Appendix 1 The European Private Company Draft Regulation: The Articles - Oxford Scholarship Jump to ContentJump to Main Navigation
The Governance of Close Corporations and PartnershipsUS and European Perspectives$

Joseph A. McCahery, Theo Raaijmakers, and Erik P. M. Vermeulen

Print publication date: 2004

Print ISBN-13: 9780199264353

Published to Oxford Scholarship Online: January 2010

DOI: 10.1093/acprof:oso/9780199264353.001.0001

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(p.427) Appendix 1 The European Private Company Draft Regulation: The Articles

(p.427) Appendix 1 The European Private Company Draft Regulation: The Articles

Source:
The Governance of Close Corporations and Partnerships
Publisher:
Oxford University Press

I. General Provisions

Article 1 (Definition)

  1. 1. A European Private Company (‘EPC’) may be incorporated by one or more individuals or legal entities, nationals of a Member State or not, in the conditions and in the manner provided for under this Regulation.

  2. 2. All founding shareholders shall, personally or through agents having special authority, be joined as parties to the articles of association. The articles of association shall be a contract binding on the founding shareholders and, after registration, on the company and future shareholders.

Article 2 (Features)

  1. 1. Each shareholder shall be liable only to the extent of the contribution made.

  2. 2. The EPC may not issue securities to the public or issue bearer shares.

  3. 3. The articles of association define, within the framework of this Regulation, the rights of shareholders, the organization and operation of the company, the powers of its governing bodies and the manner of transfers of shares.

  4. 4. The EPC shall have legal personality from the time of its registration.

Article 3 (Capital)

  1. 1. The capital of the EPC shall be divided into shares of a fixed amount. It shall not be less than 25,000 Euros or an equivalent amount, at the time of registration, in another currency. It shall be subscribed for and paid in full at the time of registration.

  2. 2. Share capital may be contributed in cash or in kind, but not in work or services.

  3. 3. The funds generated by payment for the shares shall be deposited for the account of the company being incorporated by the parties who have received them, within eight days after receipt thereof, with a notary or a bank, in exchange for an acknowledgement of receipt.

The Appendix was prepared by Robert Drury (one of the primary draftsmen of the Regulation).

(p.428) The funds may be withdrawn only after registration of the company in the manner provided for under Article 8 of this Regulation, by the company’s agent upon submission of the certificate from the agency registering the company.

  1. 4. Contributions in kind shall be put at the disposition of the company within the same period. They shall be delivered against an acknowledgement of receipt to an agent of the company being incorporated.

Article 4 (Valuation of Contributions in Kind)

  1. 1. The articles of association shall contain a valuation of each contribution in kind.

  2. 2. Such valuation shall be performed on the basis of a report appended to the articles of association and drafted subject to his, her or its own responsibility by an expert authorized to perform the statutory review of accounts according to the legislation of each Member State, in accordance with Directive 84/253/EEC. Such expert shall be appointed by the future shareholders acting unanimously or, in default, by a Court decision at the request of the most diligent future shareholder.

  3. 3. If the company is incorporated by a single person, such expert shall be appointed by the sole shareholder.

  4. 4. If the value stated in the articles of association is different from the value returned by the expert, the founding shareholders shall be jointly liable to third parties in respect of the value attributed to the contributions in kind upon the company’s incorporation, during a term of five years from the date of registration.

Article 5 (Incorporation Methods)

  1. 1. An EPC may be incorporated by means of creation or transformation, whether or not connected with a merger or division.

  2. 2. Only companies listed under Article 1 of Directive 68/151/EEC may be transformed into EPCs. Such transformation shall not entail either winding up or creation of a new legal entity.

    1. (a) The governing, management, or administrative body or bodies of the company shall draw up a proposal for the transformation and a report explaining and justifying the legal and economic aspects of the transformation, and stating the consequences for the shareholders and employees of the adoption of the form of an EPC.

