European Company – Societas Europaea

The notion of the European Company or Societas Europaea allows companies to merge or form a company or a subsidiary without having legal constraints such as the twenty seven legal systems of the EU member countries.

European Companies mainly involve PLC’s and such companies must be registered in one of the twenty seven EU member states since there is no central EU Registrar of Companies.

There are four ways of forming a European Company:

  • Through a merger
  • Formation of a holding company
  • Formation of a joint subsidiary
  • Conversion of a plc formed under national law of one of the EU member states

For the purposes of this article, the second route for formation of a European Company will be examined (formation of a holding company Societas Europaea) which is available both for PLC’s and private limited companies – Article 2(2) of Council Regulation 2157/2001.

Accordingly such private limited companies may form a Societas Europaea if the following criteria are met:

  • At least two private limited companies are governed by the law of a different EU member state
  • Or, have had for at least two years a subsidiary or a branch in another EU member state

Further information:

Article 32(2) of Council Regulation 2157/2001 requires the management (in two-tier systems) or the administrative organs (in one-tier systems) to draw draft terms for the formation of a Societas Europaea.  Such terms must explain and justify the legal and economic implications of such a formation and what the implications will be for the shareholders and employees of the company.

Such terms must be approved by the shareholders of the company in a general meeting – Article 32(6)

 

Comparison: European Company – Cyprus Company

Societas Europaea Cyprus Company
  • SE’ included in its name
  • Governed by Council Regulation 2157/2001 and Council Directive 2001/86/EC
  • If matters are not covered by Regulation and Directive then the statute (articles of association) of the European Company are looked at for guidance provided the Regulation and Directive authorizes it
  • If  a matter is not governed by EC legislation nor by statute, then the law of PLC’s of the member state concerned applies
  • Publicity: Incorporation of such a company needs to be publicized in the Official Journal of the Community
  • Minimum share capital: € 120,000 unless one of the member states requires a higher share capital
  • Registered office: where head office and business takes place – easy transfer within the Community without dissolution in one member state being necessary
  • Annual accounts: they must be submitted subject to the national laws on PLC’s in the member state where the European Company has its registered office
  • Tax: subject to the tax requirements of the member state where it has its registered office
  • Winding up, liquidation, insolvency: largely governed by national law – if a company transfers its registered office, no winding up of the company needs to take place first.  If a company transfers its registered office outside the Community then winding up needs to take place first.  Proceedings must be published in the Official Journal
  • Employee involvement: employees need to be represented by a negotiating body when a decision is taken to form a European Company
  • General meeting: general meetings must take place with shareholders present and the supervisory and management organ (in two-tier systems) or the administrative organ (in one-tier systems).  The duty of confidentiality applies
  • ‘Ltd’ or ‘limited’ included in its name
  • Governed by the Cypriot Companies Act, Cap 113
  • The memorandum and articles of association of the company need to be looked at in order to regulate the Company
  • Publicity: no requirement for publicity in the Official Gazette of the Republic of Cyprus
  • Minimum share capital: €1,000
  • Registered office: has to be in Cyprus
  • Annual accounts: these are mandatory and have to be deposited at the Cyprus Registrar of Companies  annually
  • Tax: a corporate tax of 10% is imposed on Cyprus companies, the lowest in the EU
  • Winding up, liquidation, insolvency: a liquidator needs to be appointed who collects money from the company’s debtors, pay the company’s creditors and whatever is left is distributed to the shareholders.  Publication in the Official Gazette of the Republic of Cyprus is required.  Whole procedure takes about six months.  A company may be wound up after an application of the shareholders to the court
  • General meeting: general meetings must take place by the end of each tax year

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