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2020 | OriginalPaper | Buchkapitel

Groups of Companies: Les groupes de sociétés

General Report

verfasst von : Rafael M. Manóvil

Erschienen in: Groups of Companies

Verlag: Springer International Publishing

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Abstract

This General Report provides a comparative law analysis of the phenomenon of groups of companies, through an overview and summary of the information contained in the more than twenty National Reports presented to the International Congress on Comparative Law held in Fukuoka, Japan, in 2018, which make up this book. The General Report begins by surveying the manner in which the different legislations define and describe groups of companies, then goes on to study the varied approaches and solutions found in and offered by the legal systems analysed in the book, mainly for the protection of minority shareholders and that of creditors and other third parties, also mentioning some regulations pertaining to different areas of the law (such as labour, tax and competition law). As such, it provides an overall, but altogether detailed view of the phenomenon in legislations from various parts of the world, organized around the most relevant topics surrounding groups of companies.

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Nächstes Kapitel National Report on Portugal

19.12.1881, published in RGZ, 3-123. The court declared that a management agreement by which the company assigned the right to appoint its directors to a Rumanian government agency was null and void, on the basis that legal entities cannot give away their legal capacity.

In Italy the first group of companies, established in 1931, was the IRI (Istituto per la Reconstruzione Industriale), which was a state holding.

The Greek report informs that authors define a group as the situation between several companies which allows the use of the powers of some or all organs of a company for the interest of another company.

The Belgium national report informs that pyramidal structures are still frequent in that country. The same is true for other European countries, like Germany or Italy.

What has been called the bottom-up model.

The so called top-down perspective.

“A controlling influence based on an economic dependency or imbalance is insufficient and does not constitute a controlling influence in the meaning of section 17 AktG” (see in this volume Mock, “National Report on Germany”, Nr. 47, citing case law from 1983 and 2011). “Consequently, contractual arrangements dealing with rights and obligations of the entity in their regular scope of business … do not constitute a controlling influence”.

The author of this report, notwithstanding his Argentine origin, is strongly against this approach: the problem of groups in company law is the influence on the organic decision-making process in the controlled or dependent company. Bilateral relationships, even as stringent as franchise or project-finance agreements can be, are of a different nature: all the problems arising out of the abuse of one party’s superior power in a contract can be solved applying the rules of common private law, as if the parties, especially the weaker one, were individuals and not companies.

Dominant influence is described in the UK as the right to give directions on the operating and financial policies of the subsidiary which are binding on its directors whether or not they are for the benefit of the subsidiary.

This includes the power of a shareholder who in practice prevails or may veto decisions because of the rest of shareholders’ regular absence.

The same is the case in respect of consumer law, were the parents’ liability is in subsidy of the controlled company’s liability.

This is the case of the 1972 Argentine Company Law (Art. 262), and the 1989 Uruguayan Company Law (Art. 377).

Art. 33, par. 2, of the Argentine Company Law and Art. 49 of the Uruguayan Company Law.

BGH, Beton und Monierbau AG, BGHZ, 90-381. Case law in Italy, Argentina or Uruguay, as far as we know it, hardly ever needed to make use of the external contractual control concept to decide cases, for instance in the very frequent car dealer or franchise contractual disputes.

Like the Netherlands, where only a legal entity, and not a natural person, can qualify as parent.

The Swedish report refers to an implicit conflict of interest.

At least according to the High Level Group of Company Law Experts.

Besides legal persons foreseen in its national Law, the Dutch report provides further examples: a foreign company and a Dutch Societas Europaea.

Art. 32, General Companies Law.

2006 Company Act, Section 136.

Art. 52, Commercial Companies Law.

This description was introduced at the time of the implementation of the Seventh European Directive.

In this sense, a Supreme Court decision declared that a group was a consortium that, despite not being a legal entity, could have rights and obligations and be an employer.

The Dutch report points to the organisational interconnectedness being also structured through a combination of a minority shareholding and special voting rights in the articles of association. A contractual basis is also mentioned, albeit without specifying which types of contracts would be a part of it. It is unclear, for instance, whether joint venture or cooperation agreements between two or more entities are included or left aside.

It is important to note that under no legislation contemplating these agreements can the dominant enterprise act directly on behalf of the dependent company.

If the instructions are in conflict with the purpose defined in the articles of association of the dependent company and if they endanger such company’s existence.

In this respect it is worth mentioning the 2013 European Court ruling in the Impacto Azul case (June 20th, 2013, proc. C-186/12, Impacto Azul Lda. c. BPSA 9) where it was decided that a rule like Art. 501 of the Portuguese Commercial Companies Code which foresees the liability of a Portuguese but not of a foreign parent company for its subsidiary’s debts (an inverse discrimination) does not conflict with European freedom of establishment and non-discrimination rules.

Nor from Albania, who did so in 2008.

Nevertheless, Art. 2497 septies offers some doubts, since it foresees the case of an activity of direction or coordination carried out by a company which does not fall under the definition of control of Art. 2359 but is entitled to carry out such activity on the basis of an agreement or a clause in the company’s articles of association. The question of what sort of agreement is envisioned arises. Does it include domination agreements of the German type?

