A proposal for reforming group law in the European Union –
Comparative Observations on the way forward
European Company Law Experts: Peter Böckli, Paul L. Davies, Eilis Ferran, Guido Ferrarini, José M. Garrido Garcia, Klaus J. Hopt, Adam Opalski, Alain Pietrancosta, Markus Roth, Rolf Skog, Stanislaw Soltysinski, Martin Winner, Jaap W. Winter, Eddy Wymeersch
The legal regime applicable to groups of companies in the European Union has been discussed for many years. National legislations have been adopted in a certain number of member states, and new initiatives are being considered by the European Commission and in academic writing. The central issues in groups of companies is the relationship between the controlling shareholder, often the parent company and the subsidiaries, and the potential for abuse to the detriment of the latter’s minority shareholders and creditors. Several answers have been formulated, going from a duty of the parent to indemnify the subsidiary for the charges imposed by the parent, to the acceptance of these charges provided they result in some benefit to the subsidiary and provided they do not endanger the subsidiary’s solvency. In a third approach, these issues may be solved by other common company law, e.g. on the basis of the unfair prejudice provisions. With respect to shareholder and creditor protection, a comparative analysis concludes that there is no need for additional regulatory safeguards. The present approaches indicate that group relations are often characterised by conflicts of interest. Therefore, it is proposed to develop a standard for dealing with these, especially under the form of Related Party Transactions. The specific conditions for dealing with intragroup related party transactions are submitted for further discussion.
Key words: Parent-subsidiary relations – minority and creditor protection – related party transactions – European regulation
Table of contents
A. The state of the discussion on group law in the European Union
- The early proposals of the European Commission
- The Action Plan of the European Commission of 2003 and academic preparation and ensuing comments
- Specific regulation of groups of banks and of other financial institutions
- The proposals of the Forum Europaeum of 1998 and 2015
- Some academic literature on European group law
B. Introductory analysis of issues relating to groups of companies
- How groups are formed
- Definitions of control
- How control is exercised
- Integrating the group interest
- Conflicts of interest and related party transactions
C. The protection of the interest of the shareholders in groups of companies
- Minority protection of subsidiary shareholders in general
- Exclusion and withdrawal (or exit) rights
- Exit rights in listed companies
- Conclusion on the protection of minority shareholders in groups of companies
D. The protection of the interest of the creditors in groups of companies
- Instruments of creditor protection
- Conclusion on the protection of minority shareholders in group of companies
D. The position of directors of companies belonging to a group
E. Recommendations as to policy and research on regulating groups of companies in the European Union
- No need to have a full-fledged European law of groups of companies
- Selected group law issues on which further work should be done: pursuit of group interest and related party transactions
- The future shareholder directive
- Recommendations of the ECLE as to measures at the European level
- Recommendations of the ECLE as to measures at the Member State level
A. State of the discussion on group law in the European Union
1. The early proposals of the European Commission
The subject of the legal status of groups of companies has been on the agenda of the European Commission for more than 40 years. A first proposal dates back to early 1970s with the Proposal for a Ninth Company Law Directive, while a later proposal remained in the status of an internal document. In 1983, the directive on consolidated accounts was adopted. Since then no further initiative in the field of company groups was published, although the Commission continued to consider dealing with issues relating to groups of companies by having expert groups analyse the state of company law at that time and develop appropriate recommendations
2. The Action Plan of the European Commission of 2003 and academic preparation and ensuing comments
In 2002, the High Level Group of Company Experts recommended to the Commission for the medium term to “provide a framework rule for groups, allowing the adoption at subsidiary level of a co-ordinated group policy with proper protections of creditors and shareholders“. Providing for transparency and allowing for the group interest to be taken into account were two prominent recommendations. In response to the High Level Group, the Commission published a Report on „Modernising Company Law and Enhancing Corporate Governance in the European Union – A Plan to Move Forward” in which it stated that while no overall directive may be needed, specific provisions dealing with issues of groups of companies as identified by the High Level Group, may be required.
In 2011, the ”Reflection group on the Future of Company Law“, constituted by the Commission devoted an extensive chapter to groups of companies and concluded i.a. that two points required special attention, i.e. the disclosure of information on the main features of the group structure, its functioning and management and, subject to further evidence, the adoption of a recommendation on the recognition of the group interest in company decision making.
On the basis of this report, the Commission also launched a public consultation. With respect to a question on groups of companies, two-thirds of the responses from the business community expressed support for EU intervention, especially in the area of better information on groups and the recognition of the group interest. Protection of the interest of minority shareholders and creditors was also supported. However, the business federations from their side, considered that no action was needed at EU level. From the responses to the consultation the Commission in its 2012 Action Plan on Company Law concluded that: ”the public is in favour of well-targeted EU initiatives on groups of companies” and that “ it will, in 2014, come with an initiative to improve both the information available on groups and the recognition of the concept of “group interest”. On the other hand, the idea of a comprehensive legal EU framework covering groups of companies was met with caution.
As a follow-up, the Commission’s Informal Company Law Expert Group (ICLEG) in March 2016 issued a Report on Information on Groups with recommendations on the improvement of the information available both to stakeholders in the parent company and in the subsidiary.
3. Specific regulation of groups of banks and of other financial institutions
All the mentioned proposals and reports relate to group law in general. Numerous specific provisions involving issues of groups of companies are applicable to groups of banking and other financial institutions which are subject to prudential supervision. Due to the nature of the risks to which they are exposed, the provisions applicable to these institutions have been laid down in specific sectoral instruments, such as CRD IV and Solvency II, or in AIFMD. In these cases, additional safeguards are provided to protect the claims of creditors and avoid financial stability risks, while the position of the shareholders is subject to restrictions, especially in the case of insolvency (BRRD, SRM regulation). Special mention deserve the chapter on intragroup financial support. The approach adopted in that legislation is however only appropriate to resolution, which is dominated by public interest consideration and there the position of the banking and insurance groups have not been included in this report.
4. The proposals of the Forum Europaeum of 1998 and 2015
In the same period, several academic studies and initiatives also developed proposals for dealing with groups of companies.
The Forum Europaeum, a college of company law academics and leading practitioners from the then EU member states, published in 1998 a detailed opinion on “Konzernrecht fuer Europa”, or “Group Law for Europe”. Its recommendations can in short be presented as follows:
*Additional information about the internal organisation of the group
*Conditions for taking into account the group interest – reference to the Rozenblum case with sanctions according to national law
*Shareholders should be entitled to request a judicially mandated expert investigation relating to the group’s affairs
*Mandatory bids, squeeze out and sell out rights
*The group leaders’ right to direct the group, with corresponding liability to shareholders and creditors
*In case of insolvency of a group entity, the parent should decide to support or to liquidate it. If not, the parent may be held liable (comp. wrongful trading).
In 2015 the Forum Europaeum on Company Groups published an updated position paper under the title „Proposal to Facilitate the Management of Cross-Border Company Groups in Europe“. It basically differentiates between the 100% owned, often small subsidiaries providing an ancillary or “service” function in the group as opposed to the larger more independent subsidiary. Subject to different protective rules, both types of subsidiaries would be formally required to abide by the parent’s instructions, and follow a uniform standard for the manager’s duties towards the general public, labelled a rule on his “duties of care and loyalty”.
For the small, service companies, the instructions should be followed unless if they would jeopardise the subsidiary’s solvency for the next 12 months. Instructions to the subsidiary would also have to be followed if the parent had fully guaranteed the subsidiary’s liabilities for a 12 months, rolling period. However, not all jurisdictions allow single member companies to be constituted.
The larger subsidiaries, also called “ordinary companies” would be entitled to develop their own business activity, to shape their own policies and engage corresponding responsibilities, all within a coherent group policy and the group’s appropriate structure. Relative autonomy v. rational integration allow taking advantage of opportunities under the general guidance of the Rozenblum formula. A group-wide applicable coherent business plan should balance the different interests in a medium and long term perspective. A further corrective mechanism could be developed by relying on the recent proposals on related party transactions, calling for an independent fairness opinion and allowing directors to refuse a transaction if unfairness has been concluded to.
Both approaches deserve further analysis. The proposal adopts the principle that the group interest can validly be included in the subsidiary’s decision making and this for all subsidiaries. In this respect the proposal is in line with most other reports and studies, and should be supported. Yet in essence, this proposal mainly addresses the issues relating to the creditor’s interest in wholly owned subsidiaries, as per hypothesis there are no minority shareholders interest to be protected in these “service” companies. The main objective is the simplification of the rules applicable to them. For the “ordinary” companies where minority interests are present, the solution proposed is rather of a general nature and especially the harder cases of abusive exercise of majority power are not really addressed. The regime applicable to the directors of the subsidiary would probably also include a Rozenblum defence although it remains unclear whether the Rozenblum reasoning would be included in the “duty of care and loyalty” which duty may be owed to the general public as well, with the consequence that the risks for these directors would be considerably extended.
With respect to the proposal to disclose more information on the group structure, the question should be raised what information should be disclosed. The present regulations already provides for the publication of consolidated accounts and for the information to be published in accordance with the Transparency Directive. These disclosures already allow readers to identify the companies belonging to the group, the percentages held in the group subsidiaries and provide for financial statements containing the overall financial position, with special attention to the intragroup liabilities and guarantees. The actual practise in different member states differs considerably. In some jurisdictions, parent companies also publish an abbreviated version of the main subsidiaries’ financial statements. In several jurisdictions, group parent companies already publish some of this information in their corporate governance reports. In view of this, rather than requiring a great quantity of additional information, it seems more important that information be published that is specifically relevant for the protection of minority shareholders and creditors. A particularly relevant part could be achieved in the context of the related party transactions regime, to be commented on later.
5. Some academic literature on European group law.
A rich academic literature has recently been devoted to the legal regime applicable to group of companies. Only some select publications are mentioned here:
Amstutz, South of no North, Über Geschichte und Zukunft des europäischen Konzernrechts, in: Die Schweiz und die Europäische Integration/La Suissse et l’intégration européenne, Université de Fribourg, Zürich/Basel/Genf 2015, 203
I gruppi di società, Rivista delle Società, Convegno internationale di Studi, 3 vol. , Giuffrè, 1996
E. Antunes, Os Grupos de Sociedades. Estrutura e Organização Jurídica da Empresa Plurissocietária, Almedina, 2002
17 June 2015, http://www.leclubdesjuristes.com/?s=interet+de+groupe
Chiapetta/U. Tombari, Perspectives on Group Corporate Governance and European Company Law, ECFR 2012, 261
P.H.Conac, Constraining Dominant Shareholders’ Self-Dealing: The Legal Framework in France, Germany, and Italy, ECGI – Law Working Paper No. 88/2007
P.H. Conac, Directors’ Duties in Groups of Companies – Legalizing the Interest of the Group at the European Level, ECFR, 2013-194-226
Drygala, Europäisches Konzernrecht: Gruppeninteresse und Related Party Transactions, Die Aktiengesellschaft 2013, 198
M. Embid, Introducción al Derecho de los grupos de sociedades, Comares, 2016.
Enriques, Related Party Transactions: Policy options and Real-World Challenges (2015) 16 European Business Organization Law Review.
Hommelhoff., Die Societas Unius Personae: als Konzernbaustein momentan noch unbrauchbar, GmbH-Rundschau, 2014, 1065
Hommelhoff, Ein Neustart im europäischen Konzernrecht, Kölner Schrift zum Wirtschaftsrecht (KSzW) 2014, 63
K.J. Hopt, Groups of Companies – A Comparative Study on the Economics, Law and Regulation of Corporate Groups, ECGI 286/2015
K.J. Hopt, Konzernrecht: Die europäische Perspektive, Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht (ZHR) 171 (2007) 199
K.J. Hopt, Comparative company law, Oxford Handbook of Comparative Law, M. Reimann and R. Zimmermann (eds), Oxford 2006, p. 1161, also available as ECGI, 077/2006
Langenbucher, Do we need a law of corporate groups? Working Paper 147, ILF, 1/2016,
Moskała, Konstrukcja odpowiedzialności cywilnoprawnej we włoskim prawie grup spółek, SPP 2016, Issue 1
P.O. Mülbert, Auf dem Weg zu einem europäischen Konzernrecht, Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht (ZHR) 179 (2015) 645
Opalski, Prawo zgrupowań spółek, Warszawa 2012
Pyzio, Odpowiedzialność spółki dominującej względem wierzycieli kapitałowych spółek zależnych, Warszawa 2015
Roth, Related Party Transactions, http://ssrn.com/abstract=2710128 ( “RPT”),
A.B. Soogard, Koncernbegreber i Regnskabs- og Selskabsretten, (The definition of Groups in Accountancy and Company Law) Diss. Aalborg University, 2015
Chr. Teichmann, Europaeisches Konzernrecht: Vom Schutzrecht zum Enabling Law, Die Aktiengesellschaft, 2013, 184.
Chr. Teichmann, Corporate groups within the legal framework of the EU, The group related aspects of the SUP proposal and the EU Freedom of establishment, ECFR 2/2015, 219
Thévenoz and R. Bahar (eds), Conflicts of interest, Schulthess Zurich 2007Z
Tholen, Europäisches Konzernrecht: Eine Untersuchung auf der Grundlage eines Vergleichs des deutschen und englischen Rechts, Berlin 2014
Tröger, Related Party Transactions mit Blockaktionären im europäischen Konzernrecht, Die Aktiengesellschaft 2015, 53
Vetter, Regelungsbedarf für Related Party Transactions? Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht (ZHR) 179 (2015) 273
M.-P. Weller/J. Bauer, Europäisches Konzernrecht: Vom Gläubigerschutz zur Konzernleitungsbefugnis via Societas Unius Personae, Zeitschrift für Europäisches Privatrecht (ZEuP) 2015, 6
E.Wymeersch, L’organisation du pouvoir dans les groupes de sociétés. In: CDVA L’organisation du pouvoir dans la société anonyme. Hommage à Madame Benoit-Moury. 2004, p. 219-247,
Taking into account the richness of the information and of the studies mentioned above, it seemed useful to ECLE to start a reflection on how to deal with subjects related to groups of companies, by analysing the genesis of the group issues, and to determine to what extent different EU jurisdictions have responded to group related matters. On this basis the national responses given to the two main legal questions namely the protection of shareholders and creditors in a group context will be analysed, and whether specific provisions addressing the needs for the protection these interests at an EU level will be assessed. In which specific form these responses will have to be formulated – more specifically by way of Directive, Regulation, Recommendation, Guidance, general principles or any other way, should not influence the position adopted on the substantive questions.
B. Introductory analysis of issues relating to groups of companies
1. How groups are formed
To explain the issues raised by a group of companies, it is useful to start from the basic hypothesis of the single company. This is usually managed by a board acting in the interest of the shareholders, indirectly including the interests of the other stakeholders, but taking into account the longer term interest of the company itself. The latter idea often takes the form of the “interest of the firm”. Under the last mentioned notion, one should understand among others, the interest of the creditors (see especially the wrongful trading rule) and of the other stakeholders, among which the employees. The board should act in the interest of the company but is accountable to the shareholders. In the UK, the duties of directors are primarily formulated in terms of the shareholders’ interests, but as insolvency approaches, it is recognised that the creditors join shareholders as the “residual claimants’ on the company’s assets and cash-flows.
A group relation is created when a company sets up another company in which it retains a controlling holding, or when it acquires a controlling holding in another company. In principle, the same concepts should apply to this controlled entity, meaning that this subsidiary company should also be managed in the interest of itself, including the interests of the shareholders, among which the controlling shareholder, that is its parent.
