European comparative company law writeup, Dispense di Diritto Commerciale Internazionale

Scarica European comparative company law writeup e più Dispense in PDF di Diritto Commerciale Internazionale solo su Docsity! °Company law directive° The first company law directive applies to both private and public companies, it is aimed at harmonising legislations throughout Europe. It provides for all the mandatory documents for the establishment of an enterprise. Incorporations documents must be submitted to the relevant official register. The second company law directive applies only to public companies and it sets forth the legal minimum capital for the establishment of a public company. °Formation of public and private companies in UK° There are no optional or mandatory provisions regulating the deed of incorporation. The incorporation takes place subsequently to the official registration and eventual issuance of the certificate of incorporation. There is no minimum legal capital for private companies. The documents necessary for the registration are set forth by the Companies Act 2006: 1. Memorandum in the prescribed form and authenticated by each subscriber. 2. Proposed articles 3. Names of the first directors and secretaries 4. Statutory declaration of compliance 5. Statement of company’s capital 6. Initial Shareholders The company may invoke a preliminary contract, so as to being able to enter contracts prior to the company’s official incorporation. This, in accordance with the Contract Act 1999, usually results in, unless otherwise provided in the contract, in possible personal liability for the contractor in terms of the contract establishment with 3rd parties which are not satisfied. The 14 Company law directives govern the transfer of the official registered office offshore. °Formation of public and private companies in France° There are some differences between Sociétés a risqué non limité and Sociétés a risqué limité. Registered companies, such as personal companies and capital companies, have legal personality; whereas unregistered companies, such as société civile and société de fait, lack this legal personality. SARL (société a responsabilité limitée) : The statutes must be in notarized form and must include: 1. Kind of the company chosen, 2. The duration (max 99y) 3. Name and location of the company, 4. Objects and 5. Capital Company contracts must be valid and must express the intention of partners to act together in pursuit of making profits. The maximum number of members is 100, if exceeded, it must be either lowered or the company be converted into a SA within 1y. 1/5 of the cash and cash equivalents payment for the issuance of shares is required upon registration. SA (Société Anonyme): It is considered having separate legal existence upon registration at the Commercial Court. The minimum capital is eur 225k for a publicly held company and eur 37k for a non publicly held one. The articles must be in the form of a notarial deed and state: 1. Names of the persons signing the incorporation 2. Form of the company 3. Name of the company 4. Place of registered office 5. Corporate purpose 6. Share capital amount 7. Duration (max 99y) 8. Number of shares with nominal value or capital represented 9. Whether shares are in registered or bearer form 10. Persons making contributions in kind and their amount 11. Shareholders having special advantages 12. Rules about composition and allocation of profits and liquidation surplus and special reserve creation 13. Any restriction on transferability of shares Further documentation attached to the articles must states: the name of directors, statutory auditors and report of a special valuer on non cash contributions. After the incorporation, directors hold the first meeting where they elect the chairman of the board and the executive officer °Formation of public and private companies in Germany° GmbH (Gesellschaft mit beschränkter Haftung): The statutes must contain: 1. the name of the company (which must contain GmbH), 2. its registered office, 3. the objects, 4. amount of share capital and the nominal value of shares, 5. any additional obligation placed on shareholders and 6. the Stammkapital (min eur 25k) The nominal value of the shares must be equal to the Capital of the company, hence all the shares issued upon registration must be issued at their face value. ¼ of the cash and cash equivalents payment for the issuance of shares is required upon registration. The total value of shares issued for cash consideration and contributions in kind cannot fall below eur 12,5k. In the case of a one-man GmbH the overdraft must be secured. At least one manager must be appointed either by the article or by members’ resolution. France: SA (Société Anonyme) Germany: AG (Aktiengesellschaft) Italy: SpA (Società per Azioni) Shares of these types of companies are usually made freely transferrable, yet states can impose for restrictions on such transfers. As concerning minority shareholders protection, raising and maintenance of capital, powers of the BoD and GM there are detailed rules in each member state provided by their own jurisdiction. °The French SAS (Société par actions simplifiée)°  Shares of a SAS may not be offered to the public.  There are no mandatory rules regarding management, which is usually defined in the articles. The only requirement is the presence of a chairman, who detains the most extensive powers in the company  Both natural and legal persons may take part in a SAS  Minimum legal capital is eur 37 k  Taxation is the same as for public companies °Limited partnerships with shares°  No requirements for State permission of incorporation (vs Public limited companies in the 19th cent)  Some partners enjoy limited liability, some others (eg directors and managers) are subject to unlimited liability  SCA in France, KGaA in Germany and Sapa in Italy have legal personality  SCA: general partners are burdened with unlimited liability, they cannot transfer shares without the consent of all the members of the partnership Limited partners enjoy limited liability and hold transferrable shares. Such a partnership may be quoted on the stock exchange market  KGaA: at least one general partner. Relationships with limited partners and 3rd parties are regulated under the Commercial Code. Managerial power is restricted only to general partners. °Private companies