European Association of Co-operative Banks Groupement Européen des Banques Coopératives Europäische Vereinigung der Genossenschaftsbanken MARCH 2006

Size: px

Start display at page:

Download "European Association of Co-operative Banks Groupement Européen des Banques Coopératives Europäische Vereinigung der Genossenschaftsbanken MARCH 2006"

Aubrey Bruce
6 years ago
Views:

1 European Association of Co-operative Banks Groupement Européen des Banques Coopératives Europäische Vereinigung der Genossenschaftsbanken THE EUROPEAN ASSOCIATION OF CO-OPERATIVE BANKS RESPOND TO The European Commission s Consultation on Future Priorities for the Action Plan on Modernising Company Law and Enhancing Corporate Governance in the European Union MARCH 2006 Rue de l Industrie B-1040 Brussels Tel: (+32 2) Fax (+32 2) secretariat@eurocoopbanks.coop

2 About EACB The European Association of Co-operative Banks (EACB) is the voice of Co-operative Banks in Europe. It represents, promotes and defends the common interests of its 28 member organisations and of co-operative banks in general. Co-operative banks form decentralised networks which are governed by banking as well as co-operative legislation. The co-operative banks business model is based on three pillars: democracy, transparency and proximity. Through those pillars, co-operative banks act as the driving force of sustainable and responsible development by placing the individual at the heart of their activities and organization. In this respect, they widely contribute to the national and European economic and social objectives laid down in the Lisbon Agenda. With outlets and banks, co-operative banks are widely represented throughout the enlarged European Union and played a major role in the financial and economic system. In other words, in Europe one out of two banks is a co-operative. Co-operative banks have a long tradition in serving 130 million customers, mainly consisting of consumers, retailers and SMEs. They have also developed a strong foothold in the corporate market providing services to large international groups. Quantitatively co-operative banks in Europe represent 44 millions members, 700,000 employees with a total average market share of about 20%. For further details, please visit 2

3 I. General comments The European Association of Cooperative Banks (EACB) welcomes the Commission s consultation regarding the future priorities for the Action Plan on Modernization of Company Law and Enhancing Corporate Governance in the European Union and appreciates the possibility to contribute to the ongoing discussion and to present its positions. The EACB esteems the Commission s overall objective of the consultation to recalibrate the Commission s policy in order to identify the market s need for further action in the field of company law and corporate governance in the light of the Lisbon agenda, namely to improve competitiveness through sustainable economic growth and greater social cohesion. In this context, it is crucial that, as regarding new initiatives in the field of company law and corporate governance, the positions of stakeholders from all types of companies are taken into consideration to be able to be responsive to all needs and specific concerns. II. Specific answers 1. The overall aim and context for future priorities Question 1 Does the Action Plan address the relevant issues and identify the appropriate tools to enhance the competitiveness of European business? If not, please give your reasons and indicate which measures are not appropriate and/or would be desirable. What are your views on the balance of legislative/non-legislative measures proposed? Are you facing particular obstacles in the conduct of cross-border activities to which, in your opinion, the Action Plan does not provide any satisfactory remedy? Please give your reasons. The consultative document seems to be mainly aligned to the form of public limited company and to the protection of their shareholders. However, it does not have any reference to other forms of companies, e.g. co-operatives. The co-operative form of enterprise is generally acknowledged in all Members States and constitutes an important part of their economy. The EACB would like to reiterate the Commission s pro-co-operative policy as defined in its 2004 communication on the promotion of co-operative societies in Europe. The Treaty establishing the European Community recognizes the co-operative form of enterprise as well by mentioning cooperative societies in the chapter on the freedom of establishment (Article 48). Moreover, the EU has created the European Cooperative Society (SCE) as a genuine form of enterprise by adopting a regulation on the Statute for a European Cooperative Society (SCE) 1. Therein, the Commission clearly committed itself to a plurality of forms of enterprises and to an equal treatment of this business model. The EACB would like to underline the necessity to ensure all upcoming measures are adequate for all forms of enterprises to enhance the European corporate competitiveness. 1 Council Regulation (EC) No 1435/2003 of 22 July 2003 on the Statute for a European Cooperative Society (SCE) 3

