Explanatory Memorandum to COM(2008)396 - Statute for a European private company - Main contents
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| dossier | COM(2008)396 - Statute for a European private company. |
|---|---|
| source | COM(2008)396  |
| date | 25-06-2008 |
The Commission's communication on the Single Market for 21st century Europe i stresses the need for the continuous improvement of the framework conditions for businesses in the Single Market.
Small and medium-sized enterprises (SMEs) account for more than 99% of companies in the European Union but only 8% of them engage in cross-border trade and 5% have subsidiaries or joint ventures abroad. While it has become easier in recent years to set up businesses across the EU, more needs to be done to improve the access of SMEs to the Single Market, facilitate their growth and unlock their business potential.
The European Private Company Statute (Societas Privata Europaea) forms part of a package of measures designed to assist SMEs, referred to as the Small Business Act for Europe (SBA). The objective of the SBA is to make it easier for SMEs to do business in the Single Market and consequently to improve their market performance. The SPE is one of the priority initiatives of the Commission's 2008 Work Programme i.
Contents
- 2. Objectives of the proposal
- 3. Legal basis
- 4. Subsidiarity and proportionality
- 5. Consultation of interested parties
- 6. Impact assessment
- 7. Explanation of the proposal
- Chapter II: Formation
- Chapter III: Shares
- Chapter IV: Capital
- Chapter V: Organisation of the SPE
- Chapter VI: Employee participation
- Chapter VII: Transfer of the registered office of the SPE
- Chapter VIII: Restructuring, dissolution and nullity
- Chapter IX: Additional and transitional provisions
- Chapter X: Final provisions
The initiative creates a new European legal form intended to enhance the competitiveness of SMEs by facilitating their establishment and operation in the Single Market. At the same time, the Statute has the potential to benefit larger companies and groups.
The proposal for a Statute for an SPE is adapted to the specific needs of SMEs. It allows entrepreneurs to set up an SPE following the same, simple, flexible company law provisions across the Member States.
The proposal also aims to reduce compliance costs on the creation and operation of businesses arising from the disparities between national rules both on the formation and on the operation of companies.
The proposal does not regulate matters related to labour law, tax law, accounting, or the insolvency of the SPE. Nor does it deal with the contractual rights and obligations of the SPE or those of its shareholders other than those deriving from the articles of association of the SPE. These matters will continue to be governed by national law and existing Community law instruments, where relevant.
The choice of SPE as a legal form to conduct business activities in the EU should be neutral from a tax perspective. It is therefore important to ensure that the SPE enjoys the same tax treatment as similar national legal forms. To this end, the European Commission intends to begin discussions with Member States in autumn 2008 with a view to tabling a proposal to extend to the SPE the scope of the Parent Subsidiary Directive (90/435/EEC) i, the Merger Directive (90/434/EEC) i and the Interest and Royalties Directive (2003/49/EC) i. The Commission's objective is to ensure that these measures are in place and benefit SPEs from the start of their operations.
The proposal is based on Article 308 of the EC Treaty. This provision provides the legal basis for EU actions aiming to attain one of the Community objectives in the absence of any specific legal basis in the EC Treaty. Article 308 is the legal basis of the existing European company forms, i.e. the European Company, the European Economic Interest Grouping and the European Co-operative Society.
The proposal aims to make the Single Market more accessible to SMEs by providing them with an instrument that facilitates the expansion of their activities in other Member States. However, the proposal does not make the creation of an SPE subject to a cross-border requirement (e.g. shareholders from different Member States or evidence of cross-border activity). In practice, entrepreneurs usually set up businesses in their own Member State before expanding to other countries. An initial cross-border requirement would, therefore, significantly reduce the potential of the instrument. In addition, a cross-border requirement could easily be circumvented and monitoring and enforcing it would put an unreasonable burden on Member States.
Action at EU level is necessary to enable SMEs to use the same company form across the EU. This objective cannot be achieved by the Member States themselves. Even if all Member States committed to making their corporate legislations more business-friendly, SMEs would still face a patchwork of 27 national regimes.
By offering SMEs a corporate vehicle that is uniform and legally certain, yet flexible, the SPE would constitute the most effective and targeted means of achieving the objective set out above. An alternative means of achieving the same objective would be to harmonise at least the core provisions of national company law regimes applicable to private limited-liability companies. This solution would entail a significant and probably disproportionate intrusion in Member States' legislations. In contrast to harmonisation, this proposal leaves national law largely untouched. It provides SMEs with an alternative form that would exist in parallel to national company forms.