in the UK°  It may or may not be limited by shares  No maximum number of members stated, nor minimum legal capital  In the constitution it is specified the amount to which every member must contribute in case if liquidation  Shares may not be offered to the public, there are no restrictions set forth by law but they are rather stipulated in the articles (such as power to refuse transfer or pre emption rights) °Private companies in France°  Members can be both natural and legal persons, whose max number is 100  Shares: may enjoy different rights, yet cannot be deprived of vote or being conferred multiple voting right Transfer is allowed under the concept of intuitus personae that is transfer must be approved by members The transfer to be valid must be in writing and registered at the Commercial Register The transferor is charged with a 4.8% tax for registration upon transfer  Management power is extensive, one or more managers (gérants) must be appointed and in some cases there us the mandatory appointment of statutory auditors to control over the management °Private companies in Germany (GmbH)°  GmbH enjoy distinct legal personality  Regulations for GmbH are to be found in the Commercial Code. When silent, regulations of other types of entities may be applied  Minimum legal capital is eur 25k (which might be lowered down to 10k)  Management is free, yetif a GmbH has more than 500 employees a supervisory board must set up (1/3 of whose members have to be employees’ representatives, if more than 2k the proportion is ½)  No restrictions are imposed on shares transferability (might be set out in the articles). The only requirement is that transfer must take place under notarial deed. Stock exchange dealings are not allowed  Shareholders’ liability falls only in acts towards the company and not towards 3rd parties °Private companies in Italy (SRL)°  Minimum legal capital is eur 10k  Shares cannot be issued at a discount, cannot be offered to the public, can be transferred inter vivos by notarial feed and can be inherited  For one-man SRL details about the sole owner must be deposited at the Register of Enterprises, if not respected the sole Sh becomes personally liable  The management is free and directors may be enabled top act individually or collectively under the form of the BoD  A supervisory Board is mandatory if the capital exceeds eur 120k °General partnership in UK°  They are regulated under UK Partnership Act 1890  It is not considered as an independent legal entity (not true in Scotland)  Everybody is subject to unlimited liability  Clear distinction between assets of the partnership and those belonging to partners  Duty to render the accounts and disclose full information is a duty owed to co- partners °General partnership in France (SNC)°  All partners are jointly and severally liable for acts carried out by the partnership, yet 3rd parties can sue individually Partners only after they have asked for remuneration and compensation to the Partnership and its assets were inadequate to satisfy such a claim  It acquires legal personality after a contract of formation is drafted privately and then deposited at the Register of Commerce and Companies  All members thereof are entitled to take part in the management and thus have the power of representing the company  Managers who are not partners in the partnership can be dismissed bu copurt resolution for good reasons at the request of partners When managers are also partners, their dismissal will result in immediate dissolution of the partnership, either if the articles do not express otherwise or by unanimous decision of the remaining partners  Articles may empower partners to overrule decisions taken by managers; that is called sovereign power of decision °General partnership in Germany (OHG)°  The partnership comes into existence after being registered at the Commercial Register, where details such as the name of the Partnership, names of the partners and registered office are deposited.  It is not considered as having a full legal personality, yet it may acquire rights and liabilities  Any of the partners can take on managerial decisions and has the power to binf the partnership in contracts with 3rd parties  All of the partners are held jointly and severally liable without limitations to satisfy debts and obligations  The entry of a new partner, as well as a transfer of rights to 3rd parties have to meet the consent of all the already existing partners °The German Partnerschaftgesellschaft°  As for the formation it must take written and prescribed form and be deposited at a separate Partnerschaft register which is public and open to inspections. It must include the name of the partnership (which must derive from the name of one of the partners adding key words regarding the type of entity), details of the partners, as well as place and objectives of the partnership °Equity securities issued by French companies° First of all the main distinction is between capital securities and loan securities. When talking about capital securities, the ones purchasing them become Shareholders of the company, while the ones purchasing loan securities are only creditors of the company. Both types may be in registered or bearer form. Private companies are enabled to issue preference shares. If the articles so provide they may issue actions de jouissance as well (by public companies too), which are shares that may be reimbursed by profits. Shares carrying multiple voting rights are not allowed, only in SAs may issue them. Preference shares: they may be created at the time of or subsequently to the formation of the company. They may receive a preference dividend, which may be both cumulative or not and may be granted special powers in certain matters. Their issuance is limited to being half of the total SC, being lowered to ¼ if the company is a quoted one. Securities giving rights of conversion into shares: these securities may be independent or attached to other shares. The final decision whether to convert such securities or not is always left to the holder. Resolution of the EGM is necessary to authorize the issuance of such shares, and every Sh have a pre-emption right over these. °Equity issued by German Companies° Shares may confer different rights and powers, yet multiple voting shares are prohibited under all circumstances in German public