Due to its membership of the group, the entity belonging to a group of companies is subject to certain burdens: submission to group policies, including commercial policies or organisational models, centralisation of liquidities, etc. On the other hand, it enjoys certain advantages, such as the use of the group name, its credibility, financing, commercial or management support, etc. These benefits will be linked to the inclusion of that entity into the overall group action. This would not be the case, if the company in which another holds a controlling stake is in no way included into the overall action of the group: it will have to be considered a mere financial investment, and managed as any other company, taking into account the financial interest of its shareholders, and of any other stakeholders, but without any special attention being paid to other group companies. The parent company will be a mere portfolio company, comparable to an investment fund, and not offering support to its subsidiary.
This analysis leads to the specific requirement that the rules of group law should only apply if there exists between the different group entities a relationship of commercial, economic or financial nature that makes the entities related to each other in terms of strategy, ownership and capital links, and others. This may even be the case when the companies are economically or financially interdependent. This idea has been explicitly formulated in the Rozenblum case. It is formulated somewhat differently in the Dutch Civil Code.
The foregoing description clarifies that group issues are closely related to the existence of control between the companies involved. When one company controls another, the controlled company is not any more full master of its decisions, as the parent will be able, explicitly or through the presence of its representatives on the board of the subsidiary, or by casting his controlling votes at the general meeting, to influence the latter’s decisions. Therefore, the interests to which it will pay attention – willingly or not – include not only its own interests as a company, but also those of the other company, i.e. the parent, or of the other group entities. Since the parent is a – direct or indirect- shareholder in the subsidiary, having regard to the parent’s interests is in line with the general duties of the controlled company’s board. The risk, however, is that the interests of the controlling shareholder will be given disproportionate weight in the decisions of the controlled entity, to the disadvantage of the non-controlling shareholders and the controlled entity’s creditors. This widening in the range of interests takes place in the relationship of a subsidiary to its parent. To a certain extent it may also happen in the reverse relationship, where a parent in its decision making may sometimes be held to take into account, by law or public expectation, the separate interests of the subsidiary, especially if the latter is threatened by insolvency that may reverberate on the parent.
Control includes the power to decide about the orientation of the activity of the group and to organise its functioning, including the establishment and operation of an appropriate governance framework. This includes relationships with the subsidiaries that conform to the principles of group decision making.
In no jurisdiction is the group of controlled entities, i.e. the parent and its subsidiaries, considered as a separate legal entity, endowed with legal personality: recognising legal personality would result in a unitary regime for the entire group, which is clearly against the will of the founders who decided to set up a subsidiary and not a branch. Implicit in this approach is the view that the proper interests of the subsidiary, its minority shareholders and other stakeholders are to some degree separate from those of the parent and should be appropriately respected. The same principle applies to each of the group entities, which have their own legal personality, are subject to their own conflict of law rules and should be dealt with as any other company. Therefore, the group cannot act as a single separate entity, nor be sued in court. Nor has it separate organs such as a group board of directors: groupwide decision making is often organised under the form of informal committees, but without legal standing.
3. Definitions of control
Whether control exists should be the subject of separate analysis, based on numerous criteria and approaches. Control can usually be determined beforehand, on the basis of well-defined criteria in the law. In other cases, it will only appear ex post from the factual behaviour of the parties involved, and will serve as an important element in reaching certain, especially, judicial decisions. This is often referred to as “de facto” control.
For company law purposes, control can be defined as the power to direct another company’s policies and decisions. This critically implies the power to appoint the majority of the directors. Control allows the controlling shareholders to validly decide on the company affairs, the minority being bound by their decisions. Only exceptionally will the decisions be set aside on the basis of the fact that the controlling shareholders were considered to have abused their controlling power.
Control ex ante is defined in several bodies of law: the most important ones are the company law rules, where control is based on the legal power to have parent company decisions adopted or implemented at the subsidiary level. Legal control presupposes the right to give instructions, explicitly or implicitly, whether in the board, the general assembly or otherwise, to which the controlled company is legally bound. The accounting rules on consolidation of annual accounts, capital markets regulation, money laundering rules, competition rules, tax rules, co-determination provisions and others may be based on slightly different criteria. Most of these definitions are functional, serving the specific purpose of the regulation of which they are part. In the accounting definition – here: the Directive on consolidated annual accounts – the notion of control serves the purpose of expressing the value of the different group entities on the basis of the same valuation rules, and presents the aggregate cash flows that could be generated by these entities. So, while minority interests are only expressed at the level of the capital detained by the minority, all other assets and liabilities are considered part of the group. In competition law, the group approach allows competition decisions to be declared binding on all group entities (e.g. sanctions) or to oblige them to be held to a decision that is legally only addressed to one group entity, parent or subsidiary.
The clearest case of control is the one in which the parent company exercises control through the ownership of all of the equity of another company, giving it the right to exercise all votes in the latter’s general meeting, to appoint its directors, and to decide about its destiny, including winding up or disposition. In this case, the main stakeholders to whom the parent may have to pay attention are the creditors including the employees, most of the time when insolvency of the subsidiary or of the parent is on the agenda.
Normally control is presumed at the 50%+ level. When the parent does not hold all the shares, another party – or parties – hold a minority stake, reducing the freedom of the parent to decide about company matters. The parent company can impose its views but may not take due account of the position and interest of the other shareholders. A shareholder holding less than 50% cannot legally impose its views but can nevertheless effectively and “de facto” be decisive at the shareholders’ meeting, as other shareholders abstain, do not attend the meeting or do not contest his views. This type of control is referred to as “de facto” control or minority or partial control and is often directly related to specific factual circumstances. Broadening further the definition of control, at least one jurisdiction refers to “influence” which may be exercised on the basis of commercial or financial relations.
A special case is the one in which shares of the subsidiary are listed on a regulated market. In this case financial regulation and capital market law introduces additional safeguards for the minority shareholders, enhancing the accountability of the controlling shareholder.
In addition, the EU Directive on consolidated accounts mentions the case where the entities to be consolidated were subject to integrated leadership, whatever the legal relation between them (“managed on a unified basis“ or “einheitliche Leitung”).
Second draft – EW oard as “he asprovided the parent has not acted in breach of the appliacble out counterveiling measures.s.shoi
The ownership of a significant block of shares will usually be characterised as establishing control. Financial holding companies may hold significant blocks but nevertheless do not exercise strong influence on their investees: they will vote for the election of directors, some of them being their representative, and agree on the overall financial policies and especially the distribution policy. However, there is no overall control exercised, nor is there integration in an overall group objective. National legislations adopt different attitudes towards these cases; some (e.g. German law) applies group law as soon as the parent is able to exercise control, others exclude these cases from the control line, and e.g. would not require including the dependent company in the consolidated accounts.
A specific type of control is exercised through pyramids: a corporate pyramid consists of multiple layers of subsidiaries with minority shareholders, thus allowing the parent company to amplify the effects of its controlling shareholding at the higher level, while heavily reducing its ultimate beneficial interest . Minority control may exist at each of the levels of the pyramid, but the final outcome results in the top controlling shareholder fully controlling the investee company. The ultimate equity in consolidated terms may be quite thin, but effective control as exercised in the ultimate or lowest level remains nevertheless decisive.
4. How control is exercised
According to the core definition of control, it relates to the exercise of voting rights in such a way that the majority of directors of the subsidiary is designated by the party holding the controlling interest. As a consequence, the controlling shareholder decides in the general meeting to appoint the majority of directors. This implies not only the possibility to determine the policies or actions to be developed by the controlled company, but also allows the controller to dismiss the subsidiary’s directors if they refuse to follow the parent’s instructions whether at will (“ad nutum”), or by ending their contract, and where applicable according to the rules of labour law. How far this control extends, depends very much from case to case.
In jurisdictions with a dual board structure, shareholder control is exercised with respect to the appointment of the members of the supervisory board, the latter appointing the members of the executive, and this board can dismiss them though only for cause, e.g. on the basis of a loss of confidence or for refusal to follow the parent’s instructions. As the shareholders elect the supervisory board members, this type of indirect control is equivalent to direct shareholder control.
Often it is considered that the power of the controlling shareholder is exercised by giving “instructions”. This notion should be given a broad meaning, as in practice the views of the parent are usually transmitted by many other means than formal instructions, such as group business strategies and plans, group financial plans, group management (for risk, audit, human resources, marketing, etc.). Subsidiary directors, aware that their position depends on the implementation of the parent’s views, will normally adhere to the overall group policies and anticipate on the express or implied expectations of the group leadership. A specific case in which the majority or even all the directors of the subsidiary are the parent companies or their directors themselves. In fully controlled entities, control often results in a full inclusion in group action, putting a subsidiary at a level of integration, comparable to that of a branch; however there are certain other advantages in creating a subsidiary rather than a branch.
The right to give formal instructions will contribute to clarify the position of shareholders, creditors and other stakeholders. The parent should be able to structure the group and to develop a group wide policy, requiring the subsidiary to act in the interest of the group. The interest of the shareholders and creditors of the subsidiary should however be protected if the parent imposes actions that are clearly contrary to their interest, in particular if the instructions would put the solvency of the subsidiary at risk. In this case the directors of the subsidiary should refuse to follow the parent’s instructions.
The limits to the parent’s control powers can be illustrated in the case of cash pooling. There are several techniques to achieve that cash of the different entities are pooled so that debit and credit positions are compensated, reducing overall debt, while a larger cash pool may result in obtaining better market conditions. The subsidiary that is pooling its liquidity runs a risk on the entity where the pool is located. If that entity is likely to become insolvent – e.g. because of the parent appropriating the subsidiary funds – it should refuse to further take part in the pool, avoiding the risk to be itself drawn into insolvency. As a preventive measure, collateral – e.g. under the form of reverse repos in favour of each of the participants – may be required (in some jurisdictions this is a prudential requirement). Guarantees or common liability are also used, but they may extend the risks to unaffected participants. Notional cash pooling without transfer of funds is a mere valuation technique and does not raise these questions: it is only when the funds are effectively transferred, often even on an automatic and cross-border basis that the complexity and the risks are increased. Each of the different group entities should determine its own risks in the process, each contributor avoiding being endangered by the insolvency of other participants. Guarantees, and especially collateral, protect participants against the consequences of the insolvency of one of them. Participants in the arrangements should retain the possibility to limit or exclude their risks whether by terminating the arrangement or by requiring additional collateral.
5. Integrating the group interest
The law of company groups tries to find ways to integrate the interest of each individual company into the total group interest. The analysis should start from the legal idea of the juridical person, i.e. that each group entity is separate from the other group entities. This is expressed in legal terms by referring to the individual legal personality of the different group companies, which also means that each entity or subsidiary has to be managed in its own interest, and is not subordinate to the interest of another company. Subsidiaries should be managed in their own interest, taking due regard to the different stakeholders, the latter often having conflicting interests (creditors, employees, clients, etc.). This is the concept of “enlightened shareholder value” widely accepted in the EU. At the same time, the subsidiary is controlled by a parent which, being the ultimate decision maker and economic beneficiary, can determine the decisions or actions the subsidiary will develop. Some legal traditions consider that the interest of the company essentially consists of the continuation of the company and its business over a longer period of time, while in others the interest of the whole group has to be taken into account.
For subsidiaries, and due to their economic dependency, the subsidiary’s interest is often part of the group interest. It depends on the group for many aspects of its functioning, such as the use of the group name, its financing structure, its product range, etc. As a consequence, certain advantages which find their source in the group affiliation will benefit the subsidiary: for some benefits it will have to pay (see e.g. the IP profit transfer agreements) while others will consist of restrictions, e.g. a prohibition to engage in certain activities, reserved to other group entities. The question is therefore not how group influence can be excluded, but how it can be integrated in the subsidiary’s own interest.
The subsidiary is the entity where the different interests collide. Firstly the shareholders, in this case mainly the parent company, or as the case may be, the minority shareholders, are the residual claimants. These may be in conflict with the creditors, the employees and others stakeholders, who have the right to be paid before the shareholders. The parent as a shareholder decides about the ultimate future of the company, its dissolution or its sale to a third party. Creditors cannot object that the orderly liquidation results in a loss for them, or that the subsidiary is sold to a notoriously incompetent, or even insolvent party, provided the parent has not acted in breach of the applicable regulations such as the provisions on wrongful trading . In some legislations, liquidation may be governed by additional safeguards e.g. under labour law provisions, while otherwise employees are included in the class of the creditors, often receiving a privileged treatment.
This dependency is translated in some jurisdictions into the legal obligation of the subsidiary directors to pay attention to the parent’s instructions, even if these may be detrimental to the subsidiary. In some jurisdictions such binding instructions may affect the liability of the instructing parent. However, in most jurisdictions, the subsidiary directors should refuse the parent’s instructions if manifestly detrimental to the subsidiary, this detriment to be judged within a certain timeframe. A more refined criterion consists of putting the threshold for the refusal at the level of decisions that are ‘unfair’ to the subsidiary.
Bringing the parent’s and the subsidiary’s interests in line requires first that these interests be identified and recognised, and secondly that their relative value be determined. Once these steps have been undertaken, the negative group influence can be measured and either compensated as is the case in German inspired legal systems, or at least kept within certain boundaries. The legal order will intervene when the prejudice to the subsidiary is excessive.
To what extent do companies that are part of a group have to compensate for the benefits or charges that are imposed on each other? In most cases it will be the parent benefitting from the subsidiary which owes the duty to compensate. In exceptional cases, it may also be the other way round.
Whether account will have to be taken of the benefits an entity draws from group membership and the extent to which such benefit is counterbalanced by the charges imposed by group membership, depends on national legislation, case law, tax regulations, market regulation, tradition, and other factors. Three techniques for achieving this objective can be identified:
A first model as to whether and how a subsidiary will have to be compensated for burdens imposed by other group entities is laid down in German company law, composed of Aktiengesellschaften. In groups where control is exercised on a de facto basis, an annual compensatory payment will be due to the subsidiary with minority shareholders, in this case based on annual assessment of the actual benefits and charges, however complicated the determination of these may be. In fact, this approach amounts to identifying the effects of the group influence, and eliminating its negative effects by imposing a compensatory payment.
In the rather exceptional contractual groups (Vertragskonzerne), the parent is given the contractual right to give binding instructions to the subsidiary for matters that serve the interests of the group. The shareholders of the subsidiary can choose between receiving a compensatory payment (Ausgleich) or requesting that their shares be taken over by the parent (Abfindung), while the creditors are protected by the liability of the directors of the parent to the subsidiary, a claim which under certain circumstances they may pursue themselves.
This legal regime is not applicable to private companies (GmbH) but case law may lead to similar conclusions. The German model is followed, with some adaptation, in several other jurisdictions. Portuguese law e.g. states that parent companies are entitled to give instructions to subsidiaries even if these are contrary to the latter’s interest, provided they serve the interest of the group, or of the parent. These instructions may not relate to intragroup transfers of assets. The parent is jointly liable for all subsidiaries located in Portugal, but not for the subsidiaries outside the country.
In a second group of jurisdictions, approaches have been developed where the existence of the group interest is accepted but without imposing either an annual calculation of benefits and charges or an express indemnification duty. Here the group definition serves to define the limits of acceptable group influence, sanctioning the transgression of these limits in terms of liability or even of validity of acts.
This is the Rozenblum approach followed in the case law of certain Member States whereby the overall balance of benefits and charges is a requirement in such a way that the charges should not exceed the financial capacity of the company that supports them nor be without a remuneration, thereby running the risk of destroying the balance of the reciprocal benefits and charges between the companies concerned. This also means that the group imposed charges should lead to the financial capacity of the company supporting the charges, in other words lead to its insolvency . Moreover, the charges imposed on a subsidiary should be compensated by a certain consideration from the other party and they should not upset the balance of the parties’ respective obligations.
