European Company Statute

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Business law

Business organizations
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Corporation
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Business trust · LLC · LLLP Series LLC Delaware corporation Nevada corporation
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Limited company (By shares · By guarantee) (Public · Proprietary)
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European Company Statute
Doctrines
Corporate governance
Limited liability · Ultra vires
Business judgment rule
De facto corporation and corporation by estoppel
Piercing the corporate veil
Related areas of law
Contract · Civil procedure

1 Introduction
2 Worker Involvement
3 Development
4 External links

[edit] Introduction

The Council Regulation on the Statute for a European Company of the European Union (adopted October 8, 2001; OJ L 294, 10 November 2001, pp. 1-21) contains rules for a European Public Company, called an SE (abbreviation for Societas Europaea, Latin for 'European Company'); there is also a statute allowing a European Cooperative Society (Societas Cooperativa Europaea, SCE). An SE can be registered in any member state of the European Union, and the registration can be easily transferred to another member state. There is no EU-wide register of SEs (an SE is registered on the national register of the member state in which it has its head office), but each registration is to be published in the official journal; as of January 2007, at least 56 registrations have been reported (see [1]).

The member states of the European Union have widely different company laws. This means that companies have to comply with many different regulatory systems, and merger of companies from different states is often complex and difficult.

SEs can be created in the following ways:

By merger of national companies from different member states
By the creation of a joint venture between companies (or other entities) in different member states
By the creation of a SE subsidiary of a national company
By the conversion of a national company into an SE

[edit] Worker Involvement

The regulation is complemented by the Council Directive supplementing the Statute for a European Company with regard to the involvement of employees (adopted October 8, 2001; OJ L 294, 10 November 2001, pp. 22-32). The directive establishes rules on worker involvement in the management of the SE.

EU member states differ in the degree of worker involvement in corporate management. In Germany, most large corporations are required to allow employees to elect a certain percentage of seats on the board of directors. Other member states, such as the UK, have no such requirement, and furthermore in these states such practices are largely unknown and considered a threat to the rights of management.

These differing traditions of worker involvement have held back the adoption of the Statute for over a decade. States without worker involvement provisions were afraid that the SE might lead to having such provisions being imposed on their companies; and states with those provisions were afraid they might lead to those provisions being circumvented.

A compromise, contained in the Directive, was worked out as follows: worker involvement provisions in the SE will be decided upon by negotiations between employees and management before the creation of the SE. If agreement cannot be reached, provisions contained in the Directive will apply. The Directive provides for worker involvement in the SE if a minimum percentage of employees from the entities coming together to form the SE enjoyed worker involvement provisions. The Directive permits Member States to not implement these default worker involvement provisions in their national law, but then an SE cannot be created in that member state if the provisions in the Directive would apply and negotiations between workers and management are unsuccessful.

[edit] Development

Two approaches have been attempted to solve the problems cited above. One approach is to harmonize the company law of the member states. This approach has had some successes, but after thirty years only limited progress has been made. It is difficult to harmonize widely different regulatory systems, especially when they reflect different national attitudes to issues such as worker involvement in the management of the company.

The other approach is to construct a whole new system of EU company law, that co-exists with the individual company laws of the member states. Companies would have the choice of operating either under national regulations or under the EU-wide system. However, this approach has been only somewhat more effective than the harmonization approach: while states are not as concerned about having foreign traditions of corporate governance imposed on their companies, which the harmonization approach could well entail; they also wish to ensure that the EU-wide system would be palatable to the traditions of their national companies, so that they will not be put at a disadvantage compared to the other member states.

The European Company Statute represents a step in this direction, albeit a limited one. While it establishes some common EU rules on the SE, these rules are incomplete, and the holes in the rules are to be filled in using the law of the member state in which the SE is registered. This has been due to the difficulties of agreeing on common European rules on these issues.