companies. And only preferred shares may be deprived of voting right. Private companies: transfer of shares have to be authorized in a notarial form. Shares in GmbH may have enhanced or no voting rights and may be preferential over dividend, repayment of capital or liquidation surplus. Public companies: Preference shares may be issued without voting right, total value of such shares may not exceed half of the SC. Cumulative preference shares may be issued without having voting right and may be entitled to a fixed dividend only. When preferential dividends are unpaid for two subsequent years these Sh gain voting right. When voteless their priority overcomes the one of voting preference shares. If not fully paid Sh cannot claim dividends. Such issuance must be authorized in the articles, wither at the incorporation or as a subsequent amendment. Withdrawal or limitation of such preference shares power must be authorized by a class voting of the Sh involved, such resolutions are to be passed by a ¾ majority. The same is required if new shares with the same preferential rights are to be issued. °Equity security issued by Italian companies° In private companies each Sh has only one share, whose size corresponds to the amount of capital subscribed. In public ones all the shares are of the same size and every shareholder holds a different number thereof. In private companies it is allowed to issue shares with preferential rights. Public companies may confer different rights only if different classes of shares are issued. Shares in private companies may be divided into more parts, shares of public ones cannot. When in public companies two or more persons own the same share they must elect a common representative. Public company’s shares may have or may not have a par value. Multiple voting right shares cannot be issued, yet the articles may provide for shares with no voting or limited voting rights. A company may issue preference shares, yet they may not exceed ½ of the SC. Saving shares may be issued by publicly held companies, such shares do not confer any voting right, yet those Sh are entitled to attend and vote at class meeting and may also attend general meetings. The issuance of financial instruments is also permitted under art. 2346 CC, in return for contributions made by Sh or 3rd parties. The holders of such are permitted to vote on particular matter and to appoint independent members of the managerial bodies. Shares can be in bearer form only if fully paid. Enjoyment shares can be issued against the restitution of outstanding shares for the purposes of lowering nominal capital. Such shares do not carry right to vote and participate only in distributions of dividends and liquidation surplus. The issuance of tracking shares is also permitted under art 2350 CC, such shares have financial rights corresponding to the results of a company in a given field of action. A resolution of GM which prejudicially affects the rights of different class of shareholders must be authorized by class voting first. °Increase and reduction of capital° °UK° Increase of capital: no company is now required to fix a ceiling on the number of shares. Company’s articles may require reso of GM to increase SC. Directors must be authorized either by the articles or by GM, such authorization will state the maximum number of shares to be issued and the expiry date. Pre-emption rights apply when there is an issuance of new shares. Reduction of capital: this may happen by means of a special reso of GM. Court consent is needed only for public companies. Capital may be reduced via extinguishing or reducing company’s liabilities for unpaid SC, or via cancellation lost or unrepresented capital, or by repaying any excess in SC. After passing such a resolution companies ask to a court for an order confirming it, after this creditors are entitled to object the reduction. °France° Increase of capital: this may occur through means of cash contributions or contributions in kind. Since an increase of SC involves amendment of the articles, quorum on first call is ¼, to be reduced to 1/5 on second call, whereas deliberating quorum is ½ of SC. All outstanding shares must be fully paid. A special appraiser is appointed where contribution in kind take place. In public companies increases of capital have to be authorized by EGM with a 2/3 majority of the present Sh. OGM is sufficient when increases of capital take place by means of capitalization. Increase may be by increase in the number of shares or by an increase in their nominal value. For the latter to take place there is the need of an unanimous consent of Sh. When the decision is whether or not to increase the capital further requirements are prescribed. A maximum period of time during which the delegation may be used and the maximum amount of SC that can be issued all accompanied by a complementary report. In quoted companies the board may sub delegate the power conferred by GM. If all the established capital fails to be subscribed in full by already existing Sh, directors and executives may lower the subscribed amount down to ¾ of the original, decide how to distribute such shares or offer them to the public. If still not all subscribed the operation is invalid. In the case of contribution in kind an EGM will decide in the evaluation of the contributions after an expert appointed by court prepared a report and submitted it to GM. Reduction of capital: A private company may reduce its nominal capital or the number of shares by means of EGM resolution, if the company has auditors such reduction must be submitted to them. If the reduction is approved by EGM creditors may oppose to it within 1 month from the deposit of the relevant reso at the Reegistrar of the commercial court. For a SARL it is forbidden to purchase its shares, yet GM may authorize managers to reacquire shares for cancelling them. If the SC falls below half of the capital stated the company may decide tow inf up. If this does not occur the company must reduce its capital by the amount it cannot write off or increase its assets to reach at least such a half. A public company needs EGM reso to reduce its capital too. An SA may write off losses or repay capital in excess. If the reduction is motivated by losses EGM will deliberate after having been submitted a report from the board and the auditors. If a reduction in the nominal value of capital is authorized Sh cannot oopose to such. If the reduction is not motivated by losses it can take place in two different ways: an offer to purchase shares to all the Sh or to some specific Sh. After such purchase Shares must be cancelled within 1m. Listed companies whose SC has fallen below the stated one must either reduce their capital by authorization of EGM reso or wind up. If neither steps are taken anyone may request the court to dissolve the company.  