The SE will give companies operating in more than one Member
State the option of being established as a single company under
Community law and so able to operate throughout the EU with one set
of rules and a unified management and reporting system rather than
all the different national laws of each Member State where they
have subsidiaries.
For companies active across the Internal Market, the SE
therefore offers the prospect of reduced administrative costs and a
legal structure adapted to the Internal Market as a whole.
Internal Market Commissioner Frits Bolkestein said
yesterday:
"Adoption of the European Company Statute
will give companies the option of using this efficient structure
for their pan-European operations. The European Company will enable
companies to expand and restructure their cross-border operations
without the costly and time-consuming red tape of having to set up
a network of subsidiaries. This is a practical step to encourage
more companies to exploit cross-border opportunities and so to
boost Europe's competitiveness in accordance with the objectives of
the Lisbon Summit."
The legislation is due to enter into force in 2004. Under the
European Company Statute, a European Company can be set up by the
creation of a holding company or a joint subsidiary or by the
merger of companies located in at least two Member States or by the
conversion of an existing company set up under national law.
Anna Diamantopoulou, Commissioner for Employment and Social
Affairs, added:
"This tool is a fair wind for pan-European
businesses. At the same time, it ensures that employees do not
suffer any slippage in their existing rights to consultation and
participation. Today's final adoption thus marks a clear staging
post in the Lisbon strategy: to make the EU into the world's most
competitive and cohesive place to live and do business. We must
concede that the European company statute is not yet perfect: much
work remains to be done on taxation matters. But, in the
Commission's view, the glass is half full, not half empty".
Worker involvement
Under an affiliated Directive on worker involvement in European
Companies, the creation of a European Company would require
negotiations on the involvement of employees with a body
representing all employees of the companies concerned.
If it proved impossible to negotiate a mutually-satisfactory
arrangement then a set of standard principles, laid down in an
annexe to the Directive would apply. Essentially, these principles
oblige managers of European Companies to provide regular reports on
the basis of which there must be regular consultation of and
information to a body representing the companies' employees. These
reports must detail the companies' current and future business
plans, production and sales levels, implications of these for the
workforce, management changes, mergers, divestments, potential
closures and layoffs.
In certain circumstances, where managers and employee
representatives were unable to negotiate a mutually-satisfactory
agreement and where the companies involved in the creation of an SE
were previously covered by participation rules, a European Company
would be obliged to apply standard principles on participation of
its workers. This would be the case of a European Company created
as a holding company or joint-venture when a majority of the
employees had the right, prior to the creation of the SE, to
participate in company decisions.
In the case of a European Company created by a merger, the
standard principles on participation of its workers would have to
be applied when at least 25% of employees had the right to
participate before the merger. It is on this element that agreement
on the Directive had, until a summit in Nice in December 2000, not
proved possible.
The compromise struck by Heads of State and Government was to
authorise a Member State not to implement the Directive on
participation in the case of SEs created by merger, but in that
case the SE could be registered in that Member State only if an
agreement was concluded or when no employees were covered by
participation rules before the SE was created. This compromise was
endorsed by the Council on 20 December.
In the case of a transformation of a national company into an
SE, the arrangements for worker participation applied by this
national company prior to its transformation as a European Company
would have to continue to apply.
The European Commission's FAQs about the European Company
Statute
1. What is the European Company Statute?
It is a new legal instrument based on European Community law
that gives companies the of forming a European Company known
formally by its Latin name of 'Societas Europeae' (SE). An SE will
be able to operate on a European-wide basis and be governed by
Community law directly applicable in all Member States. The
European Company Statute is established by two pieces of
legislation, namely a Regulation (directly applicable in Member
States) establishing the company law rules and a Directive (which
will now have to be implemented in national law in all Member
States) on worker involvement. The Regulation and Directive will
enter into force on the same day three years after their formal
adoption.
2. How can a European Company be set up?
In one of four ways:
- By the merger of two or more existing public limited companies
from at least two different EU Member States;
- By the formation of a holding company promoted by public or
private limited companies from at least two different Member
States;
- By the formation of a subsidiary of companies from at least two
different Member States;
- By the transformation of a public limited company which has,
for at least two years, had a subsidiary in another Member
State.
3. What are the advantages of setting up a European
Company?
The creation of the European Company Statute will mean in
practice, that companies established in more than one Member State
will be able to merge and operate throughout the EU on the basis of
a single set of rules and a unified management and reporting
system.
They will therefore avoid the need to set up a financially
costly and administratively time-consuming complex network of
subsidiaries governed by different national laws. In particular,
there will be advantages in terms of significant reductions in
administrative and legal costs, a single legal structure and
unified management and reporting systems. The potential savings in
terms of administrative costs were estimated to be up to €30
billion per year by the Competitiveness Advisory Group of
industrialists convened in 1995 by the Heads of State and
Government and chaired by Carlo Ciampi.
By setting up as a European Company a business can restructure
fast and easily to take the best possible advantage of the trading
opportunities offered by the Internal Market. European Companies
with commercial interests in more than one Member State will be
able to move across borders easily as the need arises in response
to the changing needs of their business.
