Member States must require undertakings governed by national law to prepare consolidated financial statements and a consolidated management report where a parent undertaking: (a) holds a majority of shareholders’/members’ voting rights in a subsidiary; (b) can appoint or remove a majority of the administrative, management or supervisory body of a subsidiary while being a shareholder or member; (c) exercises dominant influence by contract or constitutional provision where permitted by the subsidiary’s law; or (d) is a shareholder/member and either (i) a majority of board members were appointed solely by its voting rights or (ii) controls a majority of voting rights pursuant to an agreement. Member States need not require the parent to be a shareholder; point (i) may be subject to a 20% voting-rights threshold and does not apply where a third party holds the rights in (a)–(c)./p>

Rights of appointment and voting held by other subsidiaries or by persons acting on behalf of the parent or its subsidiaries are added for the purposes of (a), (b) and (d); those rights are reduced where shares are held on behalf of third parties, by way of security (when exercised under instructions), or in loan-related financing exercised for the lender. Voting rights attached to treasury shares of the subsidiary or its subsidiaries are excluded. A parent and all its subsidiaries must be consolidated irrespective of registered office. Member States may additionally require consolidation where the parent exercises dominant influence or unified management, or where unrelated undertakings are managed on a unified basis by contract or constitution or share majority management, in which case the relevant undertakings and their subsidiaries shall be consolidated and specified aggregation and application rules apply./p>