The European Company Statute:
The Proposed Societas Europaea – Partially or Wholly Governed by EU Legislation?
May 2001 Dr Maria Chetcuti Cauchi. All Rights Reserved.
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 1960s, 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 it.
In the 1990s 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.
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 registration. 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 single MS. 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.
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 supervisory organ. 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 EUs 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 created.
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.