JUDGMENT OF 12. 11. 1974 — CASE 32/74 HAAGA

In Case 32/74 Reference to the Court under Article 177 of the EEC Treaty by the Bundesgerichtshof (Federal Supreme Court) for a preliminary ruling in the action pending before that court in the matter of the entry on the companies register of

THE COURT composed of: R. Lecourt, President, C. Ó Dálaigh, President of Chamber, A. M. Donner, R. Monaco, J. Mertens de Wilmars, P. Pescatore (Rapporteur) and H. Kutscher, Judges, Advocate-General: H. Mayras Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts

The facts and procedure of the case and the written observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows:

I — Facts and written procedure

On 9 March 1968 the Council of the European Communities adopted a First Directive 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, with a view to making such safeguards equivalent throughout the Community (OJ L 65, p. 8).

According to its recitals, this Directive is concerned with the coordination of provisions laid down by law, regulation or administrative action in the Member States concerning disclosure, the validity of obligations entered into by, and the nullity of, companies limited by shares or otherwise having limited liability, for the purpose of protecting the interests of third parties. Such disclosure must in particular allow third parties to have knowledge of the basic documents of a company and certain other information concerning the company, especially particulars of the persons who are authorized to bind the company.

To this end Article 2 (1) (d) lays down that the Member States shall take the measures required to ensure compulsory disclosure by companies of the appointment, termination of office and particulars of the persons who either as a body constituted pursuant to law or as members of any such body are authorized to represent the company in dealings with third parties and in legal proceedings. It must appear from the disclosure whether the persons authorized to represent the company may do so alone or must act jointly.

In accordance with Article 13 of the Directive the Federal Republic of Germany amended, with effect from 1 September 1969, by Article 3 of the law of 15 August 1969, implementing the First Council Directive on coordination of company law (Bundesgesetzblatt I, p. 1146), the law on limited liability companies: a third paragraph was added to Article 8, according to which the declaration made for the purpose of inclusion on the companies register must also indicate the extent of the directors' power to represent the company, and the first paragraph of Article 10 was supplemented by a sentence requiring that the entry on the register should also state the extent of the directors' power to represent the company.

No amendment was made to the provisions of the law on limited liability companies relating to the power of representation itself. The latter is still exercised jointly if there are several directors, individually if there is only one.

The entry made on the companies register with regard to representation of the limited liability company Friedrich Haaga GmbH, having its head office in Stuttgart, states, in accordance with a clause of the instrument of constitution of the company that

‘if several directors are appointed, the company shall be represented by two directors or by a director and a “prokurist” (duly authorized person)’.

By decision of 11 August 1971 the Rechtspfleger (an official concerned in the administration of justice, entrusted with certain jurisdictional functions, especially in relation to non-contentious jurisdiction) attached to the Amtsgericht of Stuttgart, whose duty it is to keep the company register, required the Haaga company to state, before 1 October, the directors' abstract power of representation in a number sufficient to represent the company and, in particular, to state, in the event of there being a single director, whether the latter is authorized to represent the company alone.

On 25 September 1971 the Haaga company opposed this decision, arguing that the statement required was superfluous. It is clear from the wording of the entries in the register that if only one director is appointed, he alone represents the company.

On 1 October 1971 the Amtsgericht dismissed this objection and submitted it on appeal, on 16 November, to the Landgericht of Stuttgart.

The Landgericht rejected the appeal by decision of 8 December 1971.

On 9 January 1973 the Haaga company lodged a further appeal against this decision before the Oberlandesgericht of Stuttgart.

The latter held that the appeal was unfounded. However, in view of the fact the Oberlandesgericht of Frankfurt-am-Main had expressed a contrary opinion in a decision of 6 May 1971, it was unable to bring a finding to this effect and submitted the case on a further appeal to the Bundesgerichtshof, pursuant to Article 28 (2) of the law on non-contentious proceedings.

The Second Civil Senate of the Bundesgerichtshof has found that a solution in the case depends upon the question whether Article 10 (1), second sentence, of the German law on limited liability companies, as newly worded, requires an entry to be made in the companies register that, in the event of there being only one director, he alone shall represent the company. Since this provision is entended to bring German law into line with the Council Directive of 9 March 1968, the decision depends on an interpretation of Article 2 (1) (d), second sentence, of that Directive.