The creation of a new European legal form requires a legal instrument that is directly applicable, i.e. a regulation. Neither a recommendation nor a directive would result in a uniform regime that is applicable in all Member States.
The European Private Company Statute was initially developed by business and academic circles in the 1990s and gained broader support over time from industry organisations and from the European Economic and Social Committee i. It was listed as a possible measure of the 2003-2009 Action Plan on Modernising Company Law and Enhancing Corporate Governance i. The 2006 public consultation on the future priorities of the Commission in the fields of company law and corporate governance confirmed this support i.
In June 2006, the Legal Affairs Committee of the European Parliament held a public hearing on the SPE and drafted an own-initiative report and a resolution calling on the European Commission to present a proposal for an SPE before the end of 2007 i. The Parliament reiterated its support and firm commitment to the initiative in a resolution of 25 October 2007 i. Given the strong interest of the Parliament in the proposal, it should be closely associated in the work on the SPE from the start.
In July 2007, the Directorate General for Internal Market and Services launched a specific public consultation on the SPE. In addition, a survey among companies in the 27 Member States was conducted through the European Business Test Panel i.
On 10 March 2008, the Commission held a conference on the SPE.
The European Commission's advisory group on corporate governance and company law i provided information in relation to the impact assessment and advised on the substance of the SPE Statute. The group is also drafting examples of provisions for the articles of association of an SPE, which will be made available to facilitate the understanding of the draft Statute.
Recent surveys i and public consultations show that, despite their strong potential, SMEs face legal and administrative obstacles, which hinder their development in the Single Market. Although all companies wishing to expand cross-border are affected by legal and administrative barriers, these are proportionately greater for smaller companies, who are less well equipped in terms of financial and human resources.
The difficulties which businesses face as a result of the diversity of company forms essentially consist of compliance costs on the formation of a company (e.g. mandatory minimum capital requirement, registration and notary fees, cost of expert legal advice) and of difficulties and compliance costs associated with the operation of a company, which make the day-to-day operation of foreign subsidiaries more expensive compared with domestic subsidiaries.
SMEs are also hindered in their cross-border development by the lack of trust in certain foreign company forms in other Member States. This problem exists mainly in relation to the less widely known company forms.
The impact assessment examines four high level policy options:
– Taking no action and relying on existing legislation and case law: despite efforts to make company formation quicker and easier throughout the EU, SMEs still have to face 27 company law regimes.
– Seeking to harmonise the company laws of the Member States: A high degree of harmonisation of national regimes would be necessary to significantly reduce the costs of company formation and operation across Member States. However, the major changes to national legislation which this approach would entail would not necessarily be proportionate to the objective of the proposal.
– Improving the European Company Statute (SE) and adapting it to the needs of SMEs: Making the Statute of the SE accessible to SMEs would require significant amendments. This option would require a thorough redrafting and re-negotiation of the SE Regulation before it is evaluated in 2008/2009.
– Proposing an SPE Statute for SMEs: The creation of a new European legal form targeting SMEs best solves the problems presented above by offering a company form featuring uniform rules on formation throughout the EU, flexibility as regards the internal organisation, thus saving costs. It would also offer SMEs a European label and thus make cross-border business easier.
Chapter I: General provisions
The general provisions define the main features of the SPE. The SPE is a company having legal personality and share capital. It is a limited-liability company, i.e. its shareholders may not be liable for more than the amount they have subscribed for. As the SPE is a private company, the shares of the SPE may not be offered to the public or be publicly traded.
There is no restriction on the formation of the SPE. It may be set up by one or more founders, natural persons and/or companies or firms under Article 48 of the EC Treaty. In addition, an SE, a European Co-operative Society, a European Economic Interest Grouping or another SPE may also take part in the formation of an SPE.
As regards the scope of application of the Statute and its interface with national law, the Regulation provides that:
An SPE is governed first and foremost by the directly applicable mandatory provisions of the Regulation. These rules facilitate the formation and ensure the necessary uniformity of the SPE in the EU.
The Regulation requires a range of matters, in particular the internal organisation of the SPE, to be regulated in the articles of association (Annex I). In order to ensure flexibility, shareholders are free to decide how to regulate these questions, subject only to the rules of the Regulation.
In matters covered by the SPE Statute, national company law is only relevant where specified by the Regulation. The provisions which are required or allowed by Annex I to be included in the articles of association are not subject to national law.
The provisions of the Regulation and the list of matters in Annex I which must be covered in the articles of association define the scope of the EU rules. The proposal does not contain any default provisions which apply in case the articles do not cover the matters listed in Annex I. However national law has to set out the sanctions of such omission or other breach of the Regulation.
