280 5 Equity and Shareholders’ Capital
Second Directive, no part of the remuneration of the consultancy firm may consist of shares
allotted to it, if the subscribed capital is increased at the same time. The wording of the Di-
rective does not prevent the allotment of shares to the consultancy firm, if the subscribed
capital will not be increased. In practice, this is possible where the company’s shares do not
have a nominal value and the consultancy firm pays nothing for the shares; on the other
hand, this would cause problems because of shareholders’ pre-emptive rights (see above).
The Directive does not say whether those rules can be circumvented by allotting share op-
tion rights instead of shares.
There are some exceptions. According to the Second Directive, Member States
may “allow those who undertake to place shares in the exercise of their profession
to pay less than the total price of the shares for which they subscribe in the course
of this transaction”.^730
Contract v company law. It can be difficult to combine the terms of the contract
for the purchase of assets with mandatory provisions of company law.
When assets are traded for cash, each party plays a clear role: one party acts as
the buyer and the other as the seller. When assets are traded for shares, that rela-
tionship is complemented by another relationship: the seller of assets acts as the
buyer (subscriber) of shares and the company acts as the seller (issuer) of shares.
Now, the contract for the sale and purchase of assets is likely to contain clauses
that are characteristic of that particular contract type, and the contract for the sub-
scription of shares may contain clauses that are characteristic of business acquisi-
tion contracts.
Two particular problems arise. First, the conclusion of those contracts may re-
quire compliance with detailed rules on the internal decision-making of the com-
pany (for counterparty corporate risk, see Volume II).^731 In practice, the contract
for the sale of assets will often be conditional and subject to approval by the gen-
eral meeting if the transaction should, according to the applicable company law
rules, be decided on by the general meeting.
Second, usual remedies for breach of contract can be constrained by mandatory
provisions of company law. For example, the seller of assets might not be able to
repudiate the contract in the event of breach by the company of its representations
and warranties or claim reimbursement of damage caused by the company breach-
ing its contractual obligations, as distributions to shareholders are constrained by
mandatory provisions of company law (see also section 16.4).^732
(^730) Article 8(2) of Directive 77/91/EEC (Second Company Law Directive). For other excep-
tions relating to placements, see Article 3(2) of Directive 2003/71/EC (Prospectus Di-
rective) and Articles 2(12) and 11 of Regulation 2273/2003.
(^731) See nevertheless Article 9 of Directive 68/151/EEC (First Company Law Directive)
(^732) Article 15(1)(c) of Directive 77/91/EEC (Second Company Law Directive).