This probably resulted from the fact that, according to some Italian scholars who most likely had some influence in the law-making process, group only defines a technique to organise a single economic unity and has no legal meaning.

Art. 2497 sexies of the Civil Code establishes as a rebuttable presumption that there is direction or coordination activity in case of control as defined in Art. 2359. Given that the presumption is rebuttable, there may be control without direction or coordination activity.

It is therefore somehow surprising that in Greece there are doubts around the possibility of concluding domination agreements of the German type, without a legal rule allowing that type of agreement.

Forum Europaeum Corporate Group Law, High Level Group of Company Law Experts, Reflection Group, the Action Plan on European Company Law and Corporate Governance, and more recently The Informal Company Law Expert Group.

Just as an example: Greek accounting standards provide that transactions with affiliated entities are to be disclosed in the addenda of financial statements.

Finland and Italy have such provisions in their national laws.

Of all countries that made contributions to this general report, only in the case of Brazil a separate detailed report on the Tax obligations of enterprises within corporate groups was submitted.

Stereo Development Co. Ltd. v. Commissioner of Taxation.

Parke Davis y Cía. de Argentina SA (Fallos 286: 97); Mellor Goodwin SA (Fallos 287: 79).

With the exception of the rules on subordination, which depend on the law applicable to the insolvent company.

In Austria, in the first place, such decisions may be declared void.

This sort of compensation had been denied by the Federal Court in Germany in the 1975 ITT case (BGHZ, 65, p.15).

General Company Law, Art. 54.

Cass. Crim., February 4th, 1985, JPC et G II, 1985, p. 20585.

It was again proposed, but later dismissed, in 2012 in the context of the project of the new Civil and Commercial Code that came into force on August 1st. 2015.

Art. 54, draft of a new third paragraph.

In Argentina a 1983 obiter dictum of the Buenos Aires Commercial Chamber of Appeals, included a very similar statement, which was completely irrelevant to solve the case (Carabassa c. Canale, Cám. Com., Sala B, LL, 1983-B-353.).

In a recent decision, however, the Delaware Supreme Court held that the combination of approval by a committee of independent directors plus a majority of the minority shareholders returns scrutiny to the deference of the business judgment rule.

The Southern Peru Copper case cited in the US report.

The British report mentions that approval by independent directors or by the shareholders supersedes this duty. But the parent or controlling shareholder should be barred to vote when in conflict of interests.

For details, see the US report.

Second Council Directive 77/91/EEC of 13 December 1976 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent now integrated in Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company law.

The Singapore report informs that such challenges are nevertheless rarely successful.

Germany, France, Italy, Argentina and many other jurisdictions provide rules for this purpose.

Argentine General Companies Law, Art. 31, and Uruguayan Commercial Companies Law, Art. 47.

Art. 172 of the Argentine insolvency law.

This terminology seems to have been used in the first place by Hommelhof, a German author, who wrote a book with this title.

The famous Walkovsky v. Carlton decision of the New York Court of Appeals.

DHN Food Distributors Ltd v. Tower Hamlets LBC (1976), where the wholly owned subsidiaries were “bound hand and foot to the parent company and must do just what the parent company says”.

The Albazero (1977), Woolfson v. Strathclyde Regional Council (1978), Southard & Co Ltd (1979), where the language was particularly remarkable: “If one of the subsidiary companies … turns to be the runt of the litter and declines into insolvency to the dismay of its creditors, the parent company and the other subsidiary companies may prosper to the joy of the shareholders without any liability for the debts of the insolvent subsidiary”. In the same line were the decisions in Adams v. Cape Industries Plc (1990), Re Polly Peck Plc (1996), Newton-Sealey v. Armor Group Services Ltd (2008) and VTB Capital Plc v. Nutritek International Corp (2013).

Antonio Gramsci Shipping Corp v. Stepanovs.

As a curiosity, it is worth mentioning that the courts in the UK have admitted a so-called reverse veil piercing, which has also been criticised. But within a group of companies this remedy should be as effective and necessary.

Case law mentions that abuses in the use of different legal entities is unacceptable, but the report states that this sort of claims hardly ever succeed.

For references, see the Cyprus report.

Republic v. KEM Taxi Ltd.

Argentine General Company Law, Art. 54, 3rd. paragraph, and Uruguayan Commercial Companies Law, Arts. 189/191.

Art. 236, Ley de Sociedades de Capital, and art. 172 bis, Ley Concursal.

This may be a way to be entitled to direct the partnership’s business.

Fuchs A (2003) Tracking Stock - Spartenaktien als Finanzierungsinstrument für deutsche Aktiengesellschaften. ZGR:177

Titel: Groups of Companies: Les groupes de sociétés
verfasst von: Rafael M. Manóvil
Verlag: Springer International Publishing
Buch: Groups of Companies
Print ISBN: 978-3-030-36696-4

Electronic ISBN: 978-3-030-36697-1

Copyright-Jahr: 2020
DOI: https://doi.org/10.1007/978-3-030-36697-1_1

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