SE-aspects of practical application

Tallinn, March 19, 2009


SE- aspects of practical application

Deutsch-Baltische Handelskammer

Jevgeni Robakov Lawyer

European Company

European Public Limited Company

Establishment available since Oct. 2004

Council Regulation on the Statute of a European company



The idea of SE is considered as old as the EC in its basic form

Draft statue submitted in1959 Working party set up on the initiative of the

French government in 1965 Primary aim was to construct a substitute to

national company legislationsSupranational legislation to support internal market

Historical background


Commission's proposal in 1970 on SE statues Creation Management and organization Accounting Labor law aspects Revision Liquidation Taxation



1975 a new proposal submitted by the Commission to the Council

Criticized for being too radical MSs did not want to accept rules on management

of groups of companies and employee involvement

Battles between 1976-82 showed the difficulty of reaching the compromise, common taxation system abandoned



1989 a totally new draft of provisionsMajority of MSs agreed with urgent necessity of

introduction of SE Statues Taxation and concern provisions left out Employment regulated in the separate directive First references to national legislation and co-

ordination by European company law directives A lot of inspiration from Fifth CLD



1997 Davignon report settled employment disparities (14 MSs)

Spain continued to block dossier until 2000 Meeting of heads of states and heads of

government in Nice in 2000 In October 2004 the SE Company regulation

was adopted


Political expectations

Statement of the Commission accompanying proposal for Regulation

“To create a European Company with its own legislative framework. This will allow companies incorporated in different Member States, to merge or form a holding company or joint subsidiary, while avoiding the legal and practical constraints arising from the existence of fifteen different legal systems. To arrange for the involvement of employees in the European company and recognize their place and role in the company.”



Commission’s assertions pointed out Optional new instrument Flexible and less bureaucratic management of

cross-border enterprise Improved competitiveness of Community

companies Directly applicable common legislation for all

MSs



Expected advantages Reduced administrative costs Options for fast and easy restructuring Freedom of movement Optimizing groups of companies Attraction investors and private venture capital

for trans-European projects “European dimension”


Formation

Cannot be incorporated solely through investment of private capital

Two legal enterprises under different national legislations

Establishment governed by the legislation of the MS where SE has its seat

Legal status in the MS of registration Subscribed capital120 000 EUR


Formation

Merger Creation of a holding Incorporation of a subsidiary SE ConversionGeneral regulation requirement for registered

office and actual seat of the participating companies to be situated within the Community

No specific register or registration procedure


Management of SE

Option to choose between one-tier and two-tier system

Regulated areas SE organs, appointment, duration Authorization of transactions Quorum and decision taking Confidentiality and liability


Employee involvement

MSs divided into ones supporting participation and ones preferring information and consultation

General principal: upon establishment of an SE it shall be attempted to preserve systems of companies forming an SE

Creation of SE requires prior determination of modalities of employee involvement

Parties have an option to call of negotiations in favor of national legislation


Freedom of Establishment

Article 43 of the EC Treaty prohibits application of restrictions on the nationals of one MS in another MS

Fortification for establishment of branches, agencies and subsidiaries

Condition to be registered within the framework of EC


Transfer of Seat

Seat principle Location of seat determines applicable

legislation Central administration and principal place of

businessIncorporation principle Companies are recognized on a sole condition

of a lawful establishment within the EC


Mobility of SE

Regulation clearly states that the registered as well as the head office of an SE shall be located in the same MS→ determination of nationality?

Possible avoidance of “mailbox companies” or Delaware effect

No winding up or creation of new companies during the process of transfer

Obligation to transfer both registered and the head office deprives from advantages of incorporation


Mobility of SE

Change of applicable law upon transfer of seat→ dependence on national regimes

Criteria of “common good”, avoidance of tax fraud and money laundering

As a result escaping requirement of re-incorporation still leaves a requirement to conform with rules of a new home state

Any significant differences from national LL companies?


Supranationality

Big part of applicable law derived from national legislations

References to MS frameworks: Capital and its maintenance Shares Registration Powers of general meeting Annual/consolidated accounts Winding up, liquidation, insolvency


Supranationality

Totally 65 references and 32 options out 65 substantial articles

Creates an image of SE as of 28 different legal entities that are similar only in the original theory

Weak prospect of eliminating national differences craving time→ SE will most certainly remain the subject of legal uncertainty for some time

“…the lowest common denominator in relation to original intensions, being a lot closer to national limited liability companies than it was ever intended.” C. Huschka (1992)


Practical perspective

Allianz SEOne of the biggest German insurance and financial

service companies Necessity of becoming “more international”,

particularly in questions of administration and management

Centralization of company governance Improvement of customer focus

CEO Mr. Michael Diekmann, through canceller



Elcoteq SEOne of the leading electronics manufacturing

services company. First Finish SE Important aim was transfer of seat to

Luxembourg As amendments common taxation and accountig

rules were namedMs. Minna Aila, projects director



Donata Holding SEItalian web-creation and -advertising corporation Course of internal market towards trans-national

character and unification Importance of corporate movement for

simultaneous operation in several MSs Mr. Cesare Casadonte, owner and director



Galleria di Brennero BBT SEEU financed infrastructure project for building a

railway tunnel

Facilitation of cross-border mergers Transfer of seat from Austria to Italy for technical

reasons of construction Both participating countries got equal influence

and control over the projectMs. Patrizia Fink, magistrate



MAN Diesel SEWorld’s leading provider of diesel engines for

marine and power plant applications, Germany Showing “single face” to customers Faster integration into new markets and better

competitiveness International status while retain parity structure

Katia Langmann, assistant of communications



Plansee SEWorlds leading supplier of refractory metals and

composite material products, Austria Option to apply one-tier system→ forum

shopping within EC framework?Mr. Karlheinz Wex, head of finance and accounting



Nordea Bank AB Uniting of national markets Institution comprising several legally separate

companies may act as one integrated enterprise Enhanced operational efficiency, reduced risks

and complexity Considered necessary development of merger

optionsCommission’s Consultation opinion, 2006



Hermes Investment Management LtdInstitutional fund manager General results of SE adoption considered

insignificant Yet an elegant way to reduce size of German

supervisory boards Example of Allianz success

Commission’s Consultation opinion, 2006



Theoretical and socio-political aspects seem to dominate the practical establishment and actual business application

May SE be considered a “hybrid” essentially similar to national limited liability companies?

General lack of interest for establishment or just poor marketing?→ ≈ 70 registrations

Option to avoid certain national restrictions or apply narrow but essential possibilities?



National entityVS

European company



Documents

SE-aspects of practical application