The four Rozenblum conditions required to escape criminal conviction are so rigorously defined that the exception as such rarely applies. These can be presented – in translation- as follows: intragroup relations should be governed by the following considerations:
- the existence of group relations between the companies concerned should be based on a common interest, formulated against the background of groupwide objectives
- groupinternal relations should have a reciprocal consideration
- which should not distort the balance of the respective liabilities of the companies concerned
- nor exceed the financial capacity of the group entity supporting the burden
In civil cases, French courts do not directly refer to the Rozenblum criteria but do take into consideration the existence of a group in order to determine whether a particular transaction could be characterized as being in the interest of a particular company, especially in the context of guarantees provided by a company benefiting fellow group companies. Moreover, the basic concept can be considered as having overarching value. It has been applied in the Belgian case law and in several other jurisdictions that, not necessarily in the same terms, have expressed the same concept of allowing group decision making, under the proviso that the existence of the subsidiary should not be jeopardized
The approach has received wide support from several European study groups, and recently from the Commission as a key element in a possible future European harmonisation of the law on groups of companies. Historically Rozenblum was a case of “abus de biens sociaux”, therefore a criminal case, but other cases are known that were exclusively civil. Moreover, the basic concepts can be considered as having overarching value.
The Rozenblum approach is the criterion for assessing several aspects of group behaviour, such as determining the parent company’s liability or the personal liability of the directors of the subsidiary or more exceptionally of the parent directors, but has also been used for judging in contract law the validity of certain contracts or, in criminal law, the behaviour of shareholders organising transfers between related companies.
A comparable although somewhat different approach is followed in Italian company law. The Italian system is based on a broader concept first by obliging companies to identify themselves as belonging to a group, and by imposing a general duty to manage the company properly and according to the “principles of fair corporate and business management”. If this standard is violated the controlling company will be liable to shareholders and creditors for the damage caused to the company’s assets or its profitability. However, there will be no liability if the damage does not exist, taking into account the entire reciprocal activity of the controlling and the controlled companies, or if the damage is eliminated as a consequence of additional action undertaken with a view to compensating for it. The decisions on these matters must be motivated in an analytical way and state the reasons and the interests that have influenced the decision. Financing transactions are especially mentioned.
According to a third approach, followed in certain jurisdictions the existence of the group interest is accepted but does not give rise to specific consequences, at least in terms of liability. The subsidiary of a group is treated as any other independent company and the remedies applicable to the parent-subsidiary relationship are the same as applicable to any other company.. This means that the group issue is regarded as an example of a more general corporate law problem, for example, that of excessive conduct on the part of a controlling shareholder (whether the controlling shareholder is another company or not) or of unfair treatment of creditors as the company approaches insolvency (whether the company is part of a group or has a controlling shareholder or not). At the same time the rights and duties of the directors have been defined in a more precise way. This is the approach followed in the United Kingdom: it is based on the general concept that a company should not run its affairs in a manner that is “unfairly prejudicial” to the interests of its membership, whether its members in general or part of it. This provision is not specific to the group context but applies to all company affairs. It only protects the shareholders, not the other stakeholders. With respect to creditor protection, the concept of ‘wrongful trading’ is central.
6. Conflicts of Interest and related party transactions
The inherent underlying conflicts of intragroup relations are further dealt with in specific regulations on “conflicts of interest” and more specifically “related party transactions”, a specific form of a possibly conflicted operation. These regulations aim at identifying conflicted transactions, subjecting these to an independent assessment procedure and insuring adequate disclosure and approval by non-conflicted directors or shareholders. They are applicable to all companies, including those with only one shareholder.
Several jurisdictions have adopted detailed rules for dealing with related party transactions or more generally with conflicts of interest. Most of the time these relate to the conflict of a director and his company, but often they can be extended to the wider group setting.
French company law requires any agreement between a director, a general manager, a 10% shareholder, and its subsidiary, a controlling shareholder or its controlling shareholder or another company of which a director or general manager is the owner, to be subject to a specific procedure. Unless this procedure is followed the contract is voidable. The procedure consists of submitting the agreement to the prior authorisation of the board, the conflicted member not being entitled to vote. In case of approval, the board should indicate and motivate how the agreement is beneficial to the company. The auditors should establish a special report for the AGM. The agreement is then submitted to the AGM, the conflicted member being excluded from the vote. Agreements approved in previous years should be reassessed annually by the board in view of a new audit report. Agreements that have been disapproved by the AGM will remain in force, but the negative consequences may be charged to the conflicted party or to other board members, leading to director’s liability, unless the general meeting decides to hold the director harmless. The rule is not applicable to agreements for transactions in the ordinary course of business and at normal rates, or between a company and its 100% subsidiary, but otherwise all agreements are subject to the rule.
A similar approach has been introduced in Belgian law in 2002 and is specifically applicable to group relations in listed groups. The provision aims at submitting certain related party transactions to an enhanced regime of decision making and disclosure. The provision addresses the relations between group companies in general, especially protecting the interests of the listed subsidiary. In the case of intragroup transactions – however not including transactions with a controlling shareholder, other than a group entity – a detailed procedure will apply requiring the assessment by a committee of three independent directors, assisted by an independent financial expert, the auditor giving assurance as to the underlying data. These parties will analyse the proposed transaction both as to its fairness, comparing the benefits and charges for the company, and whether the transaction is likely to inflict manifestly abusive damage to the company taking into account its policies. This opinion will then be submitted to the full board for decision, and reported in the company’s annual report. It is not submitted to the general meeting for approval. Additionally, adopted decisions violating this provision may be declared null and void, at least in cases where the other party knew or should have known that the provision was breached. Directors would be liable, even if the procedure has been followed, in case the transaction caused to the company an “abusive financial prejudice to the benefit of another group company”. The rule only applies to transactions or decisions involving a listed company conferring a financial advantage between that company and a group company – including a parent or other group company – with a controlling influence on the company.
The Dutch Company Code states that in case of conflicts of interest of a director with the company, the director concerned will have to abstain and if no decision can be adopted in the board, that the matter will be referred to the Supervisory Board or in the absence of that board, to the general meeting of shareholders.
With respect to listed companies, the Dutch Corporate Governance Code contains a detailed chapter on conflicts of interest. This states the general obligations to disclose, the duty to abstain, approval by the supervisory board, and disclosure in the annual report. Especially conflicts with large shareholders (10%) are the subject of the best practice provisions, including the requirement to conclude these at “arm’s length” . Other transactions are subject to the general regime for related party transactions. A provision of the Dutch Code further requires a vote of the general meeting on decisions of the board introducing important changes in the “identity or the character of the company or the enterprise”, including the transfer of the firm, the subscribing or discontinuation of “ a long term cooperation” or the transfer of a capital participation for a value of at least 1/3 of the value of the company.
The United Kingdom has an extensive set of rules on conflicted transactions, developed by the courts over the past two centuries and now codified in ss. 175, 177 and chapter 4 of Part 10 of the Companies Act 2006. However, the historical focus of these rules has been on transactions between the director and the company. By contrast, in the case of an intra-group dealing, the other party to the transaction will typically not be a director of the subsidiary but a shareholder in the subsidiary – the parent company or another group company in the case of an indirect subsidiary. After some initial debate it was made clear in 2015 that these provisions apply also to ‘shadow directors’ i.e. someone in accordance with whose direction or instructions the directors of the subsidiary are accustomed to act. However, the value of this reform in the context of group transactions was substantially reduced by a failure to amend the definition of a ‘shadow director’ in s. 251 of the Companies Act. This states that “a body corporate is not to be regarded as a shadow director of any of its subsidiary companies . . . by reason only that the directors of the subsidiary are accustomed to act in accordance with its directions and instructions.” The overall point is that the legislature apparently did not want the extension of directors’ liability to shadow directors to impede the imposition of a common strategy on the group companies.
In the UK, therefore, the main protection for minority shareholders in the Companies Act is contained in the unfair prejudice provisions which apply to those who have control of the company, whether as directors or as shareholders. For companies with a premium listing, however, the Listing Rules laid down by the Financial Conduct Authority apply not only to related-party transactions with directors but also to those with large shareholders (≥ 10% of the voting rights). The Listing Rules require shareholder approval of related party transactions (other than those in the ordinary course of business) with the related party excluded from voting. Finally, it should be noted that the creditor protection provisions of the Insolvency Act 1986 (especially the wrongful trading provisions) also extend to shadow directors, but in this case there is no exclusion of controlling companies from the definition of shadow director.
The UK Financial reporting Council has further clarified the accounting notion of “related party transactions” by stating the circumstances in which the status of “related party” would occur. It also indicates the way the transaction has to be disclosed. An exemption applies for wholly-owned subsidiaries of large or medium sized companies and groups, and there is a simplified regime for small companies.
Under German law, there are no specific corporate law provisions dealing with related party transactions but only specifically for loans to members or service contracts for members of the management or the supervisory boards. A more general obligation is dealt with in the corporate governance code e.g. forbidding the pursuit of personal interest or the use of business opportunities. Within the context of company groups, the protections are based on the law addressing de facto groups, where a report on intragroup dealings has to be drawn up by the management of the subsidiary, verified by its auditors and the burdens resulting from them must be compensated. The report is not published but submitted to the general meeting.
Spain has recently modified its company law with respect to the regulation of conflicts of interest of shareholders, making it clear that conflicted shareholders should refrain from voting on a certain number of topics mentioned in the law. In cases of conflict that are not listed in the law, the conflicted shareholders may take part in the vote, but in case of litigation, the company or the conflicted shareholder will have to prove that the decision was in the company’s interest. For certain matters, such as decisions about the revocation of a board member or relating to a member’s liability and other similarly significant subjects, the conflicted member will be excluded from voting, the burden of proof being for the parties that are in disagreement with the decision.
In Spain, where the simultaneous listing of parent and subsidiaries has been the object of much controversy in the last decade, the Corporate Governance Code of 2006 included the recommendation that, in such cases, the parent company and the subsidiary should define publicly and precisely their respective activities and their potential business relationships (and those of the subsidiary and other enterprises in the group), foreseeing mechanisms to resolve conflicts of interest between them. This recommendation has been followed in practice by the adoption of “protocols” by listed parents and subsidiaries.
Italian law tries to prevent conflicts of interest through a strategy of disclosure and board deliberation requirements. Related parties transactions of listed companies are subject to a special regime found in a regulation adopted by Consob pursuant to article 2391-bis Codice civile and articles 113-ter, 114, 115 and 134-ter Testo Unico della Finanza. Consob Regulation should ensure that related party transactions are performed in a transparent manner and in compliance with substantive and procedural fairness. Moreover, the board of auditors in the traditional Italian governance model must supervise compliance with the relevant criteria and report to the AGM. Consob Regulation foresees two types of information flows: one within the company, as directors must take an informed decision on related party transactions; the other to the market, for the company must inform investors on related party transactions. Moreover, each listed company must adopt detailed procedures to ensure the transparency and fairness of related party transactions.
In Sweden, the Companies Act contains no rules regarding related party transactions. Nor are there any such rules in the Corporate Governance Code. This is an area where the Swedish legislator has chosen a general approach and there are no ongoing or forthcoming national legislative reforms in this field.
However, according to a statement by the Swedish Securities Council, in the event that a listed company decides to transfer shares in a subsidiary or a business activity or other assets to an officer of the company or to a 10 % shareholder – provided the transfer is not insignificant to the company – a resolution concerning the transfer must be adopted or approved by a shareholders’ meeting of the listed company. Before the proposed resolution is presented to the shareholders’ meeting, the board of directors must obtain an appraisal opinion from an independent expert and prepare a report regarding the proposed transfer. The appraisal opinion and report must be made available by the company and posted on the company’s website prior to the shareholders’ meeting that will address the issue. The appraisal opinion and report must also be presented at the shareholders’ meeting. The aforementioned will also apply where the company or its subsidiary adopts a resolution to acquire assets from an officer or a 10 % shareholder of the company.
Under the Polish law separate rules on related party transactions apply to directors and shareholders. In all contracts with the management board members the company must be represented by the supervisory board or a special proxy appointed by the general meeting of shareholders. Additionally, granting loans and guarantees to both groups of directors requires consent of the general meeting of shareholders. A management board member must abstain from participating in the decision making process in case of any conflict of interests involving him or a related person. This obligation applies by analogy to the supervisory board members. A prohibition to exploit business opportunities is based on the general duty of loyalty of board members but seldom applied and interpreted by Polish courts.
Related party transactions with shareholders must be concluded at arm’s length due to the prohibition of “hidden distributions”, constituting part of the legal capital regime. Legitimate interest of the group can justify deviations from the fair value in intra-group transactions, however, the scope of acceptable departures remains unclear. An interested shareholder being party to a transaction with the company can vote on that transaction at the general meeting. The shareholder is excluded from voting only on those resolutions that are related to its liability towards the company, release it from an obligation towards the company, or concern its dispute with the company. Further reaching rules are provided in the Warsaw Stock Exchange Corporate Governance Code. This code requires consent of the supervisory board for a “material agreement” with a shareholder who holds at least 5% of the total vote in the company or with a related party. Typical transactions and transactions at arm’s length made as part of the company’s operations between the company and members of its group are excluded from this rule. It is expected that at least 2 supervisory board members will be independent from the company, its management board members and, most importantly, shareholders holding at least 5% of votes in the company.
Swiss legal practice has introduced rules on dealing with conflicts of interest over the last 20 years by the jurisprudence of the Supreme Court, particularly its decision of 7 April 1987 stating that “Strict standards are to be applied where members of the Board of Directors do not act in the company’s interest but in their own interest or the one of (i.e. part of) shareholders or third parties.” Legal writing has developed quite tight rules about those “standards” to be applied: abstention from voting or even participating in the deliberation, dealing at arm’s length criteria, fairness opinion, approval of the proposed transaction by non-conflicted directors, creation of a non-conflicted subcommittee of independent directors, and resignation from the Board in extreme cases of lasting severe conflicts of interest.
In 2007 an Article 717a was proposed in the corporate law chapter of the Swiss “droit des obligations” along the lines adopted by the Swiss Code of Best Practice on Corporate Governance (and which had already then been closely followed by public companies and still is). The reform has been delayed due to the impact of the “Minder” initiative on board remuneration, but will likely be enacted in the pending bill on corporate law. The content of Art. 717a is already now widely followed as an expression of minimum standards in the conflict of interest area and as a rule to tackle significant RPTs which are not in line with recognized dealing at arm’s length practices.
A specific issue of the “related party” subject concerns the “corporate opportunities” in a group context: this relates to group decisions by which benefits to which a group entity might have been entitled, are diverted to other entities, whether or not within the group, depriving the subsidiary of the opportunity of the contract or of a business development. The decision would be taken by the parent company or its controlling shareholder, and often will be unknown to the subsidiary. The issue becomes more critical if the initiative is explicitly taken out of the hands of the subsidiary, e.g. research being stopped at the subsidiary and transferred to other group entities. Many company laws in the EU have not dealt explicitly with the protection against appropriation of corporate opportunities, although there are references in corporate governance codes and in case law, based on the general principle of loyalty.
The Spanish Companies Act establishes as part of the regulation of conflicts of interest, the obligation of directors of “not taking advantage of corporate business opportunities”. The rule has implications in the group context, since it is considered unlawful to divert a business opportunity to a company related to the director, which would be the case in the case of the directors of a subsidiary diverting an opportunity to the parent company . However, the law also foresees that the duty can be waived, especially when there are compensatory measures (art. 230).
Other techniques for dealing with related party transactions may be found in special legislation. A rather specific approach is found in tax laws where intragroup transactions should in principle take place at arm’s length, preventing thereby intragroup benefit transfers. The interposition of a market pricing mechanism may result in avoiding unfair intragroup transfers.
C. The protection of the interests of shareholders in groups of companies.
The shareholders are the first group of stakeholders which may be directly affected by group decisions. One should distinguish between minority protection in general, and minority protection in listed companies.
