European comapny - A new institution

The following questions and clarifications refer to the proposals for the Regulation about the SE and the Directive about the role of employees.

It is self understood that, these proposals may be changed considerably and be different in their final form.

2. Which are the clauses foreseen by the statute of an SE?

3. Does the Regulation cover every legal aspect concerning the running of an SE?

An SE can be founded in one of the next 4 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.

It foresees the implementation of community law that will stand in all the Member States of the EU, as far as founding and running an SE are concerned.

The Community Law in this case consists of two pieces of legislation:

A Regulation that governs company’s law rules and a Directive that must be implemented in national law of all Member States, and concerns the workers’ involvement.

The Regulation doesn’t cover aspects concerning the operation of an SE, like the tax law, the competition law, the intellectual property law or insolvency law.

For these matters stand the law provisions of the Member States as well as the community law where applicable.

Despite of this fact, there is an effort to harmonize national laws in these matters, so there will not be a selective concentration of European Companies in countries that have for example lower tax rates.

According to the plan of the Regulation the two of them must coincide obligatorily.

About this point there are some reservations stated by Luxembourg and Holland.

On the contrary, weight has been put into enabling small or at least medium size enterprises from different Member States, to profit from the benefits of the SE.

For this reason it is stated that the minimum capital for an SE should be no more than 120000 Euro.

SE is designed in that way that it makes the best out of the common economical space.

Synoptically these advantages are:

• Avoidance of the need of keeping a complex system of subsidiaries that corresponds to a money and time consuming multiple-management and reporting system following the labyrinth network of laws and rules of each country.
• Reduction of administrative and legal cost and rise of flexibility and effectiveness in making and carrying out decisions through establishment of a common managing and reporting system.
• Increased ability of the company to respond and to adapt to the opportunities and changes that arise in the internal market
• Improvement of the potential for transnational activities in order that the companies can better cope with the conditions of competition in their sector.
• Augmentation of the chances for pumping money from the international stock markets for transnational projects (e.g. transportation, energy).

It is calculated from the Competitiveness Advisory Group for the Industries that just because of the reduction of managerial cost the enterprises will save about 30 billion Euro.

No. An SE will be treated by tax authorities as any public company of the specific sector in that country.

Nevertheless, an SE has to submit just one balance sheet in just one country and specifically in the country it is registered into, and not e.g. 15 ones, one for each country. If that country happens to have favorable tax regulations then the entire SE along with its subsidiaries, benefits from this fact. Unified profit and loss account permits the deduction of losses in one or more countries from profits in others and in this way, payment of less taxes.

Each SE must be enrolled in the same register as any other, national level, public company.

Therefore, there will be a common register of Public and European companies for each country.

The difference lies in the fact that the foundation as well as any other change in the statute of an SE will be published in the ECs’ Official Journal.

The Regulation proposal, about SEs, mentions specifically in the 3^rd article of the introductory note that necessary precondition for the merger of established companies from different Member States who want to combine their staff through that merger, is the respect for the rules of competition (e.g. that they don’t create a monopoly).

European Company is offered as an option to the companies that fulfil the prerequisites of the Regulation and not as an obligation.

In case they don’t create a European Company they should keep following the legislation and the procedures previewed in each country they operate, which results in additional costs.

An SE that transfers its registered office outside the community may be resolved following the application of any person concerned or any competent authority.

The European Company statute provides as governing bodies:

• The general meeting of shareholders.
• Either a management organ and a supervisory organ (two-tier system) or an administrative organ (single-tier system).

• Under single-tier system the European Company is managed by an administrative board, whose members represent the SE towards third parties and in legal proceedings. The administrative board can assign the management of a European Company to one or more members of the board.
• Under two-tier system a management board manages the SE and its members represent the company to third parties and in legal proceedings. The decisions of the management board must have the approval of the supervisory board.

It is not allowed to the same person to participate at the same time to both management and supervisory boards of the same company.

In case a seat of the management board is vacant, the supervisory board may appoint one of its members to exercise the functions of the member of the management board. During that period of time, all the functions of the person concerned as a member of the supervisory board shall be suspended.

Participation of workers in a SE does not mean participation in day to day decisions, which is a matter the management deals with, but participation in the supervision and strategic development of the company.

• Participation of employees in the supervisory board or the management board.
• Creation of a separate body that represents the employees of the European company.
• Models of participation agreed between the governing bodies or the management teams of the founder companies and the employees, as long as the level of information and consultation stays at least the same as it is stated for the separate body.

Employees’ participation is a precondition for the foundation of a European company. The general meeting of shareholders can not approve the formation of an SE unless one of the models of participation has been chosen.

Any plan to set up an SE must include negotiations with representatives of the employees of the companies concerned with a view to making arrangements for employee involvement in the SE.

The members of the negotiating team are elected or appointed in proportion to the number of employees working in each country (one member of the negotiating team corresponds to 10% of the whole of the employees in the concerned companies and their subsidiaries). This number can be increased by 20% so employee representatives from in most cases the small countries, that have a relatively small number of employees, can participate.

The way of election or appointment of the members of the special negotiating team is defined by the Member State in which the company/subsidiary operates.

The member state can even indicate that the representative of the employees may be a union member, independently from if he/she is working in this company/subsidiary/installation or not.

The negotiations can last up to six months from the formation of the special negotiating team. If it is commonly agreed the negotiations can expand beyond the six-month limit, up to one year.

In this case stand the provisions mentioned in the annex of the Directive.

These provisions preview the creation of a board for the representation of employees from the company and its subsidiaries or its installations. Representatives will be elected or appointed in proportion to the number of employees that are employed in each member state.

The responsibilities of the employees’ representation body are limited to the matters that concern the SE or its subsidiaries and exceed the authorities of the respective bodies in a single Member State.

The representative body meets at least once a year with the respective body of the SE after the agendas of the meetings of the administrative board or the management and supervisory board as well as the documents submitted to the general meeting of the shareholders of the SE, have been presented to it.

The representative body is notified about the progress of the European Companies’ activities and its perspective, and gives its opinion about them.

In cases of major concern to the interests of the employees and specifically in cases of relocation, transportation, closing down facilities or companies or collective discharging, the body has the right to be informed, in plenary session or through a restricted committee and to express its opinion to the body of the SE that has the power to make decisions.

A European company is obliged to give paid leaves to the members of the employee representation body for them to participate into the meetings, educational leaves if needed, as well as to pay for the organization, translation, transportation and subsistence expenses for the members of the representation body and the restricted representation body.

The members of the committee of employee representation benefit from the protection that the national legislation of the Member State previews for trade union officials and they can be assisted from experts of their own choice.

A Regulation constitutes of a law directly applicable to the Member States of the European Union, while the Directive must first be voted by the national parliaments, for it to become an internal law in all Member States.

To start with, all the texts must pass again for approval by the European Parliament, because there has been a change about the participation of employees since the time the parliament gave its last consultatory response (January 1991). The European parliament in fact can not exercise veto because the texts are not subject to the co-decision procedure. Instead, it may propose amendments, which are at the discretion of the European Commission to be incorporated or not in the final version. Afterwards, these texts have to be accepted by the Council of Ministers. The Regulation and the Directive will be put into effect in exactly 3 years after their formal adoption by the Council of Ministers.