By order of 14 February 1974, the Bundesgerichtshof therefore decided, pursuant to Article 177 of the EEC Treaty, to stay the proceedings until such time as the Court of Justice has given a preliminary ruling on the following question:

‘Ought Article 2 (1) (d), second sentence, of the First Directive of the Council of the European Communities of 9 March 1968 on the coordination of company law (OJ L 65, 14. 3. 1968, p. 8) to be interpreted as meaning that in cases where the body authorized to represent a company may consist of one or of several members and where in the event of only one member being appointed national law compulsorily lays down his exclusive authority to represent the company, then there must be disclosure not only of the provisions as to the representation of the company applicable in the event of the appointment of several members, but also of the fact in the event of the appointment of a single member he alone represents the company? Or may the last-mentioned particulars be omitted on the ground that the possibility of only one person being appointed to the body authorized to represent the company, as well as his sole authority to represent the company, follow automatically from the entry relating to the power of several persons to represent the company, in conjunction with the legal provisions?’

The order of the Bundesgerichtshof was registered at the Court on 14 May 1974.

In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC written observations were submitted, on 12 July 1974, by the Commission of the European Communities.

Having heard the report of the Judge-Rapporteur and the opinion of the Advocate-General the Court decided to open the oral procedure without any preparatory inquiry.

II — Written observations submitted to the Court

The Commission observes that the question referred by the Bundesgerichtshof is essentially concerned to discover whether, in the case where the body authorized to represent a company consists of a single member, the fact that he alone represents the company must be disclosed, given that the representative body of a company may consist of one or of several members and that, in the event of a single member being appointed, national law strictly lays down that the latter has sole authority to represent the company. It must therefore be ascertained whether Article 2 (1) (d), second sentence, of the Directive of 9 March 1968 necessitates a disclosure in the following form: ‘If there is a single director, he alone represents the company.’

a) The text itself of the provision in question and purely grammatical analysis do not provide a clear answer to this question. The obligation to disclose ‘whether the persons authorized to represent the company may do so alone or must act jointly’ may refer only to the case where several persons are authorized to represent the company; on the other hand, the plural may also include the singular.

b) With regard to the spirit of the provision to be interpreted, the following observations must be made: In effect, the laws in force in the Member States do not diverge where the representative body consists only of one person; a third party may be sure that, throughout the whole Community, the sole member of the body authorized to represent a company is authorized to represent the company alone. Disclosure of the power of representation by a single person accordingly appears superfluous.

Since the disclosure required by the Directive is essentially intended to safeguard the interests of third parties, it is tempting to interpret its provisions widely and to state that the power of representation must also be registered in the event of a single person being appointed. However, it should be decided whether the protection of third parties really requires such disclosure.

The argument that it cannot be assumed that persons involved have a precise knowledge of the divergent legislations of the Member States and that the impression should not be given that a director may act only jointly with a duly authorized person is not convincing.

c) The circumstances surrounding the formulation of the text are equally inconclusive on the question whether the individual power of representation of the single member of the representative body must be disclosed.

d) Accordingly, the Commission is of the opinion the question referred by the Bundesgerichtshof should be answered as follows: Article 2 (1) (d), second sentence, of the Council Directive of. 9 March 1968 must be interpreted as follows: where the representative body of a company may consist of one or of several members and where a single member has been appointed, it is not necessary to disclose the fact that this single member is authorized to represent the company alone. The Commission, represented by its Legal Adviser, R. Wägenbaur, as agent, submitted oral observations at the hearing on 2 October 1974. The Advocate-General presented his opinion at the hearing on 23 October 1974.

Law

1. By Order of 14 February 1974, registered at the Court on 14 May, the Bundesgerichtshof, pursuant to Article 177 of the EEC Treaty, referred a question on the interpretation of Article 2 (1) (d), second sentence, of the First Council Directive of 9 March 1968 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies, with a view to making such safeguards equivalent throughout the Community (OJ L 65, p. 8) concerning compulsory disclosure of certain information relating to bodies authorized to represent the company in dealings with third parties.