1. Minority protection of shareholders in general
There are different levels in a group where minority shareholders have to be protected, as there are different techniques for doing so. To a large extent, protective techniques that can be applied in any individual company, will also be applicable for the protection of the shareholders both of the subsidiary as of the parent company, as both are to be considered as individual entities. Therefore the instruments applied for protecting minorities in subsidiaries are applications of the general company law rules dealing with minority protection. The position of a minority shareholder in a subsidiary is in principle not different from that of any other minority shareholder. Instruments aimed at protecting minorities’ rights will often be based on abuse of majority power, or on the directors’ fiduciary duties towards shareholders. The latter have been recognized in some jurisdictions but not in all.
It goes without saying that the matter of minority protection at the subsidiary level is not applicable to 100% owned subsidiaries, although the need for creditor protection is then prevalent.
Shareholders of group entities and also of individual companies are often protected by obtaining disclosure of the company affairs. The annual reports contain often extensive information on the activities of the company, as well as on the composition of its assets, while the overall financial position is reflected in the consolidated accounts.
In general, minority shareholders can complain when the majority is abusing its power (“abus de majorité”), a remedy that is closely related to the common law remedy of abuse of right (‘abus de droit’) being the exercise of a right in a way that runs contrary to the ‘normal diligence’ that can be expected. This notion is comparable to the “abus de droit” where someone uses his legal or factual position and exercises his right with a view to inflicting damage to someone else, or in a way that is not compatible with this right’s purpose. But other legal techniques to deal with abusive conduct are also followed.
As far as minority shareholders in a subsidiary are concerned, this principle also applies: minority shareholders have to undergo the consequences of the decisions of the majority of shareholders, whether that majority is the result of the votes of several individual shareholders or just the votes of a single shareholder – the parent company. In a subsidiary, minority protection is mainly needed against conduct of the group leadership which may be detrimental to the minority, whether it is dictated by the group interest or by the individual interests of the parent or of its controlling shareholders.
On the other hand, the group interest may be a valid justification for imposing decisions that are prejudicial to the subsidiary, but are dictated by the overall interest of the group. In these cases, the subsidiary should accept the prejudice, as it also benefits from the advantages of belonging to a group. But when the parent or the majority impose decisions or transactions that are manifestly and grossly detrimental to the subsidiary and its minority shareholders, legal redress will be available. In a group context this situation may occur more frequently as the interest of the parent – or of the controlling shareholders – resides in the overall interest of the group and is not necessarily in line with that of the subsidiary. The tool that achieve this protection are usually general company law instruments.
According to s. 994 of the UK Companies Act 2006, in case the affairs of a company have been conducted in a manner that is “unfairly prejudicial” to the shareholders or part of these, a member may apply for an order to the court, giving the court the power to apply a wide range of remedies. It is accepted in the case-law that decisions taken by the parent may constitute conduct of the affairs of a subsidiary and even that conduct of the affairs of the subsidiary may constitute conduct of the affairs of the parent.
French and Belgian case law has developed a considerable body of cases applying the concept of “abus de majorité’ in which a company decision is held to be “contrary to the general interest [ of the company] and adopted with the sole intention to benefit the majority to the detriment of the minority” . The concept is related to the overall definition of the purpose of the company. i.e. that it should act “ in the common interest of tits members” . These decisions lead to annulling the contested decision, granting damages to the injured party or appointing a judicial “minority“ expert investigating the facts. A similar approach is found under Belgian law, but the company code requires claimants to hold at least 1% of the voting shares , or shares for a value of €1 1,250.
The cases in which this type of abuse has been sanctioned usually relate to instances where the majority adopted a decision that was in the sole interest of the majority, thereby disregarding the interests of the minority or in cases where the decision was clearly detrimental to them. It has been held not to be in the interest of the company to grant a mortgage to guarantee a loan to the majority shareholder, or in order to cover the threatened insolvency of another unrelated company, owned by the majority shareholder, or to protect that unrelated company’s managing director against liability for his bad management; or of transforming the company in a Societé en commandite for the sole reason that this allowed the majority shareholder to take advantage of the tax benefits of that company form; a refusal by a shareholder to vote on an increase of the company’s capital may be abusive if the company had incurred losses resulting in a breach of the minimum capital requirement; but not if the capital increase was only needed to expand the business; or also a decision to grant excessive remunerations to the directors, thereby reducing the returns to shareholders Well noted examples relate to the case of the majority shareholder consistently refusing to distribute dividends to his fellow shareholders, in order to keep the funds for his other business activities he controls. The abuse should be gross and manifest, and will usually also constitute a breach of the rule of equal treatment of shareholders. Nullity of the decision or transaction would be the usual remedy. These remedies belong to general company law, and are not specific to group law. However, these decisions are mostly heavily fact-dependent. Guaranteeing a loan taken out by another group company may well be in the interests of the company giving the guarantee when the finance raised is to be used to promote the business of the group as a whole. In the absence of group law permitting them to take a wider view, the crucial point is that the directors of the company taking the decision need to analyse the matter solely from the point of view of that company , and not exclusively serving the interest of the controlling shareholder.
In Italy the parent company can be found liable under article 2497 Codice Civile in case of breach of the principles of fair corporate and business management in the exercise of the direction and coordination activity. Shareholders and creditors of the subsidiary can bring an action directly against the parent company and claim for damages suffered by them, provided that these damages have not been compensated otherwise. Courts and scholars have analysed the nature of this liability asking whether it derives from a violation of contractual duties or from a tort. The majority of the courts and scholars have concluded that it is a contractual liability deriving from the breach of obligations concerning the direction and coordination activity within a group.
In Spain, the notion of “abuse of corporate majority” is integrated in Criminal law as a specific corporate crime (art. 291 of the Criminal Code). The application of this provision, in force since 1995, has been controversial, since its effect has been to criminalize conduct that in most cases could be redressed through ordinary civil remedies. Specific instances of abusive conduct are indeed contemplated in company law, with the result of triggering exclusion or sell-out remedies.
Under Austrian law for public companies, actions detrimental to the company will lead to the parent’s liability if it has wilfully made use of its influence over the subsidiary in order to obtain special benefits outside of the company’s sphere. Although liability will not attach if the influence has been used to obtain an advantage which “serves interests worthy of protection”, contemporary scholars unanimously hold that the group interest (or, even less, the interest of the parent company itself) is not privileged by that provision. Similarly, if a decision by the general meeting is based on the vote of a shareholder who thereby tries to obtain special benefits outside of the company’s sphere, the decision is voidable.
In German law protection of the minority shareholder is dealt with under the heading of the duties of the organs of the company, i.e. management board, supervisory board and general assembly and by specific concepts such as the principle of equality. The emphasis of minority rights is rather on procedural questions such the rights of a minority to get information, to get a special inquiry started, both in the independent company and in the group, or to have the directors sued. Whether there is a minority right to sue against serious impairment of their membership rights by the directors is controversial. Apart from (procedural) minority rights, minority protection in Germany is focusing on minority protection of the shareholders in the subsidiary, and this is dealt with by German group law.
The judiciary is quite reluctant to intervene in these cases, as the majority shareholder will often be able to find a justification in its business judgment privilege. The Rozenblum yardstick may also be relevant here as allowing decisions to be adopted in the group’s interest, at the same time putting some outer limits to the majority’s freedom of judgment, safeguarding the company’s interest. If these safeguards are disregarded, the minority should be able to have the decision set aside. Another way of analysing this situation is to characterise this position as a “conflict of interest”, between the group and the subsidiary interest. In some cases, this conflict may lead to special safeguards, usually referred to as the provisions on “related party transactions”.
A minority of shareholders may have the right to sue directors in liability for obtaining redress of the harm caused to the company, and indirectly to themselves (derivative action). Company directors are exposed to liability for mismanagement, for breaches of a provision of the law or of the charter provisions but only to the company, to third parties, and also- derivatively – to the class of shareholders. The protection granted to the interests of the subsidiary can take different forms: damages, liability of directors, annulment of the majority decision -possibly with damages-, or, under UK law, any useful remedy.
Usually it is quite difficult for minority shareholder to find effective protection on the basis of these rules: the access to a minority legal action is restricted by minimum shareholding conditions, and other collective action issues while the financial benefits usually flow to the subsidiary, not to the minority shareholders, who often may have to advance the often considerable legal expenses and lose them if the claim is rejected. In addition, the necessary information is often not accessible, creating the need for an effective special investigation instrument. As a consequence, dissatisfied shareholders and activist investors use other more market related instruments.
In some jurisdictions, individual shareholders would only have the right to sue for damages directly and individually inflicted to themselves, but not as shareholders. Otherwise the liability would only run towards the subsidiary and not to the individual shareholder. Shareholders would only exceptionally be able to sue the parent company or its directors in liability: this might be the case if specific shortcomings or torts committed by these directors can be proved as having been the cause of the damage to the subsidiary – derivative action – or to its shareholders, e.g. for abruptly cutting the credit or supply lines to the subsidiary.
2. Exclusion and withdrawal or exit rights
Another approach for solving the majority-minority conflict consists in allowing the conflicted parties to leave the company at a normal price. This remedy is often available in partnership-type of companies. The legislation of certain Member States grants an exit right as a protection against abusive conduct of the majority even in stock corporations, both in groups and in independent companies as well. One should distinguish between unlisted and listed companies.
A first set of exit rights in unlisted companies pertains to shareholders in cases of – factually unsurmountable – conflicts between them: according to Belgian law, a shareholder owning at least 30% of the shares may apply to court to have the shares of another shareholder transferred to him and this for “serious reasons”, in fact mainly for insoluble conflicts. The price is to be fixed by the judge or under his scrutiny. The reverse remedy consists of the right of any shareholder to require his shares being taken over by the shareholder that is the cause of the conflict. Here again the court decides on the transfer price. These remedies do not apply to listed companies,
These remedies – both exclusion and withdrawal right – have been used very frequently in unlisted or privately held companies. They have also provided effective protection in a group context, when the parent company made an excessive use of its power to the prejudice of the minority.
3. Exit rights in listed companies
Shareholders in a listed company can avail themselves of other additional statutory protections which are rooted in the Takeover Directive.
The first and most radical of these remedies applies when a takeover bid is launched on the shares of the listed entity, in which case all shareholders should have the right to tender their shares and receive the same price, often the highest price at which the acquirer has bought before the bid. The rule is often applied in the context of a restructuring, when a new group takes over a listed company and makes a bid for all – or almost all – outstanding shares. The takeover regulation contains additional protections, e.g. for avoiding secret pre- or post-bid deals. In many jurisdictions the obligation to launch a bid also applies in the case that one party builds up a controlling stake, crossing a pre-set threshold, often 1/3 of all shares. In these cases, the minority protection will take the form of giving them an exit right, thereby eliminating the risk of being exposed to oppressive conduct, or to a radical change in the risk profile.
Comparable statutory exclusion or withdrawal rights apply in listed companies under the form of squeeze-out or sell-out rights, the first allowing a large shareholder to acquire all remaining shares in the market once he has acquired a very high percentage (usually 90 or 95%) through a public offer. All shares will by law pass to the bidder. In the reverse case, a minority shareholder will be bought over by the majority if he complains about the latter’s conduct. Here again the remedy serves to protect small shareholders against the risk of future oppression and applies only in a post-takeover context.
These remedies have been implemented in all EU member States, some – as Germany – having extended it from takeover law into general corporate law. Similar remedies apply in case of a merger, and in some jurisdictions of significant changes to charter provisions or to company activity.
4. Conclusion on the protection of minority shareholders in groups of companies
The protection of minority shareholders in a group subsidiary is governed by general legal remedies, applicable to individual companies and subsidiaries of other companies. These remedies are generally applicable and not specific to group relations. For listed companies, additional protections are applicable essentially derived from the takeover bid directive or from financial regulation, especially with respect to mandated disclosures.
D. The protection of the interest of the creditors in groups of companies.
Creditors of the subsidiary – and more exceptionally of the parent- may be protected in several ways against the consequences of group decisions. These remedies will become relevant not only in case of the debtor company becoming insolvent (insolvency law contains useful remedies), but also outside the formal insolvency context. These remedies will specifically apply in the group context by opening recourse to creditors against other group companies- parent company and other subsidiaries – and where applicable to the latter’s directors, in addition to recourse against the debtor company, and its directors.
As a rule, the rights of subsidiary creditors should only be exercisable against the company with which they have contracted, or against which they have a claim. There is no general group liability, as the French Cour de cassation has rightly reminded. Group liability can only exist when it flows from the law, or when the activities of a group company, mostly the parent have led to widening the ambit of the creditors’ recourse.
On a voluntary basis, group entities may have accepted responsibility for some group liabilities, (see: guarantees, letters of comfort, collateral), reducing the need for statutory creditor protection. Contractually organised groups in which respective duties and rights are agreed among group members have been mentioned.
1. Instruments of creditor protection
The subject of creditor protection in case of a company’s insolvency cannot be developed in the present context , as this would require very elaborate developments of civil law company law or insolvency law or other special branches of the law. Therefore, only cases that relate to the group context will be summarised here.
The subsidiary creditors are first protected by general remedies proper to all companies and may exercise all remedies that may be pursued against their debtor and its directors.
A broadening of their recourse may occur in cases where the company has continued to trade, although it was insolvent, or was irremediably evolving towards insolvency. In this case the directors of the company may be liable on the basis of “wrongful trading”, as formulated in company or in insolvency law. This is an example of the general duty of care of directors, meaning that diligent company directors – or diligent businessmen in general – should not have continued to trade and put the company’s counterparties in danger if they knew, or ought to have known that the company was likely to become insolvent and would not be able to honour its debts. In case of “wrongful trading” the creditors’ recourse may be extended to the parent, if the latter acted as a “de facto” or “shadow” director, being held to the same obligations as the de iure director of the subsidiary. This may happen when the parent became active as a director of the subsidiary, although not having been appointed in that capacity, and nevertheless actively managed the business of the subsidiary. The additional liability is not specific to group law: even in a small company the shareholder may incur this liability if he started to take over the management of the company, although not having been formally appointed as director. As a de facto director, he may in addition be liable for “wrongful trading” by not stopping the activity of the company, although it was bound to fail. In the group context, this liability may coexist with that of the subsidiary’s directors, who engaged at the demand of the parent in business activities that were too risky: they should have refused its demand, and if not, may be held liable. The circumstance that they acted at the demand of the parent would not modify their personal responsibility, although it might be considered an attenuating factor, or might give them the right to have recourse against the parent.
Liability of a parent company as a “de facto” director presupposes an ongoing intervention by the parent in the activities of the subsidiary, and not a single decision, nor the mere existence of a controlling holding. In the group context, de facto group integration leading to intrusive centralised management is likely to increase this risk of parent liability. Most parent companies will avoid this type of liability by avoiding giving proper orders to the subsidiary, or by presenting their orders as “recommendations” leaving the subsidiary board “free” to act, although this may not be sufficient to deny the parent’s influence. In principle, group executive management is required to leave sufficient independence to the group companies to develop their own decision making and allow their board and management to determine the limits of their personal responsibility.
