Documents considered by the Committee on 2 February 2011 - European Scrutiny Committee Contents

7   The European Company



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COM(10) 676

Commission Report on the application of Council Regulation 2157/2001 of 8 October 2001 on the Statute for a European Company (SE)

Legal base
Document originated17 November 2010
Deposited in Parliament25 November 2010
DepartmentBusiness, Innovation and Skills
Basis of considerationEM of 7 December 2010
Previous Committee ReportNone
To be discussed in CouncilNo date set
Committee's assessmentLegally important
Committee's decisionCleared


7.1  The European Company Statute (or "SE Regulation") was adopted on 8 October 2001 after 30 years of negotiation in the Council. It created a new legal form called the European Company, more widely referred to as the "SE" (Societas Europaea). The objectives of the SE Regulation, according to its recitals, were to remove obstacles to the creation of groups of companies from different Member States; (…) allow companies with a European dimension to combine, plan and carry out the reorganisation of their business on a Community scale and to transfer their registered office to another Member State while ensuring adequate protection of the interests of minority shareholders and third parties; (…) to ensure as far as possible that the economic unit and the legal unit of business in the Community coincide; (…) permit the creation and management of companies with a European dimension, free from the obstacles arising from the disparity and the limited territorial application of national company law; (…) and (…) to allow companies with a European dimension to adapt their organisational structure and to choose a suitable system of corporate governance ensuring efficient management, proper supervision and the maintaining of the rights of employees to involvement.

7.2  Article 69 of the SE Regulation requires the Commission to present a report on its application including proposals for amendments, where appropriate, five years after the entry into force. The report is a consequence of widespread consultation, a conference and external report.

The Report


7.3  As of 25th June 2010, 595 SEs were registered in EU/EEA Member States. Of that number 23 were registered in the UK, the fourth highest number behind Czech Republic 281, Germany 134 and Netherlands 24.



7.4  The European label of an SE is reported to be one of the most important drivers for setting up an SE. It is particularly attractive for companies, which are keen to stress their European credentials or want to benefit from a European legal form that is better known than the national legal form of company, to penetrate other Member States' markets without having to set up foreign subsidiaries. However, the importance of a European label varies. It is reported to be an advantage for companies in small countries, in Eastern European countries, in Belgium and in export-oriented countries (e.g. Germany). On the other hand, in some Member States a national label is considered to be more marketable than the European label.

7.5  The supra-national character of an SE is reported as a potential advantage in the process of conducting cross-border mergers or structural changes in a group (e.g. transforming national subsidiaries into branches of the parent company). In particular, it helps to avoid the feeling of a national 'defeat' of the management and staff when taken over by a company established in a different Member State.

7.6  The possibility of transferring the registered office of a company to another Member State is reported as one of the main advantages of the SE compared to national companies. In the absence of a Directive on the cross-border transfer of registered offices of a company, the SE remains the only company legal form that allows companies to transfer their registered office to any other Member State without liquidation. This possibility is particularly attractive for holding companies. However, in practice, only a limited number of SEs has transferred their registered office (49 as of 25 June 2010).

7.7  A number of respondents to the public consultation mentioned the SE's potential for reorganisation and simplification of a group's structure as a driver. The transformation into an SE, including the conversion of subsidiaries into branches, is particularly attractive for companies in the finance and insurance industries. The advantages mentioned are only one supervisory authority (instead of a number of them in all the Member States where a company has subsidiaries) and easier compliance with capital requirements. However, the advantages of such restructuring into an SE are not evident unless combined with other advantages, such as the creation of a European brand, the supra-national character of the SE or the possibility of seat transfer.

7.8  Respondents to the public consultation mentioned also the advantages of the SE in terms of financing (stronger position in negotiations with banks and in bids for EU financial support) and the SE's flexible rules on employee involvement in Member States where these matters are regulated by mandatory rules. As regards the latter, both companies and unions report that the SE Statute offers the possibility to: (i) negotiate an employee participation model, thereby tailoring it to the specific needs of the company or group, instead of having to comply with mandatory national rules; (ii) have a mixture of employee representatives from different Member States instead of representatives only from one Member State (this can help to build a European consciousness among employees and could be an advantage for European wide groups); and (iii) reduce the size of the supervisory board and thereby increase its efficiency.