    2. (b) The proposed transformation shall be publicized in accordance with the legislation applicable in each Member State implementing Article 3 of Directive 68/151/EEC, one month at least prior to the date of the general meeting called to resolve upon the transformation.

    3. (c) Prior to the general meeting, one or more independent experts, appointed or approved in the manner provided for by the legislation in each Member (p.429) State implementing Article 10 of Directive 78/855/EEC, by a judicial or administrative agency of the State in which the company transforming into an EPC is established, shall attest that the company has assets valued at no less than the amount of its issued capital.

    4. (d) The general meeting shall approve the proposed transformation and the EPC’s articles of association of the EPC in the manner provided for by the legislation of each Member State implementing Article 7 of Directive 78/855/EEC.

  3. 3. If the EPC has not been incorporated within six months after the first deposit of funds performed in accordance with Article 3-3 of this Regulation, the contributors may, through an agent representing them collectively, withdraw the amount of their contributions.

Article 6 (Registered Office)

  1. 1. The registered office of the EPC shall be located within the Union. It shall correspond to the location of its central administration.

  2. 2. The registered office of the EPC may be transferred to another Member State. Such transfer shall not entail a winding up or creation of a new legal entity. The transfer plan shall be drawn up by the body or bodies designated by the articles of association. It shall be filed and publicized in the manner provided for under Articles 8 and 9 of this Regulation. No decision to approve the plan may be taken within a period of one month following its publication.

  3. 3. The shareholders and creditors of the company shall be entitled to examine at the company’s registered office the transfer plan and report referred to under the foregoing paragraph not less than one month before the date scheduled for the general meeting called to resolve upon the transfer.

  4. 4. When an EPC no longer complies with the obligation of having its central administration on the territory of the Member State of the European Union where it is registered, it shall be required to rectify the position within three months. In default of rectification within the period of three months, the company shall be liable to winding up.

Article 7 (Name)

The EPC shall select a corporate name which may include the object of the company, the name of one or more shareholders, or be entirely imaginary, provided that it must not be misleading or liable to cause confusion. The company’s name shall be preceded or followed immediately by the words ‘European Private Company’ or the acronym ‘EPC’.

(p.430) Article 8 (Registration)

  1. 1. The EPC shall be registered in the State of its registered office, in the register specified by the legislation in that State implementing Article 3 of Directive 68/151/EEC.

  2. 2. The registration formalities may be carried out by any person authorized by the founders for such purpose or appointed by the articles of association to represent the company in relation to third parties.

  3. 3. For registration purposes, the following information shall be provided: The company’s form and name, its duration if determined, the objects of the company, the address of the company’s registered office, the amount of subscribed capital and the body or bodies having authority to enter into commitments to third parties for the company and to represent it before the Courts, The names and particulars of the persons appointed to such governing body or bodies shall also be specified.

    The following documents shall be provided: The articles of association, a document specifying the allotment of shares, the acknowledgement of receipt of the deposit of the capital contributions, and evidence, if appropriate, that the contributions in kind have been put at the disposition of the company, the experts’ report on such contributions, and if applicable, the resolution approving the transformation, merger, or division.

  4. 4. The agency responsible for the register shall ascertain that the requirements provided for under paragraph 3 are met and that all the information required to be included in the articles of association under this Regulation is contained therein. It shall issue a certificate evidencing compliance with the registration procedure and validity of the registration. It shall transmit all such information and any amendment or striking-out to the central Community register created for such purpose.

  5. 5. An EPC’s registration with, or striking-out from, the national register shall be publicized.

Article 9 (Publication)

Matters relating to the EPC and requiring publication under this Regulation shall be publicized in accordance with the legislation of each Member State implementing Article 3-4 of Directive 68/151/EEC, and shall also be publicized by means of a notice in the OJEC. Such notice shall contain in all cases the corporate name, registration number, date of registration of the action, and location of the EPC’s registered office.