Parent liability may also be due to negligent acts that may have caused the demise of the subsidiary: French law recognises liability when a party, in this case the parent, has abruptly stopped its relations with the subsidiary, leading to the latter’s insolvency. Other jurisdictions, like for example Germany, have similar case law, but are more restrictive. This case is different from the previous one as no action by the subsidiary is involved. Therefore, the subsidiary’s directors should not be held liable. The rule applies not only in the group context, but would also apply in case of abrupt interruption of all business relationships. Comparable is the case of the parent causing the insolvency of the subsidiary by imposing decisions that disregarded or harmed the subsidiary’s interests: e.g. by imposing a decision that shifted the risk from the parent to the subsidiary that ultimately fails. Ordering the mere continuation of the deeply compromised activities of a subsidiary without corresponding financial support could also constitute a negligent act, leading to parent liability. Some have argued in favour of a “devoir de secours” , according to which the parent should intervene when it sees the position of its subsidiary deteriorating. Depending on the action undertaken by the parent, this may be regarded as interference in the management of the subsidiary, making it a “de facto” director, hence rendering the parent liable. Normally, this type of measures will not be dictated by the parent, but effectuated through a change in the management of the subsidiary, to be decided by the parent in the AGM of the subsidiary. The parent is normally not liable for what it approved as a shareholder.
It should be remembered that the creditors of a subsidiary have no right to see the subsidiary always solvent. If insolvency threatens, it is up to the subsidiary directors to take the necessary measures and apply for liquidation, or other judicial measures. It is not the duty of the parent to ensure that its subsidiaries should always remain solvent. The liability of the parent should only intervene when the parent has imposed specific acts that could be characterised as undue interference, or negligence in their own right.
Group liabilities may also be based on other instruments.
“Extension du passif “– “action en comblement d’insuffisance d’actif” or “en comblement de passif” – are statutory remedies applied in certain member states when bankruptcy – or a similar measure – has been declared and provided insolvency is in some way attributed to the action or inaction of the director or former director or any other person who has effectively held the power to manage the company: these persons will be held personally liable for all or part of the company’s debts, depending on the decision of the judge, provided that their action or inaction contributed to the insolvency. The qualification of the triggers of this far-reaching liability are different: in some states, ”a manifest gross negligence” is required, in others a ‘’management error” will suffice. In some jurisdictions this liability may also be imposed in case of non-respect of the social legislation, money laundering or tax fraud. The UK provision on “wrongful trading” is to some extent comparable, allowing for liability of the persons who continued to trade a company past the point when they “knew, or ought to have concluded that there was no reasonable prospect of avoiding insolvent liquidation”; and “did not take “every step with a view to minimising the potential loss to the company’s creditors”. It should be distinguished from ‘fraudulent trading”, as this refers to trading with the intent of purposefully deceiving and defrauding their creditors. 
The Belgian case law declared the shareholder of small companies liable for the debts of the bankrupt company, if that shareholder acted as the de facto director and committed some serious management error, thereby combining the “wrongful trading” and the “de facto director” ideas. The rule could also be applied to controlling shareholders, that intervened actively in the subsidiary’s activities. Its application in the group context is not specific, being applicable to all companies. It derogates from general rules of liability to the extent that a judge can declare the defendant liable for all – or none – of the company’s debts, not only those that were caused by the defendant or under his authority.
Under German law the director of a GmbH may become liable for payments made after the GmbH has become illiquid or insolvent. While doctrinally rather different, in the end the creditor protection is rather similar to the UK wrongful trading.
The joint trading of parent and subsidiary may create the appearance of a partnership making both partners liable. This is an application of common rules, known in French terminology as the “théorie de l’apparence” which is subject to restrictive conditions as to the parent’s conduct. It is generally applicable even to the joint trading by two unrelated companies, or by one individual trader and a company.
A sub-example is the one in which the parent and the subsidiary created confusion as to who is the contractual party: both can be held liable. “Confusion de patrimoines” has also been mentioned, in which case where the assets and liabilities of parent and subsidiary are so commingled up to the point that they form one single bankruptcy estate or “masse”: here both parties will be jointly liable for the whole debts with their joint assets. In case that the parent and the subsidiary committed a join tort, they will be jointly liable according to general tort liability principles.
“Fictivité de la personne morale”is another sometimes mentioned basis for group liability : this remedy presupposes the legal entity to be considered a fiction, which would be considered null and as a consequence, the judge will declare the bankruptcy of the person trading under the cloak of the legal entity. Sometimes the legal entity is declared a “shell or fictitious” company allowing to tax the owner directly.”. Belgian legal writing refers to “abuse of the legal personality” occurring in case of no separation between the company and the shareholders assets, or the non-functioning of the company internal decision making, leading creditors to reach for the shareholders’ assets. Some writers have however objected referring to the civil law doctrine of the unity of once assets, the persons or companies behind the company, because the legal entity is supposed to be removed, all relationships being directly linked to shareholders, or directors, and hence declaring them liable for everything that was undertaken by the company. This rather blunt method is rarely used in most of Europe, although it was sometimes applied in environmental cases. The Belgian Court de Cassation expressly refused it, and in the UK it has always been treated very narrowly. The most recent case suggests the doctrine is available only when a company is used to defeat a liability which already exists, but not otherwise. In Spain, it seems to be more frequently used. This technique should not be confused with the exceptional provisions whereby one should take into account the identity, especially the nationality of the shareholders, a classical war time instrument. Also, this reasoning has been used for declaring parent and subsidiary as a single economic entity, although the outcome may be more convincingly reached through other techniques (such as de facto director, joint trading).
“Piercing or lifting the corporate veil” is sometimes used as a technique to reach the persons or companies behind the company, because the legal entity is supposed to be removed, all relationships being directly linked to shareholders, or directors, and hence declaring them liable for everything that was undertaken by the company. This rather blunt method is rarely used in most of Europe, although it was sometimes applied in environmental cases. The Belgian Court de Cassation expressly refused it, and in the UK it has always been treated very narrowly. The most recent case suggests the doctrine is available only when a company is used to defeat a liability which already exists, but not otherwise. In Spain, it seems to be more frequently used. This technique should not be confused with the exceptional provisions whereby one should take into account the identity, especially the nationality of the shareholders, a classical war time instrument.
Finally, general civil law doctrines can often be applied in the group context so as to impose liability on the parent or controlling shareholder. Thus, in the recent case in the UK Supreme Court where piercing the veil was rejected, the company was treated as holding its assets on trust for its ultimate beneficial shareholder . Where the parent exercises detailed control over the operations of the subsidiary, it may be treated as owing a duty of care directly to the employees of the subsidiary injured in the course of its business.
2. Conclusion on the protection of creditors in groups of companies
Creditor protection in groups of companies takes place by using existing instruments that are available to creditors of individual companies as well. Their application to the group context only extends the reach of the remedy to other group entities and their directors. Often creditors are indirectly protected on the basis of the rules for shareholder protection.
E. The position of directors belonging to a group of companies
Directors of group companies are liable according to the general principles of company law and tort law, towards shareholders of the companies where they perform their functions. This liability applies to directors of both parent and subsidiary companies.
The situation of the directors of subsidiaries is different, as they direct – and in smaller subsidiaries manage – the subsidiary taking into account its interest, but also the interests of the parent, or of the group. In that context, they may legally have to follow up the instructions of the parent, although most of the time their decision will conform to the overall objectives of the group. In some jurisdictions, e.g. the UK, where parent companies normally entitled under the articles to give binding instructions to the directors of subsidiaries, the directors of subsidiaries are protected against liability to the shareholders – though their duties to creditors (for example, under the wrongful trading provisions) would be unaffected.
Refusals to follow the recommendations or instructions of the parent company are rare and will normally result in the termination of the directors’ contract, or at least a relocation within the group. Therefore, directors of subsidiaries can hardly be expected not to follow the parent’s or the group’s instructions.
Although in principle, the position of the directors of a subsidiary will be the same as for any company director, the liability will have to take into account the specific context of the group relationship. Depending on the jurisdiction analysed, the liability may more or less be influenced by the group context – e.g. in the UK or Sweden – , or may – within certain limits – be able to take into account the interest of the group. In this last case, reference should be made to the Rozenblum test, allowing directors to adapt their commitment to the sole interest of the subsidiary to the wider group interest, while respecting the conditions and limitations formulated in that test.
The personal position of a director may however have an impact on the extent of his liability. Directors of the parent and of the subsidiary, are usually are independent organs of the company, while in some jurisdictions they are considered employees of the parent or of the group, certainly if they are elected under codetermination. This qualification does not only affect their tax, or social security status, but also their liability. Therefore, whether and to what extent members of the executive management will be dealt with on the same basis as the directors deserves additional differentiation. In some jurisdictions, the statutory remedies would only be applicable to the legally defined “directors”, while in others the top officers, whether or not members of the board, have the general power to direct the company, and hence will be assimilated to the directors especially for questions of liability.
As employees, their liability might be limited or even excluded on the following basis: depending on the applicable legal regime, the liability of employees in many legal systems is very limited; in several member states – but not in all – employees can only be held liable for fraud, gross misconduct or repeated negligence. In practice, this protects the subsidiary’s directors against creditors’ actions for negligence. National liability regimes may be very different in this respect: the employer, here the subsidiary, will be liable for the negligent acts of the employee. It seems controversial whether this exoneration only applies to their actions as employees, or also to their actions as directors of the subsidiary. It is unclear whether at the subsidiary level, employees of the group who are directors of the subsidiary, will still qualify as employees for their acts as directors. The practice however seems to be that they will be considered employees of the subsidiary, or even of the parent, and hence not be liable. Social security regimes contribute to this qualification, as directors are often qualified as employees under the social security regime. All this illustrates the ambiguity of the regimes applicable to group employees-directors.
F. Recommendations as to policy and research on regulating groups of companies in the European Union
1. No need to have a full-fledged European law of groups of companies
The foregoing overview is a critical contribution to the ongoing discussion at the European Union level whether and, if yes, to what degree group of companies law needs to be harmonised. The overview indicates that in the European Union several national legal systems coexist that use a great variety of instruments for dealing with issues of groups of companies. Three main problem areas have been identified: first, do minority shareholders in a group company need legal protection against the negative consequences of the group influence? Second, what are the instruments to protect creditors of a group company, mainly – but not only – in case of its insolvency? Third, what is the effect of the group relationship on the position of the directors of a subsidiary? These questions have received answers most of the time in case law, usually by the courts applying general principles of law. In addition, there are some specific supplementary provisions of company law or of bankruptcy law, especially in financial regulation and mostly limited to listed companies.
As the law stands and is being developed in most jurisdictions, there is no need to develop a comprehensive European regime for the protection of the aforementioned interests. This conclusion is also supported by several official reports developed at the European Union level. It is also the position adopted in most of the recent legal writing.
There are however some doubts as to whether the applicable legal regimes in the different jurisdictions offers comparable levels of protection: one could argue that harmonisation should intervene in order to offer if not the same, at least a minimum level of protection all over the Union, thereby contributing to the level playing field in terms of cross border establishment and contributing to investment in other Member states.
It does not seem necessary at least at present to extend the level of protection to all European countries by introducing similarly protective provisions, as other remedies may be available that allow to achieve the same objectives. However, to the extent that it is not yet available, the” wrongful trading” remedy should be considered for introduction in all member states as a prominent instrument for creditor protection. The right for shareholders to apply to court for the appointment of a special investigator would also be a useful complementary instrument for their protection.
2. Selected group law issues on which further work should be done: pursuit of group interest and related party transactions
It is important to identify the main topics on which further work could usefully be undertaken:
-The first topic relates to the still not generally accepted concept that a company which is part of a group of companies can lawfully take into account not only that company’s own interest but also the interest of other group entities or of the group as a whole. How these two interests have to be put in balance is open for discussion. Often reference is made to the Rozenblum test, including the two limitations that are an integral part of that test. The German approach for the de facto groups also accepts group influence, but is stricter as it imposes a yearly indemnification for detriment caused by the parent to the subsidiary.
-The second topic relates to the extent to which group decisions – including decisions by controlling shareholders – could impose unfavourable transactions to subsidiaries, being transactions that reflect the interest of the group, or of its controlling shareholders, but not the financial or economic interest of the subsidiary. The application of the Rozenblum criteria offers a way of dealing with this question. However, it leaves too wide a discretion to the parent and to the subsidiary concerned, as no limits – quantitative or other – are implied as to the amount of negative influence on the subsidiary, while no time limit is set for the compensating action. The protection for minority shareholders is a rather weak, while a regime consisting of a yearly calculation of the benefits and charges along the lines followed under German law creates a stricter obligation, but – whatever its merits – it does not seem the best response for a Europe-wide proposal, since many Member States already find the weaker Rozenblum test very demanding.
One could sensibly characterise the group relationship – between parent and subsidiary, but also between other group entities or with controlling shareholders – as essentially reflecting a conflict of interest between the group, or the controlling shareholders and the interest of the subsidiary. The conflict make take different forms, one consisting of a transaction between parties that having pre-existing relations, may not necessarily act in the interest of the company. The conflict may be prejudicial to the subsidiary but should not necessarily nor always be so. In the latter case, the relationship should not be analysed as a conflict of interest but is part of the parent’s economic or financial policy.
Although most legal systems have adopted provisions dealing with conflicts of interest between a director and the company, the group dimension is generally not included. Several sources indicate that the legal regime relating to conflicts of interest within the group context usually focus on transactions between group entities, their directors and shareholders, which is usually referred to as “Related Party Transactions”(RPTs).
This approach has been mentioned in an elaborate study by the OECD and by several other sources, including the European Commission, which within the framework of a revision of the Shareholder Rights Directive, is preparing provisions on “related party transactions” (“RPT”). Academic studies have also drawn attention to the possibility to deal with core issues of group law by making application of the regime of “related party transactions” in group relations. Therefore, it is worthwhile to further explore this line of reasoning.
3. The future Shareholder Directive
According to this future Directive in the version as approved by the European Parliament, it will provide for a procedure applicable to transactions between a related party and a company the shares of which are traded on a regulated market within the Union. The proposal is comparable with the one identified in the OECD report on Related Party Transactions and Minority Shareholder Rights, which identified four core components of RPT regulations: disclosure, board approval processes and controls, shareholder input and enforcement. Detailed findings have been made in this report and in legal writing analysing the laws and regulations already in force.
The proposed Directive has not received much support from the business organisations that represent large companies, Business Europe and European Issuers warning that “prescriptive provisions would slow down corporate decisions, increase costs and inadvertently give sensitive information to competitors”. EFAMA welcomes the proposed provisions but an exemption should be provided for intra-group transactions where these are part of the normal course of business. Also the European Banking Federation published a critical view on the RPT regime, arguing that “Member States have already in place today rules to protect minority interests in line with their own individual national company law regime”. These opinions contrast with the supporting statements by the industry.
The proposed Directive requires Member states to adopt procedures for dealing with RPTs. It does not take a position on the standards on which conduct within a group has to be assessed. Therefore, it does not take a stand asto the existing division of present systems, as mentioned above: i.e. the German system, calling for full indemnification, the Rozenblum approach tracing the outer limits of acceptable group direction, and the UK system applying general company law. Therefore the enforcement systems would lead to very different results.
4. Recommendations of the ECLE as to measures at the European level
Based on the developments above, the ECLE recommends the Commission to continue its present work on Related Party Transactions and develop a regime specifically addressing the case of groups of companies . From that perspective the following provisions could be considered.
The provisions would apply not only apply to listed companies – whether parent or subsidiary companied – but also to the unlisted ones when dealing with their subsidiaries and other group companies.
- The provisions should not be limited to transactions but should also include decisions, even if these may not result in transactions in the traditional sense, but may procure financial benefit or disadvantage.
- The concept of “group” can be defined by referring to one of the definitions already used in other European instruments, but the rules should include decisions of controlling shareholders, e.g. natural persons, which may not be considered part of the group, but should be known to the directors. Transactions between subsidiaries should be included.
- The regime should apply to fully owned subsidiaries, unless the parent offers sufficient guarantees for the protection of creditors.