7.9  Set-up costs, time-consuming and complex procedures, legal uncertainty, a lack of practical experience in legal advisors and national authorities are reported as the most important obstacles to establishing an SE. Well-known examples of the high cost of forming an SE include Allianz SE and BASF SE, whose costs for reincorporation as an SE amounted to €95 million and €5 million respectively. Leaving these cases aside, the average set-up costs for the SEs interviewed in the study were approximately €784,000 (including the tax and legal advisory costs, translation costs and registration costs). The overall set-up costs range from approximately €100,000 to figures of between €2 and 4 million.

7.10  Insufficient awareness about the legal form of an SE amongst the business community in and outside of the EU is reported as being the most significant problem in the running of the SE. When announcing an intention to adopt the legal form of an SE, a company often has to invest in explaining the nature of the SE to business partners (customers, suppliers, banks etc.) and employees.

7.11  Several companies, legal advisors and business associations consider the rules on employee involvement as an impediment as, in their view, they are complex and time-consuming, especially in Member States where the national legislation does not provide for a system of worker participation. The requirement that registration of an SE cannot be made before the completion of negotiations on employee participation is also mentioned as an important negative driver, in particular for listed companies for whom the certainty of procedures and of the timeframe for registration is crucial. However, these opinions are not shared by workers' organisations.


7.12  The study reports that the size of national companies is likely to have an effect on the distribution of SEs. The increased cost (especially the high minimum capital requirement) and complexity of setting up an SE as compared to a public limited-liability company can constitute more of a hurdle in Member States where the national companies tend to be small and medium sized enterprises. Poland, Spain, Portugal, Greece and Italy are mentioned as examples of countries where this could partially explain the small number of SEs. One respondent to the public consultation thought there was a correlation between the number of multinational companies and the number of SEs in a given Member State.

7.13  The knowledge and awareness in the legal and business community of the SE also seems to have an impact. Testimonies suggest that in Member States where the SE has been actively promoted, for instance in the Czech Republic and Germany, there are more SEs, whereas in Member States such as Italy or Spain, where information and advice on the SE form is not easily available, very few or no SEs have been set up. It is also possible that there is knock-on effect: an increased number of SEs in a Member State raises the interest of other companies in the same State in this legal form of company, which in turn results in more SEs being set up.

7.14  The external study also found that late implementation of the SE Regulation in some Member States could have had an impact on the level of awareness and the number of SEs in these countries.

7.15  Another reported trend is that more SEs have been set up in countries with a two-tier system of corporate governance, rather than a one-tier system; and very few SEs are set up in countries that allow both systems.

7.16  Respondents to the public consultation mentioned other possible explanations for the distribution of SEs in the EU/EEA, in particular: (i) the flexibility of certain aspects of the legal form of an SE compared to national legal forms; (ii) different views on the value of a European label; (iii) differing set-up costs and transaction costs in Member States; and (iv) different tax systems in Member States.

7.17  The high number of shelf SEs in certain Member States, in particular the Czech Republic and Germany, also contributes to the high number of SEs in these two Member States. The creation of shelf SEs by professional providers in these countries can be explained by the fact that shelf companies being available for sale is a common practice and meets specific business needs. According to the respondents to the public consultation, companies buy shelf SEs in these countries to save time and costs and to avoid a complex and uncertain formation procedure, including negotiations on employee involvement. This is particularly attractive for smaller companies. In contrast, unions in these countries are concerned that shelf SEs might be used to avoid the SE Regulation's rules on worker involvement.


Creating an SE

7.18  The initial aim of the SE Statute was to provide a European legal framework for existing cross-border businesses of a reasonable size without making it difficult for SMEs to form SEs. However, the consultation showed that businesses, in particular SMEs, consider the current formation conditions very burdensome.

