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Financial Institutions as Members of Company Groups in the Law of the European Union

Published online by Cambridge University Press:  17 February 2009

Eddy Wymeersch
Eddy Wymeersch
Affiliation:
Professor of Law, University of Ghent.
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Extract

Financial groups may be defined as groups in which one or more components, legally independent companies, engage in offering financial services to the public, acting as a bank, a broker, an insurance company, an investment adviser or in any other capacity, offering their services to individuals, professional investment managers or other business firms. Firms that exclusively offer financial services to other group entities – the so-called “in-house banks” would be excluded, as these normally do not receive “deposits or other repayable funds” from the public.

Type
Articles
Information
European Business Organization Law Review (EBOR) , Volume 2 , Issue 1 , March 2001 , pp. 81 - 99
Copyright
Copyright © T.M.C. Asser Press and the Authors 2001

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References

1 See the definition of “credit institution” in Art. 1 of Directive 77/780/EEC of 12 December 1977, where deposit taking is considered a condition for declaring the prudential supervisory system (introduced by the directives) to be applicable.

2 On the liability for apparent identification, see the Swissair decision of the Swiss Supreme Court, and the later Motor Columbus decision, referred to in Druey, and Vogel, , Das Schweizerische Konzernrecht in der Praxis der Gerichte (Zürich: Schulthess 1999) pp. 119 et seq.Google Scholar; also: Lutter, , “Haftung aus Konzernvertrauen?”, in: Schön, (ed.), Gedächtnisschrift für Brigitte Knobbe-Keuk (Köln: Schmidt 1997) 29Google Scholar. But this line of reasoning has also been developed in French group law, relating both to parent and to sister companies: see for an overview Wymeersch, and Tison, , “L'émergence de la notion de groupe de sociétés, en particulier de groupe bancaire”, in: Association Luxembourgeoise des juristes de Banque (ed.), Le contrôle des groupes bancaires (Luxembourg, 1995) 11.Google Scholar

3 See on the subject of private benefits Bebchuk, , “Efficient and inefficient sales of corporate control”, The Quarterly Journal of Economics (1994) 962.Google Scholar

4 Cauwenbergh, , International Transfer Pricing. De fiscale behandeling van de prijsbehandeling van grensoverschrijdende intragroepscontracten (Antwerp: Intersentia 1998)Google Scholar; International Fiscal Association (ed.), “Transfer pricing in the absence of comparable market prices”, Cah. dr. fisc. intern. (1992) 77a.Google Scholar

5 Art. 437 French L. 1966.

6 See Forum Europaeum Corporate Group Law, “Corporate Group Law for Europe”, 1 EBOR (2000) 165Google Scholar (ZGR (1999) 772).

7 For details, see Wymeersch, , “Comment le droit pourrait aborder certains groupes de sociétés”, in: Mélanges offerts à Pierre Van Ommeslaghe (Brussels: Bruylant 2000) 703.Google Scholar

8 Art. 101 French L. 1966.

9 See Pres. Trib. Brussels, November 1999, 21 December 1998, Tijdschrift voor Rechtspersoon en Vennootschap (T.R.V.) (1999) 105.

10 Art. 60bis of the Belgian Companies Act; for more details see: Ernst, , Belangenconflicten in naamloze vennootschappen (Antwerp: Intersentia 1997)Google Scholar; Wymeersch, , De belangenconflicten-regeling in de vennootschappen (Antwerp: Maklu 1996).Google Scholar

11 A Government Commission recently proposed to strengthen this provision. See: “Naar een beter bestuur van Belgische vennootschappen. Verslag van de Regeringscommissie Corporate Governance”, available at <www.law.rug.ac.be/fli/WVPindex.html>. A draft bill was introduced in Parliament on 23 April 2001. Reference: Chamber, 1211/001.

12 See ss. 311 et seq. of the UK Companies Act 1985, also applicable to some group relations (e.g., s. 333 et seq.).

13 §§ 300 et seq. and §§ 321 et seq. AktG (German Marketable Share Company Act).

