68 accuracy of the annual statement relating to the company’s corporate governance statement governance structures and practices. The Group believes that the collective responsibility of the board for EU law should financial and key non-financial statements should be confirmed as a confirm collective responsibility matter of EU law. 4.4. Wrongful trading In our Consultative Document, we particularly addressed the need to strengthen the accountability of directors when the company is threatened by insolvency and suggested the introduction of a European framework rule on “wrongful trading”. This is a matter all Member States’ laws have to deal with, usually in a combination of company law and insolvency law. Some respondents argued that, as this is a matter of insolvency law, the EU should not interfere with it at all. The Group rejects this view. The responsibility of directors when the company becomes insolvent has its most important effect prior to insolvency and is a key element of an appropriate corporate governance system. From this perspective, it is irrelevant whether rules relating to this responsibility are laid down in company law or insolvency law.
The introduction of a framework rule on wrongful trading at EU level
The gist of the UK “wrongful trading” rules, the French and Belgian “action en comblement du passif”, and other Member States laws is similar : if the directors ought to foresee that the company cannot continue to pay its debts, they must decide either to rescue the company (and ensure future payment of creditors) or to put it into liquidation. Otherwise, the directors will be liable fully or in part to creditors for their unpaid claims.
Existing national rules make directors liable for not reacting when they ought to foresee the company’s insolvency
The details of the national rules vary considerably. In some Member States there are no specific provisions, but a similar effect is achieved through general rules on directors’ liability, sometimes by tort law, though the general duty to file a petition for bankruptcy in the case of actual insolvency comes too late. The concept of wrongful trading applies both to independent companies and to companies within groups. The directors of a subsidiary company are subject to the rules, as well as the parent company and its directors if they operate as de facto or “shadow” directors of the subsidiary. The beauty of the rule is that it does not interfere with the on-going business decisions of directors, as long as an insolvency situation is not yet foreseeable. A general obligation to file for bankruptcy in case of actual insolvency usually comes too late.
National rules vary considerably
Was opposed by some respondents on formal grounds Which are not shared by the Group
But they apply also to group companies And do not interfere with ongoing business decisions