The European Company Statute is a new legal instrument based on European Community law that gives companies the option 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 establishing the company law rules (directly applicable in Member States) and a Directive on worker involvement (which will now have to be implemented in national law in all Member States). The Regulation and Directive will enter into force on 8 October 2004.
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.
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.
By setting up as a European Company a business can restructure fast and easily to take the best possible advantage of trading opportunities. 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.
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 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.