- Disclosure of the RPT by the parties concerned should be based on their voluntary action, identifying the conditions and the parties involved and information to be submitted to the board of the group entities concerned. Only significant transactions should qualify, small transactions or transactions in the ordinary course of business should be exempted, the threshold being defined by the company, or better by law. The assessment of the transactions should be submitted to the board of directors of the company concerned, acting on the basis of an external expert, the conflicted directors not taking part in the decision. The board should take a position not only on the amounts involved but also on the fairness of the transaction, paying attention to the consequences of the transaction on the continuing existence of the company and the position of the shareholders and creditors. If applicable, alternative remedies may be used. If important, the board could decide to submit the transaction to a shareholder vote, intervening at the annual general meeting, or at a special general meeting if the board decides so. The final decision – of the board or of the AGM – will be made publicly available.
- Shareholders should not be entitled to request that the transaction is declared null and void, if the procedure has been followed, but should be able to claim damages if their interest have been substantially prejudiced. Shareholders should have the right to apply for a judicially appointed investigating expert.
- Summing up it would be it is useful that at least the principles relating to Related Party Transactions should be clearly stated in a European Union instrument:
- In a group context companies can take into account the interest of other group companies, or of a group as a whole;
- With respect to transactions within the group, there should be a regime on related party transactions protecting the interest of shareholders and creditors in the subsidiary;
- Adequate legal remedies for the protection of these interests should be provided;
- These principles should apply to listed and to unlisted public companies;
- Thresholds should be voiding the requirements to be applied to small, or day-to-transactions.
- How these principles could be further implemented in national legal provisions should remain a matter for the member states.
5. Recommendations of the ECLE as to measures at the Member State level
The implementation could be pursued by the Member States according to the following lines:
- Group parent companies should make available essential information for the protection of their shareholders and stakeholders, including a description of the group, the main intragroup relationships and, where applicable, the identity of the ultimate controlling shareholder;
- The Related party regime would only be applicable to transactions that cross the threshold as determined in accordance with the national provisions; it would be applicable to wholly owned subsidiaries if the creditors’ rights might be endangered;
- It would not apply to mergers subject to the EU directive;
- The identification of RPTs and the commencement of the specific procedures is a task of the parties involved, i.e. the board of the subsidiary company, or the board of the parent company for transactions with controlling shareholders, or with other group entities. The board should be fully informed on all essential elements of the transaction.
- The board of directors should designate an independent financial expert to analyse and report on the effects of the transaction on the company;
- The board should adopt a position on the transaction, including its fairness to the shareholders, taking into account the opinion of the financial expert; transactions at proved “arm’s length” or standard terms are considered fair and should be exempted;
- The board should decide to submit important transactions to be submitted to a shareholder vote; this would also apply when all directors are conflicted.
- The final decision – of the board or of the AGM – will be made publicly available, where applicable taking into account the restrictions on market abuse.
- Shareholders should have the right to apply for a judicially appointed investigating expert.
- Shareholders should not be entitled to see the transaction being declared null, if the procedure has been followed, but could ex post claim damages if their interest has been substantially prejudiced.
- Alternative remedies such as compensatory damages, a withdrawal right or a squeeze-out may be considered.
Special thanks go to Mr. Robert Einefors, Gothenburg University, for language review of this paper.
 The 1984 text of this directive is reprinted in M.Lutter, Europaeisches Unternehmensrecht, 4th edition,1996; First versions of proposal a ninth directive were considered in 1974 DOK.nr.XI/328.74-D and 1875, DOK.nr XI/593.75-D; the version of 1984 DOK nr III/1639/84, in ZGR, 185, 444.
 Seventh Company Directive 83/349 EEC of 13 June 1983 on Consolidated accounts, OJ L 193, 18 June 1983, replaced by Directive 2013/34/EU of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC.
 http://ec.europa.eu/internal_market/company/docs/modern/report_en.pdf. The areas where intervention with respect to groups were considered relate in particular to: (i) the transparency of the group’s structure and relations; (ii) the tensions between the interests of the group and of its parts; and (iii) the special problems of pyramid structures.
 Communication 21 May 2003, COM (2003) 284 final. The Commission decided that while no overall directive was needed, specific provisions may be needed in the three areas identified by The High Level Group.
 See for details F.3.
 http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52012DC0740&from=EN. For a critical evaluation of the Action Plan see K. J. Hopt, Corporate Governance in Europe, A Critical Review of the European Commission’s Initiatives on Corporate Law and Corporate Governance, New York University Journal of Law & Business 12 (2015) 139, on groups idem at 178 et seq, also available as ECGI Law Working Paper No 296/2015.
 See feedback statement of 17 July 2012 and responses received, at: http://ec.europa.eu/internal_market/company/modern/index_en.htm#consultation2012.
 Relating respectively to the organization and capital requirements for bank, insurance companies and the alternative investment fund management companies (AIFM).
 Article 19 e.s. of Directive 2014/59/EU of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms (BRRD); Regulation (EU) No 806/2014 of 15 July 2014, establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (SRM).
 As to these see E. Wymeersch/K. J. Hopt/G. Ferrarini (eds). Financial Regulation and Supervision, A Post-Crisis Analysis, Oxford 2012; E. Ferran/N. Moloney/J. G. Hill/ J. C. Coffee, Jr. (eds.), The Regulatory Aftermath of the Global Financial Crisis, Cambridge 2012; E. Faia/A. Hackethal/M. Haliassos/K. Langenbucher (eds.), Financial Regulation, A Transatlantic Perspective, Cambridge 2015; R. H. Huang/D. Schoenmaker (eds.), Institutional Structure of Financial Regulation, Theories and international experiences, London/New York 2015. See also K. J. Hopt, Corporate Governance of Banks and Other Financial Institutions After the Financial Crisis, Journal of Corporate Law Studies 13 (2013) 219, also in G. P. Miller (ed.), Economics of Financial Law, vol. II, Cheltenham 2016, p. 573.
 Commission droit et vie des affaires, Les groupes de sociétés, U. Liege, 1973; I gruppi di società, Rivista delle Società, Convegno internationale di Studi, 3 vol., Giuffrè, 1996. See further the literature mentioned sub A. 5.
 ZGR, 27, 4/1998, 683; For the English version, see: Corporate group Law for Europe, European Business Organization Law Review, 2000, p. 165.
 Implemented in Directive 2004/25 of 21 April 2004 on takeover bids.
 ECFR 2015, 299-306; for a German version see: Zeitschrift für Unternehmens- und Gesellschaftsrecht (ZGR) 2015, 507; for the French version see: Revue des sociétés, 2015, 09, 500.
 French law requires a plurality of shareholders, seven shareholders being required (art.225-10 Code de commerce) However, with respect to the approval of related party transactions, the 6 other shares are not taken into account: article 225-39 Code de commerce, as modified by Ordonnance n° 2014-863 du 31 juillet 2014 relative au droit des sociétés, prise en application de l’article 3 de la loi n° 2014-1 du 2 janvier 2014 habilitant le Gouvernement à simplifier et sécuriser la vie des entreprises.
 See Transparency Directive, 2004/109 of 15 December 2004, modified by Directive 2013/50 of 22 October 2013. This regime is only applicable to companies listed on regulated markets.
 In German law, this is referred to as the Unternehmensinteresse, including the interests of the shareholders, creditors, employees, and according to some even the public interest. The ambit of this notion is being discussed under the increasing interest for the shareholder value as criterion for company conduct. See more generally, P.Davies, K.J. Hopt, R. Nowak and G. Van Solinge (eds) , Corporate Boards in Law and Practice, OUP, 2013, 68 e.s.. Compare under Dutch law article 250(2) describing the objective of the supervisory board to act in “ the interest of the company and of the related enterprise”, referring to the continuity of the firm. For an analysis of group relations among different shareholders and stakeholders see K. J. Hopt, Groups of Companies, A comparative study on the economics, law and regulation of corporate groups, Feb. 2015, ECGI, WP 286/2015, I C p. 3 et seq.
 This idea was expressed in the Rozenblum case in the following terms: “le concours financier apporté … doit être dicté par un intérêt économique, social ou financier commun, apprécié au regard d’une politique élaborée pour l’ensemble de ce groupe’. See further Nte 60 for the full text : Rozenblum Cass crim 4 February 1985. In the absence of said common interest, the transfer of funds between different companies would not be justified (Cass.crim fr 14 February 1993, Bull Joly, 1993, 225, note Jeantin), and the transaction not exempted from the general principle; Cass. crim. 2 December 1991, n° 90-87563.In other cases, reference was made to at least « un lien logique minimal»: CA Paris 14 February 1984, Juris-Data N° 021620; see also: Cass.crim 9 December 1991, Rev Sociétés 1992, 358; Freyria, Ch and Clara J., L’abus de biens sociaux et de crédit en groupe de sociétés JCP, Rd E, 1993, 247. A similar approach is followed in other parts of the world: see the Australian case: Equiticorp Finance Ltd v Bank of New Zealand (1993) 11 ACSR 64, where support to ailing subsidiaries was justified on the basis that the financial welfare of the subsidiaries was intimately connected to the interests of the group. Compare Article 233-1 of the French Code de commerce; Article 11 of the Belgian Companies Code.
 Article 24 B of the Dutch Civil Code book 2 stating that a “group is an economic unit in which legal persons and companies are organically joined “: these are called “group companies”. German law uses the more complex notion of “Verbundene Unternehmen” among which the “Konzernunternehmen”, being included in the companies managed on a unified basis by the parent.
 See BCBS, Revised principles for governance of banks, Principle 5.
 In that sense, Guyon, Droit des Affaires, V.1, 12th ed., nr. 616, b. referring to Cass. Fr., 2 April 1996, JCP, 1997, II, 22803. See for the further consequences of this reasoning: Guyon o.c. 615.
 M. Parient, « Les groupes de sociétés et la loi de 1966 », Rev. sociétés, 1996, p.467; C. Freyria et J. Clara, « De l’abus de biens et de crédit en groupe de sociétés », JCP E 1993, p. 251, n° 9.
 This subject has been discussed in German literature, but there is general agreement that legally speaking there is no Konzernaufsichtsrat. Most of the times the board of directors of the parent company will be the ultimate responsible body.
 The national definitions of control are in substance often quite similar and inspired by the wording used in the Directive on consolidated accounts; s. 89 j of Part 43 of the Companies Act 2016; Comp. article 24 a of the Dutch Civil Code, Book 2; article 11 Belgian Company Code (sociétés liées et associées”) .
 See the directive on consolidated annual accounts: Directive 83/349 replaced by Directive 2013/34
 The identity of the group as such is expressed in accounting terms on the basis of the control criterion. For groups that are fully or partially controlled by a parent company, full consolidation will express the financial position of the group as a whole. For non-controlled minority blocks held in other companies, according to the “equity method of accounting”, there will be no a line-per-line consolidation.
 See Directive 2009/38/EC on the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees, OJ EU L 122/28. Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a European company with regard to the involvement of employees, OJ EC L 294/22. German Co-determination provisions are based on a partial consolidation, excluding non-German subsidiaries. Statutory definitions sometimes exclude parent- 100% subsidiary from the scope of the group provisions.
 IAS 24 Related Party Disclosures-, aims at disclosure, not at determining group conduct nor relations between group entities. It is not especially geared to the existence of a group relationship, e.g. by also addressing management’s conflicts. Its violation may trigger specific sanctions for accounting or reporting breaches. The standard does not contain indications on the fairness of the reported transactions.
 See e.g. ECJ, C-440/11 P, 11 July 2013 (Commission / Stichting Administratiekantoor Portielje, Gosselin Group NV); ECJ, General Court, T-543/08, 11 July 2014 (RWE and RWE Dea / Commission) attributing to a parent, activities of a subsidiary that carries out, in all material respects the instructions of the parent.
 See Article 233-1 of the French Code de commerce defines the subsidiary as the company in which another company holds more than 50% of the shares. But other criteria are mentioned: ownership of 40%, without anyone holding a higher percentage, creates a presumption of control.
 CA Paris, 12 June 1996, RD bancaire et bourse 1996, p. 233, obs. F.-J Crédot et Y. Gérard; T. corr. Paris, 16 May 1974, arrêt Willot: Gaz. Pal. 1974, 2, jurispr. p. 886; D. 1975, jurispr. p. 37; Rev. sociétés 1975, p. 665, note B.O.
See CA Paris, 20 February 1998, 1re ch., Assoc. Adam c/ CGE et SA Havas: JCP G 1998, II, 10096, note J.-J.Daigre ; JCP E 1998, p. 705, note A. Viandier ; Dr. sociétés 1998, comm. 81, obs. H. Hovasse ; Banque et droit, mars-avr. 1998, p. 26, obs. H. de Vauplane; Rev. sociétés, 1998, p. 346, note Bucher; Joly., 1998, p. 622, § 210, note P. Le Cannu; Joly bourse, 1998, p. 233, § 62, note Robineau.
 See Company law of the Czech Republic, s. 71(1), ZOK.
 Article 1(2)(b) of Directive 13 June 1983” managed on a unified basis”; see for the same terminology, article 22 (2)(b) of Directive 2013/34. . See also the definition of the “Konzern” in § 18 of the German Stock Corporation Law: “under unified direction” (unter einheitlicher Leitung). For details see V. Emmerich, M. Habersack, Aktien- und GmbH-Konzernrecht, Kommentar, 8th ed., Munich 2016, § 18, § 19.
 These cases would be dealt with under the so-called equity method, only viewing to express the value of the holding. The provisions on the related party disclosures would apply; see IAS 24, referring to “significant influence” as used in IAS 28 “Investments in Associates and Joint Ventures”.
 For example, a parent company may have a 51% shareholding in a subsidiary (second level). In turn, this subsidiary may have a 51% in another subsidiary (third level), and finally, the latter may have a 51% shareholding in another company (fourth level subsidiary). The parent is able to direct the vote and the decisions at all the levels, but in the fourth level subsidiary, the real economic interest of the parent in the subsidiary is less than 13%, despite having a majority of the votes.
 See on this subject: High Level Group of Company Law Experts, A Modern Regulatory Framework for Company Law in Europe, Report for the European Commission, November 2002, ch. V: Groups and Pyramids, p. 94-100; for Italy M. Bianchi, M. Bianco, L. Enriques, Pyramidal Groups and the Separation Between Ownership and Control in Italy, in: Fabrizio Barca Marco Becht, eds., The Control of Corporate Europe, Oxford 2001, p. 154-187.
 Known as “vorauseilender Gehorsam” in German legal writing.
 There would be no room for instructions, or these would not free the directors to act in the interest if the subsidiary as a separate legal entity.
 Taxation, labor relations, local presence etc.
 See Chr. Teichmann, Corporate groups within the legal framework of the EU, ECFR 2/2015, 219.
 See Tribunal Supremo (Spain), 11 December 2015 (JUR 2015, 302357).
 The validity of this technique is generally recognized: see in France, where it constitutes an exception to the monopoly of the banks (Code monétaire et financier, article L 511- 7-1-3). The Rozenblum approach applies to the relationship in the pool: see Guyon, o.c., 617. Sometimes special conditions apply: see for Germany BGHZ 179, 71 comment 13 et seq., U. Hüffer, J. Koch, Aktiengesetz, 12th ed., Munich 2016, § 311 comment 50 with further references.
 See P. van Schilfgaarde – J. Winter, Van de BV en de NB, 14th ed, p.177, referring to art 7 of the Dutch Civil Code, book 2, on the company’s object. J.Winter, Concernfinanciering 1992, where esp. the different factual settings are analysed in p.258 e.s., possibly leading to the liability of the subsidiary’s directors on the basis of “grossly negligent management”(kennelijk onbehoorlijk bestuur” as referred in art.248 Dutch Civil Code, Book 2). In the same sense: Guyon, o.c, nr 617, referring to the Rozenblum case; for Austria Saurer in Doralt/Nowotny/Kalss, Aktiengesetz, 2nd Ed., 2012, § 52 nr 86.
