5.2  The European Company (SE)

5.2.1  Case Study

Case Study

Seeing his activities in Germany as part of a long-term business strategy for the European market, B is interested in cross-border restructuring options of companies operating in the EU. In this context B wants to know more about the European Company (‘Societas Europaea’, SE) as a new European company form, which, in his view would be a convenient option forAto do business throughout Europe. In particular, he wants to know what advantages the SE has and how it can be established.

5.2.2  General Background

Since October 2004 the European Company (Societas Europaea, SE) is available as a new transnational company form within the EU. This new company form was created by the European legislature in order to overcome the numerous legal constraints existing for companies engaged in cross-border transactions. The legal framework for the SE is set out in the Regulation on the Statute for a European Company (hereinafter: SE Regulation)51, which is complemented by a EU Directive on questions relating to the involvement of employees (hereinafter: SE Directive).52 In Germany, this European requirements have been transposed into national law by the SE Implementation Statute (SE-Ausführungsgesetz, SEAG) and the SE Participation Statute (SE-Beteiligungsgesetz, SEBG). This framework provides rules for certain key issues (such as minimum capital, management structure and shareholder meetings), but with regard to many other questions, the SE is still subject to the relevant national company laws of the member state in which it has its registered office. This means that a SE will be subject to a variety of different rules stemming from the SE Regulation. These rules were passed to implement the associated EC Directives (such as the SEBG), as well as ‘regular’ national company law provisions (such as rules from the German Stock Corporation Act, AktG) for matters which are not yet determined by the SE Regulation and, finally, the provisions of the SE’s constitutional documents (in particular the articles of association).53

The SE is intended to enable companies which are established in more than one EU member state to merge and operate throughout the EU on the basis of a single set of rules and a unified management and reporting system. By using a SE as a business vehicle, enterprises engaged in cross-border activities can now restructure

51  Council Regulation (EC) No. 2157/2001 of 8 October 2001 on the Statute for a European Company (SE), OJ L 294/1 as of 10 November 2001.

52  Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a European Company with regard to the Involvement of Employees, OJ L 294/22 as of 10 November 2001.

53  SeeArt. 9 SE Regulation.

faster and more easily instead of being forced to create a complex network of subsidiaries governed by different national laws. Initially, not many enterprises took advantage of this new European company form. In the meantime, however, various German blue chip companies like, for example, Allianz, BASF and Porsche have changed their corporate form to that of a SE. This indicates that this new European company form has become more and more attractive.

5.2.3  Formation of the European Company

The SE is a company with a separate legal personality54, its capital being divided into shares.55 As with the German AG only the company’s assets are liable for the debts of the SE.56

There are five ways of setting up a SE provided for in the SE Regulation:

•by merger of two or more existing public limited companies from at least two different EU Member States;57

•by the formation of a holding company promoted by public or private limited companies from at least two different EU Member States;58

•by the formation of a subsidiary of companies from at least two different EU Member States;59

•by a SE setting up another SE as a subsidiary;60 and

•by transformation of a stock corporation which has, for at least two years, had a subsidiary in another Member State.61

The name of the European Company must have the letters ‘SE’ attached either as a prefix or a suffix.62 It acquires its legal capacity for all legal forms upon registration63, i.e. in the case of Germany, upon its registration in the commercial register.

5.2.4  Corporate Governance in the SE

The SE is free to choose its own management system.64 On the one hand, it may adopt the two-tier system, as provided for under German law, consisting of a super-

54  SeeArt. 1 para. 3 SE Regulation.

55  SeeArt. 1 para. 2 sentence 1 SE Regulation. 56  SeeArt. 1 para. 2 sentence 2 SE Regulation. 57  SeeArt. 2 para. 1, 17 et seq. SE Regulation. 58  SeeArt. 2 para. 2, 32 et seq. SE Regulation. 59  SeeArt. 2 para. 3, 35 et seq. SE Regulation. 60  SeeArt. 3 para. 2 SE Regulation.

61  SeeArt. 3 para. 4, 37 et seq. SE Regulation. 62  SeeArt. 11 para. 1 SE Regulation.

63  See Art. 16 para. 1, 12 SE Regulation; notice the registration (as well as a deletion of such registration) shall be published both in the national gazette as well as in the Official Journal of the European Union, seeArt. 13, 14 SE-Regulation.

64  SeeArt. 38 lit. b SE Regulation.

visory board and a management board. On the other hand, the company may choose to adopt the Anglo-American one-tier system in which only a single administrative body exists—the executive board (Verwaltungsrat), which not only manages the company but also assumes a supervisory role. This administrative body may appoint one or more managing directors to deal with the day-to-day running of the business.

5.2.5  Employee Participation in the SE

Employee participation is regulated by the EU SE Directive and the German SE Participation Statute (SEBG). The question of employee participation can become a key aspect in the formation process of a SE if companies from different jurisdictions are involved.The main objective of the SEBG is to ensure that existing employment participation rights are not restricted when forming or changing into a SE. Such rights include information and consultation rights, as well as employment participation on the board of the SE if such participation rights existed before.65

The legal framework is based on the idea that the participation rights of the employees should be mutually negotiated between the employer and employees. This means that a special negotiating body must be formed with the task of negotiating an agreement regarding employees’involvement within the new company and setting it out in an agreement.66

In the event that the management of the companies develops plans to set up a SE, it is obliged to inform the employee representatives of the companies involved, the subsidiaries affected and the production units about their plans and to request them to set up a special negotiating body.67 If no employee representative exists, then the employees must be informed directly.68 It is the main duty of the special negotiating body to enter into a written agreement with the SE, or rather with the companies involved in the formation of the SE, regarding the employees’involvement in the SE. In doing so, the negotiation period is limited to six months which can, however, be extended to a year in total if the parties agree.69 Both parties of the negotiating body can decide not to begin the negotiations, or also to break off negotiations. However, such a decision requires a two-thirds majority.70

In the event that an agreement is concluded between the management of the associated companies and the special negotiating body, the extent of employee participation is determined by such agreement. To a great extent the parties to the agreement are at liberty to make their own arrangements. However, if the parties cannot reach an agreement, special contingency rules (Auffangregelungen) take ef-

65  See Sec. 1 para. 1 sentence 2 SEBG.

66  SeeArt. 3 paras. 1 and 3 SE-Directive; Sec. 4 para. 1 SEBG. 67  See Sec. 4 para. 2 sentence 1 SEBG.

68  See Sec. 4 para. 2 sentence 2 SEBG. 69  See Sec. 20 SEBG.

70  See Sec. 16 para. 1 sentence 1 SEBG.