The European Company Statute (being a legal instrument based on European Community law) gives companies the option of forming a European Company – known formally by its Latin name of ‘Societas Europeae’ (SE).
An SE can 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 have to be implement in national law in all Member States) on worker involvement.
Setting up a European Company
A European company can 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.
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 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.
Registration of European Companies
Each SE will be registered in a Member State on the same register as companies established under national law. The registration of each SE will be published in the EC’s Official Journal.
In addition, 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.
Share capital
The minimum capital requirement has been set at 120,000 euros so as to enable medium-sized companies from different Member States to create an SE.
Tax
The SE statute does not contain any tax arrangements. An SE will therefore, for tax purposes, be treated as any other multinational company according to the national fiscal legislation applicable at company level or branch level.