Articles may set remuneration and salary of directors, as well as quantum meruit if the directors perform services not contemplated in their contracts.  Articles may require retirement by rotation  If directors lose requirements they shall vacate office, these requirements include bankruptcy, insolvency, absence from GM or mental conditions  Directors can generally be dismissed at any time, yet this may be avoided by granting them multiple voting right °Power of directors°  The allocation of powers is provided in the articles  Usually all the powers are conferred to the BoD, expect those powers which are mandatorily to be executed by GM  The BoD detains broad power of delegation to individual directors and other agents °Duties of directors°  Directors owe fiduciary duties of reasonable care, skill and diligence to the company, and they have to exercise their powers bona fide in the best interests of the company.  They should not make unauthorized profits given their position as directors, if this occurs they must communicate so to the BoD. They shall not make use of corporate information and opportunities for personal interests.  They owe fiduciary duty not to be in conflict of interests regarding exploitation of property, information and opportunity. If such conflicts exists they must communicate so to the BoD or to GM, who will accept or not such contract, if not accepted such contract entered with a conflict of interests is void. °The general meeting°  The Company Act 2006 requires public companies to hold annual general meetings, such requirements is not applicable to private companies.  GM has to approve annual accounts, dismiss directors and decide whether to take an action against them. If actions are not taken, then minority Sh have right to bring a derivative action.  GMs have to be held once a year and upon request of a 10% Sh  GMs can be replaced by written resolution  GMs require 14d notice, 21d if an AGM  Ordinary resolutions require simple majority, special resolutions require a ¾ majority of the vote actually cast and a special notice of 28d before the meeting to be notified. °Minority protection°  Shareholders derivative action may be brought up by any member of the company. It may be brought for both an active or passive commission of a wrongdoing (eg negligence, default breach of duty or trust). Should the act or the omission thereof been authorized by a previous resolution of GM the court won’t sustain such claim.  Minority SH in some cases may be entitled to an indemnity  Shall the relevant act or lack thereof infringe personal rights of a shareholder, they might sue in respect of their personal rights or bring an action in representative form. FRANCE °Power and duties of managers in a SARL°  The appointment us by articles for the first managers, subsequently by resolution in GM with at least half of positive votes of the whole SC. Shall the meeting be called a second time, simple majority voting will suffice.  Managers may be removed by reso of the GM with the same rules applying to their appointment. Good cause is not needed, yet in absence of such managers are entitled to a claim for damages.  In a SARL it is prohibited to borrow or secure personal debts of managers or shareholders with company assets without ratification by GM. In a one person SARL the decision must be included in the Company’s register of decisions. °Control over the management of a SARL°  GM have to approve the accounts of the financial year within 6 m from its ending  Managers have the duty to provide Sh with financial reports, report of the statutory auditors and a text of the proposed reso 15 d before the GM takes place.  Managers are jointly and severally liable towards the company, its members and 3rd parties  Anyone may bring a derivative action against managers °Position of members of a SARL°  Members of a SARL enjoy right of inspection and of being informed of the company’s affaires  Decisions may be reached through GM, which may be called by Sh holding ½ of the SC or representing ¼ of all Sh, or by written consultation.  Ordinary reso need to be passed on first call with the majority vote of the majority of shares, on second call with a majority of votes actually cast  Extraordinary meetings reso need to be passed by a ¾ majority  Multiple voting rights may not be given to particular shares, nor may be deprived of such right. °The single board system°  Directors: may be both natural and legal persons (if natural may hold max 5 registered offices in France). They are first appointed by the articles (with an office duration of 3y), then by GM (max 6y duration). They must be no less than 3 and no more than 18 plus at max 4 employee representatives. Their dismissal may be through Sh reso at any time by OGM or EGM. Damages are contemplated only if prejudicial circumstances arise.  The BoD: defines company’s policies and exercises supervision over the management. It prepares annual accounts and draw up inventory, call GM and authorize agreements drafted by the chairman.  Managing directors, assistant managing directors and executive officers carry out the proper management of the company  The chairman of the Board must be a natural person, is appointed by the BoD whose end coincide with the one of the Chairman appointment.  Managing director enjoys the most extensive powers within the company. They are permitted to exercise their powers within the limits set by the company’s objects. They can bind the company with 3rd parties. They may ask the GM to appoint up to 5 executive officers or assistant managing directors holding the same power as the chairman. °The dual board system°  The executive board: it carries out the actual management of the company. Mx 5 members, 7 if the company is public. Members must be natural persons and cannot be members of the supervisory board. Their office may last from 2 up to 6 years. They are appointed by the SB, who can order their dismissal. If such dismissal is without good cause they are entitled to a claim for damages. One or more members of such board may be nominated as executive officers by the SB, conferring them the same powers. The EB must submit reports on management and prepare annual accounts.  