Economic Outlook - European-wide private company statute
Small- and medium-sized enterprises (SMEs) today represent 99.8 per cent of all companies in the EU and account for 70 per cent of employment. But unlike large companies, small businesses remain mostly within national borders. In fact only 8 per cent...
Small- and medium-sized enterprises (SMEs) today represent 99.8 per cent of all companies in the EU and account for 70 per cent of employment. But unlike large companies, small businesses remain mostly within national borders. In fact only 8 per cent of SMEs engage in cross-border trade and 5 per cent have subsidiaries or joint ventures abroad. This is due to the fact that there are language barriers and cultural differences in the EU member states, alongside differences in company law, tax and labour systems.
In its quest to protect a single free internal market the European Commission recently proposed a regulation for the creation of a Statute for a European Private Company. The new legal instrument is designed for SMEs and gives entrepreneurs the option of forming a European private company, referred to also by its Latin name as Societas Privata Europea (SPE). The statute will contain a set of uniform company law rules that would apply to any SPE across the EU.
The benefits of the SPE vary. European entrepreneurs will be able to set up their business in the form of an SPE following the same company rules throughout the EU. Thus they can set up an SPE instead of a GmbH in Germany, an sp.z.o.o. in Poland and an SAS or SARL in France. It will exist in all the member states, and hence create a flexible yet transparent company form. It will also allow entrepreneurs to set up all their companies and/or their subsidiaries with the same management structure, regardless of where they are located. There is already a European company statute which was adopted in 2004 following 30 years of negotiations. But it is devised for mainly large or public companies rather than SMEs. For instance, to create a European company today one requires the participation of national companies from at least two member states and a minimum capital of €120,000. This requirement is obviously a major hurdle for small companies that simply want to operate across a border without merging with a foreign company and do not always have such large amounts of money. SMEs consequently end up dealing with 27 different national company statutes should they wish to operate in the entire European market.
The Commission's proposal will reduce compliance costs on the creation and operation of businesses arising from the disparities between national rules both on the formation and operation of companies. However, it will not regulate in matters such as labour law, tax law, accounting, insolvency, contractual rights etc. Nor will it replace national statutes. What it will do is create an option to a large number of entrepreneurs who wish to develop cross-border activities.. An alternative to the SPE is to harmonise the core provisions of national company law regimes, but this is more difficult to design and will take longer to implement. The SPE will circumvent this by leaving national law largely untouched and provide an alternative form that would co-exist with the national company forms currently in existence in the EU member states.
Creating a single European private company statute, open to all private companies on a voluntary basis, would simplify the legal framework of SMEs and hence facilitate their access to cross-border markets. This will boost not only economic growth but also EU integration and remove another remaining hurdle in the creation of a truly-single European free market.
• Mr Cuschieri is an exucutive at Impetus Europe Consulting Group Ltd.
In its quest to protect a single free internal market the European Commission recently proposed a regulation for the creation of a Statute for a European Private Company. The new legal instrument is designed for SMEs and gives entrepreneurs the option of forming a European private company, referred to also by its Latin name as Societas Privata Europea (SPE). The statute will contain a set of uniform company law rules that would apply to any SPE across the EU.
The benefits of the SPE vary. European entrepreneurs will be able to set up their business in the form of an SPE following the same company rules throughout the EU. Thus they can set up an SPE instead of a GmbH in Germany, an sp.z.o.o. in Poland and an SAS or SARL in France. It will exist in all the member states, and hence create a flexible yet transparent company form. It will also allow entrepreneurs to set up all their companies and/or their subsidiaries with the same management structure, regardless of where they are located. There is already a European company statute which was adopted in 2004 following 30 years of negotiations. But it is devised for mainly large or public companies rather than SMEs. For instance, to create a European company today one requires the participation of national companies from at least two member states and a minimum capital of €120,000. This requirement is obviously a major hurdle for small companies that simply want to operate across a border without merging with a foreign company and do not always have such large amounts of money. SMEs consequently end up dealing with 27 different national company statutes should they wish to operate in the entire European market.
The Commission's proposal will reduce compliance costs on the creation and operation of businesses arising from the disparities between national rules both on the formation and operation of companies. However, it will not regulate in matters such as labour law, tax law, accounting, insolvency, contractual rights etc. Nor will it replace national statutes. What it will do is create an option to a large number of entrepreneurs who wish to develop cross-border activities.. An alternative to the SPE is to harmonise the core provisions of national company law regimes, but this is more difficult to design and will take longer to implement. The SPE will circumvent this by leaving national law largely untouched and provide an alternative form that would co-exist with the national company forms currently in existence in the EU member states.
Creating a single European private company statute, open to all private companies on a voluntary basis, would simplify the legal framework of SMEs and hence facilitate their access to cross-border markets. This will boost not only economic growth but also EU integration and remove another remaining hurdle in the creation of a truly-single European free market.
• Mr Cuschieri is an exucutive at Impetus Europe Consulting Group Ltd.