MiFID II definition of the 'group'


 

The 'group' definition is relevant for multiple MiFID II institutions, like for instance ancillary activity exemption (where ancillary activities must constitute a minority of activities at group level).

 

For the definition of the term 'group' Article 4(1)(34) MiFID II refers to the definition of Article 2(11) of Directive 2013/34/EU on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings (Accounting Directive).

 

According to this definition 'group' means a parent undertaking and all its subsidiary undertakings.

 

Articles 4(1)(32) and (33), MiFID II also refer to the Accounting Directive in relation to the terms 'parent undertaking' and 'subsidiary'.

Article 2(9) Accounting Directive sets forth that a parent undertaking is an undertaking which controls one or more subsidiary undertakings.

 

Article 2(10) of Accounting Directive stipulates that a subsidiary undertaking is an undertaking controlled by a parent undertaking, including any subsidiary undertaking of an ultimate parent undertaking.

 

Article 22 of the Accounting Directive (to which Articles 4(1)(32) and (33) MiFID II also refer) sets forth the requirement to prepare consolidated financial statements and contains further elements characterising the relationship between a parent undertaking and a subsidiary undertaking which include the following points:

 

1. the parent undertaking has a majority of shareholders' or members' voting rights in a subsidiary undertaking;

 

2. the parent undertaking has the right to appoint or remove a majority of the members of the administrative, management or supervisory body of a subsidiary undertaking and is at the same time a shareholder in or member of that subsidiary undertaking;

 

3. the parent undertaking has the right to exercise a dominant influence over a subsidiary undertaking of which it is a shareholder or member, pursuant to a contract entered into with that subsidiary undertaking or pursuant to a provision in its memorandum or articles of association;

 

4. the parent undertaking is a shareholder or member of a subsidiary undertaking and:

a) a majority of the members of the administrative, management or supervisory bodies of the subsidiary undertaking who have held office during the financial year, during the preceding financial year and up to the time when the consolidated financial statements are drawn up, have been appointed solely as a result of the exercise of its voting rights (except where a third party has a majority of the shareholders' or members' voting rights or has the right to appoint or remove a majority of the members of the administrative, management or supervisory body or has the right to exercise a dominant influence), or

b) controls alone, pursuant to an agreement with other shareholders in or members of the subsidiary undertaking, a majority of shareholders' or members' voting rights in the subsidiary undertaking.

 

5. the parent undertaking has the power to exercise, or actually exercises, dominant influence or control over the subsidiary undertaking; or,

 

6. the parent undertaking and the subsidiary undertaking are managed on a unified basis by the parent undertaking.

 

Mindful of the above provisions, ESMA considers that the term 'group' comprises the parent undertaking and all its subsidiary undertakings.

Subsidiary undertakings are those undertakings that are controlled by a parent undertaking under consideration of the above mentioned elements of control.

This definition entails that non-EU entities of a group are also covered by the term, regardless of whether the group is headquartered inside or outside the EU.

 

 

 

 

Last Updated on Monday, 21 March 2016 22:39
 

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