The supervisory board: it is appointed by the articles and then by subsequent reso of GM, with an appointment of max 6y. Between 3 and 18 members plus employee representatives. Natural persons max 5 directors in registered offices in France. The SB is entitled to carry out inspections. It nominates members of the executive board and their chairman, as well as their dismissal. The SB elects a chairman and a vice-chairman. °Directors liability°  Granting loans and guarantees by companies to directors and executives is prohibited and void. Not applicable if directors are legal persons.  When there is an agreement between the company and one of the directors, executives or Sh possessing more than 10% of SC and another company where the same persons covers one of the positions above listed, it needs the approval of the BoD or of the GM if the person is in the BoD. If the GM does not grant such approval the company may claim damages.  Managing directors, executive officers and members of the boards musr respect limitations of their powers set by law. Should such limitations be infringed, then action for damages will be brought against them both personally and via a derivative action. °The position of Shareholders°  GM has the power to appoint and dismiss directors, executives and members of the ExB, as well as that of approving the accounts.+  Meetings may be ordinary or extraordinary. Ordinary meetings require presence of 1/5 of shares entitled to vote, resolutions are passed by simple majority Extraordinary meetings require the presence of ¼ of shares entitled to vote, which becomes 1/5 on second call. Resolutions are passed with a 2/3 majority. Sh may dismiss them with a ¾ vote cast. Court may dismiss them on request of the SupB.  The SupB appoints and dismisses managers. It has right of inspection and is in charge of approving financial accounts and submit them with all the accompany notes to Sh in general meetings.  They also are under a duty of care and responsibility and may be subject to criminal provisions. °The General Meeting°  GMs principal tasks are: passing resolutions concerning the company’s legal and financial structure, elect the SupB, instituting proceedings against members.  It must be called within 8 months from the end of the financial year so as to approve the accounts and determine what to do with profits, 1/20 of which must be transferred to the statutory reserve  Articles may provide for participation to GMs only if communicated intention of the Sh to attend such meeting is given notice of 7 days before the GM. In the case of public companies, a certificate of ownership of shares must be presented 21 days before such meeting.  Notice of GM includes date, time, place and items on the agenda. Sh have right of inspection on the agenda.  Every fully paid share confers voting rights. No multiple voting shares are allowed and non voting shares only in the case of cumulative preference shares, when dividends to be paid is no more than 1 year in arrear.  Proxies are authorized. They last 15 months and can be revoked at any time. They are valid only if specifics have been provided by Sh. Persons appointed as procies must inform Sh of GM decisions and vote.  Either simple majority for ordinary or a ¾ majority of vote cast for extraordinary may be needed. In some cases class voting shall apply, with a ¾ majority of the class interested in the reso.  Every GM must be recorded in minutes to be deposited at the commercial register. °Minority protection°  Holders of at least 10% of SC are empowered to prevent waiver of certain claims that the company may have against members of the board of managers.  The AktGG sets forth the rules governing preliminary procedures, that is such actions may be purported only if authorized by reso of GM, which may appoint special representatives to assert the claim for damages. If the Gm fails to do so, the court may.  If Sh having at least 1% of SC or eur100k in value had acquired their shares before they became aware of the alleged breach of duty, they might be granted the permission for a direct action against the company. ITALY °Public companies° Quoted public companies are subject to stricter limitations set out in the Code for Corporate Governance, if they do not they are required to state why they do not abide by such compliance. The Code requires the formation of an Internal Code Committee and a Remuneration Committee, consisting of mainly independent directors. Public companies in Italy may decide whether to apply the traditional structure of management or the new models, that are the dualistic and the monistic one. °Management in accordance with the traditional model° First directors are usually named in the deed pf incorporation, if not they are subsequently elected via deliberation of the GM. Their office may not last more than 3 y. Persons who are mentally ill, bankrupt or subject to a penalty are not suitable to be directors. They may be reappointed. They have to elect a chairman who presides over the BoD. The BoD may elect one or more managing directors to whom its powers are delegated. The BoD exercise its powers collectively and with the accordance of the majority of its members. Directors may act with their full right respecting limitations set by the articles. Such limitations may not be imposed on 3rd parties who acted in good faith. Particulars of remuneration of directors or managers are set either in their contracts or determined by GM. Directors and auditors of public company must declare yearly to CONSOB the amount of remuneration obtained by the company. Directors are held jointly and severally liable if they fail to fulfil the duties imposed on them by law. A director may avoid liability for improper actions in which he has not taken part in. In this case he has to record his dissent in the minutes and give written notice to the chairman. They cannot cover management or directive positions in other companies engaged in the same business unless authorised by GM. If a conflict of interests arises and the directors