European company forms: EEIG, SE, SPE proposal

European company forms: EEIG, SE, SPE proposal Doc dr Tatjana Jevremović Petrović

European company forms • Competition reasons, psyhological reasons, uniformity of company law, different national laws ... • Harmonization by Directives • Special european forms, regulated by Regulations (unification, not only approximation of laws) – legal base art. 352 of the TFU (ex art. 308) (unanimity and consultation of the European Parliament) • EEIG, SE, SCE (European co-operative society), SPE proposal, European foundation proposal (FE)

EEIG • European Economic Interest Grouping - Council Regulation (EEC) No 2137/85 of 25 July 1985 on the European Economic Interest Grouping (EEIG) • groupement européen d'intérêt économique (GEIE) • Europäischen wirtschaftlichen Interessenvereinigung (EWIV) • Evropsko gospodarsko interesno združenje (EGIZ) • Not common in practice: legal firms, some industrial cooperation (FIAT)

EEIG EEIG has the capacity, name, rights and obligations of all kinds, right to make contracts or accomplish other legal acts, and to sue and be sued. Member States shall determine whether or not EEIG has legal personality. Main purpose of a EEIG is to facilitate or develop the economic activities of its members and to improve or increase the results of those activities. Its purpose is not to make profits for itself. Unlimited joint and several liability of members for all transactions in name and on behalf of EEIG

SE - Introduction • SE background – fighting the competition • European internal market – mobility issues • European label (Allianz SE) • Removal of national differences (?)

Proposed SE – Nordea SE (before)

Proposed SE – Nordea SE (after)

SE – History of proposals • Prof. Sanders – idea for the SE • EC Commission proposals: • 1970/1975 • 1989/91 • Political agreement on Nice Summit of the European Council, December 2000 • 2001 Statute for a SE adopted + Directive on employee participation • Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company • Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a European company with regard to the involvement of employees [Official Journal L 294, 10.11.2001].

SE – General provisions • Form of a European public limited-liability company • Capital of 120 000 euros, divided in shares • Registered and head office in same MS, possibility of transfering registered and head office into another MS • Transfer proposal (obligatory content) • Report done by administrative/management board • Information and protection of shareholders and creditors • Adequate protection before the competent authority issues the certificate

SE – General provisions • Certification of formalities and procedures and registration of SE • New registration and information of the previous register (deletion of the old registration) • Publication • Change of applicable law (possibility for MS to oppose the transfer of the public interest grounds in two months period)

SE – General provisions • Impossible if proceedings for winding up, liquidation, insolvency or suspension of payments or other similar proceedings have been brought against it • Protection of public interest • in respect of any cause of action arising prior to the transfer – previous seat • Explicit mention of the public bodies as creditors – adequate protection • satisfaction or securing of payments to public bodies

SE – Formation • Public limited-liability companies by means of a merger provided that at least two of them are governed by the law of different Member States. • Public and private limited-liability companies by formation of a holding SE provided that each of at least two of them: • (a) is governed by the law of a different Member State, or • (b) has for at least two years had a subsidiary company governed by the law of another Member State or a branch situated in another Member State.

SE – Formation • Companies and firms may form a subsidiary SE by subscribing for its shares, provided that each of at least two of them: • (a) is governed by the law of a different Member State, or • (b) has for at least two years had a subsidiary company governed by the law of another Member State or a branch situated in another Member State.

SE – Formation • A public limited-liability companymay be transformed into an SE if for at least two years it has had a subsidiary company governed by the law of another Member State. • An SE may be converted into a public limited-liability company governed by the law of the Member State in which its registered office is situated. No decision on conversion may be taken before two years have elapsed since its registration or before the first two sets of annual accounts have been approved. • No ex-nihilo foundation (circumvention by shelft SE) • Cross-border character of operation (not for purely domestic reasons)

SE – Applicable law (art. 9) • 1. An SE shall be governed: • (a) by this Regulation, • (b) where expressly authorized by this Regulation, by the provisions of its statutesor • (c) in the case of matters not regulated by this Regulation or, where matters are partly regulated by it, of those aspects not covered by it, by: • (i) the provisions of laws adopted by Member States in implementation of Community measures relating specifically to SEs; • (ii) the provisions of Member States' laws which would apply to a public limited-liability company formed in accordance with the law of the Member State in which the SE has its registered office; • (iii) the provisions of its statutes, in the same way as for a public limited-liability company formed in accordance with the law of the Member State in which the SE has its registered office. • 2. The provisions of laws adopted by Member States specifically for the SE must be in accordance with Directives applicable to public limited-liability companies.

