An European company – arguments for and against
European Company (Societas Europae – SE) is a legal person whose authorized capital is divided into shares. Establishment of the SE means that different companies operating in different Member States may form a single legal entity and thus operate throughout the whole EU under a single system of rules.
The establishment of the SE
SE is established and regarded as a public limited-liability company governed by the law of the Member State in which it has its registered office.
SE can be established in one of the four ways:
1) merger of the public limited-liability companies from different Member States;
2) the creation of a holding SE;
3) the establishment of a subsidiary SE by subscribing for its shares;
4) or by restructuring operating public limited-liability company into the SE.
The authorized capital of a SE shall not be less than 120,000 EUR. Even though at a first glance this sum would appear to be quite high, in case of formation of the SE by merging of several existing companies, in most cases, this sum would be smaller than the sums of minimal authorized capitals of the said companies established by national laws.
National laws apply also to SE
Although, the rules for establishment and operation of an SE should be the same in all EU countries and it is free to conduct business cross-border and throughout the European Union, it is necessary to bear in mind that many questions remain regulated by the national laws of a State in which the SE is registered, and in several issues, of the State in which the SE actually operates. To be specific, issues of taxation, accounting, intellectual property, competition, insolvency and liquidation, the responsibilities of the management bodies for the breach of their duties, etc. would be governed under national law.
Easy transfer of the registered office
The registered office of the SE may be easily transferred from one Member State to another, which could not be done under the national laws, and such a transfer does not result in the winding up of the SE or in the creation of a new legal person. However, it should be noted that even though the SE can be registered in any selected Member State, its registered office shall be in the same State where the head office of its permanent management body is set up.
Clear type of a company
Knowing only the abbreviated form of the name of a company it is quite difficult to distinguish whether the company is a public limited-liability company or a private limited liability company. Whereas the name of a SE always shall be preceded or followed by the abbreviation SE and only SEs may include the abbreviation SE in their name.
Employee’s participation in SE
SE requires a mandatory employee participation concept which is so far uncommon in the Baltic countries. This question is probably the most delicate in the process of establishing the SE. Employee’s participation means any mechanism, including information, consultation and participation, through which employees’ representatives may exercise an influence on decisions to be taken within the company. Following models of participation are available: 1) the employees form part of the supervisory board or of the administrative board; 2) the employees are represented by a separate body; 3) other models to be agreed between the management or administrative boards of the founder companies and the employees in those companies, the level of information and consultation being the same as in the case of the second model.
Opportunity to reduce the administrative and business management costs in SE
SE companies preparing usually single audit and single financial statement also forming the same management structure, so reducing the administrative and business management costs.
SE more suitable for large and international businesses
All in all, it can be said that SE is more suitable for large businesses and large companies. In the current moment in the Baltic States there are several insurance companies registered as SEs e.g. Mandatum Life Insurance Baltic SE, Swedbank Life Insurance SE, Compensa Life Vienna Insurance Group SE, ERGO Insurance SE and ERGO Life Insurance SE. Based on the practice of other European countries the SE corporate format should also be suitable for banks, IT and medical firms and for companies in other fields of cross-border or regulated business.