has not previously asked for the BoD or the committee of auditors’ permission he should inform the above mentioned bodies. Liability may arise within 90 days from the relevant decision An action or breach may be brought by the company and needs to be passed by at least 1/5 majority. If such a majority is reached the director is dismissed. SH holding at least 1/5 of the SC may bring a derivative action against the company. °Committee of auditors in unquoted companies° The committee of auditors of an unquoted company consists of 3 to 5 statutory plus two alternate auditors. They are appointed by GM or deed of incorporation. Their office duration is 3 y. Persons within the 4th degree of relationship with persons covering managing or directive position in the same company cannot be appointed as auditors. Committee of auditors of a company which has not access to venture capital may audit its annual accounts. If the company has access to venture capital annual accounts are subject to external control by auditing firms recognized by CONSOB. The committee must report to GM and may attend board and executives meetings. The Committee has the right of inspection which can be exercised both on an individual or collective basis. Controls may be requested to the court by 10% SH committee of auditors, supervisory board or the internal committee if grave irregularities arise. Then the GM may appoint new directors and auditors, if this does not prove sufficient the court will appoint external directors and auditors to manage temporarily the company. °committee of auditors in quoted companies° Rules concerning the committee of auditors in quoted companies are contained in the Decree Law No. 58 of 1998. The committee has to be composed at least by 3 regular members and two alternate members. Rules for appointment dismissal and limitations are to be set in the provisions, which require at least one member of the committee to be elected by employees. The committee is required to observe that the company policies and regulations are abided by as well as examining the adequacy of organization and provisions in the case of a controlling company owning subsidiaries. The committee of auditors may attend GMs, and meeting of the BoD. If members fail to attend 2 of such meetings without good reasons, they vacate office. The committee is required to communicate to CONSOB any irregularity and to send the relevant minutes of GMs. Directors are required to report to the committee. The committee has power of inspection and control and may call meetings of boards as well provided that it gave notice thereof to the chairman. The committee refers to GM’s any supervisory activity it has carried out and can make proposals to GM. °The dualistic system° The supervisory board is to be formed at least by three members to be appointed in the articles and subsequent offices to be assigned through GM, their office lasts up to 3y. Under the dualistic system the supervisory board has most of the powers granted to the committee of auditors and some of the GM when the traditional system is applied. Its main role is to supervise the conduct of executives and to make reports of irregularities to the competent bodies, as well as to make approvals of annual accounts, which must be subsequently approved by external auditors (no for companies having access to venture capital market). °The unitary board system° This model entails a BoD, whose one third of the members must fulfil the requirements of independence. If the company has access to market for venture capital, the establishment of a Internal audit committee is mandatory, which have to include at least 3 members, sho have to satisfy the requirements of independence regarding management of the same company or of companies which controls or are under the control of the company. At least one member of such committee must be entered in the register of auditors. This board examines the organizational structure and the system of internal control administration and accounting, as well as perfomances carried out by authorized by directors. °General meetings° Ordinary GMs are held once a year, within 120 days from the end of the financial year, which become 180 days in the case in which a company has to prepare consolidated financial accounts. The GM powers cover: approval of the accounts, appointment and dismissal of directors, chairman, committee of auditors, external auditors, and supervisory board if present. Furthermore it has to set their remuneration in case articles are silent about it. A GM deliberating on managerial decision has to pass the relevant resolution to the Board. °Private companies° Directors: Unless otherwise provided, directors have to be members of the company. They can be appointed either by the deed of incorporation of by resolution of the GM. Their office has no mandatory period. The deed may prescribe for both individual and collective power of representation, while actions involving the BS as well as corporate changes have to be carried out by the board as a whole. Resolutions where votes have been cast by directors having personal interests in it may be challenged within 3m by any director or committee of auditor. Directors may be released by their liabilities if 2/3 shareholders support it and this decision is not opposed by SH owning more than 10% of SC. The committee of auditors: In an SRL its establishment may be required by the deed of incorporation or by law if some limits regarding capital and returns of the company are exceeded. Members who are not involved in the management of the company have the right of inspection and to be informed by directors. Decisions of the members: Decisions of the members are to be found in the deed of incorporation. These include: Approval of accounts and distribution of dividends, appointment of directors, committee of auditors and external auditor, amendment of the deed and decisions involving corporate changes. If provided by the deed consultations of SH may take written form. Methods regarding the calling of a meeting are stated in the deed. Members may be represented in meetings. If not differently stated GM take place at the seat of the company with the presence of at least half of the SC representatives. Decisions are taken by absolute majority. Resolutions not been taken in conformity with the law or the deed may be challenged by dissenting members within 6 m from its entrance in the company’s register of decisions. Decisions having illegal objects or in absence of SH information within 3y and purporting illegal or impossible activities can be challenged anytime. Accounts and distribution of profits: Accounts must be presented to SH within 120d from the end of the financial year. Profits may be distributed only if they are really earned and based upon a regular approved BS. Minority rights: Every SH may bring a derivative action and has the right to participate in the decision making process by exercising his voting rights. Withdrawal is usually regulated by the deed of incorporation, or however always granted in case of SH dissenting from resolutions involving corporate changes. Chapt. 