Tiedotus

Lausunnot 2006

Consultation on future priorities for the action plan on modernising company law and enhancing corporate goverance in the european union

27.03.2006

Introduction

HTM-tilintarkastajat represents certified auditors in public practice and it is the largest auditors’ association in Finland. Its over 900 members fulfill the criteria of EU’s 8th.
Directive. They are mainly focused on audits of small and medium sized companies and give out ca. 60.000 opinions and statements annually.

We shall comment on the following focused questions of annex 1.

Item 1: The overall aim and Context for Future Priorities / question 1

“…to enhance the competitiveness of European business” - gives the right direction as a goal. It is, however, difficult to discuss the contents of the corresponding activities without more thorough studies of what has been done. At least the results and activities, disclosed in annex 2, seem to include this right direction. However, there exists the risk of over organising.

Item 1 /question 2

The three principles disclosed as basis for future development work seem to be acceptable. Regarding these we will stress the following:

The leading principles shall be “principle-based approach” and “as much flexibility as possible”.

The healthy structures of organised activities shall be supported.

Bureaucracy and other opacities against efficiency shall be avoided.

Item 2.1.1.1. One share, one vote / question 3

On EU-level, if anything, the clear principles of best practice can be regulated according to the principle ‘comply or disclose’. Too much democracy may affect adversely to business decisions.

Item 2.1.1.2. Rights of shareholders / question 4

The minimum rights of minorities to launch ‘special investigations into the conduct of company affairs’ can be stipulated by directive. Through other means this minority protection may be difficult to get in force. However, it should be noted, that if the minority rights become too strong, they may become obstacles for effective business. Therefore, in this phase, no new regulations are necessary.

Regarding other aspects, only recommendations of the best corporate governance practices are needed.

Item 2.1.1.3. Disclosure by investors of their voting policies / question 5

The referred ‘OECD Principles on Corporate Governance’ may be much enough also as EU-recommendation, nothing else is needed.

Item 2.1.1.4. Directors’ responsibilities / Enhanced transparency of legal entities / question 6

Healthy structures for organised business activities are preventing and protecting elements also against wrongful trading and other crimes, and therefore in principle proper to become stipulated in EU company laws. However, here the existing regulations may be much enough.

In this connection the basic elements of healthy organised business structures are quality of the information to become disclosed in financial statements and the quality of the corresponding assurance processes. Here the most efficient assurance processes are professional audits of all active public and private limited companies in spite of their size.

Item 2.2.1.1. The 14th Company Law Directive on the transfer of the registered office / question 7

Regarding also SMEs, new regulations can be considered, if they, by giving new flexible means, can support mergers over borders and changing of re-gistering state and state of residence.

Item 2.2.1.2. The choice between the monistic and dualistic types of board structures / question 8

No new regulations at EU-level are needed. This item shall be covered by general best practice corporate governance recommendations as far as possible with as little as possible other regulations. Here any regulations needed shall be stipulated according to the principle ‘comply or disclose’.

Now the latest stipulations are including in EU 8th directive (auditing). In wider meaning, as general part of good corporate governance practices, this stipulation and recommendations shall become included elsewhere.

Item 2.2.1.3. Squeeze out and sell out / question 9

This item concerns generally minorities of less than 10 % of shares and majorities of 90 % or more. Here also regulations on EU-level may be useful as minimum requirements because of following reasons.

Squeeze out: The majority owner should have the option to buy the minority shares, but at not less than current prices. The implementation of this rule needs legislation.

Sell out: The minority owners should have the option to sell their minority shares to the majority owner, but at least at current prices. The implementation of this rule needs legislation.

In both cases, with clear rules, unnecessary quarrels leading to inefficiencies can be avoided. It should however be studied if the local legislation in EU-member states is much enough to avoid possible problems.

Item 2.2.1.4. Groups and pyramids / question 10

The main question should be resolved within the rules concerning accounting and contents of the financial statements. The sub question and limit of what is allowed and what criminal, should mainly be resolved elsewhere.

Item 2.2.2.1. The European Company / question 11

More experiences should be gathered of the rules concerning existing European companies, other activities are not current.

Item 2.2.2.2. The European Private Company / question 12

This concerns a new company form EPC (European Private Company), where also the private companies, as public companies above, can function in several EU-countries.

This would be a new flexible possibility, which however may reach only few users. This may be suitable as long term project analogous to public companies, but not until thorough experiences of them. Look also our response to the question 7.

Item 2.2.2.3. The European Foundation / question 13

In this phase, the foundations should be only as national organisations, no new European Foundations are needed. Otherwise this might cause more problems than solutions. In the long run, this issue may be considered once again.

Item 3 Simplification and Modernisation of European Company Law / question 14

In principle, comprehensive and clear rules are a good target. However, also unnecessary changes should be avoided. There is the risk that this activity becomes an elephant problem with endless useless work with unnecessary changes and costs.

HTM-TILINTARKASTAJAT RY

The Association of Certified HTM-auditors

Kari W. Saari

Authorized Public Accountant Member of the board