COMPANY LAW : EUROPEAN PARLIAMENT APPROVES CHANGES TO PLC CAPITAL DIRECTIVE.

The European Parliament has approved a Commission proposal amending parts of the Second Company Law Directive covering the formation, maintenance and alteration of capital. In its plenary session on 14 March, the Parliament adopted a report by Piia-Noora Kauppi (EPP-ED, Finland) in its second reading, thereby backing the Commission's efforts to promote the competitiveness of European companies without eroding shareholders' rights.

The Commission is trying to make it easier for public limited companies (PLCs) to take certain measures affecting the size, structure and ownership of their capital by making them subject to fewer regulations.

Adopted thirty years ago, the 2nd Company Law Directive (1) (77/91/EEC) coordinates national provisions on the formation of PLCs, minimum share capital requirements, distributions to shareholders and increases and reductions in capital. The Directive establishes the conditions to ensure that the capital of the company is maintained in the interest of creditors. Furthermore, it protects minority shareholders and states the principle that all shareholders who are in the same position should be treated equally.

A number of elements of this system were identified as too inflexible and costly and, therefore, modifications were recommended notably by the Simpler Legislation for the Internal Market (SLIM) group in 1999 and by the Group of High Level Company Law Experts in 2002.

The proposed Directive will implement a number of these recommendations, including the acquisition of shares through contributions in kind and the acquisition by a company of its own shares. Also, the current...