BETA

Activities of Sajjad KARIM related to 2018/0114(COD)

Shadow reports (1)

2016/11/22
Committee: JURI
Dossiers: 2018/0114(COD)
Documents: PDF(1 MB) DOC(472 KB)

Amendments (35)

Proposal for a directive
Recital 4

(4) These developments in the case-law have opened up new opportunities for companies and firms in the Single Market in order to foster economic growth, effective competition and productivity. At the same time, the objective of a Single Market without internal borders for companies must also be reconciled with other objectives ~~of European integration such as social protection (in particular the protection of workers),~~such as the protection of creditors and the protection of shareholders. Such objectives, in the absence of harmonised rules specifically regarding cross-border conversions, are pursued by Member States through a number of multifarious legal provisions and administrative practices. As a result, whereas companies are already able to merge cross-border, they experience a number of legal and practical difficulties when wishing to perform a cross-border conversion. Moreover, the national legislation of many Member States provides for the procedure of domestic conversions without offering an equivalent procedure for converting cross-border.

2018/09/25
Committee: JURI

Proposal for a directive
Recital 5

(5) This leads to legal ~~fragmentation and legal~~ uncertainty, and thus to barriers to the exercise of the freedom of establishment. ~~It also leads to a suboptimal protection of employees, creditors and minority shareholders within the Single Market.~~

2018/09/25
Committee: JURI

Proposal for a directive
Recital 6

(6) It is appropriate therefore to provide procedural and substantive rules on cross-border conversions which would contribute to the abolition of restrictions on freedom of establishment and provide at the same time adequate and proportionate protection for stakeholders, such as employees, while respecting national employment laws, and providing certainty for creditors and minority shareholders.

2018/09/25
Committee: JURI

Proposal for a directive
Recital 7

(7) The right to convert an existing company formed in a Member State into a company governed by another Member State may in certain circumstances be used for abusive purposes such as for the circumvention of labour standards, social security payments, tax obligations, creditors', minority shareholders' rights or rules on employees participation. In order to combat such possible abuses, a general principle of Union law, Member States are required to ensure that companies comply with national laws and do not use the cross-border conversion procedure in order to create artificial arrangements ~~aimed at obtaining undue tax advantages or at~~or unduly prejudic~~ing~~e the legal or contractual rights of employees, creditors or members. In so far as it constitutes a derogation from a fundamental freedom, the fight against abuses must be interpreted strictly and be based on an individual assessment of all relevant circumstances. A procedural and substantive framework which describes the margin of discretion and allows for the diversity of approach by Member States whilst at the same time setting out the requirements to streamline the actions to be taken by national authorities to fight abuses in conformity with Union law should be laid down.;

2018/09/25
Committee: JURI

Proposal for a directive
Recital 10

(10) To allow all stakeholders' legitimate interests to be taken into account in the procedure governing a cross-border conversion, the company should disclose the draft terms of the cross-border conversion containing the most important information about the proposed cross- border conversion, including the envisaged new company form, the instrument of constitution and the proposed timetable for the conversion. Members, creditors, investors and employees of the company carrying out the cross-border conversion should be notified in ~~order~~a timely manner so that they can submit comments with regard to the proposed conversion.

2018/09/25
Committee: JURI

Proposal for a directive
Recital 14

(14) With a view to avoiding disproportionate costs and burdens for smaller companies carrying out the cross- border conversion, micro and small enterprises, as defined in the Commission Recommendation 2003/361/EC45 , should be exempted from the requirement to produce an independent expert report. However, these companies can resort to an independent expert report to prevent litigation costs with creditors. _________________ 45 Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises (OJ L 124, 20.5.2003, p. 36).deleted

2018/09/25
Committee: JURI

Proposal for a directive
Recital 20

(20) In order to prevent the circumvention of employee participation rights by means of a cross-border conversion, the company carrying out a conversion which is registered in the Member State which provides for the employee participation rights, should not be able to perform a cross-border conversion without ~~first~~ entering into negotiations with its employees or their representatives when the average number of employees employed by that company is equivalent to ~~four fifths of~~ the national threshold for triggering such employee participation.

