European law report - New SPE statute in the pipeline
As part of Europe's recent drive to reduce administrative burdens for small- and medium-sized enterprises and to enable them to partake fully of the advantages offered by a single market, the European Commission has recently proposed a new vehicle...
As part of Europe's recent drive to reduce administrative burdens for small- and medium-sized enterprises and to enable them to partake fully of the advantages offered by a single market, the European Commission has recently proposed a new vehicle through which entrepreneurs can conduct business. A new Statute for a European Private Company (also known as SPE) is now in the pipeline. This new piece of legislation has the precise objective of reducing the current onerous obligations imposed on SMEs operating across borders and to do away with the current requirement to set up subsidiaries in different company forms in every member state in which they want to conduct business.
The statute contains a set of uniform company law rules that would apply to any European Private Company across member states. This means that entrepreneurs will be able to set up their business in the form of a European Private Company following the same company law rules throughout the EU.
A European private company may be set up by one or more founders, individuals or companies. An application to set up such a company may be made by electronic means, in the language of the member state of registration. The proposed law does not make the creation of a European Private Company subject to a cross-border requirement such as the requirement to have shareholders from different member states or evidence of cross-border activity. However, entrepreneurs would then have a possibility to expand in the single market with the company's European label right from the start.
The SPE is a private company. This means that its shares may not be offered to the public or publicly traded. The minimum capital requirement for the SPE is set at €1 in order to facilitate start-ups.
In line with recent rulings of the European Court of Justice, an SPE is allowed to have the registered office and the headquarters in different member states. Similarly, an SPE will also have the right to transfer its registered office to another member state without losing its legal personality. The SPE could transfer its registered office with or without moving its headquarters at the same time.
Most of the matters which are essential to the corporate life of the SPE are covered by the proposed law. The statute also sets out a list of items that must be covered by the SPE's articles of association. These include among others the name and initial capital of the SPE, the procedure and requirements for increasing or reducing the share capital, the method of adopting shareholder resolutions as well as the way the management of the SPE is organised.
The SPE will be governed primarily by the proposed law and the articles of association. Other matters are governed by the national law which applies to private limited-liability companies in the member state where the SPE has its registered office.
By way of example, the SPE statute does not regulate matters related to labour law, tax law, accounting, or the insolvency of the SPE.
Such matters will continue to be governed by the relevant national and EU law. In particular, the statute does not provide any special tax rules for the SPE.
The fundamental principle that an SPE should not be discriminated from the national legal forms and that an SPE should enjoy the same tax treatment as similar national legal forms, however, prevails at all times.
The proposed law also provides uniform rules protecting an SPE's creditors. Any kind of distribution of the SPE's assets to the shareholders such as payment of dividends can only be made if the SPE's assets fully cover its liabilities. The SPE statute also requires that the most important decisions in relation to the company's capital such as capital increase or reduction are taken by the shareholders. The proposed law also contains a number of safeguards intended to protect minority shareholders.
The most important decisions, such as approval of the annual accounts, reduction of capital, transformation or a merger of the SPE must be taken by a qualified majority of at least two-thirds of all the SPE's voting rights. Furthermore, the minority shareholders will have the right to request a shareholder's resolution on a matter important for them. The statute also allows a shareholder to withdraw from the SPE under specific conditions.
The advantages of operating via this legal vehicle are various: it exists in all member states, it is a flexible yet transparent company form, it allows entrepreneurs to set up all their companies and/or their subsidiaries with the same management structure, rega rdless where they are located and it offers a European label that is easily recognisable throughout the EU.
These features allow entrepreneurs to save time and reduce costs, especially legal costs related to setting up different company forms in different member states.
• Dr Vella Cardona is a freelance consultant in EU, intellectual property and competition law. She is also a visiting lecturer at the University of Malta.
mariosa@vellacardona.com
The statute contains a set of uniform company law rules that would apply to any European Private Company across member states. This means that entrepreneurs will be able to set up their business in the form of a European Private Company following the same company law rules throughout the EU.
A European private company may be set up by one or more founders, individuals or companies. An application to set up such a company may be made by electronic means, in the language of the member state of registration. The proposed law does not make the creation of a European Private Company subject to a cross-border requirement such as the requirement to have shareholders from different member states or evidence of cross-border activity. However, entrepreneurs would then have a possibility to expand in the single market with the company's European label right from the start.
The SPE is a private company. This means that its shares may not be offered to the public or publicly traded. The minimum capital requirement for the SPE is set at €1 in order to facilitate start-ups.
In line with recent rulings of the European Court of Justice, an SPE is allowed to have the registered office and the headquarters in different member states. Similarly, an SPE will also have the right to transfer its registered office to another member state without losing its legal personality. The SPE could transfer its registered office with or without moving its headquarters at the same time.
Most of the matters which are essential to the corporate life of the SPE are covered by the proposed law. The statute also sets out a list of items that must be covered by the SPE's articles of association. These include among others the name and initial capital of the SPE, the procedure and requirements for increasing or reducing the share capital, the method of adopting shareholder resolutions as well as the way the management of the SPE is organised.
The SPE will be governed primarily by the proposed law and the articles of association. Other matters are governed by the national law which applies to private limited-liability companies in the member state where the SPE has its registered office.
By way of example, the SPE statute does not regulate matters related to labour law, tax law, accounting, or the insolvency of the SPE.
Such matters will continue to be governed by the relevant national and EU law. In particular, the statute does not provide any special tax rules for the SPE.
The fundamental principle that an SPE should not be discriminated from the national legal forms and that an SPE should enjoy the same tax treatment as similar national legal forms, however, prevails at all times.
The proposed law also provides uniform rules protecting an SPE's creditors. Any kind of distribution of the SPE's assets to the shareholders such as payment of dividends can only be made if the SPE's assets fully cover its liabilities. The SPE statute also requires that the most important decisions in relation to the company's capital such as capital increase or reduction are taken by the shareholders. The proposed law also contains a number of safeguards intended to protect minority shareholders.
The most important decisions, such as approval of the annual accounts, reduction of capital, transformation or a merger of the SPE must be taken by a qualified majority of at least two-thirds of all the SPE's voting rights. Furthermore, the minority shareholders will have the right to request a shareholder's resolution on a matter important for them. The statute also allows a shareholder to withdraw from the SPE under specific conditions.
The advantages of operating via this legal vehicle are various: it exists in all member states, it is a flexible yet transparent company form, it allows entrepreneurs to set up all their companies and/or their subsidiaries with the same management structure, rega rdless where they are located and it offers a European label that is easily recognisable throughout the EU.
These features allow entrepreneurs to save time and reduce costs, especially legal costs related to setting up different company forms in different member states.
• Dr Vella Cardona is a freelance consultant in EU, intellectual property and competition law. She is also a visiting lecturer at the University of Malta.
mariosa@vellacardona.com