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Seventh Directive: consolidated accounts of companies with limited liability

22 December 2009
by Ina Dimireva -- last modified 25 December 2009

This Seventh Company Law Directive coordinates national laws on consolidated (i.e. group) accounts. Together with the Fourth Directive on the annual accounts of public limited liability companies, it belongs to the family of "accounting directives" that form the arsenal of Community legal acts governing company accounts.



Seventh Council Directive 83/349/EEC of 13 June 1983 based on Article 54(3)(g) of the Treaty on consolidated accounts.


The following text concerns a consolidation of existing Directives on consolidated accounts of companies with limited liability.

A parent company and all its subsidiaries are companies to be consolidated where either the parent company or one or more subsidiaries is established as a company with limited liability if the parent company exercises a dominant influence over the subsidiary.

These Directives define the circumstances in which consolidated accounts are to be drawn up. Any company (parent company) which legally controls another company (subsidiary company) is under a duty to prepare consolidated accounts. In most cases, legal control takes the form of the holding of a majority of voting rights. Member States may also require consolidated accounts to be prepared in other cases where a parent company has only a minority shareholding but exercises de facto control. They may provide for exemption from this obligation. The figures given in euro in Directive 78/660/EEC serve as thresholds for defining the small groups which can be exempted completely from the consolidated accounts requirement.

The Directive sets out the methods of drawing up consolidated accounts:

  • Consolidated accounts comprise the consolidated balance sheet, the consolidated profit and loss account and the notes to the accounts. These documents constitute a composite whole. Consolidated accounts must give a true and fair view of the assets, liabilities, financial position and profit or loss of the companies included therein taken as a whole.
  • The book values of shares in the capital of companies included in a consolidation must be set off against the proportion which they represent of the capital and reserves of those companies. Such set-off must be effected on the basis of book values as at the date on which the companies are included in the consolidation for the first time.
  • The consolidated accounts must be drawn up on the same date and by the same methods as the annual accounts of the parent company.

Contents of the notes: certain information must be provided in the notes, on such things as valuation methods, the names and the registered offices of the undertakings included in the consolidation, total of certain types of debts, etc.

The Directives also regulate the contents of the consolidated annual report. This must include at least a fair review of the development of business and the position of the undertakings included in the consolidation taken as a whole, and certain indications for each of those undertakings (number and nominal value of shares, etc.).

The Directives establish a system of auditing under which a company which prepares consolidated accounts must have them audited by one or more persons authorised to audit accounts under the laws of the Member State which govern that company. The person or persons responsible for auditing the consolidated accounts must also verify that the consolidated annual report is consistent with the consolidated accounts for the same financial year.


The Directives lay down rules on disclosure. The consolidated accounts, the consolidated annual report and the auditor's report must be published in accordance with the provisions of the first Directive.


Directive 83/349/EEC [adoption: consultation CNS/1976/1011]
Entry into force: 29.6.1983
Deadline for transposition in the Member States: 31.12.1987
Official Journal: OJ L 193, 18.7.1983

Amending acts:

Directive 89/666/EEC
Entry into force: 3.1.1990
Deadline for transposition in the Member States: 1.1.1992
Official Journal: OJ L 395, 30.12.1989

Directive 90/604/EEC
Entry into force: 19.11.1990
Official Journal: OJ L 317, 16.11.1990

Directive 90/605/EEC
Entry into force: 20.11.1990
Official Journal: OJ L 317, 16.11.1990

Directive 2001/65/EC
Entry into force: 16.11.2001
Official Journal: OJ L 283, 27.10.2001

Directive 2003/51/EC
Entry into force: 17.7.2003
Official Journal: OJ L 178, 17.7.2003

Directive 2006/43/EC
Entry into force: 29.6.2006
Official Journal: OJ L 157, 9.6.2006

Directive 2006/46/EC
Entry into force: 5.9.2006
Official Journal: OJ L 224, 16.8.2006

Directive 2006/99/EC
Entry into force: 1.1.2007
Official Journal: OJ L 363, 2012.2006

The successive amendments and corrigenda to Directive 83/349/ECC been incorporated into the original text.


Proposal for a Directive of the European Parliament and the Council of 17 April 2008 amending Directives 78/660/EEC and 83/349/EEC as regards certain disclosure requirements for medium-sized companies and obligation to draw up consolidated accounts [ COM(2008) 195 Final – Not published in the Official Journal].

This proposal aims to simplify the communication of financial information for small and medium-sized companies (SMEs) in order to relieve them of the administrative burden and related costs inherent in this type of activity, without this leading to a loss of useful information. The amendment clarifies the interaction between the 7th Directive and the IAS with regard to establishing consolidated accounts.

Codecision procedure ( COD/2008/84)

Commission interpretative communication concerning certain articles of the Fourth and Seventh Directives on accounting.

On 7 January 1998 the Commission adopted an interpretative communication concerning certain articles of the Fourth and Seventh Council Directives on accounting [C(97) 4226 final - Official Journal C 16 of 20 January 1998].

The following summary concerns the Seventh Directive only: The communication contains a definition of ‘group’ and clarifies the scope of consolidation. An undertaking which holds a majority of the voting rights in another undertaking must draw up consolidated accounts:

  • the shares held by the undertaking concerned should be taken into account purely on the basis of the voting rights attached to them and irrespective of the proportion of the capital they represent;
  • the “majority of voting rights” should always be taken to mean a simple majority of all voting rights in a company;
  • provisions in the law or in the memorandum or the articles of association which limit the voting power of a shareholder or member do not affect the obligation to draw up consolidated accounts, except where severe long-term restrictions substantially hinder the parent undertaking in the exercise of its rights over the assets or management of the subsidiary;
  • consolidation is required where an undertaking has the right to appoint or remove a majority of the board members of the subsidiary company (and not merely a minority holding the majority of the voting rights);
  • the exclusion of subsidiaries with incompatible activities should take place only in very rare circumstances when the application of the “true and fair view” principle so requires.

The layouts of the balance sheet and profit and loss account are governed by the provisions of the Fourth Directive, with adjustments resulting from the particular characteristics of consolidated accounts provided for in the Seventh Directive. Member States may authorise the classification of stocks in accordance with the purpose most frequently used.

If an undertaking which is required to prepare its consolidated accounts in conformity with the Seventh Directive wishes to satisfy at the same time the requirements following from other rules such as International Accounting Standards (IAS), this is possible only to the extent that the consolidated accounts remain in conformity with the Seventh Directive.

Commission report of 20 March 1996 to the Council on Member States' experience in applying the provisions listed in Article 50 of Council Directive 83/349/EEC on consolidated accounts [COM(96)94 final – Not published in the Official Journal].

The Commission proposes not amending the provisions in question, viz. the second subparagraph of Article 1(1)(d), Article 4(2), Articles 5 and 6, Article 7(1) and Articles 12, 43 and 44. Following an examination, in conjunction with the Member States, of the use made by each one of them of the possibilities offered by the Directive, the Commission concluded that those options have not given rise to problems in any Member States. In particular, there are no indications that they impair the equivalence and comparability of consolidated accounts.