2018/09/25
Committee: JURI

Proposal for a directive
Recital 22

(22) The issue of the pre-conversion certificate by the departure Member State should be scrutinised to ensure the legality of the cross-border conversion of the company. The competent authority of the departure Member State should decide on the issue of the pre-conversion certificate within one month of the application by the company, unless it has serious concerns as to the existence of an artificial arrangement ~~aimed at obtaining undue tax advantages or~~ unduly prejudicing the legal or contractual rights of employees, creditors or members. In such a case, the competent authority should carry out an ~~in-depth~~ assessment. However, this ~~in-depth~~ assessment should not be carried out systematically, but it should be conducted on a case-by-case basis, should not create disproportionate burdens, and should only be carried out where there are serious concerns as to the existence of an artificial arrangement. For their assessment, competent authorities ~~should~~may take into account ~~at least~~ a number of factors laid down in this Directive which however should be only considered as indicative factors in the overall assessment ~~and not be considered in isolation~~. In order not to burden companies with an overly lengthy procedure, ~~this in-depth~~an assessment should in any event be concluded with~~in two months of informing the company that the in-depth assessment will be carried out.~~out delay and with minimal administrative burdens;

2018/09/25
Committee: JURI

Proposal for a directive
Recital 24

(24) In order to provide for the appropriate level of transparency and use of digital tools and processes, the decisions of competent authorities in the departure and destination Member States ~~should~~may be exchanged by means of the system of interconnection of business registers ~~and should be made publically available~~.

2018/09/25
Committee: JURI

Proposal for a directive
Recital 40

(40) ~~The right of c~~Companies to carrying out a cross- border division may in certain circumstances be used for abusive purposes such as for the circumvention of labour standards, social security payments, tax obligations, creditors' or members' rights or rules on employees participation. In order to combat such abuses, as a general principle of Union law, Member States are required to ensure that companies do not use the cross- border division procedure in order to create artificial arrangements aimed at obtaining undue tax advantages or at unduly prejudicing the legal or contractual rights of employees, creditors or members. In so far as it constitutes a derogation from a fundamental freedom, the fight against abuses must be interpreted strictly and must be based on an individual assessment of all relevant circumstances. A procedural and substantive framework which describes the margin of discretion and allows for the diversity of approaches by Member States whilst at the same time setting out the requirements to streamline the actions to be taken by national authorities to fight abuses in conformity with Union law should be laid downshould pay due regard to the principle of subsidiarity and the competences of Member States involved regarding employment, social security and tax laws.

2018/09/25
Committee: JURI

Proposal for a directive
Recital 41

(41) Given the complexity of cross- border divisions and the multitude of the interests concerned, it is appropriate to provide for an ex-ante control in order to create legal certainty. To that effect, a structured and multi-layered procedure should be set out whereby both the competent authorities of the Member State of the company being divided and of the Member State of the recipient companies ensure that a decision on the approval of a cross-border division is taken in a fair, objective and non- discriminatory manner on the basis of all relevant elements and by taking into account all legitimate public interests, in particular the protection of employees, shareholders and creditors.deleted

2018/09/25
Committee: JURI

Proposal for a directive
Recital 43

(43) In order to provide information to its members, the company being divided should prepare a summary report. The report should explain and substantiate the legal and economic aspects of the proposed cross- border division, in particular explaining the implications of the cross- border division for members with regard to the future business of the company and the management organs’ strategic plan. It should also include explanations about the exchange ratio, where applicable, the criteria to determine the allocation of shares and potential remedies available to members, where they do not agree with the decision to carry out a cross-border division.

2018/09/25
Committee: JURI

Proposal for a directive
Recital 44

(44) In order to provide information its employees, the company being divided should prepare a summary report explaining the implications of the proposed cross-border division for employees. The report should explain in particular the implications of the proposed cross-border division on the safeguarding of the jobs of the employees, whether there would be any material change in the conditions of employment and the locations of the companies’ places of business, and how each of these factors would relate to any subsidiaries of the company. The provision of the report should be without prejudice to the applicable information and consultation proceedings instituted at national level following the implementation of Directives 2001/23/EC, 2002/14/EC or 2009/38/EC.