(p.431) Article 10 (Adoption of Acts)

  1. 1. The company shall not be bound by any acts of the founders carried out in its name prior to its registration. It may, however, after registration, substitute itself for the founders, subject to the consent of the other party if the act adopted constitutes a binding agreement.

  2. 2. Unless the act is adopted by the company, the individuals or legal entities having carried it out shall be jointly and severally liable and without limitation therefor during a term of five years from the date of registration.

Article 11 (Nullity)

Nullity of a company may arise only out of an express provision of the law applicable in the State of the registered office in accordance with Article 11 of Directive 68/151/EEC.

Article 12 (Governing Law)

  1. 1. The EPC shall be governed by the provisions of this Regulation and the provisions of the EPC’s articles of association which are not inconsistent therewith.

    The matters governed by this Regulation shall not be subject to application of the law of the Member States, even with respect to those points which it does not settle expressly.

  2. 2. The following shall be successively applied in the order stated below:The general principles of the Regulation;

    The general principles of Community company law and the general principles common to the national laws, provided that they are not inconsistent with this Regulation.

  3. 3. The provisions of national company law in the State of the registered officeof the EPC shall apply only in those cases where this Regulation makes expressreference thereto.

Article 13 (Contents of Schedules to the Regulation)

This Regulation includes:

  1. (a) as Schedule 1: Standard-form articles of association which the shareholders may expressly adopt wholly or in part;

  2. (b) as Schedule 2: The form of company to which the EPC shall be considered equivalent in each Member State, in particular in respect of the application of accounting, social and criminal legislation;

  3. (c) as Schedule 3: The corporate forms into which an EPC may be transformed.

(p.432) II. Organization and Operation

Article 14 (Organization of the Company)

The articles of association shall determine the company’s organization. In particular, they shall determine the manner of appointment, powers and terms of operation of the company’s governing bodies, and the relationship between them.

They shall specify the terms of appointment of the statutory auditors and their function and duties in the circumstances and conditions provided for by the national law implementing Directive 78/660/EEC.

Article 15 (Rights and Powers of the Shareholders)

  1. 1. The articles of association shall determine the pecuniary and non-pecuniaryrights relating to each class of shares. They need not be proportional to the fraction of the capital represented by each share.

    The following matters shall be so determined, in particular: the proportion of the distributed profits and of the surplus assets in a liquidation attributable to each share;

    the number of votes granted, for decisions taken collectively by the shareholders, to each share to which a voting right attaches. Such number may vary according to the nature of the decisions.

  2. 2. The articles of association shall determine the decisions which must be taken collectively by the shareholders. They shall also provide for the required procedures and requirements, in particular as to the manner of consultation and requirements as to quorum and majority. Unless otherwise provided for by the articles of association, collective decisions shall be binding on the officers.

  3. 3. The approval of the annual accounts and the allocation of profits, the appointment of the statutory auditor provided for under Article 14, and any amendment of the articles of association, in particular as regards increase, redemption or reduction of the capital, merger, spin-off or winding up, shall require a collective decision.

    One or more shareholders holding at least ten per cent of the votes may, at any time, call for a consultation of the shareholders holding voting rights, in the manner provided for by the articles of association.

  4. 4. A sole shareholder shall exercise the powers granted to the shareholders collectively.

  5. 5. The collective decisions referred to under paragraphs 2 and 3 shall be minuted. Resolutions of the sole shareholder shall be minuted or reduced to writing.

(p.433) Article 16 (Representation of the Company in Relation to Third Parties)

  1. 1. The company shall be represented in relation to third parties by one or more individuals or legal entities having full powers to act in all circumstances in the company’s name. They shall exercise such powers within the limits of the objects of the company, and subject to those matters in respect of which the Regulation or the articles of association require collective decisions by the shareholders.

  2. 2. In its relations with third parties, the company shall be bound even by action taken by its representatives outside the objects of the company. Provisions in the articles of association restricting the governing bodies’ powers may not be relied on as against third parties.