Location of registered and head offices

7.19  A number of respondents to the public consultation said the requirement that the registered and head office of an SE be located in the same Member State (or, in some Member States, in the same place) was inconsistent with the evolution of business practice. The Statute provides for a severe sanction (liquidation) if the SE does not comply with this requirement. The report states that since the adoption of the SE Statute developments have occurred that have changed the Statute's approach to the question of a company's seat. In particular, the case law of the Court of Justice has allowed for the separation of the registered office from the head office in the European Union. The study commissioned by the report argues in favour of the SE Statute being amended to follow this trend.


7.20  The report concludes as follows:

"The European Company has made it possible for companies with a European dimension to transfer the registered seat cross-border, to better reorganise and restructure and to choose between different board structures, while maintaining the rights of employees to involvement and protecting the interests of minority shareholders and third parties. The European image and supra-national character of the SE are other positive aspects of the SE.

"However, six years of experience with the SE Regulation have shown that the application of the Statute poses a number of problems in practice. The SE Statute does not provide for a uniform SE form across the European Union, but 27 different types of SEs. The Statute contains many references to national law and there is uncertainty about the legal effect of directly applicable law and its interface with national law. Furthermore, the uneven distribution of SEs across the European Union shows that the Statute is not adapted to the situation of companies in all Member States.

"Any considerations of amendments to the SE Statute to tackle the practical problems identified by various stakeholders will have to take into account that the SE Statute is a result of a delicate compromise following lengthy negotiations. The Commission is currently reflecting on potential amendments to the SE Statute, with a view to making proposals in 2012, if appropriate. Any such amendments, if put forward, would need to be carried out in parallel with any possible revision of the SE Directive, which would be subject to the consultation of social partners in accordance with Article 154 of the Treaty. More generally, any measures which the Commission would propose as a follow-up to the present report would be subject to better regulation principles, including an impact assessment."[20]

The Government's view

7.21  In his Explanatory Memorandum of 7 December 2010 the Minister for Employment Relations, Consumer and Postal Affairs at the Department for Business, Innovation and Skills (Mr Edward Davey) says that the UK welcomes the report produced by the Commission. It raises a number of points which suggest why the SE company has not been as successful as first envisaged. The distribution of SEs across the EU interesting. Only the Czech Republic and Germany have over 100 SE companies registered. 21 Member States have less than 10 SEs and of this number nine have no SEs. The Minister says the suggested reasons for such low numbers include the high minimum capital requirement (€120,000, approximately £107,000) which is thought to be too high in those Member States with predominantly small companies. There is also a lack of knowledge of the SE in most Member States, and more SEs have been set up in countries that require national companies to have a two-tier corporate governance system.

7.22  In terms of the UK, the Government is not being lobbied by business to seek amendment to the legal form of the SE to make it more attractive. This, the Minister suggests, is probably due to the success of the UK public limited company and private limited company. Both are well known forms of company law and relatively easy to understand. This compares well with the lesser known and complex SE company. However, he recognises that some companies in other Member States may benefit from changes to the SE statute.  

7.23  The Commission has stated that it will consider amendments to tackle the practical problems identified, but only if such proposals are appropriate. The minister says the UK would support amendments if they lead to real benefits to business and did not compromise key elements of UK company law. But he underlines that agreement to the SE Statute was a delicate compromise following lengthy negotiations. Opening up the debate on issues such as minimum capital, requirements for registration and worker participation may not lead to any agreement to amend the Statute, as Member States have entrenched positions based on their different concepts and traditions of company law.


7.24  We report the Commission's analysis of the application of the SE Statute, also known as the European Company Statute, because this is the first time it has been reviewed since coming into force in 2001, following 30 or so years of negotiation in the Council.

7.25  We agree with the Minister's conclusion that, for reasons of complexity, expense and administrative burden, the SE has not been the success that many had hoped, including in the UK where public and private limited companies continue to be the norm.

7.26  The Commission document does not propose any amendments to the SE statute—the Commission says it is reflecting on possible amendments but with a view to making proposals in 2012 if appropriate. We are therefore content to clear this document from scrutiny.

20   See pages 9-10. Back

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