The objective of company law is to ensure that businesses are efficient and competitive. Yet the competitiveness of SMEs is often hampered by obstacles when carrying out cross-border trade.
“By lifting the barriers to cross-border trade, a European Statute would bring greater legal certainty and allow the risks of liability for companies and entrepreneurs to be calculated more easily. The European Parliament has proved it understands the crucial role of SMEs in the competitiveness of the European economy. Now it is up to the Commission to put a proposal on the table by the end of 2007,” said Pierre Simon, President of Eurochambres.
Businesses have been calling for the creation of a proper European vehicle for SMEs since 1998. Back then, Eurochambres and Unice strongly supported an initiative from its constituency, namely the Paris Chamber of Commerce and Industry and Medef, to develop a European Private Company Statute designed for SMEs. The idea was backed by the European Economic and Social Committee in 2003. A draft regulation was drawn up and submitted for comments on an open Internet platform.
In the absence of a definite reaction by the European Commission, the European Parliament decided to use its power of political initiative which allows it to examine the Commission’s annual work programme and to say which laws it would like to see introduced.
Thus, in February 2007, the European Commission was asked by the European Parliament to submit a legislative proposal on a Statute for European Private Companies before the end of the year.
The European Commission is currently undertaking an impact assessment study with the aim of acquiring a better understanding of the demand for such a new legal structure for SMEs and the impact it would have.
Nevertheless, the decision to go forward with the proposed regulation on the EPC is not easy. In 2001, the European Union established the European Company statute. The European Company (known by its Latin name 'Societas Europaea' or SE) was created to give companies operating in more than one Member State the option of being established as a single company under Community law – and thus be able to operate throughout the EU under one set of rules and a single unified management and reporting system – instead of having to deal with the different national laws of each Member State where they own subsidiaries.
Five years later, the SE is the subject of criticism and has hardly been used. However, the promoters of the European Private Company believe that it would be more effective than the SE. The draft EPC regulation is quite different from the SE regulation: it relies on contractual freedom and does not include any reference to domestic law.
Features of the european private company
The draft EPC regulation is a legal form available to all, on a voluntary basis, whether natural or legal persons. It can be formed ex nihilo in order to foster entrepreneurship, in accordance with the recommendations made by the European Commission.
It is based on the requirement of a moderate share capital, e.g. € 10,000, subject to possible changes concerning the suppression of a minimum capital for companies incorporated by shares.
The registered office would be located within the European Union and might be transferred to any Member State, without the dissolution or creation of any new legal person.
A simple and voluntary statute adaptable to each SME
The result of the discussions with entrepreneurs is clear. The statute is advantageous if it is simple and offers great flexibility. This is why the contractual freedom left to the entrepreneurs should cover:
- the definition of the members’ rights, which would be unequal and specific;
- the approval of new members, the withdrawal or expulsion of a member;
- the organisation and operation of the company;
- the powers of corporate bodies, the terms of transfer of the shares, etc.
Such extensive freedom would be compensated for by the prohibition of any public offering of bonds or shares by the EPC.
The statute should be in compliance with the rights of minority shareholders, and take into account responsibility and control rules.
A genuine european structure
In order to make this mechanism European in nature, ensure its clarity and give certainty to shareholders and third parties, the EPC would be governed by a Community regulation and by its articles of incorporation, without any reference, even in an alternative manner, to the Member States’ legislations.
Some exceptions are nevertheless expected. Domestic law may apply in a few cases where public policy issues are concerned (criminal law, insolvency procedures, etc.).
The rules concerning the information and consultation of employees and, where applicable, their involvement in the Company’s corporate bodies should be determined by the laws governing the EPC’s registered office.
A priori, the EPC would not benefit from any tax relief. However, those businesses choosing EPC status would be the first beneficiaries not only of the single consolidated tax base mechanism (which would be a simplification tool making it possible to avoid multiple taxation), but also of any other customized measure, excluding discrimination compared to other legal forms.
“Having a common and truly European legal structure based on contractual freedom would allow SMEs to organise themselves into European groups or networks of companies and to form joint European enterprises. Moreover, such a label would be a significant competitive advantage, particularly for companies from new Member States and, in general, for all those looking for a strong European identity,” concluded Mr Simon.
http://www.etudes.ccip.fr/dossiers/spe/fr/index.html
Further information: Vincent TilmanAdvisor, EU Affairs, EurochambresTilman@eurochambres.eu
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