The European company (SE) is a company under EU law. It has its own legal framework and acts as a single economic operator throughout the entire European Union (EU).

The European company status:

• allows mergers and the restructuring of European groups; and
• avoids the legal and practical obstacles that exist in the law of different EU countries.

A European company no longer needs to set up a complex network of subsidiaries governed by the different national legislations as it can carry out its activities on EU territory through branches.

The SE is an instrument of EU origin and is intended to be:

• a tool for cross-border mergers: the SE allows for mergers between companies that have their registered offices in different EU Member States;
• a tool for mobility within the EU: the registered office of an SE may be transferred to another Member State without the need to dissolve the company in the country where it was established;
• a tool for streamlining legal structures: the SE can rely on common provisions to harmonise the rules of 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 EU;
• reduce the complexity of managing an international network operating under multiple legislations;
• facilitate cross-border restructuring and cooperation.

Prerequisites

The prerequisite for setting up an SE is the existence of at least 2 structures on the territory of at least 2 different EU countries.

The SE status can be used not only by international groups, but also by small and medium-sized enterprises, provided that they raise the required capital and follow the procedures dictated by EU 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 (SA)

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;
• contributions;
• company accounts;
• mandatory information in the articles of association;
• changes in the share capital;
• the regime governing shares issued by the SE;
• the legal personality;
• going public;
• the liability of managers.

Provisions specific to an SE

Constitutional documents

The SE must be incorporated before a notary under the same conditions as the public limited company, but it cannot be incorporated from scratch. The establishment of a European company is only possible on the basis of existing companies.

A European company can be set up as follows:

• incorporation by merger between 2 or more national companies from different Member States;
• setting up a European holding company by a contribution of shares in companies from different Member States in exchange for new shares issued by the European company;
• formation of a European company subsidiary by companies from different Member States;
• conversion of a public limited company into a European company (provided that it has had a subsidiary in another Member State for at least 2 years).

The drafting of articles of association is mandatory.

The creation of a European company must be published in the Official Journal of the EU.

The SE must also be registered with the Luxembourg Trade and Companies Register (RCS).

One condition governing the admissibility of the registration is the social aspect of worker involvement. This aspect must be addressed so that the European company can be validly formed.

A European company may, after a period of 2 years, be converted into a public limited company in the country of its registered office.

Capital

The minimum capital of an SE has been set at EUR 120,000, to allow medium-sized businesses established in different Member States to opt for this regime. It is not possible to opt for another currency.

If a Member State's legislation provides for a higher minimum capital for companies carrying out certain types of activities, that legislation will be applicable to SEs carrying out those activities.

Shares can be registered or bearer shares.

Stock market listed SEs are treated in the same way as listed companies under national law.

Registered office

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 (place of effective management).

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.

The registered office of the SE can be transferred to another EU Member State without losing its legal personality, i.e. without having to set up a new structure in the host country, provided that the SE also transfers its central administration (real headquarters).

A transfer plan is drawn up and after the decision is taken at an extraordinary general meeting, the SE can immediately transfer its registered office by simple registration and publication of the project.

The transfer of the registered office outside the European Union leads to the dissolution of the SE.

Structure

An SE has the possibility to adopt a governance structure:

• one-tier system: a board of directors that manages the company.
• two-tier system: a management board that manages the company, whilst a supervisory board supervises the management.

There are, however, certain management features that are 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 foreseeable development;
• When an SE adopts the two-tier system 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.

The number of directors is set by the SE's articles of association.

Company name

The name of a European company can be chosen in the same conditions as that of an SA.

The name of a European company must always contain the abbreviation 'SE'.

Taxation

Community regulations contain no provisions concerning the taxation of an SE. In Luxembourg, the Luxembourg Inland Revenue (Administration des contributions directes - ACD) 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 Luxembourg gives rise to the 'fiscal' liquidation of the company (unless a permanent establishment is maintained in Luxembourg).

An SE migrating outside of Luxembourg 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 Luxembourg.

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