review rejected it, under certain conditions, for an equal treatment, etc. Ca. 47% (56 respondents) answered question 28c. Of these, 55% (31 respondents) answered positive, 25% negative (14 respondents) and 20% (11 respondents) gave an answer other than yes or no. A majority (of the ones that responded) found that in companies with more than one class of share the rule should operate on a class-by-class basis. Other comments (positive, negative or other) were: it should operate in terms of voting rights rather than ownership of capital, attention should be given to convertible bonds, a two tier approach is suggested, depends on the threshold, it will make takeover bids more attractive for potential bidders, etc. 5.6 Other issues Only a few respondents answered question 29 whether there is a need for legislation at the EU level providing for restructuring in ways not already discussed. Some of the answers were: there should be a European regulation on winding up, on material and procedural insolvency law and on recovery of companies in crisis; the possibility of "Reverse Triangular Mergers" (in line with Delaware law); the introduction of a squeeze-out rule below 90-95% in case minority shareholders of a subsidiary receive shares in the holding company; the restructuring measures that form part of the Financial Service Action Plan should form the priority focus of EU company law initiatives; legislation for an easy dissolution of private limited companies; the tax and stamp duty rules on share for share exchanges and de-mergers in separate jurisdictions; statutory, contractual and security rights of lenders. 6. THE EUROPEAN PRIVATE COMPANY 6.1 An initiative to establish a European Private Company Ca. 57% (68 respondents) answered question 30a, ca. 62% positive, 38% negative. A majority thinks an EPC will or can be useful. SME’s play an important role in the European economy, account for more than 90 percent of all European firms and should be facilitated with a fitting European form. The Regulation should not be complicated but it should deal with matters like directors liability and make use of the notaries expertise. It can be argued that if the legal form of subsidiaries were the same, the cost when setting up and operating subsidiaries would be reduced. Some respondents suggest that it is better to monitor the further development of the SE before an EPC should be founded, others disagree. Some arguments mentioned by the minority against a new European form are the issue of co-determination, the lack of a need or interest for an EPC, a lack of predictability, an EPC cannot be governed exclusively by the Regulation, harmonisation is preferable. Ca. 30% (36 respondents) answered question 30b, 47,2% of which positive, 47,2% negative, 5,6% other. Half of the respondents think that the model for regulation of a private company is an appropriate way to encourage flexible regulation in Member States. Some consider it to be a more interesting possibility than an EPC (at this moment). It could amount to a benchmark which all Member States would be encouraged to aspire. A minimum set of standards in the model law would be appropriate with reference to the first and second EU company law directives. Arguments against a model law are that it cannot be a substitute for an EPC and that this is no priority. One respondent notes that there is no hard evidence of the inefficiency of the laws of Member States at facilitating SME’s. 6.2 Incorporation of the European Private Company Ca. 45% (54 respondents) answered question 31, 87 % of which positive, 11% negative, 2% other. A big majority of the respondents conclude that it should be possible for an EPC to be set up by both individuals and legal entities and by one or more nationals of one Member State as long as the EPC undertakes economic activities in two or more Member States. A small group of respondents do not agree with the element ‘economic activities in two or more Member States’. Easy access and contractual freedom are mentioned as important factors. European governance will have to ensure equal positions for the shareholders in each Member State. 6.3 A genuine European company Ca. 48% (57 respondents) answered question 32a, 40% of which positive, 60% negative. A minority thinks that the EPC, with respect to the company law applicable to it, could be exclusively governed by the provisions of the Regulation and the provisions of its articles which are not inconsistent therewith, with autonomous interpretation ultimately by the ECJ. Most think it is hard to see how an EPC could operate outside a body of national law or in the absence of a European body of private law and implementation will be very difficult. It would leave great legal uncertainty and would damage the credibility of the EPC. On the other hand one respondent notes that high costs for advice and information, uncertainties and accountability risks can only be reduced when reference to national law will be abolished. Shareholders must be able to regulate all important issues in the memorandum of association. Standard forms of articles of association should assist those forming an EPC. In the case of problems with interpretation, judges and arbitrators will decide. In the case of a legal vacuum, which according to some seems highly unlikely, referral to national law is unavoidable. The EPC should then be treated like one of the corporate forms in existence in the relevant Member State. Concerning the role of the ECJ some respondents note that an increase of its competence will be unjustifiable and it will lead to an unmanageable burden for the ECJ. A few respondents note that tax harmonisation is the key for European companies. Ca. 45% (53 respondents) answered question 32b, 64% of which positive, 36% negative. A majority thinks it is necessary to refer to the law applicable to the private companies in the Member States of incorporation where a question is not answered in the Regulation of the EPC or its articles of association. This would be an easy, efficient and transparent solution. Parties could freely choose the most efficient system.   