2. It appears from the order for reference that this question was referred as the result of an objection raised in non-contentious proceedings against an order issued by the Registrar of Companies, requiring the private limited liability company concerned to indicate the directors' power of representation and, in particular, to specify that, in the event of only one director being appointed, he is authorized to represent the company alone. The Company opposed this requirement on the ground that the entry demanded was superfluous, since from the wording of the entries on the register it was already clear that if only one director was appointed, he alone represented the company, according to the legislation in force in the Federal Republic of Germany.

3. The Bundesgerichtshof, to which this objection was taken on final appeal, faced with divergent interpretations offered by various courts, considered it necessary to obtain an interpretation of the relevant provisions of the Directive of 9 March 1968 so as to ensure that the law adopted for the implementation of that Directive by the Federal Republic of Germany should be applied in a manner which conformed to the requirements of Community law. To this end, the Bundesgerichtshof asked whether Article 2 (1), (d), second sentence, of the Directive must be interpreted as meaning that in cases where the body authorized to represent a company may consist of one or of several members and where in the event of only member being appointed national law compulsorily lays down his exclusive authority to represent the company, there must be disclosure not only of the provisions as to the representation of the company applicable in the event of the appointment of several members, but also of the fact that in the event of the appointment of a single member he represents the company alone, or whether the last-mentioned particulars may be omitted, on the ground that the possibility of only one person being appointed to the body authorized to represent the company, as well as his sole authority to represent the company, follows automatically from the entry relating to the power on the part of several persons to represent the company, when read in conjunction with the legal provisions.

4. Article 2 (1) of the Directive of 9 March 1968 lays down that: The second sentence of Article 2 (1) (d), the interpretation of which is sought, adds that ‘is must appear from the disclosure whether the persons authorized to represent the company may do so alone or must act jointly.’

‘Member States shall take the measures required to ensure compulsory disclosure by companies of at least the following documents and particulars:

…

d) the appointment, termination of office and particulars of the persons who either as a body constituted pursuant to law or as members of any such body:

are authorized to represent the company in dealings with third parties and in legal proceedings;

take part in the administration, supervision or control of the company.’

5. According to the rules of legal construction, the expression ‘persons who are authorized to represent the company’ must be understood as being a generic expression, so that the grammatical plural may indicate, without distinction, the case of a single person and that several persons authorized to represent the company. This provision therefore implies that, in the. event of a single person being authorized to represent the company, the power of representation of that person is required to be made known expressly.

6. This interpretation is in conformity with the objective of the Directive, which is to guarantee legal certainty in dealings between companies and third parties in view of the intensification of trade between Member States following the creation of the Common Market. In view of this fact, it is important that any person wishing to established and develop trading relations with companies situated in other Member States should be able easily to obtain essential information relating to the constitution of trading companies and to the powers of persons authorized to represent them. In the interest of legal transactions between nationals of different Member States, it is therefore important that all the relevant information should by expressly stated in official registers or records, even if certain information follows automatically from national legislation or may appear self-evident. In fact, third parties cannot be expected to have a full knowledge of the legislations or current commercial practices of other Member States. It therefore appears necessary to require, insofar, as the power of representation of directors of a limited liability company is concerned, that an entry should appear on the Companies Register conveying this information to third parties, even if it seems possible to deduce this information, in the absence of any entry on the Register, by logical reasoning or reference to national law.

7. The answer to the question referred should therefore be that Article 2 (1) (d), second sentence, of the First Council Directive of 9 March 1968 on coordination of company law must be interpreted as meaning that where the body authorized to represent a company may consist of one or of several members, disclosure must be made not only of the provisions as to representation applicable in the event of the appointment of several directors, but also, in the event of the appointment of a single director, of the fact that the latter represents the company alone, even if his authority to do so clearly flows from national law.

Costs

8. The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable, and as these (proceedings are in the nature of a step in the action pending before the Bundesgerichtshof, costs are a matter for that court.

On those grounds, THE COURT in answer to the question referred to it by the Second Civil Senate of the Bundesgerichtshof by order of 14 February 1974 hereby rules: