The statute for a European company provides for an innovative vehicle for conducting business across EU borders. The opportunity for entrepreneurs to set up a European company or as it is more commonly known, an SE, has been around since 2001 when the EU law regulating this company came into force. Nonetheless, a recent report tabled by the European Commission shows that this type of company is not as popular as it should be.

The European Company Statute creates the legal form of a European public limited-liability company. There are a number of benefits which accrue to those entrepreneurs who opt to go for this type of company. SEs are governed by one set of EU rules, directly applicable in all member states, at least in so far as formation and structure are concerned. SEs are also able to operate throughout the EU on the basis of a unified management and reporting system.

The establishment of such an SE is also conducive to a lessening in administrative costs in that it avoids the need for those entrepreneurs who want to operate across EU borders to set up a network of subsidiaries governed by different national laws. More importantly, the statute permits an SE registered in member state A to move its registered office to member state B without having to wind up the company in member state A and re-register it in member state B.

The recent Commission’s report has, however, identified a number of shortcomings in the practical implementation of the statute. The fact that the European Company Statute makes a number of cross-references to national laws themselves when it comes to regulating a number of important aspects such as taxation and winding-up and liquidation does not do much for legal certainty and homogeneity.

The statute also imposes a requirement that the registered office and the head office of an SE are located in the same member state. Any breach of such a requisite would lead to the liquidation of an SE. Such an imposition is often seen as a practical obstacle to conducting business in today’s day and age.

Around 595 SEs have to date been registered in Europe, the vast majority of which having been registered in the Czech Republic and in Germany. It is interesting to note that the Commission’s report goes to show that very few SEs have been registered in Southern European member states, with the exception of Cyprus. Indeed, in a number of states including Malta not even one SE has been registered.

The positive and negative aspects of the current legal regime regulating the European company as identified in the Commission’s report will now serve as a point of departure for any future necessary steps which the Commission thinks ought to be taken. Future amendments to the statute, if any, could perhaps serve to address the ever-changing needs of European business and to ensure that the SE becomes a more popular instrument for conducting business across borders than it currently is.

mariosa@vellacardona.com

Dr Vella Cardona is a practising lawyer and a freelance consultant in EU, intellectual property, consumer protection and competition law. She is also a member of the National Commission for the Promotion of Equality.

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