Structure of the SE • An SE shall comprise: • (a) a general meeting of shareholders and • (b) either a supervisory organ and a management organ (two-tier system) or an administrative organ (one-tier system) depending on the form adopted in the statutes.(party autonomy) • One tier system: administrative organ • Two tier system: management and supervisory board • Structure irrespective of the national system adopted, same in the case of transfer of the company’s seat (change of applicable law, but no obligatory adoption of the imperative company law provisions regarding structure of the company)

Structure of the SE - The 1975 Proposal contained detailed provisions on (corporate governance) remuneration, responsibilities, conflicting interests, insider trading, and even investigation procedure initiated by minority shareholders; - The 2001 SE Regulation is relatively ‘poor’, as it is restricted to certain matters only

SE and Corporate Governance • Board structure is closely linked to the ‘corporate governance debate’ • Recommendations High Level Group Reports 2002 • independence and competence of board members • one tier: distinction between executives and non executives • remuneration • formation of board committees • internal/external audit committees • duty of care and business judgment rules • duty of loyalty • conflicting interests • financial statements • wrongful trading

SE and national laws on Corporate Governance • Only one tier board adopted (UK, Greece) • Both systems allowed (France, Belgium) • Only two tier board adopted (Germany, Austria, Czech Republic) • Problems: • Different board structure of the SE • Application of the national law provisions for public limited liability companies • What (national) provisions would apply ? • Possible but no obligatory additional national rules on the board structure and its functioning • Employee participation in one tier board structure

SE – Employee participation • Directive on employee participation in SE based on “before and after” principle • Formation of special negotiating body • Adoption of standard rules by MS, which can be applied if negotiating body so decides, plus deadlines for negotiations.

SE today

SE today • State of Art: 31 May 2012 1280 established SE • Data: http://ecdb.worker-participation.eu/index.php • In Jun 2009 out of 725 companies following structure: • 86 ‘shelf companies’ (for sale) • www.foratis.com. 132 000 € (share capital 120 000€) • 183 UFO (presumably with operation and employees; however little or nothing known) • 41 ‘empty’ (with operation, but without employees) • Usually motivated by circumvention of laws (national rules on company’s structure, employee participation) and not by economic reasons (cross-border mobility) • Almost half of SE’s founded in Czech Republic (among which 115 shelf and 375 UFO companies) • Reasons for operating firms: European image of the SE, reduction of the members in board structures (and one-tier system), mobility (2 cases) • Operating in Serbia (example Strabag SE, BASF SE)

SE today – Allianz SE Example - Allianz Versicherungen AG • Acquisition of all shares in subsidiary companies, followed by • Setting up SE together with Italian insurance company RAS which had been acquired as well • All existing subsidiary companies transformed to dependent branches Leading motive - Abolish supervision in each MS where a subsidiary resides - Exclusive supervision by the financial and banking authority (‘Basel II’) where SE itself resides (covering dependent branches as well) • Source: Dr. S.F.G. Rammeloo December 2009, European Company Law(3) EU Law Business formats EEIG; SE; (future) SPE

SPE • Idea: Jeanne Bouchourevliev: ‘Pour une Sàrl Européenne’ (1973) • Conference “Pour un societe fermée européenne”1997 • Commission public consultation 2007 • Commission Proposal 2008 • European Parliament procedure by March 2009

SPE - Background • SME’s • Compared to SE: • Minimum capital • Creation ab initio • National rules on private companies • SE - european company? • Contractural nature • No cross-border element

SPE – Proposal • Same, simple, flexible company law provisionsacross the Member States • Psyhological effect • Right to move across internal market – change of registered office

SPE – General provisions • Legal basis: Art. 352 – unanimity • The SPE is a company having legal personality and share capital, but not able to offer publicly its shares • It may be set up by one or more founders, natural persons and/or companies or firms under Article 54 of the EC Treaty. In addition, an SE, an SCE, EEIG or SPE may also take part in the formation of an SPE.