2018/09/25
Committee: JURI

Proposal for a directive
Recital 45

(45) In order to ensure the accuracy of the information contained in the draft terms of division and in the reports addressed to the members and employees and to provide factual elements necessary to assess whether the proposed division constitutes an artificial arrangement which could not be authorised, an independent expert report to assess the division plan should be required to be prepared. In order to secure the independence of the expert, the expert should be appointed by the competent authority, following an application by the company. In this context, the expert report should present all relevant information to enable the competent authority of the Member State of the company being divided to take an informed decision as to whether or not to issue the pre-division certificate To this end, the expert should be able to obtain all the relevant company information and documents and carry out all necessary investigations in order to gather all the evidence required. The expert should use information, in particular net turnover and profit or loss, number of employees and the composition of balance sheet collected by the company in view of the preparation of financial statements in accordance with Union law and the law of Member States. However, in order to protect any confidential information, including business secrets of the company, such information should not form part of the expert’s final report which itself would be publically available.deleted

2018/09/25
Committee: JURI

Proposal for a directive
Recital 46

(46) With a view to avoiding disproportionate costs and burdens for smaller companies carrying out cross- border division, micro and small enterprises as defined in the Commission Recommendation 2003/361/EC of 6 May 2003 should be exempted from the requirement to have produce an independent expert.deleted

2018/09/25
Committee: JURI

Proposal for a directive
Recital 47

(47) On the basis of the draft terms of the cross-border division and the reports, the general meeting of the members of the company being divided, should decide on whether or not to approve those draft terms. It is important that, the majority requirement for such a vote should be sufficiently high in order to ensure that the decision to divide is a collective one.deleted

2018/09/25
Committee: JURI

Proposal for a directive
Recital 48

(48) It is appropriate that members who held voting rights and who did not vote to approve the draft terms of the cross- border division and those members without voting rights, who could not present their position, should be afforded the right to exit the company. Those members should be able to leave the company and receive cash compensation for their shares equivalent to the value of their shares. Furthermore, they should have a right to challenge the calculation and adequacy of that cash compensation offered and also the share exchange ratio where they wish to remain members of any of the recipient companies before a court. As part of those proceedings, the court should be able to order any company involved in the cross-border division either to pay additional cash compensation or to issue additional shares.deleted

2018/09/25
Committee: JURI

Proposal for a directive
Recital 63

(63) The Commission should carry out an evaluation of this Directive. It should examine its impact on the economy, competitiveness and growth. Pursuant to paragraph 22 of the Interinstitutional Agreement between the European Parliament, the Council of the European Union and the European Commission on Better Law-Making of 13 April 201652 that evaluation should be based on the five criteria of efficiency, effectiveness, relevance, coherence and value added and should provide the basis for impact assessments of possible further measures. _________________ 52 OJ L123, 12.5. 2016, p. 1.

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

3. Member States shall ensure that the competent authority of the departure Member State shall not authorise the cross-border conversion where it determines, after an examination of the specific case and having regard to all relevant facts and circumstances, that it constitutes anWith due regard and respect for subsidiarity and Member States competences regarding tax and employment laws, Member States shall aim to prevent artificial arrangements aimed at ~~obtaining undue tax advantages or at~~ unduly prejudicing the legal or contractual rights of employees, creditors or minority members.

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 g – title

~~Article 86g Examination by an independent expert~~deleted

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 g – paragraph 1

Member States shall ensure that the company carrying out the cross-border conversion applies not less than two months before the date of the general meeting referred to in Article 86i to the competent authority designated in accordance with Article 86m(1), to appoint an expert to examine and assess the draft terms of the cross-border conversion and the reports referred to in Articles 86e and 86f, subject to the proviso set out in paragraph 6 of this Article.deleted

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 g – paragraph 1 – subparagraph 1

The application for the appointment of an expert shall be accompanied by the following: (a) the draft terms of the cross-border conversion referred to in Article 86d; (b) the reports referred to in Articles 86e and 86f.deleted

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 g – paragraph 1 – subparagraph 1 – point a

~~(a) the draft terms of the cross-border conversion referred to in Article 86d;~~deleted

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 g – paragraph 2

2. The competent authority shall appoint an independent expert within five working days from the application referred to in paragraph 1 and the receipt of the draft terms and reports. The expert shall be independent from the company carrying out the cross-border conversion and may be a natural or a legal person depending upon the law of the departure Member State. Member States shall take into account, in assessing the independence of the expert, the framework established in Articles 22 and 22b of Directive 2006/43/EC.deleted

