7 The European Company
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16803/10
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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)
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| Legal base | —
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| Document originated | 17 November 2010
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| Deposited in Parliament | 25 November 2010
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| Department | Business, Innovation and Skills
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| Basis of consideration | EM of 7 December 2010
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| Previous Committee Report | None
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| To be discussed in Council | No date set
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| Committee's assessment | Legally important
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| Committee's decision | Cleared
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Background
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
NUMBER OF SES
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.
THE MAIN DRIVERS AND TRENDS
Positive
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.
Negative
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.
TRENDS ON THE DISTRIBUTION OF SES
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.
PRACTICAL PROBLEMS IN THE APPLICATION OF THE SE STATUTE
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.
CONCLUSION
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.
Conclusion
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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