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FAQs - Setting up a European Company (SE)

If a company has its head office in a non-EU country, can it participate in the formation of a European Company?


If a company has its head office in a non-EU country, can it participate in the formation of a European Company?

This is up to each individual EU country – but only if the company in question:

  • is formed under the law of an EU country

  • has its registered office in that country, and

  • has a real and continuous link with an EU country's economy.

This applies in the following EU countries: Belgium, Czechia, Denmark, Finland Greece, Italy, Luxembourg, Norway, Poland, Spain, Slovenia, Slovakia.


Can national authorities oppose the formation of a European Company?

YES. In merger cases. This is up to each individual EU country and can only be based on grounds of public interest.


This applies in the following EU countries: Belgium, Bulgaria, Cyprus, Denmark, France, Greece, Latvia, Netherlands, Poland, Portugal, Spain, Sweden.


Do the registered and head offices of a European Company have to be in the same country?

YES. If a European Company no longer meets this requirement, it will be requested to either re-establish a head office or transfer the registered office, to ensure they are in the same country. If it fails to comply, it should be liquidated.


In addition, a country may require the registered and head offices to be at the same address. This applies in the following EU countries: Austria, Bulgaria, Czechia, Denmark, France, Greece and Latvia.


Are there any requirements related to organisational structures?

A European Company can operate under either of the following structures:


  • one-tier system – company management consists of an administrative body

  • two-tier system – company management consists of a management body and a supervisory body

How does the one-tier system work?

The administrative body must meet at least once every 3 months

It appoints a chairman from among its members

Its members are appointed by the general meeting (the members of the first administrative body can be appointed by the European Company's statutes)


How does the two-tier system work?

No person may be a member of both the management and the supervisory body at the same time

The supervisory body appoints its chairman from among its members

Its members are appointed by the general meeting (the members of the first supervisory body can be appointed by the European Company's statutes)

Members of the management body are appointed, and removed, by the supervisory body. EU countries may require or permit the European Company's statutes to specify that this be done during the general meeting

The management body must report to the supervisory body at least once every 3 months and also pass on to it any important information.


Who can be a member of a European Company's bodies?

Members can be natural persons as long as they haven't been disqualified from serving on the board of a public limited liability company at national level.

The European Company statutes may also permit a company or other legal entities to be a member (unless the relevant national law on public limited liability companies dictates otherwise). In such a case, a natural person must be designated to exercise this function.


How many members can European Company bodies consist of?

The European Company Statute does not lay down a specific number

The number of members – or the rules for determining this – must be laid down in European Company's statutes


EU countries can set their own rules regarding minimum/maximum numbers of members for European Company bodies. In addition, in the two-tier system, they can specify the number of members for the supervisory body


However, where employee participation is regulated by Directive 2001/86/EC, the administrative body must have at least 3 members.


How long can the European Company bodies be appointed for?

Maximum period of a term in office–is 6 years

The chosen period must be set out in the European Company's statutes

Members can be reappointed just once, sometimes this can be done multiple times (subject to any restrictions in the European Company's statutes).


What are the rules on the European Company's statutes?

The Regulation does not provide a standard format or prescribe the full content. Instead it sets out a number of rules, such as:


  • the statutes can only be amended with a 2/3 majority decision by shareholders in a general meeting, unless:

  • national rules on public limited liability companies in the EU country where the European Company is registered permit or require a higher majority, or

  • national rules allow a simple majority of votes cast to be sufficient, where the shareholders present represent at least half of the subscribed capital.

  • the statutes must not conflict with the agreed arrangements for employee involvement. If they do, they must be amended. EU countries might decide that this be done without any further decision by the general shareholders' meeting. The statutes should also cover aspects such as the:

  • organisational structure (one- or two-tier systems)

  • number of members on each managing body, or rules for determining this

  • term of office for members of the managing bodies (and potential restrictions on reappointment)

  • list of categories of transaction which require an express decision by the administrative body in the one-tier system, or authorisation by a supervisory body in the two-tier system.

How are creditors, employees and minority shareholders protected?