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 g – paragraph 3

3. The expert shall draw up a written report providing at least: (a) a detailed assessment of the accuracy of the reports and information submitted by the company carrying out the cross-border conversion; (b) elements necessary for the competent authority, designated in accordance with Article 86m(1), to carry out an in-depth assessment to determine whether the intended cross-border conversion constitutes an artificial arrangement in accordance with Article 86n, including at a minimum the following: the characteristics of the establishment in the destination Member State, including the intent, the sector, the investment, the net turnover and profit or loss, number of employees, the composition of the balance sheet, the tax residence, the assets and their location, the habitual place of work of the employees and of specific groups of employees, the place where social contributions are due and the commercial risks assumed by the converted company in the destination Member State and the departure Member State.deleted a description of all factual

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive 2017/1132
Article 86 g – paragraph 3 – point a

~~(a) a detailed assessment of the accuracy of the reports and information submitted by the company carrying out the cross-border conversion;~~deleted

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 g – paragraph 3 – point b

(b) a description of all factual elements necessary for the competent authority, designated in accordance with Article 86m(1), to carry out an in-depth assessment to determine whether the intended cross-border conversion constitutes an artificial arrangement in accordance with Article 86n, including at a minimum the following: the characteristics of the establishment in the destination Member State, including the intent, the sector, the investment, the net turnover and profit or loss, number of employees, the composition of the balance sheet, the tax residence, the assets and their location, the habitual place of work of the employees and of specific groups of employees, the place where social contributions are due and the commercial risks assumed by the converted company in the destination Member State and the departure Member State.deleted

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 g – paragraph 4

4. Member States shall ensure that the independent expert shall be entitled to obtain, from the company carrying out the cross-border conversion, all relevant information and documents and to carry out all necessary investigations to verify all elements of the draft terms or management reports. The expert shall also be entitled to receive comments and opinions from the representatives of the employees of the company, or, where there are no such representatives, from the employees themselves and also from the creditors and members of the company.deleted

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 g – paragraph 5

5. Member States shall ensure that information submitted to the independent expert can only be used for the purpose of drafting their report and that confidential information, including business secrets, shall not be disclosed. Where appropriate, the expert may submit a separate document containing any such confidential information to the competent authority, designated in accordance with Article 86m(1) and that separate document shall only be made available to the company carrying out the cross- border conversion and not be disclosed to any other party.deleted

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 h – paragraph 1 – point c

(c) a notice informing the members, creditors and employees of the company carrying out the cross-border conversion that they may submit, before the date of the general meeting, comments ~~concern~~regarding the documents referred to in points (a) and (b) of the first subparagraph to the company and to the competent authority designated in accordance with Article 86m(1).

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 i – paragraph 3

3. Member States shall ensure that the approval of or any amendment to the draft terms of the cross-border conversion requires a majority of not less than two thirds but not more than 90 % of the votes attached either to the shares or to the subscribed capital represented. In any event the voting threshold shall not be higher than that provided for in national law for the approval of cross-border mergers.

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 i – paragraph 4

4. The general meeting shall also decide ~~whether the cross-border conversion would necessitate~~on any amendments to the instruments of constitution of the company carrying out the conversion.

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 n – title

Article 86n ~~In-depth a~~Assessment

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 n – paragraph 1 – subparagraph 1

Member States shall ensure in order to assess whether the cross-border conversion constitutes an artificial arrangement within the meaning of Article 86c(3), that the competent authority of the departure Member State carries out an ~~in-depth~~ assessment of all relevant facts and circumstances and ~~shall~~may take into account ~~at a minimum~~ the following: the characteristics of the establishment in the destination Member State, including the intent, the sector, the investment, the net turnover and profit or loss, number of employees, the composition of the balance sheet, the tax residence, the assets and their location, the habitual place of work of the employees and of specific groups of employees, the place where social contributions are due and the commercial risks assumed by the converted company in the destination Member State and the departure Member State.

2018/09/25
Committee: JURI

Proposal for a directive
Article 1 – paragraph 1 – point 3

Directive (EU) 2017/1132
Article 86 n – paragraph 2

2. Member States shall ensure that where the competent authority referred to in paragraph 1 decides to carry out an ~~in- depth~~ assessment, it is able to hear the company and all parties that have submitted observations pursuant Article 86h(1)(c) in accordance with national law. The competent authorities referred to in paragraph 1 may also hear any other interested third parties in accordance with national law. The competent authority shall take its final decision regarding the issue of the pre-conversion certificate within two months from the start of the in-depth assessment.

2018/09/25
Committee: JURI