Europe’s version of Sarbanes-Oxley could effectively be adopted later this
month by law-makers, but concerns are growing that a long-running power struggle
between the two main EU bodies could result in delays.
The European parliament is expected to approve the EU’s eighth directive on
company law, which beefs up corporate governance and auditor responsibilities,
at a plenary session in the last week of September.
But an unresolved political issue over who controls how these rules are put
into practice could yet throw a spanner in the works.
The implementation of parts of the directive will be decided by comitology, a
process that will see a permanent committee established by the European
Commission to decide on these specific measures.
But such committees have been of concern to the European parliament for some
time, and it wants powers to supervise them and ensure they do not go beyond
It had been hoped these concerns would be resolved after a deal was struck to
put proposals in the European constitution, but successive no votes in France
and Holland left the plans in tatters.
‘The parliament is saying: “What rights do we have over this process?”’ said
a source in Brussels. ‘That discussion is going on now and everyone is concerned
to ensure that things don’t get sidelined by this issue.’
The new requirements of the eighth directive include the publication by
auditors of an annual transparency report, audit partners to be rotated at least
every five years and quality assurance reporting for audit committees and
management. Observers likened the directive to the US Sarbanes-Oxley Act, which
came in the wake of corporate scandals.
Initial plans would have required every listed company to have an independent
audit committee with at least one financial expert sitting on it, but these
proposals were eventually dropped following outcry from the business community.
But even if the European parliament endorses the proposals at the session,
bureaucratic procedure means it will be several months before the directive
comes into law, as the documents are translated into the languages of each of
the 25 member states.
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