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5 Cross-Border Corporate Activities |
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fect. These contain rules regard the establishment of a works council in a SE71 and the board-level co-determination of employees.72
In the case of the establishment of a SE by way of transformation of a national stock corporation (such as an AG), the co-determination rules remain as they were prior to the transformation (‘before as after’).73 In the case of all other methods of formation, the statutory rule offers more options: board-level co-determination by virtue of law takes place if a quorum of SE employees had up to now been subject to one form of co-determination.74 This varies according to the method of formation (in the case of a SE formed by merger, a quorum of 25%75, in the case of a SE formed by a holding company, a quorum of 50%76). However, if the quorum has not been reached, but the special negotiating body nevertheless passed a resolution for the use of co-determination by virtue of law, then board-level co-determination will also be implemented.77 If none of the companies involved in the SE formation is subject to statutory board-level co-determination, then a board-level co-determi- nation will also not take place in the SE.
In the case of a board-level co-determination by virtue of law, the employees of the SE, their subsidiaries and production units/plants or their representative body have the right to elect or appoint a certain number of the members of the supervisory board, or executive board respectively, or to recommend or reject their appointment.78 The number of employee representatives on the supervisory board or executive board of the SE is proportionate to the highest number of employee representatives existing in the bodies of the companies involved at the time of formation of the SE (principle of protection of acquired rights).79
If German companies are subject to employee co-determination rules (e.g. under the Co-DeterminationAct, Mitbestimmungsgesetz or the One-Third Co-Determina- tion Act, Drittelbeteiligungsgesetz)80, the respective level of co-determination may well be transferred to the SE depending on the outcome of the above-described negotiation process.
5.2.6 Possible Use of the SE
The use of an SE can be particularly advantageous in the following cases:
71 See Secs. 22 et seq. SEBG. 72 See Secs. 34 et seq. SEBG.
73 See Secs. 34 para. 1 no. 1, 35 para. 1 SEBG. 74 See Sec. 35 para. 2 SEBG.
75 See Sec. 34 para. 1 no. 2 lit. a SEBG. 76 See Sec. 34 para. 1 no. 3 lit. a SEBG.
77 See Sec. 34 para. 1 nos. 2 lit. b, 3 lit. b SEBG. 78 See Sec. 35 para. 2 sentence 1 SEBG.
79 See Sec. 35 para. 2 sentence 2 SEBG.
80 For a detailed discussion of the German rules on employee participation see supra, Sect. 2.5.
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5.2.6.1 Cross-Border Merger of Companies by Using SE
A cross-border merger of completely independent companies being combined with a company which has been set up specifically for this reason and which, possibly, has its registered office in a third Member State, does not at first glance seem to be a takeover by the one company of the other, but rather to be a ‘merger of equals’. Therefore, psychological barriers are broken down between the management and employees promoting the development of an integrated corporate culture and European awareness among the employees (European Corporate Identity). Following the merger into a SE, the groups of shareholders can be merged completely so that any further restructuring activities cannot be obstructed by minority shareholders. Vis-à-vis clients and public authorities, a SE profits from a modern, European corporate image, as well as a uniform appearance in the capital, job and procurement markets.
5.2.6.2 Reorganization of the European Organizational Structure
The use of the SE legal form will enable those groups of companies already active in Europe to appear in all Member States using the same name and legal form and thus provide a completely uniform appearance. In the individual Member States, either legally independent subsidiaries, or dependent branches may be established.At the same time, the choice given between the one-tier and two-tier governance system offers the possibility of organizing all group companies in a uniform manner, for example in accordance with the Anglo-American board system. Management and control of the group companies are facilitated and the exchange of information between managing and supervising directors can be improved. In addition, small subsidiaries for which, in Germany, up to now virtually only the legal form of a GmbH was feasible, may now be organized in the form of a SE.
5.2.6.3 Change in the Corporate Governance Structure
Related to this issue, the transformation of an existing stock corporation (such as an AG) into a SE also makes the transition to the one-tier system of corporate governance easier. The SE can also be used to adapt the company’s co-determination regulations. This option creates chances to reach a flexible, tailor-made compromise with the employees.
5.2.6.4 Cross-Border Transfer of Corporate Seat
Finally,thetransformationofanationalbusinessvehicleintoaSEcanbeconsidered when preparing for the transfer of the corporate seat to another EU Member State. In contrast to national companies which are, in Germany81 (as in other Member
81 In Germany, a transfer of the registered office to another jurisdiction would still be regarded as a ground for winding-up an AG; for the GmbH, however, the German legislature abandoned the corresponding provision in the course of the MoMiG, see Sect. 3.1.