The “European Private Company”
By: Carsten Lexa, LL.M.
In the European Union, each of the 27 Member States provides regulation for different types of companies. Because of this diversity it is becoming increasingly difficult to know all the differences between the different types. Especially because the European Court of Justice has allowed the utilization of companies set up in one of the Member States in another Member State.
This diversity creates even more problems for small and midsize enterprises (SMEs) who cannot afford advisors in each and every country they want to do business. The European Commission in 2007 has highlighted the necessity to improve the framework conditions for enterprises in the European Single Market, especially for SMEs that represent over 99% of all enterprises in the European Union but of which only 8% do cross-border business and of which only 5% have a subsidiary or a joint enterprise in a foreign country. The Commission also recognizes that it has become easier to incorporate enterprises all over Europe, but stresses that more must be done to improve the access of SMEs to the European Single Market and to make the process of growth easier for them (Source: Note of the Commission of November 20, 2007).
In June 2008 the European Commission presented a proposal for a “Regulation regarding the European Private Company Statute” (Latin: “Societas Privata Europaea”; hereinafter: SPE) (document: COM(2008) 396/3). This statute should provide a legal form for SMEs that can be used all over Europe and is tailored for the special needs of SMEs. It allows business owners to incorporate SPEs in all Member States according to the same simple and flexible regulations. The proposal aims at the reduction of costs for complying with the regulations for the incorporation and the operation of enterprises that arise typically from the differences between national regulations for the incorporation and operation of enterprises in the different Member States.
What follows is an outline of the most important contents of the proposal.
1.
The SPE is a company form with legal personality from the time of its registration. The SPE has its own original capital. It is a company with limited liability, which means the shareholders are only liable for capital subscribed by them. Because the SPE is a private company, the shares cannot be offered or traded publicly.
The SPE will be governed primarily by the directly applicable mandatory provisions of the Regulation. Those provisions simplify the incorporation of a SPE and ensure the uniformity of SPEs in the European Union.
The internal structure of an SPE will be governed by the articles of the company. The shareholders are allowed to create freely the articles, as long as they comply with the provisions in the Regulation.
National law will govern all the topics that are not govered by the Regulation, for example in the areas of Labour Law, Insolvency Law and Tax law.
2.
The Regulation does not contain provisions regarding the foundation of the company. The SPE can be incorporated “ex nihilo”. She can be also established by transformation, merger or demerger. By complying with the national law every national enterprise can be transformed into an SPE.
The name of the company must be followed by the affix “SPE”.
3.
The minimum capital for the SPE is 1 Euro. Studies have shown that creditors are more interested in other aspects regarding the solvency of a company than a high minimum capital. This European approach corresponds with the general opinion in Great Britain regarding minimum capital (a British company limited by shares, a company similar to the SPE, can be incorporated with a mimimum capital of 1 Pound Sterling), but differs from the general opinion for example in Germany (the German GmbH, similar to the SPE, requires at least 12.500 Euro as minimum capital). The owners of SMEs often offer personal guarantees to banks for their loans, therefore reducing the need for a high minimum capital.
4.
Regarding worker participation, the SPE is subject to the national regulations of the Member State in which the SPE has its registered office. Therefore, the SPE will be equally attractive as comparable national companies.
5.
With full reserve to its legal personality and without being forced to liquidate the company, the SPE can relocate its registered office to another Member State. The relocation cannot take place during a liquidation, a closure or something similar.
Conclusion
Currently, the proposal of the European Commission is discussed in the Member States. It can be expected that some changes opposite to the proposal will appear in the final Regulation. But it can already be said that the proposal of the Commission seems to be reasonable and well balanced and will suit the needs for SMEs who want to expand their businesses into foreign countries.
For inquiries please contact the author: kontakt@kanzlei-lexa.de