Article 17 (Liability of Officers)

  1. 1. The officer or officers of the EPC, appointed in accordance with Article 14, shall be liable, individually or jointly, to the company for actions in breach of the rules applicable to the company by virtue of Article 12 of this Regulation. They shall be liable, in the same manner, for breach of their duties and the standard of diligence reasonably required in the conduct of business.

  2. 2. When a legal entity performs representation or management or takes part therein, its officers shall be subject to the same requirements and obligations and incur the same civil and criminal liability as if they performed management in their personal capacities, without prejudice to the liability of the legal entity which they manage.

  3. 3. De facto officers shall be treated as de jure officers as regards all obligations and liability to which the latter are subject.

Article 18 (Actions for Reparation)

  1. 1. Each shareholder may bring action against the officer or officers for reparation of the damage suffered by the shareholder personally.

  2. 2. Shareholders holding ten per cent at least of the capital or votes may, individually or together, bring action for reparation on behalf of the company against the officers. The plaintiffs may call for reparation of all the damage suffered by the company to which, if applicable, the damages shall be awarded.

  3. 3. Actions for reparation shall be time-barred three years after the event causing the damage or, if concealed, after its discovery.

Article 19 (Nullity of a Resolution)

Any resolution of the shareholders or a governing body of the company in breach of a rule or a significant formality provided for under this Regulation or (p.434) the articles of association may be annulled by the Court of competent jurisdiction. The action for annulment may be brought, within six months after the date of such resolution, by any shareholder not having approved it, subject to rectification by the company.

III. Rules Governing Securities

Article 20 (Assignment of Shares, Change in Control)

  1. 1. If a transfer of shares requires approval, the articles of association shall specify the body having competence to give it, and the applicable procedure and timetable. They shall determine the manner of withdrawal of a shareholder to whom approval is denied.

  2. 2. The articles of association may specify that any change in control over a shareholder, as defined by the articles of association, shall be treated as an assignment. It shall be notified to the company in the manner and within the period determined by the articles of association.

  3. 3. The articles of association may provide for non-pecuniary rights attaching to the shares of the EPC held by a non-approved shareholder or the shareholder over which control has changed, to be held in abeyance.

Article 21 (Compulsory Assignment and Withdrawal of a Shareholder)

  1. 1. Shareholders may be required to assign their shares in the circumstances and according to the procedure provided for under the articles of association.

    In addition, at the request of one or more shareholders holding a majority of votes, the Court of competent jurisdiction may order an assignment of a shareholder’s shares, if the shareholder has seriously damaged the company’s interests or if the continuation of the shareholder as a member of the company is detrimental to its proper operation. The articles of association may also provide for the non-pecuniary rights of such shareholder to be held in abeyance until the assignment has been carried out.

  2. 2. Shareholders may claim acquisition of their shares in the circumstances and in accordance with the procedure provided for under the articles of association. In addition, any shareholder considering that their interests have been damaged may petition the Court of competent jurisdiction for the acquisition of their shares, in the event of a significant change in one or more of the articles of association, assignment or contribution to another company of all or the essential assets of the EPC, substantial change in the company’s business or the withholding, for several financial years, to an extent not justified by the company’s financial position of any distribution of profits relating to their shares.

(p.435) Article 22 (Price for Acquisition or Assignment of Shares)

  1. 1. The manner of determination of the price for acquisition or assignment shall be determined by the articles of association in the cases referred to under Articles 20 and 21. The price may not be less than the actual value of the shares.

  2. 2. If the shares are redeemed by the EPC, it shall be bound to assign or cancel them within six months after the redemption.

Article 23 (Inalienability of Shares)

The articles of association may provide that shares shall be inalienable for a term not exceeding five years.

