STATUTORY INSTRUMENTS

S.I. No. 693 OF 2004

European Communities (Financial Transparency) Regulations 2004

I, Brian Cowen, Minister for Finance, in exercise of the powers conferred on me by section 3 of the European Communities Act 1972 ( No. 27 of 1972 ) and for the purpose of giving effect to Commission Directive 80/723/EEC of 25 June 1980¹ , as amended by Commission Directive 85/413/EEC of 24 July 1985² , Commission Directive 93/84/EEC of 30 September 1993³ and Commission Directive 2000/52/EC of 26 July 2000⁴ , hereby make the following regulations:

Citation.

1.         These Regulations may be cited as the European Communities (Financial Transparency) Regulations 2004.

Interpretation.

2.         (1)        In these Regulations, unless the context otherwise requires -

“Directive” means Commission Directive 80/723/EEC of 25 June 1980¹ , as amended by Commission Directive 85/413/EEC of 24 July 1985² , Commission Directive 93/84/EEC of 30 September 1993³ and Commission Directive 2000/52/EC of 26 July 2000⁴ ;

“exclusive right” means a right that is granted by the State to one undertaking through any legislative, regulatory or administrative instrument, reserving to it the right to provide a service or undertake an activity within a given geographical area;

“Minister” means the Minister for Finance;

“public undertaking” means an undertaking over which a public authority may exercise, directly or indirectly, a dominant influence by virtue of their ownership of it, their financial participation in it or the rules that govern it;

“public undertaking operating in the manufacturing sector” means a public undertaking -

(a)        whose principal area of activity, defined as being at least 50 per cent of total annual turnover, is in manufacturing, and

(b)        whose operations fall to be included in Section D - Manufacturing (being subsection DA up to and including subsection DN) of the NACE (Rev. 1) classification⁵ ;

“special right” means a right that is granted by the State to a limited number of undertakings through any legislative, regulatory or administrative instrument that, within a given geographical area -

(a)        limits to 2 or more the number of such undertakings, authorised to provide a service or undertake an activity, otherwise than according to objective, proportional and non-discriminatory criteria,

(b)        designates, otherwise than according to such criteria, several competing undertakings, as being authorised to provide a service or undertake an activity, or

(c)        confers on an undertaking, otherwise than according to such criteria, any legal or regulatory advantages that substantially affect the ability of any other undertaking to provide the same service or to operate the same activity in the same geographical area under substantially equivalent conditions;

“Treaty” means the Treaties establishing the European Communities;

“undertaking required to maintain separate accounts” means an undertaking that enjoys a special right or exclusive right granted by a Member State pursuant to Article 86(1) of the Treaty, or that is entrusted with the operation of a service of general economic interest pursuant to Article 86(2) of the Treaty and receives State aid in any form whatsoever, including any grant, support or compensation, in relation to such service and which carries on other activities.

(2)        In these Regulations-

(a)        a reference to a Regulation is to a Regulation of these Regulations;

(b)        a reference to a paragraph, subparagraph or clause is a reference to a paragraph, subparagraph or clause of the provision in which the reference occurs, unless it is indicated that reference to some other provision is intended.

(3)        A word or expression that is used is used in these Regulations and is also used in the Directive has, unless the context otherwise requires, the same meaning in these Regulations as it has in the Directive.

Public authorities and public undertakings.

3.         (1)        A public authority and a public undertaking shall ensure that the following are open and transparent:

(a)        public funds that a public authority makes available directly to a public undertaking;

(b)        public funds that a public authority makes available through the intermediary of a public undertaking or a financial institution;

(c)        the use to which public funds referred to in subparagraph (a) or (b) are actually put.

(2)        Without prejudice to the generality of paragraph (1), the following aspects of financial relations between a public authority and a public undertaking shall be open and transparent:

(a)        the setting-off of operating losses;

(b)        the provision of capital;

(c)        non-refundable grants, or loans on privileged terms;

(d)        the granting of financial advantages by forgoing profits or the recovery of sums due;

(e)        the forgoing of a normal return due;

(f)        compensation for a financial burden imposed by a public authority.

(3)        This Regulation shall not apply to financial relations between a public authority and the following:

(a)        a public undertaking-

(i)         as regards the supply of services that is not liable to affect trade between Member States to an appreciable extent, or

(ii)        whose total annual net turnover over the period of the 2 financial years preceding that in which the public funds referred to in paragraph (1) are made available or used (if used in a subsequent financial year) has been less than €40,000,000;

(b)        a central bank of a Member State;

(c)        a public credit institution-

(i)         as regards deposits of public funds placed with it by the public authority on normal commercial terms, or

(ii)        whose balance sheet total over the period of the 2 financial years preceding that in which the public funds referred to in paragraph (1) are made available or used (if used in a subsequent financial year) has been less than €800,000,000.

(4)        In order for the State to comply with its obligations under Article 5 of the Directive, public authorities and public undertakings shall keep information regarding public funds and financial relations referred to in this Regulation at the disposal of the Commission for 5 years from the end of the financial year in which the public funds were made available or used, whichever is later, and shall provide this information and such other information to the Minister as he or she may request.

(5)        A dominant influence on the part of a public authority shall be presumed when a public authority, directly or indirectly in relation to an undertaking -

(a)        holds the major part of the undertaking’s subscribed capital,

(b)        controls the majority of the votes attaching to shares issued by the undertaking, or

(c)        can appoint more than half of the members of the undertaking’s administrative, managerial or supervisory body.

Public undertakings operating in the manufacturing sector.

4.         (1)        In this Regulation “public undertaking” means a public undertaking operating in the manufacturing sector whose turnover in the most recent financial year exceeded €250,000,000.

