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The European Private Company (SPE)
and the Cartesio case
11 June 2009
Judit Fischer – European Commission, DG Internal Market and Services
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What is the European Private Company (SPE)?
• The SPE is
– a new European legal form,
– designed for SMEs,
– may be set up and run following the same company law rules all over Europe.
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Context
• The proposal for an SPE Statute was adopted on 25 June 2008
• The idea of a European company for SMEs comes primarily from business and continues to be strongly supported – public consultations
• Embraced by the EP – Resolution with recommendations on the SPE in 2007
• It is a part of the Small Business Act for Europe
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What is the problem?
• More than 99% of EU companies are SMEs but only – 8% engage in cross-border trade– 5% have subsidiaries or joint ventures abroad
• Reasons are related to – language barriers and cultural differences– differences in company law, tax and labour systems
• Company law–related costs: setting up and running companies (subsidiaries) following different rules in every MS – administrative costs, cost of expert legal advice, etc.
• Lack of trust in foreign legal forms (esp. EU-12)
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Objectives of the SPE Statute
• Objectives: To reduce costs and to encourage entrepreneurs to do business in other MS
• According to the respondents to public consultations– savings could be up to € 10.000 – 20.000 when setting
up a subsidiary (reduced internal costs, consultant fees, notary fees, no start-up capital) and € 1.000 - 8.000 per year in relation to running the company
– the SPE would provide businesses with a European label
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The SPE Statute
• The main features of the SPE:– its name comes from Latin: Societas Privata Europaea –
no need to translate, European identity– it is designed for SMEs but there is no size limitation– it has legal personality– its shareholders have limited liability– it is a private company – its shares may not be publicly
traded – its registered office and headquarters may be in
different MS - it may transfer its registered office to another MS
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Which law governs the SPE?
• The mandatory provisions of the Regulation govern major company law matters such as the formation and the capital of the SPE or creditor protection
• Annex I lists the matters that shareholders must regulate in the articles of association (e.g. shares, management structure) – contractual freedom
• National law applies to insolvency, tax, labour and when it is specifically required by the Regulation
• Model articles of association – examples for entrepreneurs to facilitate start-up
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Formation of the SPE
• By any individual or legal entity in any MS • Single-member company or multiple shareholders• No cross-border requirement (e.g. shareholders from
different MS)• From scratch, by transformation, merger, division• Same registration procedure as national companies• Online application possible• A single legality check on formation
• Access to information in the BR from any MS
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Capital of the SPE
• Minimum capital requirement: €1 – to facilitate start-up– it has no role in creditor protection– shareholders are the best placed to define the capital
needs of their business• Instead, the assets of the SPE are to be protected
– broad definition of distributions– a balance-sheet test to precede any distribution– shareholders may also require the management to sign
a solvency statement (option)
+ transparency requirements
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Internal organisation of the SPE
• Most important decisions must be taken by the shareholders (e.g. amendments to the articles of association, capital increase or reduction, merger)
• Some by qualified majority (at least 2/3 of the votes)• But no need to hold meetings – decisions may be
taken in writing, by e-mail, etc.• Options for management: an individual director, one-
tier or two-tier board• Supervisory board – optional in two-tier system
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Employee participation
• Employees' participation rights are left to the national law of the MS where the SPE is registered
• The SPE should not be used to circumvent employees' participation rights
• In the case of cross-border operations pre-existing employee participation rights must be protected– Cross-border mergers – Directive 2005/56/EC applies– Transfer of the SPE's registered office to another MS –
obligation to start negotiations on participation rights – if no success, pre-existing rules to be maintained
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Adoption procedure – state of play
• Council: Article 308 – unanimity • Difficulties:
– Lack of cross-border requirement on creation– Minimum legal capital requirement of €1– Rules on employee participation– Seat of the SPE
• Czech Presidency presented a revised compromise proposal and a progress report to the Council
• Incoming Swedish Presidency is expected to reach a political agreement
• European Parliament: consultation procedure– Adopted its report on 10 March
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The Cartesio case
• 16 December 2008 – ECJ delivered its ruling in the Cartesio case
• The facts of the case:– In 2005 the Cartesio Bt. (limited partnership) filed an
application to the competent regional registering court to change the address of its seat to an address in Italy
– The court rejected the application on the following ground: Hungarian law does not allow a company incorporated in Hungary to transfer its seat abroad and remain subject to Hungarian law as its personal law
– Cartesio lodged an appeal against the decision
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The question to the ECJ
• Are the rules of national law that prevent a company from transferring its seat to another MS whilst retaining its status as a company under that national law incompatible with Articles 43 and 48 of the EC Treaty (freedom of establishment)?
• At the time of the case, Hungarian law defined the seat of a company as the place where the company's central administration (headquarters) is situated.
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The findings of the Court
• Seat transfer under Hungarian law would require the winding up of the company and subsequent re-incorporation in the MS of destination.
• Article 48 of the EC Treaty places the three possible connecting factors (the registered office, the central administration or the principle place of business) on equal footing.
• Distinction between two situations: – Seat transfer without a change in the national law
applicable to company form (Cartesio)– Seat transfer with a change in the national law
applicable to company form
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Seat transfer with/without a change in the applicable law
• Seat transfer without a change in the applicable law– MS are free to decide on the connecting factor– MS may prevent a company from transferring its seat
to another MS whilst retaining its status as a company governed by the law of the MS of incorporation
• Seat transfer with a change in the applicable law– MS cannot require the winding up of a company that
wants to relocate to another MS and convert itself into a form governed by the law of the MS of destination, if this is permitted under the law of the latter MS
– Such a barrier would be a restriction of freedom of establishment unless it serves public interest
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Situation in the Member States
• No Community law instrument to govern seat transfer
• Inbound and/or outbound seat transfer (with a change of the applicable law) is allowed in some MS, e.g. ES, LU, CY, IT (outbound)
• Allowing the transfer is under consideration in some MS, e.g. UK, NL, DK, HU, CZ
• Some MS and the EP would like to see a directive on seat transfer – up to the next Commission to decide
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Interconnection of business registers
• E-Justice + end of BRITE project• How to help the enforcement of the company law
directives? (cross-border mergers, seat transfer of the SE, branch disclosure, possibly the SPE)
• By October 2009 DG Internal Market and Services – will present a progress report on the state of play of
the interconnection of business registers– will outline different options for the way forward (EBR,
E-Justice, IMI, possible legislative changes)
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Thank you for your attention.
For more information: http://ec.europa.eu/internal_market/company/index_en.htm