14 §§ 311 et seq. AktG (German Marketable Share Company Act).

15 See the Croatian Companies Act, Arts. 573-510; the Slovenian Companies Act, Arts. 460-495, for the Czech Republic, see the country report in: Hopt, , Jessel-Holst, and Pistor, (eds.), Emergence, Behavior, and Regulation of Company Groups in Transition Economies in Legal and Economic Perspective (forthcoming).Google Scholar

16 See for the doubts expressed by Druey, and Hommelhoff, , “Empfiehlt es sich, das Recht faktischer Unternehmensverbindungen – auch im Hinblick auf das Recht anderer EG-Staten – neu zu regeln?”, 59 Deutscher Juristentag (München 1992)Google Scholar. In general: Emmerich, and Sonnenschein, , Konzernrecht, 4th ed. (Munich: Beck 1992) pp. 351 et seq.Google Scholar

17 This argument has especially been made with respect to mandatory takeover bids: see Bebchuk, , “Efficient and inefficient sales of corporate control”, The Quarterly Journal of Economics (1994) 957.Google Scholar

18 Or on the acquisition of shares that lead to a block that is presumed to be controlling.

19 See the contribution by Sándor, and Sárközy, , 2 EBOR (2001) No. 2 (forthcoming).Google Scholar

20 See Art. 57 of the Fourth Company Law Directive, providing that subsidiary companies need not publish separate accounts provided, inter alia, that the parent “declares to guarantee the commitments entered into by the subsidiary”.

21 See for the early analysis of these issues: “L'avant-projet de loi fédérale sur les banques”, in: Etudes suisses de droit européen (Geneva 1983) pp. 183 et seq.Google Scholar; Müller, , La pratique de la Commission fédérate des banques (Zürich 1987) pp. 101 et seq.Google Scholar

22 See Art. 7(3) of the directive on consolidated supervision.

23 Directive 92/30/EEC of 6 April 1992. A new, more comprehencive directive on conglomerates is being developed.

24 Though not formally modifying the Consolidated Supervision Directive, the BCCI Directive obliged the national authorities responsible for licensing credit institutions to ascertain whether the existence of “close links” between the applicant and other natural or legal persons do not prevent the effective exercise of prudential supervision; see Art. 2 BCCI Directive (Directive 1995/26/EC of 29 June 1995, OJ, L 168, of 18 July 1995, p. 7). This directive imposed new obligations: the structure of the financial group must be transparent so that effective supervision can be exercised over all the group's components with which there have been “close links” as defined; the head office of credit institutions must be located in the state where its registered office is located, to ensure that adequate supervision can be exercised; the procedures for the transmission of information between regulators must be extended even outside the banking sector, in which an expanded role for the auditors has been provided for. A proposal to extend the “fit and proper” test to group shareholders and directors has not been maintained. On the proposal for a directive see: Canton de, Tournai, “La proposition de la nouvelle directive sur la surveillance des établissements de crédit sur une base consolidée”, Rev dr. bancaire etde la bourse (1991) no. 24Google Scholar; Gualandari, and Vella, , “The Post-BCCI EC Directive”, Revue de la banque (1995) 202.Google Scholar

25 Art. 3(5) of the Directive.

26 Art. 3(6).

27 Art. 3(2) where it is added that this does not imply that the financial holding company standing alone will also be submitted to the supervision.

28 See Art. 6.

29 Reference is made in Art. 1 to the criteria followed in the Seventh Directive for defining “parent undertaking”.

30 More precisely as defined in Art. 32 of the Seventh Directive 83/349/EEC of 13 June 1983.

31 Art. 5 (1) (2) and Art. 5(2) Directive 92/30. The method could be followed, inter alia, for consortium banks, of which there were several in operation in the 1980's.

