Review of European Company Statute - briefing

23 March 2010
by eub2 -- last modified 23 March 2010

The European Company Statute (SE) gives companies operating in more than one Member State the possibility to reorganise their cross-border business under one European label. This enables them to work within a stable legal framework, reduce the internal costs of operating in several countries and hence be more competitive in the Internal Market. The SE has proved to be very popular in some Member States but it has not taken off in others. In order to determine whether changes are needed to make the SE Statute work better, the European Commission has launched a public consultation. With the review of the SE Statute, the Commission is aiming to increase the use of the SE across the European Union.

What is the European Company Statute (SE)?

The SE gives companies operating in more than one Member State the option of being established as a single company under Community law and so able to operate throughout the EU with one set of rules and a unified management and reporting system rather than all the different national laws of each Member State where they have subsidiaries. For companies active across the Internal Market, the European Company therefore offers the prospect of reduced administrative costs and a legal structure adapted to the Internal Market as a whole.

The European Company Statute was 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 implemented in national law in all Member States) on worker involvement.

Why is the Commission reviewing the European Company Statute?

The European Company Statute (SE) Regulation (2157/2001 – directly applicable in Member States) requires the Commission (under Article 69) to report on its practical application five years after its entry into force and to put forward amendments where appropriate.

How is the Commission consulting stakeholders?

The Commission asked a consultant to prepare an external study on the way the SE works. In the course of that work, the consultant worked with a number of stakeholders.

Furthermore, the Commission has published a consultation today (deadline for responses is 23rd May) which aims to test the findings of the external study with all interested stakeholders and to provide the Commission with input on issues relevant for the assessment of the SE.

The Commission is also organising a high-level conference on the SE Statute on 26 May 2010 to complement the evaluation work.

What is the consultation about?

The consultation relates to the findings of the external study (see below). The questions cover issues including:

* Drivers: positive and negative drivers for setting up a SE; attractiveness of national legislation for setting up a SE; the most important regulatory issues to consider for a company when assessing in which country to place its registered office and/or head office
* Main trends: reasons for the current distribution of SEs across the EU/EEA Member States
* Practical problems encountered: examples of practical problems encountered in the course of setting up or running an SE
* Possible follow up: views on the study's recommendations for possible amendments of the SE Regulation; other suggestions for amendments of the SE Regulation that would increase its attractiveness for businesses (e.g. for SMEs or for groups operating across borders)

What are the findings of the external study on the SE?

The findings of the external study on the operation and impacts of the SE Statute, conducted by Ernst & Young and finalised in December 2009, were as follows:

* Inventory of SEs: 431 SEs were registered as at 10 September 2009. The number increased exponentially from 2004 to 2008, but fewer SEs were created in 2009 (as at 10 September 2009) compared to 2008. Currently SEs are present in 20 out of 30 EU/EEA Member States, with the vast majority (around 65%) being registered in the Czech Republic (170 SEs) and Germany (109 SEs). A dominant field of activities for SEs is services (financial and insurance activities - 31%; other services activities - 27%). Around 10% of the SEs have transferred their registered office to another Member State, the most popular destinations being UK (7) and Cyprus (6).
* Drivers, trends and practical problems in the setting-up of SEs: the two most important reasons cited by companies for setting up an SE are the possibility of transferring the registered office and the European image associated with an SE. The possibility of conducting a cross-border merger, simplification of the management structure and regulatory reasons seem to be less important. The most important negative drivers are the set-up costs, complexity and uncertainty of the SE and the employee involvement (in Member States with no employee participation system).
* Proposals made by consultant for possible amendments: i) align the rules of the SE Regulation with the cross-border mergers directive and ii) make the conditions and procedures for the formation of the SE more accessible to businesses (e.g. by simplifying the cross-border requirement, by allowing also private limited liability companies to transform into an SE; by reducing the minimum capital requirement).

Will the Commission report on the SE Statute also cover the SE Directive on employee involvement?

The Commission Report will focus on the SE Regulation, which contains mainly company law rules on European Companies.

The SE Directive is a separate legal instrument which accompanies the SE Regulation as regards rules on employee involvement. Under this Directive, the creation of a European Company requires 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 applies, the exact nature of which depends on the format for worker participation in the companies concerned before the European Company was set up.

The SE Directive was already reviewed in 2008:

Does the Commission intend to amend the SE Statute?

The SE Regulation requires the Commission to consider, on the basis of the assessment of the application of the SE Regulation, whether any amendments are necessary. The Commission is currently in the process of analysing the application and effectiveness of the SE Statute. The external study, consultation and conference are all part of that work. Before any decision is taken on whether to make changes in the current legislation, the Commission has to thoroughly assess the effects of the current SE Statute and then consider the possible impact of amendments, if any.

Will the Commission follow the recommendations for amendments provided by the external study?

The external study presents only recommendations which do not bind the Commission. They are part of the process in evaluating the existing framework and reviewing it. These suggestions will of course be studied. It will be for the Commission to decide whether and which amendments of the SE Statute, if any, to propose.

Further information about the SE Statute, its advantages, methods of setting up etc - Commission memo.

Source: European Commission