National law governs those matters which are not covered by the Regulation or by the articles of association of the SPE as stipulated in Annex I. This is the case, in particular, for matters not mentioned in Annex I or in areas which are outside the scope of company law as such (e.g. labour, insolvency or tax law). The relevant applicable law is the law of the Member State where the SPE has its registered office, which applies to private limited-liability companies. Member States shall notify the name of the respective company form to the Commission.
The Regulation does not restrict the manner in which an SPE may be created. A SPE may be set up ex nihilo, in accordance with the provisions of the Regulation. It may also be created by transforming or dividing an existing company or by the merger of existing companies. Any company form existing under national law (private or public, with or without legal personality) may become an SPE, in accordance with the relevant provisions of national law. An SE or another SPE may also participate in the formation of an SPE.
The name of any European Private Company must be followed by the abbreviation 'SPE'. The SPE is required to have its registered office and its central administration or principal place of business in the territory of the Member States. However, in accordance with the Centros judgment i of the European Court of Justice, the SPE may be set up with its registered office and central administration or principal place of business in different Member States. Shareholders may also decide to transfer the registered office of the company to another Member State.
The Regulation does not set up a specific registration procedure for the SPE but builds on the provisions laid down by the First Company law Directive (68/151/EEC), while setting out some requirements to make the formation of an SPE easier and cheaper. First, it must be possible to apply for the registration of a SPE by electronic means. Secondly, the Regulation contains a closed list of documents and particulars which Member States may require for the registration of the SPE. Changes in the documents and particulars must also be filed at the register.
Finally, the proposal provides for a single legality check, i.e. either control of the legality of the SPE's documents and particulars by an administrative or judicial body, or their certification by a notary, on registration of an SPE. Founders of the SPE must not be required to satisfy both conditions.
The Regulation allows shareholders a large degree of freedom to determine matters relating to shares, in particular the rights and obligations attached to shares. An SPE may issue ordinary or priority shares. Restrictions only apply when necessary in the interest of third parties or minority shareholders.
All shareholdings must be registered in the list of the shareholders drawn up and kept by the management body of the SPE. This list serves as evidence of shareholdings, unless proven otherwise. The list may be inspected by the shareholders or third parties on request.
The conditions for the transfer of the shares must be regulated in the articles of association. Any new restriction or prohibition on transfers requires a qualified majority decision (Article 27). In addition, to protect the interests of minority shareholders, such decision requires the consent of each shareholder affected by the restriction or prohibition.
The Regulation does not provide shareholders with the right to squeeze-out minority shareholders. Nor does it put an obligation on the majority shareholder or the SPE to buy the shares of the minority shareholder (sell-out right). Such provisions may be adopted in the articles of association. However, the Regulation allows both the expulsion and the withdrawal of a shareholder under specific circumstances.
In order to facilitate start-ups, the Regulation sets the minimum capital requirement at €1. The proposal departs from the traditional approach that considers the requirement of a high minimum of legal capital as a means of creditor protection. Studies show that creditors nowadays look rather at aspects other than capital, such as cash flow, which are more relevant to solvency. Director-shareholders of small companies often offer personal guarantees to their creditors (e.g. to banks) and suppliers also use other methods to secure their claims, e.g. providing that ownership of goods only passes upon payment. Moreover, companies have different capital needs depending on their activity, and thus it is impossible to determine an appropriate capital for all companies. The shareholders of a company are the best placed to define the capital needs of their business.
The Regulation does not restrict the founding shareholders' right to decide what type of consideration is to be provided for the shares upon creation of the SPE or on capital increase. Accordingly, the articles of association must set out whether the founders need to provide consideration in cash or in kind. They are free to decide what property, rights, services, etc. they accept as consideration for the shares and when it has to be paid or provided. Also, the articles must provide whether an expert valuation of the consideration in kind is needed or not. Shareholders are liable for their contribution, in accordance with the provisions of national law.
The Regulation contains uniform rules regarding distributions (e.g. dividend, purchase of the SPE's own shares, incurring of debt) to shareholders from the assets of the SPE. A distribution may only be made if the SPE satisfies a balance-sheet test, i.e. after the distribution its assets fully cover its liabilities. The proposal does not define 'assets' or 'liabilities', in this respect the relevant accounting provisions apply (i.e. the Fourth Directive (78/660/EEC) or Regulation (EC) No 1606/2002).
Since the preparation of a solvency test on distributions only exists at present in few Member States, the proposal does not make it mandatory for SPEs. However, it explicitly allows shareholders to provide for a solvency test in the articles, in addition to the balance-sheet test that is required by the Regulation. If shareholders require the management body to sign a solvency certificate before distribution, they also have to define the related requirements (e.g. the grounds, the criteria) and the certificate is to be disclosed.