7 CO-OPERATIVES AND OTHER FORMS OF ENTERPRISE 7.1 Regulation of the European Co-operative, European Association and European Mutual Society Ca. 41% (49 respondents) answered question 33a, 69% of which positive, 31% negative. A big majority of the respondents considers the enactment of the proposed Regulations necessary or desirable. However, most respondents do not see this as a top priority. Those who are positive mainly support the proposal for co-operatives and secondly for mutual societies. One respondent was very positive about the high quality of the proposal for the European Co-operatives. The quality of the proposals for the European Association and the European Mutual Society are not up to par yet. The least desirable Regulation appears to be is that for the European Association. Ca. 28% (33 respondents) answered question 33b, 58% of which positive, 33% negative, 9% other. The majority makes a positive assessment of the potential these Regulations have in the solution of the problems affecting co-operatives and other forms of enterprise in the European Union. A level playing field is necessary. However, a group of respondents notes that the proposals do not meet the expectations. If there is a need for a European Mutual Society or a European Association, the proposals for these forms are impractical. The proposed rule on employee participation devaluates the proposal for a European Co-operative to a great extent. 7.2 Harmonisation of national laws on co-operatives, associations and mutual societies Ca. 40% (47 respondents) answered question 34a, 34% of which positive, 66 % negative. A big majority does not think that there is a need to harmonise rules for the alternative forms of enterprise in Europe. Harmonisation is considered to be very difficult because of the diversity of the forms of enterprise and their specific role. Their impact is mainly local, so harmonisation is not necessary. Ca. 19 (22 respondents) answered question 34b, 41% positive, 46% negative, 14% other. Less than half of the respondents think that it is satisfactory that the regimes in the proposed Regulations are completed by application of the Company Law Directives, which do not apply to the national forms of these enterprises. In the UK this system works for the building societies legislation, which mainly follows company law. Adversaries mention that this would bring forth a complicated system that will hollow out the regimes. Specific regulations should be drafted for different types of activity. 7.3 Foundations in Europe 37 % (44 respondents) answered question 35a, 23% of which positive, 77 % negative. A big majority opposes the introduction of a European Foundation. Foundations are mainly locally rooted, a European form for foundations should not have priority and the principle of subsidiarity must prevail. In Germany even the federation does not have legislative power concerning foundations. Tax problems for foundations and its donors should however be abolished to promote cross-border donations. One respondent, who is very enthusiastic about a European Foundation based on endowment contributions, is doing extensive research. One respondent notes that a European Foundation would be preferable to promote transparency. Ca. 34% (40 respondents) answered question 35b, 25 % of which positive, 75 % negative. A big majority is against harmonisation of national rules applicable to foundations. Harmonisation would limit the grown diversity of frameworks, which is an asset for founders and foundations. Two respondents note that the European Foundation and not harmonisation of national legislation should be the priority. However, harmonisation can also be a step towards a European Foundation and vice versa. Harmonisation in relation to key matters and tax law are mentioned as pros by a couple of respondents. 7.4 Enterprise law Ca. 43% (51 respondents) answered question 36a, 29% of which positive, 67% negative, 4% other. A big majority of the respondents does not think a definition of ‘enterprise’ would be useful. Different legal structures need different legislation. A coherent definition will be difficult, is not needed and not yet possible. Ca. 11% (13 respondents) answered question 36b, 62% of which positive, 38% negative. The majority thinks that ‘economic activity’ and ‘organisation’ should be the main elements in the definitions of enterprise. The formula should be broad. Durability should also be an element. One should be aware of the fact that the element ‘economic’ is not typical for non-profit organisations. Suggestions as elements are: marshalling of resources in an organised manner for the pursuit of a defined common purpose and co-ordinated and continuous organisation of assets existing in any Member State. Ca. 25% (30 respondents) answered question 36c, 67% of which positive, 30% negative, 3% other. A big majority thinks basic harmonised rules should only apply to limited liability entities. Regulations for all forms of enterprise do not meet the specific needs for all forms of enterprise. Harmonising regulations on partnerships would be against the principle of subsidiarity. 37 % (44 respondents) answered question 37a, 52% of which positive, 48% negative. A small majority thinks there is a need to introduce harmonised rules in Europe for registration, access to core data and powers of representation relating to enterprises as defined in the document. Harmonisation of these areas is essential for cross-border trade, freedom of movement and the reduction of costs and risks. Whether harmonisation is possible at this moment is not clear. One respondent thinks that these issues should apply to all legal persons. Another respondent explains in his extensive answer that a common technological platform for the consultation and interpretation of national registers is preferable to a European register. The internet could be a useful tool. Those who are against harmonisation note that easier cross-border access should be ensured. Ca. 28% (33 respondents) answered question 37b, 18% of which positive, 79% negative, 3% other. Most respondents do not see a need for other issues like financial reporting, branches, groups of enterprises, transformation and transfer of seat to be addressed in an Enterprise Law Directive. An Enterprise Law Directive should be limited to constituting a general legal framework.  