 F. ex. Germany, Austria, Sweden, Norway, the Netherlands and since 2006 also the UK; see K. J. Hopt, Comparative Corporate Governance: The State of the Art and International Regulation, The American Journal of Comparative Law 59 (2011) 1 at 28 et seq.; M. Roth in P. Davies et al., Corporate Boards in Law and Practice (supra note 19), p. 253 at 332 et seq.
 See M.Roth Related party transactions, http://ssrn.com/abstract=2710128 ( “RPT”), pointing to German criminal court cases which are referring to the” Gesamtkonzerninteresse” (Federal Supreme Court (BGH) 28.5.2013, 5 StR 551/11, ZIP 2013, 1382, no 42: Gesamtkonzernnutzen).
 See under French case law, the court may hold the majority shareholder liable to the subsidiary’s creditors for having sold the company to a notoriously incompetent or insolvent purchase, in the context of employees of the sold subsidiary suing the former parent companies, CA Paris, 4 September 2012, n° 11-12359; CA Paris, 10 avr. 2008, n° 07/10060, Sté San Carlo Gruppo Alimentare SPA c/ Ancelin et a. – TGI Péronne, 18 août 2009, n° 07/00856, Ancelin et a. c/ San Carlo Gruppo Alimentare SPA et a. : JCP S 2009, 1465, note J.-M. Albiol ; Semaine sociale Lamy 12 oct. 2009, p. 10, chron. G. Auzero.
 See the Belgian “Renault” law, L. 13 February 1998, providing for orderly liquidation such as assistance for laid-off staff, organisation of their re-employment at other employers, supported by financial advantages.
 For the second approach reference can be made to the Rozenblum technique.
 And in certain jurisdictions (e.g. UK) a duty towards the creditors to compensate for the damages..
 There is extensive case law, but the difficulties and uncertainties are considerable, cf. Hüffer/Koch (fn. 45) § 311comments 24 et s. There is extensive reporting on group actions: a report by the auditor, examination by the supervisory board and the possibility of a court investigation. Nevertheless, the efficacy of the system is put in doubt: see Hopt, Groups of companies, nt.19, p. 10.
 The Spanish Draft Commercial Code allows the shareholders of the subsidiary to request the acquisition of their shares, at fair value, if the parent company has not provided adequate compensation to the subsidiary for the damage resulting from following group instructions (art. 291-17).
 § 309 IV 3 of the German Stock Corporation Act.
 Though the details are quite complicated: See Emmerich/Habersack (note 36), Suppl. (Anhang) to § 138: Abhängige GmbH und „faktischer“ GmbH-Konzern.
 See Portugal, Hungary, Slovenia, Croatia, Albania, Brazil, Turkey and Austria (without reporting requirements, but with a duty to compensate immediately). The Spanish draft Commercial Code (2014) also includes a specific regime for corporate groups, inspired in the German system, but with some original solutions. However, it is uncertain that the new Commercial Code will be adopted by Parliament.
 S. 501, CSC; see for further details: J. Antunes, The Law of Corporate Groups in Portugal, ILF, Working Paper 84 (5/2008); see also: ECJ nr. C-186/12, 20 June 2013 (Impacto Azul Lda / BPSA 9 – Promoção e Desenvolvimento de Investimentos Imobiliários SA e.a., where the Court held that it was not contrary to the Treaty freedom – article 54 – that national law excludes foreign companies from said provision, it being only applicable to Portuguese groups).
 See a comparable approach under article 15 AktG, Roth, Related Party Transactions, , http://ssrn.com/abstract=2710128. According to Polish case law, the company interest includes the group interest, and companies should act in the interest of the group.
 The Rozemblum decision states ““le concours financier apporté par les dirigeants de fait ou de droit d’une société à une autre entreprise du même groupe dans laquelle ils sont intéressés directement ou indirectement, doit être dicté par un intérêt économique, social ou financier commun, apprécié au regard d’une politique élaborée pour l’ensemble de ce groupe, et ne doit ni être démunie de contrepartie ou rompre l’équilibre entre les engagements respectifs des diverses sociétés concernées, ni excéder les possibilités financières de celle qui en supporte la charge “ See Rozenblum case; Cass. crim., 4 févr. 1985, Juris-Data n° 1985-000537; Bull. crim. 1985, n° 54 ;, Juris-Data n° 1985-000537 ; Bull. crim. 1985, n° 54 ; Rev. sociétés 1985, p. 688, note B. Bouloc ; JCP G 1986, I, 20585, note W. Jeandidier ; D. 1985, jurispr. p. 478, note D. Ohl. h. Le Gunéhec, « Le fait justificatif tiré de la notion de groupe de sociétés dans le droit pénal français de l’abus de biens sociaux, à propos d’un arrêt de la chambre criminelle du 4 février 1985 », RID pén. 1987, p. 117 et s. The full decision can be consulted on : https://www.legifrance.gouv.fr/affichJuriJudi.do?idTexte=JURITEXT000007064646. The reasoning is e.g. applied in cases of cash pooling: Cass. com., 10 déc. 2003: Juris-Data n° 2003-021639 ; D. 2004, p. 2930, obs. J.-C. Hallouin ; Rev. sociétés 2004, p. 669, note J.-J. Daigre ; Joly. 2004, p. 503, note J.-M. Moulin; RD bancaire et fin. 2004, comm. 55, obs. F.-J. Crédot et Y. Gérard. See in Belgian case law: Brussels, 15 September 1994, 275, J.Tribunaux, 1993, 312, TRV, 1994, 275, nte A. Francois (Wiskemann case).
 See for an exception: Cass. crim., 6 avr 2016, n° 15-50.150, FD, Droit des sociétés n° 6, Juin 2016, comm. 115, R. Salomon.
 See Cass Com., 19 nov. 2013, 12-23.020, Publié au bulletin; Cass. com., 10 févr. 2015, no 14-11760, SCI Somopi c/ Sté Industrias Murtra, D (cassation partielle CA Montpellier, 19 nov. 2013), BJS 31 mai 2015, p. 234, note F. Danos ; Gazette du Palais, 28 juillet 2015 n° 209, P. 26, chron. J.-M. Moulin.
 See Forum Europeaum Corporate Group Law, High Level Group of Company Law Experts, Reflection Group; see Hommelhoff, Teichmann, P.H. Conac, in the studies mentioned in A.5.
 Commission, Action Plan on European company Law and corporate governance Com(2012) 740 final of 12 December 2012.
 Cass, Crim fr.13 February 1989, Rev Sociétés, 1989, 692, note Bouloc; Cass.crim 9 December 1991, Rev Sociétés 1992, 358; see: Freyria, Ch and Clara J., L’abus de biens sociaux et de credit en groupe de sociétés JCP, Rd E, 1993, 247. Some resulted in annulling the transaction. Brussels, 15 September 1994, 275, J.Tribunaux, 1993, 312, TRV, 1994, 275, note A. Francois (Wiskemann case).
 That is, “principi di corretta gestione societaria e imprenditoriale”, article 2497 Codice civile.
 Article 2497, Quinquies, Codice civile.
 Concepts as de facto director, wrongful trading, related party transactions are used for similar purposes in the UK, or in Sweden. See also: K. J. Hopt (fn. 19) II A. and B, p. 7 et seq
 See section 994, Companies Act 2006.
 Insolvency Act 1986, s 214.
 No specific creditor protection measures are usually identified in this case. The proposal for a Directive on shareholder rights would exclude the 100% owned subsidiary from the conflict rules. See generally L. Enriques, Related Party Transactions: Policy options and Real-World Challenges (2015), see sub A.5.
 Article 225-38 to 225-42; article 225-102-1, French Code des sociétés.
 See article 524 Belgian Company Code.
 The RPT between direct subsidiaries of a parent or of the other group company are outside the scope. This exception would also exclude subsidiaries in which the parent holds less than 100% of the capital.
 I. e., “ un préjudice financier abusif au bénéfice d’une société du groupe”. Article 529 Belgian Company code. This notion would refer to a prejudice that is not only excessive, but derives from an abuse of the position of the parent company.
 E.g., because all members are conflicted. Decisions not conforming to this procedure would be voidable.
 Article 239(6) Dutch Civil Code, Book 2.
 See De Nederlandse corporate governance code, Beginselen van deugdelijk ondernemingsbestuur en best practice bepalingen, Commissie Corporate Governance.
 Dutch Code, § III. 6.4; referring to conditions usual in the business sector concerned.
 See article 107 a Dutch Civil Code B II. A similar provision in the internal corporate governance statement was considered invalid under Belgian law, the board always being able to change the provision: Trib. Comm. Brussels, 18 November 2008, RPS, 2009, 7011, 486 but overruled by Brussels, 12 December 2008, RPS, 2009, 7010, 432 and the comment by Y. De Cordt, Les enjeux de l’affaire “Fortis”, RPS, 2009, 7006, 351.
 Companies Act 2006, s 170(5) (as amended).
 Listing Rules 11.1.
 Insolvency Act 1986, s. 251.
 See the pre- IFRS standard FRS 8 “related party disclosures”; now s.33 FRS 102
 See FRS 8 , defining a related party as (a) one party has direct or indirect control over the other party; or(b) the parties are subject to common control from the same source; or (c) one party has influence over the financial and operating policies of the other party to the extent that that other party might be inhibited from pursuing at all times its own separate interests; or(d) the parties, in entering a transaction, are subject to influence from the same source to such an extent that one of the parties to the transaction has subordinated its own separate interest.
 The disclosures relate to: (a) information on related party transactions; and (b) the name of the party controlling the reporting entity and, if different, that of the ultimate controlling party, whether or not any transactions between the reporting entity and those parties have taken place.
 The Austrian situation is similar.
 The general principles of the civil code on conflicts of interest may be applied in these cases; § 181, BGB. As to the doctrine, case law and legal provisions on conflicts of interest in corporate law and other areas of law see C. Kumpan, Der Interessenkonflikt im deutschen Privatrecht, Tübingen 2014. On dealing with related party transactions under German law see e.g. J. Vetter, Regelungsbedarf für Related Party Transactions? Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht (ZHR) 179 (2015) 273.
 For fear of disclosing company secrets, although recent literature pleads for reform.
 See Spanish Companies Act (Ley de Sociedades de Capital, 4 December 2014, 31/2014, article 190). These matters include: the authorisation to transfer shares, the exclusion of a member, granting a right to a member, or waiving an obligation, providing financial assistance to the member, and waiving the duty of loyalty. This last case may be the most important one, since it may include the use of corporate opportunities. For more details including on the regime provided in the Corporate Governance Code, see Recalde Castells, Sanz and Latorre Chiner, in P.Davies, K.J. Hopt, R. Nowak and G. Van Solinge (eds), nt 19, 589.
 See Codigo Unificado de Buen Gobierno (2006, updated in 2013), recommendation no. 2.
 See article 2391 Codice civile; for a commentary, G. Ferrarini, G.G. Peruzzo and M. Roberti, Corporate Boards in Italy, in Davies, Hopt, Nowak and Van Solinge (eds), nt. 19, 399 ff.
 See: Consob Regulation no. 17221 of 12 March 2010, as later amended; Ferrarini, Peruzzo and Roberti, nt. 92, 400 ff.
 Statement AMN 2012:05 Swedish Securities Council.
 Article 379 § 1 of the Polish Commercial Companies Code. The Polish law follows the German-style two-tier system of corporate governance, with the management board and the supervisory board as separate corporate bodies.
 Article 15 § 1 of the Polish Commercial Companies Code.
 Article 377 of the Polish Commercial Companies Code.
 Article 355 § 3 of the Polish Commercial Companies Code.
 Polish law has not developed a separate body of rules on groups of companies but relies on court precedents, which, however, are rare.
 Article 413 § 1 of the Polish Commercial Companies Code.
 Rule V.Z.5 of the WSE Corporate Governance Code.
 Rules II.Z.3–4 of the WSE Corporate Governance Code.
 BGE 113 ll 57.
 https://www.admin.ch/opc/fr/federal-gazette/2008/1571.pdf. The proposed article applies to conflicts with members of the management or supervisory board, provides for declaring details about the conflict to the chairman, who informs the full board. The board adopts the measures necessary to protect the company’s interest, the conflicted member being excluded from the decision.
 Davies, Hopt, Nowak and Van Solinge (eds), nt. 19, 55 e.s., and P. Davies, Country report, 749.
 See article 524 (7) Belgian Companies Code; a reference that the annual report of the listed entity should mention the substantial limitations or charges which were imposed by the parent company or which it requested their continuation: this is considered to include corporate opportunities
See e.g. in the Netherlands, Corporate Governance Code, II.3.1; on the topic in general see the comparative analysis by H. De Wulf, Taak en loyauteitsplicht van het bestuur in de naamloze vennootschap, 2002, p. 705 e.s; A.F. Verdam, Corporate Opportunities, Zwolle,1995. Group management may be held liable if the decision led to the demise of the subsidiary, without countervailing measures .In Germany, this is mainly dealt with in –rare – case law: see H. Merkt, Unternehmensleitung und Interessenkollision, ZGR, 1995, 423.
 See M.Roth, Unternehmerisches Ermessen und Haftung des Vorstands, Beck 2001, 61.
 Article 229.1 d) of the Companies Act (LSC – Ley de Sociedades de Capital).
 See article 231.2 of the Spanish Companies Act.
 Article 230 of the Spanish Companies Act.
 This would be the case, for instance, if the management of the parent in agreement with the controlling shareholder takes the business decision to invest heavily in a risky subsidiary without shareholder consent in the general assembly of the parent corporation. See BGH, BGHZ 83, 122 (1982), Holzmüller case; but see also BGHZ 159, 30 (2004) (Gelatine case).
 Therefore they would not come into play under the Second Forum Europaeum approach for the service companies, see A.4. In French law these subsidiaries are often organized as a Sociétés anonymes simplifiées, or SAS, or a EURL (in fact a SARL, article 227-1 and 223-1). According to French law, a société anonyme (SA) must have at least seven shareholders. See Fn 224
 See on ESG information: Directive 2014/95/EU of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups.
 See e.g. Dutch civil code art. 9(2), stating that directors are “responsible for their maladministration” (“onbehoorlijk bestuur”).
 In an older English case the conduct was defined as “burdensome, harsh and wrongful”. A buy-out is the normal remedy on a successful petition from relief under s 994 Companies Act, although the court can grant any remedy it thinks fit.
 Nicholas v Soundcraft Electronics Ltd  B.C.L.C. 360 CA (Civ Div); Meyer v Scottish Cooperative Wholesale Society Ltd  A.C. 324; Gross v Rackind  1 W.L.R. 3505.
 Cass com, 18 April 1961, JCP, 1091, 12164.
 Article 1833 Code civil. The Belgian Companies Code a similar approach, but the common interest is defined in term of procuring an “economic benefit to the members”.
 Company Code, article 562.
 Cass., 3e civ., 25 March 1998, Bull. Joly, 1998, 635 nte Couret.
 Cass. com., 29 May 1972, n° 71-11739, D, 1972, Somm. 176, JCP. 1973, II, 17117, note Guyon.
 See Cass., 9 March 1993, Bulletin 1993 IV N° 101 p. 69.
 Paris 3 may 2002, RTD Comm, 2002, 482 Obs Champaud and Danet.
