Former Stagiaire of Firm Authors Article on Newly Created Societas Europeae The recent creation by the European Union of the Societas Europeae (European Company) presents new opportunities for multinational companies to streamline their corporate structure. Dr. Christiane Loidl, a Partner in the Austrian law firm of Griss & Partner Rechsanwälte and a former stagiaire of the Firm, examines this new form of entity and its advantages. Please click here to see the full text of the article. Societas Europeae
Recently the Council Regulation on the Statute for a European Company (Societas Europeae - or abbreviated: the SE) has become law. The main purpose of the SE is to allow companies to operate more freely within the European Union (EU). They "should be able to plan and carry out the reorganization of their business on a community scale". The purpose of this note is to give a brief overview of the Societas Europeae and point out potential practical advantages as well as certain open issues.
1. Formation of a Societas Europeae
A Societas Europeae can not be organized, or the shares of stock held by, by a natural person. The four ways it can be set up are as follows:
* merger of two or more existing public limited-liability companies (corporations such as an AG or an SA) from at least two different EU member states (it is not necessary that the public limited liability company be "public" in the sense that its shares are listed on a stock exchange)
* formation of a holding company organized by public or private limited-liability companies (e.g. SARL or GmbH in addition to SA and AG) from at least two different EU member states
* formation of a subsidiary to be owned by companies from at least two different EU member states
* reorganization of a public limited-liability company which has had, for at least two years, a subsidiary in another EU member state
2. Advantages of a Societas Europeae
A Societas Europeae allows companies to operate across the European Union on the basis of a single set of rules and a unified management and reporting system, since community law, rather than the different national laws of various EU States, will be directly applicable to the Societas Europeae in all member states of the European Union.
In the past, a company had to establish a subsidiary or at least register a branch office in each member state of the European Union in which it was doing business. Each of these subsidiaries and branch offices was subject to a different national company law, their formation necessitated the engagement of different law firms experienced with the applicable national company laws, each year reports had to be filed with the various company registers in compliance with the respective national provisions, and, last but not least, the personnel required for the ongoing administration of the various subsidiaries triggered considerable expense. In addition, US companies operating subsidiaries in Europe are very often faced with the unexpected complexities of merging subsidiaries established in various member states of the European Community or of moving a registered office from one member state to another. These problems can be avoided in the future if these businesses decide to form a Societas Europeae.
The potential advantages are:
* lower administrative and legal costs
* a single legal structure
* unified management
* unified reporting system
* fast restructuring to take advantage of changes in the internal market since there are no legal restrictions to change the registered office from one member state to another member state. 3. Open Issues
Of the many issues of implementation, this note shall briefly address open issues pertaining to the
* board structure
* minority protection
* co-determination
a) Board Structure
Under the SE Regulation, each member state in its enabling legislation is obligated to offer the choice between the one-tier and the two-tier system (separating a managing board from a supervisory board). It may be assumed that this will create fewer problems for countries like the UK which have known so far only the one-tier or board system. On the other hand, countries like Germany will face greater difficulties in providing for a one-tier structure. The main reason being co-determination, that is to say the participation with workers within the board.
b) Protection of Minority Shareholders
The SE Regulation provides for general safeguards of minority shareholders. The formation of a SE requires the approval of the shareholders of the participating companies by qualified majority. In addition, the member states are allowed to enact rules in order to provide protection for those shareholders who oppose the transfer of the registered office of a SE to another member state, or the formation of a SE by merger or SE holding company. It shall be interesting to see how the various member states are going to use this authorization for additional measures of minority protections.
c) Worker Participation
Member states have to transform the SE Directive dealing with the participation of worker into their national laws. The procedure established in the SE Directive is designed not only to preserve, but even to expand, the existing regimes of co-determination to countries with less or with no participation of employee representatives. In case there is no agreement, the most comprehensive co-determination regime of all participating companies for the emerging SE must be implemented.
Conclusion
The SE Regulation changes the traditional structure of corporate law in the EU member states. It has the potential to open up the old systems by allowing new strategies. It will be interesting to observe future developments.
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