This is because the Statute will allow an SE registered in
Member State A to move its registered office to Member State B
without, as is the case now, having to wind up the company in
Member State A and re-register it in Member State B. For
pan-European projects, for example Trans-European Network projects
in the transport or energy sectors (the upgrading of railway
lines/road networks) a single European Company could attract
private venture capital more easily than a series of national
companies all operating under national rules.
4. Are companies obliged to become European
Companies?
No. But if they wish to operate in a series of different Member
States without establishing themselves as an SE they will have to
respect a series of national laws governing company start-ups,
often at considerable legal and administrative cost.
5. Will there be a central register of European
Companies?
No. Each SE will be registered in a Member State on the same
register as companies established under national law. However, the
registration of each SE will be published in the EC's Official
Journal.
6. Can a European Company be registered in any Member
State in which it operates (e.g. where it has a mailbox) or must it
be registered where it has its operational
headquarters?
The European Company must be registered in the Member State
where it has its administrative head office. This is the only
system that allows effective supervision of the whole SE, so as to
avoid the SE being used for doubtful practices such as tax fraud or
money laundering.
7. Why did the European Parliament have to be
re-consulted?
The European Parliament had to be re-consulted because the
texts, notably in terms of the provisions for worker participation,
had been amended since the Parliament last gave its Opinion
(January 1991).
8. Where will a European Company be taxed?
An SE will, for tax purposes, be treated as any other
multinational company according to the national fiscal legislation
applicable at company level or branch level. There will be a fiscal
advantage in creating a European Company by merger registered in
one Member State but operating through branches in a variety of
Member States.
If the Member State where the head-office is located taxes the
world-wide income of the European Company, it will be possible, in
the Member State where the head-office is located, to offset losses
from some permanent establishments against profits from other ones.
In practice, such compensation is not very often possible if the
parent company is established as an independent entity operating
through a variety of legally-independent subsidiaries rather than
as an SE.
However, the SE will continue to be a taxpayer in the different
Member States where the permanent establishments will be
located.
European Companies created by merger will be the first type of
company to be able to benefit from the Directive on eliminating
double taxation of cross-frontier mergers. However, this will
require a technical amendment to the Directive to add SEs to the
types of companies eligible under the Directive.
9. What are the provisions for worker involvement in
European Companies?
Under the Directive on worker involvement, the creation of a
European Company will require negotiations on the involvement of
employees with a body representing all employees of the companies
concerned. If it proves impossible to negotiate a
mutually-satisfactory arrangement, then a set of standard
principles, laid down in an annexe to the Directive, will
apply.
Essentially these principles oblige SE managers to provide
regular reports on the basis of which there must be regular
consultation of and information to a body representing the
companies' employees. These reports must detail the companies'
current and future business plans, production and sales levels,
implications of these for the workforce, management changes,
mergers, divestments, potential closures and layoffs.
In certain circumstances, where managers and employee
representatives are unable to negotiate a mutually-satisfactory
agreement and where the companies involved in the creation of an SE
were previously covered by participation rules, a European Company
will be obliged to apply standard principles on participation of
its workers. This will be the case of a European Company created as
a holding company or joint-venture when a majority of the employees
had the right, prior to the creation of the SE, to participate in
company decisions.
In the case of a European Company created by a merger, the
standard principles on participation of its workers will have to be
applied when at least 25% of employees had the right to participate
before the merger. It is on this element that agreement on the
Directive had, until the Nice Summit in December 2000, not proved
possible. The compromise struck by Heads of State and Government
was to authorise a Member State not to implement the Directive on
participation in the case of SEs created by merger, but in that
case the SE could be registered in that Member State only if an
agreement was concluded or when no employees were covered by
participation rules before the SE was created.
In the case of a transformation of a national company into an
SE, the arrangements for worker participation applied by this
national company prior to its transformation as a European Company
will have to continue to apply.
10. Must European Companies be publicly
quoted?
No private companies and medium sized companies may also opt to
become European Companies. If an SE's shares are quoted, it must be
treated in the same way as public companies established under
national law.
The minimum capital requirement has been set at €120,000 so as
to enable medium-sized companies from different Member States to
create an SE.
11. Why has it taken 30 years to approve this
proposal?
Partly because the European Company, in order to be based on
Community law valid in each Member State, has to be established by
a Regulation (directly applicable in all Member States) as opposed
to a Directive (implemented through national law).
Agreement therefore required consensus amongst all Member States
on aspects of company law where there are still widely varying
rules in national law. Moreover, it has required finding common
ground between those Member States with a tradition of worker
involvement (anxious that European Companies should not be used as
a means to avoid national worker involvement requirements) and
those Member States where worker involvement is not imposed
(anxious that European Companies should not be used to introduce
worker involvement obligations). In the end, it has required a
compromise at the EU's highest political level, the European
Council (at Nice).
12. Does the European Company Statute include provisions
on employment contracts and pensions?
No. Employment contracts and pensions are not covered by the
Regulation. They will be subject to national law in the Member
States where the headquarters and branches operate.
As regards company pension schemes, European Companies stand to
benefit from the provisions of the proposal for a Directive on
occupational retirement provision presented by the Commission in
October 2000, notably as regards the possibility for a company to
set up a single pension fund for all employees throughout the
EU.