• Council Regulation (EEC) 2137/85 of 25 July 1985 on the European Economic Interest Grouping (EEIG), [1994] OJ L 199/1;
• Council Regulation (2001/2157/EC) of 8 October 2001 on the Statute for a European Company (SE), [2001] OJ L 294/1 supplemented by Council Directive (2001/86/EC) of 8 October 2001 supplementing the Statute for a European Company with regard to the involvement of employees, [2001] OJ L 294/22;
• Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002, OJ L 243/1 on the application of international accounting standards.

• 1^st Council Directive (EEC) 68/151 of 9 March 1968 on co-ordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, with a view to making such safeguards equivalent throughout the Community, [1968] OJ L 65/8;
• 2^nd Council Directive (EEC) 77/91 of 13 December 1976 on co-ordination of safeguards, which for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent throughout the Community, [1977] OJ L 26/1;
• 3^rd Council Directive (EEC) 78/855 of 9 October 1978 based on Article 54(3)(g) of the Treaty concerning mergers of public limited liability companies, [1977] OJ L 295/36;
• 4^th Council Directive (EEC) 78/660 of 25 July 1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies [1978] OJ L 222/11;
• 6^th Council Directive (EEC) 82/891 of 17 December 1982 based on Article 54(3)(g) of the Treaty concerning the division of public limited liability companies, [1982] OJ L 378/47;
• 7^th Council Directive (EEC) 83/349 of 13 June 1983 based on Article 54(3)(g) of the Treaty on consolidated accounts, [1983] OJ L 193/1;
• 8^th Council Directive (EEC) 84/253 of 10 April 1984 based on Article 54(3)(g) of the Treaty on the approval of persons responsible for carrying out the statutory audits of accounting documents, [1984] OJ L 126/20;
• 11^th Council Directive (EEC) 89/666 of 21 December 1989 concerning disclosure requirements in respect of branches opened in a Member State by certain types of company governed by the law of another State, [1989] OJ L 395/96;
• 12^th Council Directive (EEC) 89/667 of 21 December 1989 on single-member private limited liability companies [1989] OJ L 395/40;

• Commission Recommendation (2001/256/EC) of 15 November 2000 on quality assurance for the statutory audit in the European Union: minimum requirements, [2001] OJ L 91/91;
• Commission Recommendation (2001/453/EC) of 30 May 2001 on the recognition, measurement and disclosure of environmental issues in the annual accounts and annual reports of companies, [2001] OJ L 156/33.
• Commission Recommendation (2002/590/EC) of 16 May 2002 on "Statutory Auditors’ Independence in the EU : A Set of Fundamental Principles", [2002] OJ L 191/22.

• The role, the position and the liability of the statutory auditor within the European Union [1996] OJ C 321/1.

• Commission Communication "Accounting Harmonisation: A New Strategy vis-à-vis International Harmonisation", November 1995, COM (1995) 508;
• Commission Communication "Financial Services: Implementing the Framework for Financial Markets: Action Plan" of 11 May 1999, COM (1999) 232;
• Commission Communication (98/C143/03) "Statutory Audit in the European Union, the way forward", [1998] OJ C 143/3;
• Commission Communication of 13 June 2000, "EU Financial Reporting Strategy: the way forward", COM (2000) 359;
• Interpretative Communication (98/C16/04) Concerning Certain Articles of the Fourth and Seventh Council Directives on Accounting, [1998] OJ C 16/4.