4 When doing so, the characteristics of the co-operative form of enterprise have to be taken fully into consideration regarding any future initiative in the field of company law and corporate governance. The scope of application and the subject matter of all initiatives have to be adapted accordingly to the co-operative specificities in order to avoid inconsistency and conflicts with co-operative laws. Question 2 Do you have comments on the proposed application of better regulation principles in the area of corporate governance and company law? Are there other ways in which, in your view, the Commission should be seeking to improve its actions in this field? The EACB highly appreciates the Commission's commitment to drive Better Regulation Principles also throughout the company law and corporate governance policy-making process. Costs of regulation heavily weigh on the banking industry. The Commission is encouraged to place the reduction of regulatory costs at the core of its objectives by way of simplification of existing legislation. Industry consultation carried out at a pre-drafting stage is likely to identify more precisely the possible obstacles and problems, and will contribute to develop well-targeted objectives and pragmatic solutions. The co-operative banks' specific status should be taken into account when drafting legislation. The initiative of evidence based research prior to issuing legislation is highly supported. This approach should contribute to develop better targeted objectives, relying on strong empirical indicators that action at EU level would be the optimal option to levy identified obstacles. In the same vein, ex-post evaluations should be systematical. To be fully reliable, ideally such studies should be carried out by independent bodies, or entities presenting clear criterions of objectivity to allow space for critical assessments and leave room for discussion when passed legislation did not deliver expected results. 2. Shareholder democracy One share, one vote Question 3 What would be the added value of addressing the issue at EU level? What would be the appropriate form for any EU instrument? Please give your reasons. Are there, in your view, specific elements which any such instrument should cover? The EACB doubts that there is a need for regulation concerning one share, one vote. It is certainly important to ensure that member states do not maintain state influence after privatization by privileged voting rights. On the other hand, positive regulation introducing the principle one-share, one vote would establish the primacy of capital as a fundamental principle. However, the establishment of such principle would seriously reduce the freedom of the individual. We do not see why private individuals should be deprived of allocating voting regimes if they want. Often there 4

5 are good reasons for doing so. From a private investor s perspective, it may even be interesting to have no voting rights at all, if such restriction is compensated by higher dividends. Furthermore, the EACB would like to underline that the one share- one vote principle, as addressed in the consultation document, is hardly adequate for the co-operative model of enterprise. A philosophy of the one share- one vote would be in conflict with the cooperative business model and therefore would be fully inadequate. As stated in the Regulation on the Statute for a European Co-operative Society (SCE) 2 cooperatives are entities with particular operating principles that are different from those of other economic agents. These include the principles of democratic structure and control and the distribution of the net profit for the financial year on an equitable basis.. The co-operative democratic model includes the principle of the primacy of the individual which is reflected in the specific rules on membership, resignation and expulsion where the one man- one vote rule is laid down and the right to vote is vested in the individual. 3 Accordingly, generally every member has one vote regardless of the number of shares he holds. This one man- one vote principle offers optimal protection for the democratic participation of all members of a co-operative. It ensures a fair representation of the interests of all individual members, who would be minority stakeholders in public limited companies where the principle one share- one vote applies. Since the voting right is not dependent on the amount of invested capital, there are no majority shareholders, who could diminish the weight of the effect of the other voting rights and thereby limit the control of the majority of members. A principle, which provides equal rights to all members regardless of the amount of shares they hold, guarantees each member the same influence on decisions and thereby the adaptation of the members demands to the greatest extent. It needs to be taken into account that the SEC Statute also allows co-operatives to seek capital from outside their member base. Any future Commission initiatives need to consider this. Rights of shareholders Question 4 What would be the added value of addressing these questions at EU level? Please give your reasons. Which instrument would be best designed to deal with these matters? Please give your reasons. Are there, in your view, specific elements which any such instrument should cover? In January 2006, the Commission published a proposal for a directive introducing minimum standards on notably cross-border voting rights and other related rights concerning the participation in general assembly. 2 Regulation (EC) No 1435/2003 on the Statute for a European Co-operative Society (SCE), Recitals 7 3 Regulation on the Statute for European Co-operative Society (SEC) 5

6 It seems to be adequate to exclude co-operatives from the scope of application of the forthcoming directive since the issues dealt with in the directive proposal relate only to public limited companies and does not take into account the way of functioning and specific features of co-operatives. In fact, the standards proposed by the Commission are likely to cause conflicts und undermine specific structures and principles of other business models. With this directive not adopted yet, we do not see any further need for action at the current stage. Disclosure by investors of their voting policies Question 5 Is there a need for this issue to be addressed at EU level? What would be the added value of addressing the issue at EU level? Please give reasons for your reply. What would be the appropriate form for any EU instrument? Please give your reasons. As regarding co-operatives, due to the principle of one-man, one-vote, there is no need for such disclosure by investors. Director s responsibility Question 6 Do you consider that a) the question of the wrongful trading rules and b) the issue of directors disqualification should be addressed at EU-level? Please give your reasons. Which instrument would, in your opinion, be most appropriate? Please give your reasons. If so, are there, in your view, specific elements which any such instrument should cover? Do you consider that any additional measures are needed to enhance transparency for legal entities and/or legal arrangements (e.g. trusts)? The EACB points out that banks are subject to specific supervisory and governance standards, such as Capital Requirements Directive (Supervisory Review Process), CEBS guidelines on the Application of the Supervisory Review Process under Pillar 2 (CP03 revised) (Internal Governance); Money-Laundering Directive. It is highly important to avoid any overlap with these regulations. 3. Corporate restructuring and mobility Corporate restructuring and mobility - transfer of the registered office Question 7 In the light of existing instruments, is there still a need for a directive on the transfer of registered office? Please give your reasons. Are there, in your view, specific elements which any such Directive should cover? 6

