European Company Statute:
The Proposed Societas Europaea
- Partially or Wholly Governed by EU Legislation?
May 2001 Dr Maria Chetcuti Cauchi. All Rights Reserved.
Proposed European Company Statute
In these last four decades of Community action in the
field of company and accounting law, what has been realised by the
Community is impressive. Many objectives of the EC have been achieved, yet
such achievements should not make us forget that in this area there are as
many initiatives that have not seen the light of day as yet. The ECS falls
within this latter category and has probably turned out to be greatest
sufferer of all.
The original drafters of the ECS envisaged a
supra-national company completely independent of the national laws of the
MSs, yet after decades of futile debate, Europe has become even more
convinced of the impossibility of this task.
In the ‘euphoric’
1960’s, the Commission had a global vision of European company law, yet,
this proved to be too ambitious a task. The present Statute
is considered to be so much condensed and so distant from the primary
inspiration of creating a company governed solely by European law, that
one even wonders whether its original architects would in fact recognize
Problems faced by the proposed ECS
In the 1990’s the EC was highly influenced by the
spirit of subsidiarity
and the proportionality principle.
Doubts as to the real need for Community action in the field of company
law arose. Community action in this field has many times been justified by
reference to the importance of uniform rules to govern the internal market
and the need to dismantle all the legal obstacles to an integrated market,
yet complete harmonisation has proved to be impractical and impossible.
This explains why many of the initiatives taken in the last decade have
been marked by lavish references to national law.
Present Proposal for a ECS
Admittedly, the ECS, when passed, will create a new
business form that will partly be regulated by European legislation and
partly by the law of the MS of registration.
In fact, it has been claimed that the potential advantages of being able
to use the ‘European Company’ label are no longer existent, in that,
in reality, the SE will not really be incorporated under a European law,
but will be substantially governed by the national laws of the State of
The greatly curtailed version
of the older proposal will not result in a purely European corporate
vehicle but rather in the development of diverse types of SEs for each
The current proposal seems to create a vehicle which is no more than a
wrapper for a national company with a limited number of common features
across MSs. Thus, one could start believing that there would be little
improvement to the obtaining situation, if any at all. It almost seems as
if the proposal for a 14th Directive on the transfer of the registered
office of a company from one MS to another could more or less achieve the
same result as the ECS, and with less complexity.
The question will then remain as to whether the ECS
will fulfil its primary objectives or any objective whatsoever. What does
the SE form offer to entrepreneurs which the usual forms of public limited
liability companies, present in MSs, do not have? The prospects for an
imminent approval of the ECS are evident, yet one has still to wait and
see whether the SE really achieves its primary purpose of creating a
uniform law for the whole EU.
Industrial Policy and the Problem Involved
The unification or harmonisation of company law rules
offers European companies tools to facilitate cross-border mergers and
co-operation. The aim is to form “transnational European companies”.
The SE fits within this perspective. In order to facilitate cross-border
restructuring, the Commission believed that the role of employees in the
decision-making process should be strengthened. Also, company institutions
at the European level are to be given a more forward-looking, democratic
content. Thus, WP provisions had to be introduced in the SE.
This idealistic goal was evidently marred by the laborious years of work
on WP provisions in the Statute.
Critics of the SE form claim that it is still open to
question whether this form of doing business is truly indispensable. The
absence of such an instrument does not appear to have hindered
cross-border restructuring within the EC. Indeed the process of
approximation has even resulted in the removal of some of the key
differences in MS company laws. One has to admit that in practice, this
type of corporate vehicle at Community level still has to overcome
fundamental differences in the culture of company law between the
'continental' model and the 'Anglo-Saxon' model.
In the area of company law, MSs have deeply rooted national traditions
which are closely linked to the organisation of their collective labour
relations. Really strong arguments are necessary for MSs to be fully
convinced of the need to harmonise such area. Such laborious task is
reflected in the years of debate on WP provisions and the continuous
blockage of the ECS.
Yet, the present draft Directive on dealing with WP
guarantees that the employees’ right of involvement in matters and
decisions affecting the life of their company is not restricted by the
creation of an SE. The
employees of an SE will have the right to be informed and consulted about
its functioning and the right to participate in its administrative or
The option given to MSs not to implement the Directive has been the first
step towards the creation of an opportunity which could be accepted by all
the MS, despite their conflicting traditions. Common ground between those
MSs with a tradition of worker involvement and those where worker
involvement is not imposed has been finally found in a compromise at the
EU’s highest political level, the European Council at Nice.
One still has to acknowledge that with the entry into
force of the new SE Regulation in 2004, various advantages for existing
public or private companies operating in different MSs will ensue.
The SE will possess the ability to operate under a single legal
regime and unified management and reporting system; to restructure
quickly; and to transfer corporate headquarters from one MS to another
with greater facility. These benefits promise considerable savings to
companies doing business in more than one MS in terms of time and money.
Also, the SE will lead MSs to agreement on aspects of company law that
have been subject to disparate rules of national law for years.
Thus, a better environment for business throughout the EU will be
The use of a single company throughout Europe will
encourage business managers to think in pan-European terms. Furthermore,
an ECS would result in significant administrative savings and would give
management the ability to reorganize across borders as and when necessary.
It is a fact that the present proposal for an SE is a
diluted version of its predecessors, yet one still has to admit that it
still does present a new opportunity to create a completely new vehicle
for business. In addition, throughout these years, in seeking a system for
the creation of a European Company which will operate effectively in the
Single Market, MSs have let go of some of the principles which permeate
their national systems and tried to find a common denominator to link
their mutual objectives. The adoption of the Statute will be a very strong
symbol of the Single Market of the future, a Single Market which is
equipped to advance into its next phase of integration.
May 2001 Dr Maria Chetcuti Cauchi. All Rights Reserved.