 This is known as “famishing“: see Cass. Civ. 3, 7 February 2012, n° 10-17812, ordering the distribution of the retained dividends, notwithstanding the liability of the majority shareholder. Under certain circumstances the subject may also qualify as a violation of the equal treatment of the shareholders. In one case it was held that the majority shareholder had behaved “contrary to the company interest by refusing to undertake an action in the interest of the company and that of all other shareholders, but exclusively aimed the controlling shareholder’s purpose. (Cass. com., 9 March 1993, n°91-14685). For Spain, see note 87 above. More controversial is the of “abuse of minority” power, as illustrated in a case in which a minority shareholder refused to vote an increase of the company‘s capital, which was indispensable to its survival as this refusal was dictated by his only will to hamper the functioning of the company and this for purely personal motives and this to benefit another company in which the shareholders’ s son-in-law held the majority of the shares ( Cass. com., 5 May 1998, n° 96-15383). Other examples relate to a parent company’s decision to assume all the subsidiary’s liabilities against the company interest, but with the only intention to cover the failed actions of a shareholder, part of the majority. Other cases involve diverting a company’s business to a company created by the majority of the shareholders of the first one.
 Equal treatment of shareholders is also an important instrument for protecting minority shareholders. It is in part rooted in the former second company law directive but is regarded as a general principle of company law, even outside the strict boundaries of that directive. Being applicable to all companies, listed or not, it is not a specific group law remedy. See now the recast 2nd directive, Directive 2012/30, of 15 October 2012, article 46, applicable only “for the purpose of the implementation of this directive”.
 Walker v Wimborne (1976) 137 CLR 1 (High Court of Australia).
 See A. Valzer, in P. Abbadessa and G. Portale (eds), Le Società per Azioni, Giuffrè, 2016, 3011 ff.
 Interestingly, one of the particular rules that gives the minority the right to sell their shares in case of lack of distribution of dividends (art. 348 bis of the Spanish Companies Act) is not applicable until 31st December 2016.
 Sec. 100 et seq. Austrian AktG.
 Sec. 195(2) Austrian AktG.
 See K. J. Hopt, Rights of Minority Shareholders under German Law, in: Liber Amicorum Guy Horsmans, Brussels 2004, p. 533; also in: E. Perakis (ed.), Rights of Minority Shareholders, Brussels 2004, p 389.
 §§ 76, 93 of the German Stock Corporation Act.
 § 116 with §§ 76, 93 of the German Stock Corporation Act.
 § 53a oft he German Stock Corporation Act.
 Cf. 132 II, 142 II, 147 of the German Stock Corporation Act.
 As to the business judgment rule in German and Swiss corporate law cf. K. J. Hopt, Die business judgment rule, Ein sicherer Hafen für unternehmerische Entscheidungen in Deutschland und in der Schweiz, in: R. Waldburger et al. (eds.), Law & Economics, Festschrift für Peter Nobel zum 70. Geburtstag, Bern 2015, p. 217
 About which more below.
 Cf. e.g. Sec. 134 et seq. Austrian AktG.
 In the UK, the parent company could exceptionally be held liable in tort or in negligence where it is held to a duty of care.
 Under German commercial partnership law a partner may ask the court to exclude another partner if there is a serious reasons in the person of the other partner. He also may terminate his membership for serious reasons. See: § 140 of the German Commercial Law, Details are controversial, cf. M. Roth in A. Baumbach/K. J. Hopt (eds.), Handelsgesetzbuch, 37th ed., Munich 2016, § 140 comments 3 et s. for the two persons partnership and § 133 comment 1.
 This remedy cannot be used by a company v.a.v. its own shareholders nor by a subsidiary with respect to the shareholders of the parent. See Belgian Companies Code article 632(2)
 Article 636 e.s. and 642 e.s. in Germany also for the OHG.
 For Germany this follows rather from the fact that the parts of a commerical partnership cannot be listed. For stock corporations other provisions apply. For the GmbH where the parts cannot be listed either the exit right is controversial, see f.ex. L, Fastrich in A. Baumbach/A Hueck, GmbHG, 21th ed., Munich 2016, Anhang to § 34: Ausschluss und Austritt von Gesellschaftern.
 In the UK, the most common remedy given to the minority in unfair prejudice claims is an order that either the majority or the company buy the minority’s shares at a non-discounted price which also reflects the value of the company before the unfair action was taken.
 Article 15 (squeeze-out) and article 16 (sell-out) rights, Directive 2004/25 on takeover bids.
 This is the so-called “mandatory bid”: K. J. Hopt, European Takeover Reform of 2012/2013 – Time to Re-examine the Mandatory Bid in: European Business Organization Law Review (EBOR) 15 (2014) 143.
 See §§ 327a et seq. of the German Stock Corporation Act.
 See article 236-6 of the General regulation of the Autorité des Marchés Financiers, requiring controlling persons or shareholders to notify to the regulator at an early stage significant changes to the charter provisions or intragroup mergers or restructurations. Decisions to cease distributions or changes in the corporate activity also have to be notified to the regulator. These notifications allow the regulator to consider appropriate action, eventually a withdrawal order.
 See UNCITRAL, Directors’ obligations in the period approaching insolvency: enterprise groups, Secretariat, 23 February 2016, A
 Cassation com. 12 June 2012, RJDA 11-12. 968, stating that a company cannot be held to the debt of its subsidiary. This may be different if it has actively intervened in the relations of the subsidiary with a creditor and made the latter believe that it would assume the liability (see also Cass com 9 October 2006, RJDA 1- 07, nr 50).
 For a survey on these instruments of creditor protection see K. H. Hopt (fn. 19) VI p. 18 et seq.; P. O. Mülbert, A Synthetic View of Different Concepts of Creditor Protection, or: A High-Level Framework for Corporate Creditor Protection, 7 EBOR 357 (2006).
 See section 214(7) UK Insolvency Act 1986. Note that the definition of a ‘shadow director’ in s 251 of the Insolvency Act does not exclude the case of a parent company giving directions to the subsidiary, as the Companies Act definition does.
 See K.J. Hopt, Groups of Companies, A comparative Study on the economics, law and regulation of Corporate Groups, nt 97, Feb. 2015, ECGI, WP 286/2015. For the UK Secretary of State for Trade and Industry v Deverell  2 B.C.L.C. 133, CA.
 Compare: see K.J. Hopt, o.c., nt. 17, p.22.
 See article 442-6 -I – 5° du code de commerce, which provides that a company would be liable for sudden interruption of business relations: « De rompre brutalement, même partiellement, une relation commerciale établie, sans préavis écrit tenant compte de la durée de la relation commerciale et respectant la durée minimale de préavis déterminée, en référence aux usages du commerce … »; comp. Brussels, 3 February 1988 JT, 1988, 516. (on the basis of “culpa in contrahendo”). Similar ideas were developed in Belgian law, where legitimate anticipation of someone’s behaviour (“anticipations legitimes d’autrui”) would justify the belief that a renowned group would not suddenly let its subsidiary default, leading to a creditor’s right of action against the parent: Malherbe, Lambrecht and Malherbe, Droit des sociétés, 2004, nr 1625, with reference to X. Dieux.
 Cf. K. J. Hopt in Baumbach/Hopt (fn. 139), (7) Bankgeschäfte comments G-28 et seq,: liability for extending credits or stopping extended credits. This applies to banks, but by analogy also to other companies. In the context of group law the general liability of the parent towards the creditors under § 309 of the German Stock Corporation Act may be applicable, see supra fn 55.
 On the ‘devoir de vigilance” in France, see http://www.assembleenationale.fr/14/ta/ta0501.asp, referring to the requirement for parent companies to prevent breaches of human rights, anti-corruption prohibitions, environmental laws… by their subsidiary and, beyond their groups, by all regular business partners. A. Pietrancosta, E. Boursican, Vigilance un devoir de surveiller, JCP, Ed G 11 May 2015.
 A different approach to creditor protection exists in Spanish law, where the claims of the parent company and of other companies belonging to the same group, are automatically subordinated (see art. 92 Ley Concursal).
 Art 621-2 Code de commerce; see J.P. Legros, Action en comblement de passif, Droit des sociétés 2015, 14-15, 984.
 See France (article 621-2, Code de commerce) and Belgium (article 409 and 530, Companies Code).
 See art 530, Companies Code Belgium; article 651-2 French Code de Commerce “faute de gestion ayant contribué a cette insuffisance d’actif” . Even a slight management error can trigger this remedy. The rule is only applicable in case of judiciary winding up.
 See article 530 Belgian Companies code.
 See article 651-2 French Code de commerce.
 See article 530 (2) Belgian Companies Code; Comm. Mons, 12 November 1979 JT 1980,265.
 Compare. S. 214 v. s. 213(1), Insolvency Act: “Fraudulent Trading” occurs “If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, the following has effect” leading to liability of the persons involved.
 Under Belgian law, “ une faute grave et caracterisée” has to be proved: serious breaches of the tax code will qualify for this criterion, art.530(2); for an application Comm Mons, 12 November 1979 JT 1980,265.
 § 64 of the Act on the GmbH.
 See the comparison between UK and German law by F. Steffek, Gläubigerschutz in der Kapitalgesellschaft, Tübingen 2011.
 “reliance on outward appearances“ or “Konzernvertrauen” in Swiss law.See :Burg and von der Krone, Vertrauenshaftung im Konzern, SZW, 5/2010.
 See the Swiss cases (Swissair, BG 15 November 1994 and Motor Columbus) are, based on the factual appearance of the economic unity of the group, Konzernvertrauenshaftung.
 See article 621-2 Code de commerce.
 See article 621-2. al.2, Code de commerce; German or Austrian law seem to be hesitant to follow this path: see K.J. Hopt, o.c. nt 19, p. 21.
 See article 621-2. al.2, Code de commerce, modified by article 16, Ord. 2014-326 of 12 March 2014. Sometimes reference is made to “personne morale considérée nulle et extension de la faillite au maître de l’affaire.” It is not a case of extension of the insolvency to the trader behind the company, but of attributing the insolvency directly to him, leading to the recognition of one insolvent estate and one liquidation procedure. Comp. Antwerpen, 1 February 1994, TRV 1996, 62, considering two foreign state-owned companies as parts of a single enterprise. Cass. 6 December 1996, Arr. Cassatie, 1996, 491 recognising the individual personality of Algerian state owned enterprises.
 One may hesitate whether this technique is still available as the 1st company law Directive restricted the ambit of the “nullity of the company to very specific cases; See article 11, Directive 2009/101 where some exceptions to the principles have been introduced.
 See K.Geens a.o., Overzicht van rechtspraak, TPR, 2012, 221.
 This refgers to the famous Aubry and Rau theory of the unity of assets, forbidding the split-up as prejudicial to creditors.
 See H De Wulf, Concernaansprakelijkheid Bestendig Handbook Jura.be , III, 5-4 ; RCJB, 1991, 301.
 Adams v Cape Industries plc  Ch. 433 (CA). In Germany too it is a rare exception.
 See Prest v. Petrodel  UKSC 34.
 See DHN Food Distributors v Tower Hamlets,  1 W.L.R. 852 at p.860 (Mayson, French & Ryan (2005)).where the corporate veil was lifted on the companies forming the group on the basis that the companies were bound “hand and foot” as in a partnership. The case is considered an outlier.
 See H De Wulf, Concernaansprakelijkheid Bestendig Handbook Jura.be , III, 5-4 ; RCJB, 1991, 301.
 Adams v Cape Industries plc  Ch. 433 (CA).
 See Prest v. Petrodel  UKSC 34.
 See Prest v Petrodel, above, which was a dispute about the division of assets between the partners on divorce.
 Connelly v RTZ Corp Plc  A.C. 854, HL; Lubbe v Cape Plc  1 W.L.R. 1545, HL; Chandler v Cape Plc  EWCA Civ 525.
 The right to give instructions to a subsidiary leads to different interpretations in the respective EU jurisdictions: in the states that follow the Rozenblum test, instructions are allowed within the criteria of that test. In the UK, a supermajority is entitled to formally instruct the subsidiary (see sub B 5 and note 60) resulting in limiting the directors of the subsidiary’s liability. This is also the case in Sweden. In the German AG law there is no right of instruction (unless there is a contractual group) ; this is accepted in the GmbH law only. However, groups often use both types of companies. In Italy directors acting according to instructions could still be held liable, on the basis of the criteria mentioned in the law.
 This is the most plausible analysis of the law. The power to give instructions to directors and its impact on directors’ duties is a somewhat underexplored area.
 There are many cases where an action apparently disadvantageous to the subsidiary has been justified by reference to the benefit conferred on the group from which the subsidiary in turn benefitted. The group context is just one of a range of situations which may be relevant to the assessment of the director’s duty of care or duty of loyalty. It is not identified for special treatment in the legislation or the courts’ decisions.
 For social security purposes they may be considered independent contractors.
 See for the French situation, A. Pietrancosta, National report, in P.Davies, K.J. Hopt, R. Nowak and G. Van Solinge (eds), nt 19, 194.
 Under French law, see article 225-251 e.s. Code de commerce, declaring the directors and the “directeur general” liable towards the company or third parties for breaches of the law, of the charter or for negligent management.
 See the references sub A.5.
 See for these supra B.5 and note 60, and the references to the Rozenblum decision.
 See OECD, Related Party Transactions and Minority Shareholders Rights, OECD (2012), Related Party Transactions and Minority Shareholder Rights, OECD Publishing. http://dx.doi.org/10.1787/9789264168008-en; ISBN 978-92-64-16800-8 (PDF); for an approximation to the measurement of minority protection, see: World Bank Doing Business 2015, Going Beyond Efficiency, Protecting minority investors: Going beyond related party transactions, p 76.e.s.
 See e. g. L. Enriques, Related Party Transactions: Policy Options and Real-World Challenges (with a Critique of the European Commission Proposal), ECGI Working Paper, 267/2017.
 See European Parliament, Coferati Report, 12 May 2015, A 8-0158/2015.
 See OECD, Related Party Transactions and Minority Shareholders Rights, OECD (2012), Related Party Transactions and Minority Shareholder Rights, OECD Publishing. http://dx.doi.org/10.1787/9789264168008-en; ISBN 978-92-64-16800-8 (PDF); for measurement of minority protection, see the World Bank reports “Doing Business”, e.g. the Doing Business report for 2016, p. 47 , mentioning the countries where rules on conflicts of interest have been introduced.
 See especially: L. Enriques, s Related Party Transactions: Policy options and Real-World Challenges (2015, sub A 5); H. De Wulf, o.c., supra nt 107
 Business Europe and European Issuers. In a later statement the criticism was extended and an exemption for groups of companies in general proposed. See 293_Joint-letter_BusinessEurope-EuropeanIssuers_on_shareholders_rights_to_EP_JURI.pdf.
 European Fund and Asset Management Association.
 Stating that “Member States have already in place today rules to protect minority interests in line with their own individual national company law regime”.
 See the Commission consultation, reflecting the positions of the companies, nr 1, as opposed to those of the professional organisations nr.31.
 See e.g. Regulation 575/2013, CRR, article 4 (15) and (16) referring for the definition of parent and subsidiary to the Directive 83/349 on consolidated accounts, the latter replaced by Directive 2013/43 of 26 June 2013.
 And this to avoid incentives for shareholders to greenmail the company.
 These points are dealt with more specifically be the OECD, Related Party Transactions and Minority Shareholder Rights, Paris 2012. Further important contributions are by L. Enriques, Related Party Transactions: Policy Options and Real-World Challenges (With a Critique of the European Commission Proposal), ECGI Law Working Paper No 267/2014, October 2014; H. Fleischer, Related Party Transactions bei börsennotierten Gesellschaften: Deutsches Aktien(konzern)recht und Europäische Reformvorschläge, Betriebs-Berater 2014, 2691; T. Tröger, Related Party Transactions mit Blockaktionären im europäischen Konzernrecht, Die Aktiengesellschaft 2015, 53; J. Vetter, Regelungsbedarf für Related Party Transactions? Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht (ZHR) 179 (2015) 273. See also K. J. Hopt, Groups of Companies (fn. 19) IV p. 13 et seq.
 In the sense of Regulation No 596/2014 on market abuse and Directive 2014/57/EU on criminal sanctions for market abuse.