A European company (société européenne - SE), often referred to by its Latin name 'Societas Europaea', is a company governed by Community law. It has its own legal framework and acts as a single economic operator throughout the entire European Union.
The status of a European company allows for mergers and restructurings of European groups and thus avoids the legal and practical obstacles under the laws of the different European Union countries. A European company therefore does not need to set up a complex network of subsidiaries governed by the different national legislations, but can carry out its activities on European Union territory through branches.
As a Community instrument, the SE aims to be:
- a tool for cross-border concentrations – an SE allows mergers between companies that have their registered offices in different Member States;
- a tool for mobility within the European Union – the registered office of the SE can be transferred to another member country without having to dissolve the company in the first country;
- a tool for the rationalisation of legal structures – an SE can be based on joint provisions to harmonise the rules governing administration.
Who is concerned
By its nature, an SE is suitable for legal or natural persons that wish to:
- operate on an international scale with structures in at least 2 countries within the European Union;
- reduce the complexity of managing an international network operating under multiple legislations;
- facilitate cross-border restructuring and cooperation.
The prerequisite for setting up an SE is the existence of at least 2 structures on the territory of at least 2 different European Union countries.
The SE status can be used not only by international groups, but also by small and medium-sized businesses, provided that they raise the required capital and follow the procedures dictated by Community regulations.
It is important to note that the creation of an SE must be accompanied by negotiations with employee representatives of the companies concerned in order to organise the participation of the employees in the SE.
How to proceed
Common elements with a public limited company
For any SE with its registered office in Luxembourg, Luxembourg law governing public companies (société anonyme - SA) applies to all provisions not covered by European standards. This is particularly the case concerning:
- the duration of the company;
- company accounts;
- mandatory indications in the articles of association;
- changes to the share capital;
- the regime governing shares issued by the SE;
- the legal personality;
- going public;
- the liability of directors, etc.;
Provisions specific to an SE
The drafting of articles of association is mandatory.
When a European company is created, it has to be published in the Official Journal of the European Union.
European companies must also be registered in the national trade and companies register (registre de commerce et des sociétés - RCS).
One condition of acceptance of the registration is the social aspect of worker participation. This aspect must be addressed so that the European company can be validly formed.
The minimum capital of an SE has been set at 120,000 euros, to allow medium-sized businesses established in various Member States to opt for this regime.
If the legislation of a Member State stipulates a higher minimum capital for companies carrying out certain types of business, this legislation will apply to SEs carrying out these activities.
Shares can be registered or bearer shares.
Stock market listed SEs are treated in the same way as listed companies under national law.
The registered office of an SE must be defined in the statutes and must be the place of its central administration, i.e. its real headquarters.
An SE may be forced into liquidation if, even though its statutory registered office is in the Grand Duchy of Luxembourg, its central administration (real headquarters) is elsewhere.
Note that the registered office of an SE may be transferred to another European Union Member State without losing its legal personality, in other words without having to create a new structure in the host country. A transfer plan is drawn up following a decision at an extraordinary general meeting, which allows the SE to transfer its registered office immediately by simply registering and publishing the plan.
Note also that transferring the registered office of the company outside of the European Union leads to the dissolution of the SE.
Just like an SA, an SE can choose one of the following management structures:
- monistic: a board of directors that manages the company;
- dualistic: a management board that manages the company, whilst a supervisory board supervises the management.
There are however certain management features specific to an SE:
- The board of directors or the management board, depending on the case, must meet at least every 3 months at the frequency stipulated in the statutes to deliberate on the business operations of the SE and their probable trend;
- When an SE adopts the dualistic system, the statutes of the SE can state that, for certain operations, the management board must obtain the prior consent of the supervisory board before acting. When the supervisory board does not approve an operation, the management board may submit the dispute to the general meeting.
Note also that the number of directors or the rules for determining this number are defined in the statutes of the SE.
The company name of a European company can be chosen in the same conditions as that of an SA. It must always include the letters 'SE'.
Community regulations contain no provisions concerning the taxation of an SE. In Luxembourg, the Inland Revenue service (Administration des contributions directes) considers an SE to be a capital company and is treated in the same way as a Luxembourg SA.
Luxembourg tax law stipulates that transferring the statutory registered office and the central administration of a capital company (including an SE) outside of the Grand Duchy gives rise to the 'fiscal' liquidation of the company (unless a permanent establishment is maintained in Luxembourg). An SE migrating outside of the Grand Duchy would therefore be deemed to realise all of its assets and liabilities at their market value. The associated latent capital gains are fully taxable unless the invested assets remain attached to a permanent establishment in the country.