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European Union companies

European Union (EU) law (which is part of UK law) provides for the incorporation of the “European Company” for companies operating in more than one Member State the option of establishing themselves as a single company under EU law (European Company (Societas Europea)). There is also a proposal for an EU private company (European Private Company (Societas Privata Europaea)).

European Company (“Societas Europea” or “SE”)

The European Company (“Societas Europea” or “SE”) is a type of public company operating in two or more EU states and created under EU law: the European Company Statute (EU Council Regulation 2157/2001); and Directive 2001/86/CE (which has been implemented in national law in all Member States) on worker involvement. These rules are supplemented by cross-references to national legislation applicable to public limited liability companies.

The policy behind the European Company statute is to ) give companies operating in more than one Member State the option of establishing themselves as a single company under EU law. Rather than having to comply with all the different national laws of each Member State where their subsidiaries are based, the Statute would make companies able to operate throughout the EU with one set of rules, including a unified management and reporting system. Furthermore, the European Company offers them the prospect of reduced administrative costs and provides a legal structure more conducive to carrying out activities within the Single Market as a whole.

The European Company Statute took more than thirty years of negotiations to be approved. It has been in force for over ten years. The European Commission has presented a report on how the SE works for business (19 November 2010).

The SE is a useful vehicle for companies operating in more than one EU member state, but the take up on this format has not been overwhelming. As at June 2010, 595 SEs were registered in 21 out of the 30 EU/EEA Member States. The vast majority of SEs, around 70%, were registered in the Czech Republic (281) and Germany (134). Very few SEs were registered in Southern European Member States, with the exception of Cyprus (12). The Netherlands (24), the United Kingdom (23), Slovakia (22) and France (19) have a relatively high number of SEs on their territory. The group of countries with the lowest use of the SE Statute includes Portugal and Spain – with only 1 SE each - and Bulgaria, Finland, Greece, Iceland, Italy, Lithuania, Malta, Romania, and Slovenia where no SEs have been set up.

How to set up a European Company:
Guidance on the formation of an SE may be found in the ; see the Companies House guidance GP06.

European Economic Interest Grouping (EEIG)

Council Regulation (EEC) No 2137/85 of 25 July 1985 on the European Economic Interest Grouping (EEIG) created a new legal entity based on Community law which was designed to facilitate and encourage cross-border cooperation.

The purpose of the grouping is to facilitate or develop the economic activities of its members by a pooling of resources, activities or skills. This will produce better results than the members acting alone. It is not intended that the grouping should make profits for itself. If it does make any profits, they will be apportioned among the members and taxed accordingly. Its activities must be related to the economic activities of its members, but cannot replace them. An EEIG cannot employ more than 500 persons.

An EEIG can be formed by companies, firms and other legal entities governed by public or private law which have been formed in accordance with the law of a Member State and which have their registered office in the Community. It can also be formed by individuals carrying on an industrial, commercial, craft or agricultural activity or providing professional or other services in the Community.

An EEIG must have at least two members from different Member States.

The contract for the formation of an EEIG must include its name, its official address and objects, the name, registration number and place of registration, if any, of each member of the grouping and the duration of the grouping, except where this is indefinite. The contract must be filed at the registry designated by each Member State. Registration in this manner confers full legal capacity on the EEIG throughout the Community.

When a grouping is formed or dissolved, a notice must be published in the Official Journal of the European Communities (C and S series).

A grouping's official address must be within the Community. It may be transferred from one Member State to another subject to certain conditions.

Each member of an EEIG has one vote, although the contract for its formation may give certain members more than one vote provided that no one member holds a majority of the votes. The Regulation lists those decisions for which unanimity is required.

The EEIG must have at least two organs: the members acting collectively and the manager or managers. The managers represent and bind the EEIG in its dealings with third parties even where their acts do not fall within the objects of the grouping.

An EEIG may not invite investment by the public.

An EEIG does not necessarily have to be formed with capital. Members are free to use alternative means of financing.

The profits of an EEIG will be deemed to be the profits of its members and will be apportioned either according to the relevant clause in the contract or, failing such a clause, in equal shares. The profits or losses of an EEIG will be taxable only in the hands of its members. As a counterweight to the contractual freedom which is at the basis of the EEIG and the fact that members are not required to provide a minimum amount of capital, each member of the EEIG has unlimited joint and several liability for its debts.

How to set up an EEIG:
Guidance on the formation of an EEIGH may be found in the Companies House guidance GP04

European Private Company (Societas Privata Europaea)

In 2008 the European Commission published a proposal for a regulation on the European Private Company (Societas Privata Europea or SPE). See the Commission Report on the application of the Statute for a European Company (SE) - 19.11.2010

We do not know when or if it is likely to become law. More information is available from the dedicated website European Private Company

The Explanatory Memorandum to the proposal states: “ 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.”

What's new:

EU Commission consults on single-member limited liability companies
The purpose of the consultation is to get more in-depth information on whether the harmonisation of national laws with regard to single-member limited liability companies would actually provide companies, and in particular SMEs, with simple, flexible and well-known rules across the EU and reduce the costs they are currently facing. The responses will be taken into account in assessing the need for and impact of a possible new instrument.

[Page updated: 08/07/2013]

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