32 See Art. 5(3) where the equity method is declared admissible, but it is mentioned that “that method shall not constitute inclusion of the undertaking concerned in supervision on a consolidated basis”. In Art. 32 of the Seventh Company Law Directive, the equity method is declared applicable if the shareholder “exercises a significant influence over the operating and financial policy of an undertaking not included in the consolidation (an associated undertaking)”. However, national supervisors may require some participations to be accounted for according to the equity method: see e.g., the Belgian RD 12 August 1994, Art. 2 § 3, 3°.

33 See Art. 2 (12), Directive 89/299/EEC of 17 April 1989 on the own funds of credit institutions, which for the purpose of the capital ratios imposes a deduction from regulatory capital of a holding in other credit and financial institutions exceeding 10% of the capital of the credit institution. Member states have fixed lower, stricter ceilings.

34 Art. 7 (4) of the Directive. In national regulations these co-operation mechanisms have been further detailed, or have been the subject of agreement between supervisors.

35 See Art. 3 §1, RD 12 August 1994.

36 See on this subject Clarotti, , “La coopération administrative entre organes de contrôle bancaire dans la CE”, Revue de la banque (1993) 583.Google Scholar

37 Lambrecht, , “Le secret professionnel des autorités de contrôle et la collaboration internationale”, Revue de la banque (1993), at pp. 503 et seq.Google Scholar; Bruyneel, , “le Secret professionnel de la Commission bancaire et financière”, Revue de la banque (1994) 28.Google Scholar

38 See Art. 4(2) of Directive 92/121/EEC of 21 December 1992 on large exposures.

39 See the rules flowing from the Belgian protocol on “banking autonomy” leading to a non-binding commitment of the shareholders to support the bank in case of crisis. See: Wtterwulghe, and Philippe, , “Le protocole bancaire, un code de comportement”, Refl. & persp. (1978) 347Google Scholar; De, Mûelenaere, “l'autonomie de la fonction bancaire”, Rev. Banque (1992) 545Google Scholar; R.P.D.B., Complement V, v° Epargne publique, n° 170-173; Smets, , “L'autonomie et la stabilité des banque”, Rev. Banque (1976) 415.Google Scholar

40 Compare European Commission, Second Report to the European Parliament and the Council on the Implementation of the Money Laundering Directive, doc. XV/1196/97-rev. 2, available at <www.europa.eu.int/comm/internal-market/en/finances/general/launden.pdf>.

41 Art. 11 of the ISD.

42 See for a discussion Druey and Vogel, supra n. 2.

43 Opinions denying group liability are found in Adler, , Düring, and Schmaltz, , Rechnungslegung und Prüfung der Aktiengesellschaft, Band 3 (Poeschel 1983)Google Scholar Vorbem. zu §§ 329-338, no. 29; Wymeersch, “Rapport general” and Van, Ommeslaghe, “Commentaire”, in: Aspects juridiques des comptes consolidés (Antwerp, 1983) 196Google Scholar referring to general rules of group liability; Schneider, , “The Supervision of Financial Conglomerates”, in: Ferrarini, (ed.), Prudential Regulation of Banks and Securities Firms (London 1990) 77Google Scholar; see also Wymeersch and Tison, supra n. 2, note 137 no. 66 p. 42.

44 For an overview of patterns see Schneider, supra n. 43, at p. 83. For empirical information, especially on bank-insurance groups see L. Van den, Berghe, “Defining Financial Conglomerates”, in: Van den, Berghe (ed.), Financial Conglomerates, New Rules for New Players? (Dordrecht 1995) 186.CrossRefGoogle Scholar

45 See Art. 12 of the Second Banking Directive: an individual holding of up to 15% of own funds can be held in the investment portfolio, while the aggregate volume of these holdings should not exceed 60% of own funds.

46 See Art. 6 of the Directive.

47 See Art. 8, RD 12 August 1994.

48 Directive 98/78/EC of 27 October 1998 on the supplementary supervision of insurance undertakings in an insurance group, (OJ)EC [1998] L 330/1 of 5 December 1998.