  • In mergers and holdings, rules on employee involvement are decided in line with Directive 2001/86/EC. Also, general meetings of companies involved have the right to block the registration of a European Company unless they are able to expressly ratify the agreed rules.

  • In conversions, EU countries can make the conversion dependent on a qualified majority or a unanimous vote in the managing body of the converting company, if it already has rules in place for employee participation. No EU country has currently chosen this option.

  • In mergers, creditors and holders of bonds or securities, other than shares will be protected according to the relevant national law (taking into account the cross-border nature of the merger).

  • In mergers and holdings, EU countries may adopt measures to protect minority shareholders who opposed the merger or creation of a holding.

  • Countries that chose this option for mergers: Austria, Bulgaria, Czechia, Denmark, Estonia, Finland, Germany, Greece, Hungary, Latvia, Netherlands, Poland, Portugal, Romania, Slovenia, Slovakia and Spain.

Countries that chose this option for holdings: Austria, Bulgaria, Czechia, Estonia, Germany, Greece, Hungary, Latvia, Portugal, Slovakia and Spain.

In holdings, EU countries may adopt measures to protect creditors and employees; the following have done so:


Creditors: Cyprus, Czechia, France, Hungary, Portugal and Spain.

Employees: Bulgaria, Cyprus, Czechia, Slovenia, Slovakia.


In holdings and conversions, draft terms need to include a report setting out the implications for shareholders and employees.


Can a European Company's share capital be changed?

This is subject to the rules for public limited liability companies in the country where the company is registered.


How are shareholders involved in decision-making within a European Company?

Shareholders take part in decision-making during the general meetings:


How often?

General meetings can be called at any time – though at least once a calendar year, within 6 months of the end of the company's financial year (unless national law requires more frequent meetings)

EU countries may also request that the first general meeting is held within 18 months of the company's incorporation.


Who can call a meeting?

one of the European Company's managing bodies

a relevant authority

Shareholders with at least 10% of the company's subscribed capital (or less, if stipulated by national law or the company's statutes) can also request a meeting. If the company does not meet, it can be ordered to do so by the relevant national authority in the EU country where it is registered.

Voting at general meetings:

Decisions are taken by a simple majority.

Exceptions:

where national law stipulates a higher majority

where the European Company Statute stipulates a higher majority (e.g. to amend the company statutes).


Can a European Company be converted into a public limited liability company?

YES. This can be done in the EU country where it is registered, provided that:


it has been registered for at least 2 years, or

its first 2 sets of annual accounts have been approved.

This will not require the European Company to be wound up, or a new legal person to be created.


What does employee involvement in a European Company mean?

The employee involvement means any mechanism through which employees may exercise an influence on decisions to be taken within a company. Such mechanisms entitle employees' representatives to:


be informed and consulted

participate in the running of the company by having

the right to elect or appoint some of the members of the company's supervisory or administrative body, or

the right to recommend and/or oppose the appointment of some or all of the members of the company's supervisory or administrative body.


What happens with employee rights in companies which participate in the formation of a European Company?

The existing practices of employee involvement within these companies should not be reduced following the establishment of a European Company, unless the management and the employees' representatives decide otherwise. Instead, the rights in force before the formation of a European Company should provide the basis for the rules on employee involvement in the European Company itself.


How is the employee involvement in a European Company decided upon in practice?

The management and the employees' representatives must decide on the employee involvement before the European Company is registered.

The rules on employee involvement are set out in an agreement negotiated between the management of the companies establishing a European Company and the representatives of these companies' employees.

A "special negotiating body", which represents the employees of the companies concerned, needs to be created for the purpose of these negotiations. Its members are elected or appointed in proportion to the number of employees employed by these companies in each Member State.

If no agreement has been reached within a six-month period (which can be extended to up to 12 months), a set of standard rules will apply regarding the employee involvement. The standard rules will not apply if the employees' representatives decide:

not to open negotiations or to terminate the on-going ones; and

to simply rely on the rules for information and consultation of employees in force in the Member States where the European Company has employees.


Source:

https://europa.eu/youreurope/business/running-business/developing-business/setting-up-european-company/faq/index_en.htm


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