Group interest in Europe

Martin Winner

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OVERVIEW

decision in the interest of the groupnot necessarily in the interest of the subsidiary Cash pool & intra-group loans Division of markets between subsidiaries

two issues: May management of sub take such measures? =

Can they follow instructions, which are in the interest of the group if not of the subsidiary? civil / criminal liability

Must management of sub follow instruction by parent?

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NATIONAL DIMENSION

Group 1: lenient approach France, Italy, Belgium general economic quid pro quo sufficient

Group 2: strict protection of subsidiary Germany, Austria prompt compensation necessary

Group 3: Where is the problem? UK, Ireland & nordic countries tradition of shareholders as ultimate decision takers other mechanisms for creditor / investor protection, .e.g. unfair

prejudice or qrongful trading

evolution rather towards leniencySEITE 3

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ROZENBLUM TEST IN FRANCE

purpose: „group defence“ for the subsidiary‘s management against prosecution for abuse of corporate assets right to give directions is not an issue

conditions group with capital links between companies business integration with coherent group policy and common

interest (no ad hoc-operation) economic quid pro quo (flexible, also non-monetary, also future =

expectations sufficient) no risk of bankruptcy for the subsidiary

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EUROPEAN GROUP LAW AS ENABLING LAW?

focus on parent company shift of focus from subsidiary and its creditors / minority

shareholders

foster formation and management of cross-border groups reduce cost of cross-border activities via groups harmonize rules on group interest easing management by recognizing group interest protection of creditors / shareholders secondary

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DISCUSSION IN EUROPE UNTIL 2012

1998: Forum Europaeum on Group Law (academia) modified Rozenblum doctrine recommended

2002: High Level Group of Company Law Experts (“Winter-group”) allowing managers to implement a coordinated group policy

2011: Reflection Group on Future of EU Company Law recommendation with yardstick for management of sub

2012: Consultation rather favourable (if lukewarm) response

2012: Commission Action Plan on Company Law initiative on recognition of group interest “2014”

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PRUDENTIAL REGULATION

CRD IV 2013/36/EU parent company responsible for organization and management of

bank group effective control of subsidiaries, esp. from risk management

perspective

BRRD group financial support agreement in case of rapidly deteriorating

financial situation of one group member interest in solvency of the group

prudential regulation & company law?

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ACADEMIA 2015

European Model Company Act 2015 no restatement, but toolbox for legislators group interest a la Rozenblum recognized

Forum Europaeum on Company Groups 2015 „equilibrate the interests among the group companies, including the

parent, in the long term“ = Rozenblum more lenient regime for „service companies“, i.e. wholly-owned subs

with auxiliary function, which must follow directions not causing insolvency

European Company Law Experts spin-off of Winter-group work on position paper on corporate groups

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COMISSION 2015

SUP: no substantial provision Commission proposal: parent has right to instruct unless violation of

national law deleted in Council‘s General Approach currently in trilogue

Informal Company Law Experts Group (ICLEG) advisory group to commission preparing policy paper on group interest intense discussions, to be expected 2016

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OPTIONS & DECISIONS

Regulation / Directive / Recommendation

cross-border groups / national groups

mandatory law / opt-in via articles of association

private / public companies

wholly-owned subs / all subs / listed subs protection mechanism for minority shareholders / for creditors

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OPTIONS & DECISIONS

interest of parent = interest of group

just recognize group interest / introduce a fully-fledged test e.g. along Rozenblum principles Which factors?

Esp. vague expectations as to future compensation sufficient?

exclusion from liability / duty to follow instructions

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DEPARTMENT FOR BUSINESS, LABOUR AND SOCIAL SECURITY LAWWelthandelsplatz 1, Gebäude D3, 1. OG1020 Vienna, Austria

UNIV.PROF. DR. MARTIN WINNER

T +43-1-313 36-4215F +43-1-313 36-764Martin.winner@wu.ac.atwww.wu.ac.at

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