7 A 14th Directive on cross-border transfer of companies registered offices could provide flexibility for companies and boost economic growth and foster competitiveness of companies. As for mergers of two national co-operatives to a European Co-operative Society (SEC), the Statute for a European Co-operative Society (SEC) (Article 7) is regulating the transfer of registered office. Monistic and dualistic types of board structures Question 8 Should the question of the choice of board structure be addressed at EU level? Please give your reasons. Which instrument would be best designed to deal with this matter? Please give your reasons. Are there, in your view, specific elements which any such instrument should cover? The choice for Member States to decide in favour for either the monistic or the dualistic type of board structures should be maintained. This topic should be left to subsidiarity. The Statute for a European Co-operative Society (SEC), which defines in Article 36 SEC Statute the structure of organs of a European co-operative society, provides both options as well. A European co-operative society should either comprise a supervisory organ and a management organ (two-tier-system) or an administrative organ (one-tier system) depending on the form adopted in the co-operative statutes. Squeeze out and sell out Question 9 Do you think that a squeeze out and a sell out right should be introduced at EU-level? Please give your reasons. If so, should these rights be limited to companies which shares are traded on a regulated market ( listed companies )? Please give your reasons. Which instrument would be best designed to deal with this matter? Please give your reasons. The EACB does not see any urgent need to introduce a squeeze out and sell out right, especially not as regarding co-operatives. Due to the co-operative principle of one-man, one-vote, co-operatives do not have majority or minority shareholders given that generally only co-operative members jointly own and democratically control their company. Groups and Pyramids Question 10 Should the issues of framework rules for groups and abusive pyramids, in your view, be addressed at EU-level? Please give your reasons. Which instrument would be best designed to deal with this matter? Please give your reasons. Are there, in your view, specific elements which any such instrument should cover? The EACB does not have any view in this respect. 7

8 4. Legal forms of enterprises Legal forms of enterprises - the European Company Question 11 How useful do you judge the ECS to be in practice? Do you consider any modifications are appropriate and desirable? Please give your reasons. The EACB regrets that the European Co-operative Society (SEC) is not regarded in the consultation document as it was the case for the Communication on Modernising Company Law and Enhancing Corporate Governance in the European Union (COM (2003) 284 final), which forms the basis for this consultation document. The Statute on the European Co-operative Society (SEC) is to be implemented within the national legislations by August As regarding both the ECS and SE, any evaluation on their usefulness would be premature for the time being since there is no sufficient empirical evidence for a proper assessment currently available, which would allow to properly assessing the value of these European forms of enterprise. The European Private Company Question 12 Do you see value in developing an EPC Statute in addition to the existing European (e.g. Societas Europaea, European Interest Grouping) and national legal forms? Please give your reasons. If so, are there, in your view, specific elements which any such statute should cover? An evaluation of the value of an EPC would be premature for the time being. It seems necessary to wait until sufficient empirical evidence for a proper evaluation of the value of the ECS and SCE is available, on which basis a proper assessment could be carried out and which would allow conclusions on the usefulness of an EPC. The European Foundation Question 13 Do you consider it useful to carry out an examination on the feasibility of a European Foundation Statute? Please give your reasons. Generally, the EACB is not opposed to any European legal instrument, which responds to a need and allows an easier development of the transnational activities. However, the resources could be more efficiently used for more urgent matters. (see aforesaid; answers to question 11 and 12) 8

9 Simplification of the EU regulatory environment- a Lisbon priority Question 14 Do you agree that there would be added value in modernising and simplifying European Company Law? Please give your reasons. Are there, in your view, areas of actual or potential overlap between the Action Plan and other initiatives or measures in related sectors? What, if anything, should be done in order to ensure coherence between the various fields of action? Please give your reasons. What should be the extent of simplification in the interests of improving the regulatory environment and rendering the text more user-friendly? Please give your reasons. A new codification of existing company law is not regarded imperative. It would simplify the use of the company law directive noticeably when the consolidated version of the existing company law directives in a clearly arranged way. 9

European Association of Co-operative Banks Groupement Européen des Banques Coopératives Europäische Vereinigung der Genossenschaftsbanken

European Association of Co-operative Banks Groupement Européen des Banques Coopératives Europäische Vereinigung der Genossenschaftsbanken Committee of European Brussels, October 28, 2005 Banking Supervisors