Article 24 (Effects of Assignment in Breach of the Articles of Association)

Any assignment in breach of the terms of the articles of association shall be void. In the event of breach of a pre-emptive right, provided for under the articles of association in favour of the company or one or more shareholders, the Court of competent jurisdiction may order, at the request of one of the parties or of the company, transfer of the benefit of the assignment to the company or one or more of the aforesaid assignees, at a price determined in the manner provided for under Article 22.

Article 25 (Change in Terms of the Articles of Association Governing the Securities)

Resolutions adding, removing or amending terms of the articles of association provided for under Articles 20, 21 and 22 may be passed only by the shareholders acting unanimously.

IV. Action Relating to the Capital

Article 26 (Capital Increase or Reduction.)

  1. 1. Increases or reductions in the capital shall be resolved upon in the manner determined by the articles of association in accordance with Article 15.

  2. 2. The proposed reduction shall be notified to the statutory auditor, who shall draw up a report within one month before the date scheduled for the collective decision. Such report shall be notified immediately to the shareholders who are to take part in the collective decision and the known creditors shall be informed of the proposed reduction, their right to enter objections and the manner of the exercise thereof.

  3. (p.436)
  4. 3. In the case of a capital reduction of capital, creditors whose debts antedate the resolution may enter objections within one month after publication of the reduction resolution in the manner provided for under Article 9. The Court trying the matter, if it upholds the objection, may order either reimbursement of the debts or the grant of security. Capital reduction operations may not begin during the period allowed for objections.

Article 27 (Redemption of its Own Shares by the Company)

  1. 1. Without prejudice to the effect of Article 26, the EPC may redeem its own shares in the manner and on the terms provided for under the articles of association.

  2. 2. The EPC may not, however, hold directly or indirectly through a party acting in its own name but on behalf of the company more than 25 per cent of the total of its own shares. The shares owned by the EPC shall not carry dividends and may not vote.

  3. 3. The provisions of the foregoing paragraph shall not apply in the event of a transfer of all assets and liabilities or of enforcement of a judicial decision.

  4. 4. Under penalty of nullity, an EPC may not accept a pledge of its own shares, or advance any funds or grant any loan or security interest for the purpose of acquisition of its own shares.

Article 28 (Diminution of the Company’s Net Assets)

  1. 1. In the event of a diminution of the company’s net assets to a level less than that of the minimum capital, the shareholders shall be consulted within one month after the losses are entered in the accounting records in order to resolve either to wind up the company or to continue its operations. In the latter case, the shareholders shall, within six months, contribute further capital such that net assets of the company are at least equal to the amount mentioned under paragraph 1 of Article 3.

  2. 2. If the company’s net assets fall below half of the subscribed capital, the shareholders shall be consulted within one month in order to consider whether the company should be wound up. If winding up is not resolved upon, the company shall be bound, within six months after the losses are entered in the accounting records, and subject to the provisions of Article 3 of this Regulation, to reduce its capital by an amount at least equal to that of the losses, or to contribute further capital so as to restore the company’s net assets to an amount at least equal to that of the subscribed capital.

  3. 3. In the event of breach of the foregoing provisions of this Article, the companymay be wound up in accordance with the procedure applicable in the Member State of its registered office.

(p.437) V. Management Supervision

Article 29 (Agreements with the Company)

  1. 1. Under penalty of nullity of the agreement, officers or shareholders other than legal entities may not in any manner whatsoever, directly or indirectly, obtain any loans from the company, obtain any overdraft from it, as a shareholder’s current account or otherwise, or obtain from it any security or any guarantee or other surety in respect of their commitments to third parties.

  2. 2. The statutory auditor referred to under Article 14 of this Regulation shall submit to the shareholders a report on agreements giving rise to conflicts of interests, made directly or indirectly between the company and one or more of its officers or shareholders. The articles of association shall determine the applicable procedure.

  3. 3. Agreements between the sole shareholder and the company represented by the sole shareholder shall be minuted or reduced to writing.

  4. 4. These provisions shall not be applicable to transactions entered into by the company in the ordinary course of its business.