(2)        A public undertaking shall make an annual report and prepare annual accounts in accordance with Council Directive 78/660/EEC⁶ . The annual accounts and annual report shall include the balance sheet and profit and loss account, explanatory notes, together with accounting policies, statements by directors, segmental and activity reports, notices of shareholders’ meetings and other pertinent information.

(3)        A public undertaking shall provide the following information, in so far as it has not been disclosed in its annual report and its annual accounts:

(a)        the provision of any share capital or quasi-capital funds similar in nature to equity, specifying the terms of its or their provision (whether ordinary, preference, deferred or convertible shares and interest rates and the dividend or conversion rights attaching thereto);

(b)        non-refundable grants, or grants which are only refundable in certain circumstances;

(c)        the award to the enterprise of any loans, including overdrafts and advances on capital injections, with a specification of interest rates and the terms of the loan and its security, if any, given to the lender by the enterprise receiving the loan;

(d)        guarantees given to the enterprise by public authorities in respect of loan finance (specifying terms and any charges paid by enterprises for these guarantees);

(e)       dividends paid out and profits retained;

(f)        any other forms of State intervention, in particular, the forgiving of sums due to the State by a public undertaking, including, inter alia, the repayment of loans, grants, payment of corporate or social taxes or any similar charges.

(4)        (a)       The information required in paragraph (3) shall be supplied separately for each public undertaking including those located in Member States and include, where appropriate, details of all intra and inter-group transactions between different public undertakings as well as transactions conducted directly between a public undertaking and the State.

(b)        In paragraph (3)(a) “share capital” includes share capital contributed by the State directly and any share capital received contributed by a public holding company or other public undertaking (including financial institutions), whether inside or outside the same group, to a given public undertaking. The relationship between the provider of the finance and the recipient shall always be specified.

(c)        (i)        The reports required in paragraph (3) shall be provided for each individual public undertaking separately, as well as for the relevant company which consolidates several public undertakings in so far as the consolidated sales of the relevant company lead to its being classified as “manufacturing”.

(ii)        In clause (i) “relevant company” means an undertaking that is a subsidiary of another for the purposes of the European Communities (Companies: Group Accounts) Regulations ( S.I No. 201 of 1992 ) that is itself a parent undertaking for the purposes of those Regulations.

(d)        A public enterprise that splits its activities into one or more legally distinct undertakings may provide a consolidated report that reflects the economic reality of a group of enterprises operating in the same or closely related sectors.

(e)        The information required by paragraph (3) shall be provided to the Commission annually -

(i)         by a public undertaking, within 15 days of the publication of its annual report, or

(ii)        by a public undertaking that does not publish an annual report, within 9 months following the end of its financial year.

(5)        In order for the State to comply with its obligations under Article 5a of the Directive, a public undertaking to which this Regulation applies shall provide such additional information to the Minister as he or she may request.

Undertakings required to maintain separate accounts.

5.         (1)        Without prejudice to any other legal requirement, an undertaking required to maintain separate accounts shall ensure that its financial and organisational structure is correctly reflected in the separate accounts so that the following are open and transparent:

(a)        the costs and revenues associated with different activities (being different activities within the meaning assigned by the Directive);

(b)        full details of the methods by which costs and revenue are assigned or allocated to different activities.

(2)        Without prejudice to the generality of paragraph (1) an undertaking required to maintain separate accounts shall ensure that-

(a)        the internal accounts corresponding to different activities are separate,

(b)        all costs and revenues are correctly assigned or allocated on the basis of consistently applied and objectively justified cost accounting principles, and

(c)        the cost accounting principles according to which separate accounts are maintained are clearly established.

(3)        Paragraph (2) shall only apply to activities that are not covered by specific provisions laid down by the Community and shall not affect any obligations of the State or undertakings arising from the Treaty or from such specific provisions.

(4)        In order for the State to comply with its obligations under Article 5 of the Directive, an undertaking required to maintain separate accounts shall keep information regarding its financial and organisational structure at the disposal of the Commission for 5 years from the end of the financial year to which the information refers and shall provide this information and such other information to the Minister as he or she may request.

(5)        This Regulation shall not apply to -

(a)        an undertaking -

(i)         as regards the supply of services that is not liable to affect trade between Member States to an appreciable extent,

(ii)        whose total annual net turnover over the period of the 2 financial years preceding any given year in which it enjoys a special or exclusive right granted by a Member State pursuant to Article 86(1) of the Treaty, or in which it is entrusted with the operation of a service of general economic interest pursuant to Article 86(2) of the Treaty is less than €40,000,000, or

(iii)       which has been entrusted with the operation of services of general economic interest pursuant to Article 86(2) of the Treaty if the State aid in any form whatsoever, including any grant, support or compensation they receive was fixed for an appropriate period following an open, transparent and non-discriminating procedure,

or

(b)        a public credit institution whose total annual net turnover over the period of the 2 financial years preceding any given year in which it enjoys a special or exclusive right granted by a Member State pursuant to Article 86(1) of the Treaty, or in which it is entrusted with the operation of a service of general economic interest pursuant to Article 86(2) of the Treaty is less than €800,000,000.

¹ OJ No. L195, 29.7.1980, p.20.

² OJ No. L229, 28.8.1985, p.20.

³ OJ No. L254, 12.10.1993, p. 16.

⁴ OJ No. L193, 29.7.2000, p.75.

¹ OJ No. L195, 29.7.1980, p.20.

² OJ No. L229, 28.8.1985, p.20.

³ OJ No. L254, 12.10.1993, p. 16.

⁴ OJ No. L193, 29.7.2000, p.75.

⁵ OJ No. L83, 3.4.1993, p.1.

⁶ OJ No. L222, 14.8.1978, p.11.