8 Employees participation °The position in the UK° Given the massive importance of the union representatives in the UK there is no compulsory employee representation on the boards of UK companies. °The position in France° The work council, personnel representatives and the trade union delegation are the three bodies representing the interests of employees in an undertaking. Expression groups can be established via collective agreements. Public companies may allow employees’ representatives to sit on the management board. °Employees’ representatives on the boards of public companies in France° The Commercial Code grants to SAs employees may be members of the executive board. Such directors may be 4, 5 if the company’s shares are admitted on a regulated market. Employees with a contract commencing 3 m before the election are eligible to vote, whilst candidate directors must have a contract of employment commencing at least 2 y before their nomination. The maximum lasting of their office is six years, to be renewed. Employees’ directors must be SH of the company. Employees’ representatives cannot be appointed for other offices in other employees’ representatives bodies. One or more employees must be elected as directors if employees collectively detain more than 3% of share capital. °Employee representation on the supervisory board in Germany° Supervisory Board can be established on a voluntary basis ,m it is mandatory for large GmbHs which are regulated under the Codetermination Laws, this board has both managerial and representative powers. °Codetermination in Coal, Iron and Steel companies° The supervisory Board is required to grant equal representation of SH and employees, plus a neutral chairman elected by SH and employees’ representatives collectively. The Codetermination Act applies to all companies employing more than 1000 persons. The supervisory board will have at least 11 members, two of whom must belong to the workforce and other 2 at max from unions. Unions must be consulted before employees’ representatives election. Employee directors sitting at the board may not be appointed nor dismissed against majority of the employees representatives’ votes. Codetermination in certain holding companies: For controlling companies operating in the Coal, Iron and Steel industries the mandatory structure of the Supervisory Board includes 7 employee representatives, 7 representatives of SH and a chairman. Codetermination under the Works council Act 1952: this act applies to all companies employing more than 500 employees. Pursuing this act at least 1/3 of the supervisory board had to be employees representatives. At least one employee representative had to be elected if any, and at least 2 if 2 or more had to be elected. Codetermination under the Act of 2004: this act applies to companies employing between 500 and 2k persons as well as to companies employing less than 500 persons established before Aug 1994. 1/3 of the members of the supervisory board must be taken from the undertaking. The number of representatives on the supervisory board of a public company depends on the nominal capital of such. Such representatives must be of legal age and have worked for the company for at least one year. Their election is carried by simple majority. if disadvantageous and shall provide for compensation. GmbHs are more likely to enter de fact groups than contractual ones since in GmbH SH already have the power to influence over the management. De facto groups in which a GmbH is the dependent company: In the ordinary de facto group the controlling company places the dependent under an uniform management. In this case it is forbidden for the controlling company to exercise any detrimental influence. If the controlling company breaches its duties, minority SH are entitled to an action for default against both companies. SH of the dependent company have the right to avoid reso passed by GM and may withdraw from the company if important grounds for doing so are present. Qualified de facto groups: In qualified de facto groups it is possible to isolate individual transactions and to measure the amount of loss and damage resulting therefrom. The German Supreme Court held that it is possible for a controlling undertaking to avoid liabilities imposed on them by Para 302-303 of the AktG if the dependent company uses proper accounting methods. These para imposes liability on the controlling company when it is evident that, because of the controlling influence over the subsidiary, not enough care was put in the administration of the affairs of the latter company. The new concept of liability for causing insolvency: There are two positive and one negative conditions as concerning the imposition of liability for causing company’s insolvency. The two positive are that the SH must have deprived the company of its assets without full consideration and this deprivation resulted in the company not being able to repay its debts. The negative is that the unlimited liability only arises when the loss cannot be fully compensated, or when the SH demonstrate that with a lawful act the company wouldn’t have become insolvent. In insolvency proceedings the claim must be brought by liquidators, yet every creditor may pursue his claims against SH if the first execution is fruitless. The onus is placed on SH to demonstrate that the loss caused by his actions didi not influence the downfall of the company. °The new provisions of Italian Law concerning groups of companies° Direction and coordination of companies is presumed whenever a parent is required to include its