Article 30 (Disclosure to Shareholders)

  1. 1. Any shareholder shall be entitled to be informed of the collective decisions referred to under Article 15, and shall be allowed access to the company’s principal management documents.

  2. 2. The shareholder may submit questions in writing regarding the operation of the company, which the officers shall be bound to answer in accordance with a procedure determined by the articles of association.

Article 31 (Management Audit)

The officers shall be bound to reply, within one month, to any question relating to one or more acts of management, submitted in writing by one or more shareholders holding ten per cent or more of the capital or votes, or by any other party having such right under the articles of association. In the absence of a satisfactory reply, and if the situation is liable to be detrimental to the corporate interest, such shareholder or shareholders may petition the President of the Court of competent jurisdiction to appoint one or more auditors to report on such act or acts of management.

(p.438) VI. Annual Accounts

Article 32

The EPC shall be subject to the accounting rules applicable, in each Member State, to the form of company to which it is considered equivalent for such purpose under Schedule 2.

VII. Employees’ Rights

Article 33

The rules relating to disclosure to and consultation of the employees, and if applicable, their involvement in the corporate bodies, shall be determined by the law applicable to the registered office of the EPC.

VIII. Criminal Law

Article 34

The EPC, its officers and its shareholders shall be subject to the rules of criminal law applicable in each Member State to the corporate form to which it is considered equivalent for such purpose by Schedule 2, except the provisions providing for penalties relating to obligations which are not applicable to it in accordance with Article 12 of this Regulation.

IX. Transformation Of The Epc

Article 35

  1. 1. The EPC may be transformed into one of the companies in the list attached as Schedule 3. Transformation shall not entail winding up or creation of a new legal entity.

  2. 2. The competent body or bodies shall draw up a transformation plan and a report presenting and justifying the legal and economic features of the plan. The report shall set out the consequences of adoption of the new corporate form for the shareholders and for the employees.

  3. 3. The transformation plan shall be notified to the employees, and publicized in the manner provided for by the legislation of each Member State implementing Article 3 of Directive 68/151/EEC, one month at least prior to the collective resolution relating to the transformation.

  4. (p.439)
  5. 4. Prior to the collective resolution, one or more independent experts, appointed or approved in the manner provided for by the legislation in each Member State in accordance with Article 10-1 of Directive 78/855/EEC, shall certify that the company has assets valued at no less than the amount of its subscribed capital.

  6. 5. The transformation plan and the articles of association of the new company shall be submitted to the EPC’s shareholders for approval in the manner provided for under the articles of association.

  7. 6. The transformation shall entail an amendment of the registration and a publication, in accordance with Article 9 of this Regulation.

X. Winding up, Liquidation, Insolvency and Cessation of Payments

Article 36 (Governing Law)

  1. 1. With respect to winding up, liquidation, insolvency, cessation of payments and other insolvency or similar proceedings, the EPC shall be subject to the legal rules applicable to the companies to which it is considered equivalent in each State pursuant to this Regulation. The persons referred to by national law may be held liable, individually or jointly, for all or part of the corporate liabilities, and subject to disqualifications and forfeitures, in the manner provided for by such law.

  2. 2. Without prejudice to the cases in which they may be held liable personally, initiation of proceedings against an EPC on the grounds of its insolvency or cessation of payments shall not entail initiation of such proceedings against the shareholders or officers.

  3. 3. An EPC against which proceedings have been brought for winding up, liquidation, insolvency, cessation of payments or other similar proceedings, may not transfer its registered office to another Member State.

Article 37 (Publication)

Insolvency or cessation of payments, initiation of proceedings for winding up or liquidation, and termination thereof and the resolution to continue operation, shall be publicized in accordance with Article 9 of this Regulation.

Article 38 (Action for Winding up and rectification)

In the event of an action for winding up, the Court trying the matter or the agency having authority may not order winding up if, on the date of its decision on the merits, the situation has been rectified. (p.440)