The proposal does not prevent the SPE from acquiring its own shares under certain conditions to protect the company's assets. Before the acquisition of its own shares, the SPE must carry out a balance-sheet test and, if prescribed in the articles of association, a solvency test. Shareholders decide on acquisition. The non-pecuniary rights attached to the respective shares (in particular, voting and pre-emption rights) will be suspended. Additional conditions and further restrictions may be set out in the articles of association.
The shareholders of the SPE enjoy a high degree of freedom in determining the internal organisation of the SPE, subject to the Regulation. Article 27 provides a non exhaustive list of the decisions which must be taken by shareholders. The articles of association must set out the required majority and quorum for voting subject to Article 27 which provides that certain of these decisions require a qualified majority (i.e., at least 2/3 of the voting rights of the SPE, but the articles may provide for a greater majority, e.g. 3/4).
There is no obligation to hold physical general meetings. The method for the decision-making of shareholders is to be prescribed in the articles of association. Shareholders have broad information rights regarding the affairs of the SPE. Their right to challenge collective resolutions is subject to national law.
The Regulation ensures two specific minority rights for the shareholders: the right to request a shareholders' resolution and the right to request the competent court or administrative authority to appoint an independent expert (in particular, an independent auditor).
All decisions which are not listed in the Regulation or in the articles of association fall under the competence of the SPE's management body which is responsible for running the company. The articles determine the management structure of the SPE (a single director or several directors, a one-tier or a two-tier board system). However, if the SPE is subject to employee participation, the chosen management structure must allow for the exercise of this right.
The shareholders of the SPE decide on the appointment and removal of directors. The articles must set out the term of directors' mandates and any eligibility criterion. The Regulation prohibits anyone who is disqualified from serving as a director in any Member State from serving as a director of the SPE.
The Regulation imposes on directors the duty of acting in the best interests of the company. Accordingly, directors' duties are owed to the SPE and may only be enforced by the company. The Regulation does not give individual shareholders or creditors the right to directly sue the members of the management body.
The Regulation lays down a general standard of care by requiring from directors the care and skill reasonably required in the conduct of business. The interpretation of this provision may be developed by national courts. While the Regulation also identifies the most important specific duties of the directors (e.g. propose distributions), the articles may set out further duties. Directors are required to avoid any actual or potential conflicts of interests. However, the articles of association may provide that situations involving such conflicts may be authorised.
The Regulation establishes directors' liability for any loss or damage suffered by the SPE due to the breach of their duties deriving from the Regulation, articles of association or a resolution of shareholders. However other aspects of liabilities, e.g. the consequences of the breach of duties or any business judgement rule, are governed by national law.
Employee participation exists in small companies only in a few Member States (e.g. Sweden, Denmark).
The general principle, derived from the Directive on cross-border mergers (2005/56/EC), is that the SPE is subject to the employee participation rules of the Member State where it has its registered office. Accordingly, the SPE, as regards employee participation, will be no more and no less attractive than comparable national companies.
Cross-border mergers involving SPEs are governed by the Directive on cross-border mergers. However, special rules are required in the case of the transfer of the registered office of an SPE.
The SPE can transfer its registered office to another Member State, while maintaining its legal personality and not having to wind-up. In order to protect the interests of third parties, the Regulation does not allow the transfer of the SPE's registered office during winding-up, liquidation or similar proceedings.
The transfer procedure is inspired by the provisions on the transfer of the registered office of the SE Regulation.
The Regulation provides for a special regime where an SPE that is subject to employee participation transfers its registered office to another Member State where there is no or a lower level of employee participation rights or which does not provide for employees of establishments of the SPE situated in other Member States the same entitlement to exercise participation rights as they enjoyed before the transfer. In such cases, if at least one third of the SPE's employees are employed in the home Member State, negotiations must take place between the management body and the representatives of the employees to reach an agreement on the participation of employees. In the absence of an agreement, the participation arrangements existing in the home Member State are maintained.
The Regulation refers the dissolution of an SPE or its transformation to a national company form to national law. Also, the SPE may merge with other companies and be divided up in accordance with the rules applicable to private limited-liability companies.
Article 42 allows SPEs registered in a Member State outside the euro-zone to express their capital and to draw up their accounts in the national currency of that Member State, although such SPEs may also express their capital and/or draw up their accounts in euro.
The Regulation requires the adoption of certain provisions by Member States. In particular, the procedural rules on registration, on the transfer of the registered office of the SPE along with sanction for breach of the Regulation and the articles of association, have to be adopted.