subsidiaries in the consolidated accounts, that is when the company exercise a dominant influence at GM of the subsidiary. Should a company exercise control over another, it will be held responsible for any loss of the subsidiary and its creditors whenever the latter proves not to be capable of compensation for its debts. For these reasons the subsidiary should always indicate its subjection to direction and coordination of another company in a section of the Register of Enterprises. A subsidiary should provide details of BS of the parent company in its notes on accounts, as well as details of their relationship with the parent and with other subsidiaries. A right of withdrawal is granted in three cases: when the company has converted itself in a company of another kind, when a member of the subsidiary obtained a court judgement stating that the parent has exercised direction and coordination rights in a manner which results in liability, and when the direction and coordination process has a begin and an end (this is not true in case of public companies). °Definition of groups of companies and related concepts° The position in the UK: Sect. 1159 of the Company Act 2006 states that a company is being treated as a subsidiary of another company in any of four ways, namely: 1. Holds a majority of the voting rights in it 2. Is a member of it and has appointment and dismissal power over majority of BoD 3. Is a member of it and controls it, either alone or through agreements with SH, a majority of the voting rights 4. Is a subsidiary of a company which is itself a subsidiary of that other company The position in France: No general definition under French law for groups of companies, yet there are about subsidiaries, participation and control. If a company holds more than 50% of shares of another one, that is said to be its subsidiary. When holds at least 40% it is presumed to being able to determine the results at GM and when at least 20% a significant influence of the management of the company is presumed. A company is treated as being a controlling one under the following circumstances: 1. When it holds a fraction of the capital conferring in it the majority of votes in GM 2. It posses the majority of voting rights by virtue of an agreement with SH 3. When it has de facto power, that is it is able to influence and determine results of the vote of a GM. The position in Germany: As under para 290 of the German Commercial Code groups are defined for the concept of consolidated accounts basing on the principles of uniform management and control. That is a company has to produce consolidated accounts when there is a vertical group where the controlling undertaking has one or more controlled undertakings. Or when an entity has majority of the voting rights of another undertaking or when it has the power to appoint and dismiss the majority of members of its management or supervisory boards. The position in Italy: Art 2359(1) of the Italian Civil Code defines controlled and associated companies under these three cases: 1. When a company holds the majority of votes in GM of another company 2. When a company has sufficient voting power to exercise an influence at GM 3. When companies are under the dominant influence of another company by reasons of particular contractual arrangements Influence is presumed whenever a company can exercise a 1/5 voting power, or 1/10 in case of public listed companies. Apart from the categories above, under another two cases companies are required to prepare consolidated accounts, namely: 1. Enterprises over which another enterprise has the right, by contract or clause in the articles, to exercise a dominant influence 2. Enterprises in which a shareholder pursuant to an agreement with other SH controls himself a majority of voting rights. °Group liability° Subsidiaries are often use to limit liabilities, since in UK law the directors of a parent company owe no duties towards its subsidiaries. Yet Group liability may arise if voluntarily assumed or by means of control contract establishment. Group liability involves the system of crossguarantees, that is when parent and subsidiaries may assume liability for each other and for the whole group of indebtedness. Some state, such as France, will be prompter to pierce the corporate veil than others (UK). In France a parent may be held liable for its subsidiaries’ debts, even in case of liquidation, if it is clear that assets have been commingled, where the subsidiary’s legal personality is of a fictitious character or where the two have seemed to be a single legal entity from an outsider viewpoint. When considering PCV it is given great importance to the concept of capitalisation. If a parent company has orchestrated subsidiaries’ affaires without proper regard of the interests of creditors, it may incur in tortious liability. In Germany a controlling undertaking may not exercise any detrimental influence on subsidiaries regarding the maintenance of capital. If this happens the controlling company incus liability to the subsidiary and every minority SH may enforce this claim. Group liability may incur In UK law when a parent is required to pay liquidation of the subsidiary in whole or in part. This may happen when the controlling company has taken part in the management with a fraudulent scope or when it has acted as the shadow director of the subsidiary. In this case a liquidator may impose to the parent the payment of a contribution to the subsidiary. The onus is on directors to prove that they not failed to recognise that the subsidiary would have gone in insolvent liquidation. Similarly in France this concept is translated into that of dirigeant de fait, that is when a controlling company has exercised extensively managerial and financial power over the subsidiary, causing a reduction of managerial power thereof. Special provisions protecting creditors: Minority shareholder protection: In Germany SH have right of information about the affairs of the company by the managers, and have right of inspection. Yet this right may be denied if there is the suspect that SH will use this information for personal or unrelated with the company’s aim purposes. This decision is up to GM, and dissenting SH may challenge such denial in court. Art. 2367 of the Civil Code empowers SH with 1/10 SC to call for GM and propose items in the agenda thereof.