SPE – Applicable rules • An SPE is governed by the directly applicable mandatoryprovisions of the Regulation. These rules facilitate the formation and ensurethe necessary uniformity of the SPE in the EU. • The internalorganization of the SPE, is to be regulated in the articles of association • Party autonomy (no dispositive rules) • The articles of association of an SPE shall regulate at least the following: foundation, shares, capital and organisation • In matters covered by the SPE Statute, national company law is only relevantwhere specified by the Regulation (directors’ duties).

SPE – Basic rules • Minimum capital 1 (8000) euro • Creation ex nihilo, transformation, division, merger • Registered office might be different from real office – possiblities to change registered office with change of applicable law and without dissolution

SPE – Internal organization • The articles determine the management structure of the SPE: • Single director or severaldirectors, • One-tier board system or • Two-tier board system • Directors duties and liabilities (much improved than SE) • Secondary application of the national provisions of applicable law • GM possible, but not necessary as an independent organ (obligatory decisions by shareholders through other mechanism) R. Drury defines: - ‘management managed SPE’ - ‘shareholder managed SPE’

SPE – Employee representation • Modeled by the rules of the Cross-border Mergers Directive • European Parliament: change of certain provisions • Same “before and after” approach • Employee participation less important – SME’s usually don’t have obligatory rules on employee representation (exception Denmark, Sweeden)

Case study Car producing industries join forces in order to survive in a globalizing world. To that end, lorry producer Plovdiv, a public limited company registered and having headquarters in Bulgaria, enters into negotiation with truck producer Cel Marul, a public limited company registered and having headquarters in Rumania, with a view to accomplishing a cross-border merger. Opinions differ in respect of the question whether after the merger has been accomplished either of both companies should remain, or whether the amalgamation of the two companies should result in a ‘new’ company. • (a) Suppose that the outcome of the negotiations would be as such that pursuant to the merger Plovdiv limited company would have to be the sole remaining company, what would you suggest to be an option from EC law point of view? Does, perhaps, more than one option exist? • (b) Suppose that the Rumanians fear for a dominant position of Plovdiv plc. What, in order to create more balance between the two merging companies, would be an alternative way to merge? • Source: Dr. S.F.G. Rammeloo December 2009, European Company Law (3) EU Law Business formats EEIG; SE; (future) SPE

Reading materials • Obligatory reading • Dorresteijn/Monteiro/Teichmann/Werlauff “European Corporate Law” • Further reading • Abraham, M., Pascal, E. »La SE: le regime juridique fixe par les textes communautaires«, PA, 27 mai 2004, no. 106 • Aitken, Morgan »Societas Europaea: is tax an incentive or a barrier?”, European Business Review, 6/04 • Avagianou, A. „The SE Statute“, ELSA Selected Papers on European Law 2002 (2), http://www.elsa.org/publications/spel_02_2.html • Bartman, Steef »Editorial: The SPE Revolution«, Volume 5, Issue 6, December 2008. • de Kluiver, H-J., “Editorial: (Re)Considering the SPE”, European Company law, vol. 5, issue 3, June 2008 • di Luigi, C. »An invasive top-down harmonisation or a respectful framework model of national laws? A critique of the SE«, International Company and Commercial Law Review, vol. 19, issue 2, 2008. • Drury, R. »A European Private Company?«, International and Comparative Corporate Law Journal, vol. 3, issue 2, 2001 • Drury, R. »The European Private Company«, EBOLR, 9. 2008 • Ebke, W. »Die Europäische Aktiengesellschaft ist da - und jetzt?Die SE muss sich auf dem "Markt der Gesellschaftsrechtsordnungen" durchsetzen“, Europäisches Wirtschafts- und Steuerrecht, Heft 01/2002 • Edwards, V. „The European Company – Essential tool or eviscerated dream?“, Common Market Law Review, 2003

Reading materials • Eidenmuller, Engert, Hornuf « The SE as a Vehicle for Legal Arbitrage », EBOLR, 2009 • Garcia-Riestra “The transfer of seat of the European Company v free establishment case-law”, European Business Law Review, 6/04 • Menjucq « French interpretations and strategies about the European Company”, European Business Law Review, 6/04 • Rose, C. „The New Corporate Vehicle Societas European: consequences for European corporate governance“, Corporate Governance, Vol. 15, Number 2, March 2007 • Skoie Morkve C. »The SE in Scandinavia«, European Business Law Review, 2/05 • Werlauff « The SE Company”, European Business Law Review 1/03

European company forms: EEIG, SE, SPE proposal