Societas Europaea
Since the dawn of the European project in 1951, when six European countries decided to sign the Coal and Steel treaty and the subsequent establishment of the European Economic Community (EEC) in 1957, the European continent has undergone a significant transformation. The European Union (EU), which now counts 28 Member States, has achieved a great deal through developing its unique economic and political union. The form of cooperation that harmonises many areas is based on the rule of law of every Member State, unified through the treaties.
There are many areas essential to the functioning of the internal market of the European Union. An important pillar is specifically European Company law. There is no codified European Company law within the European Union but there are several separate acts such as but not exclusively the directives on disclosure of company documents the formation of public limited liability companies, requirements for foreign branches and single-member companies. They aim to establish a more modern and more efficient company law as well as a corporate governance framework for European citizens, their undertakings, investors, employers and employees.
One of the areas, where the European Commission was eager to unify the Member States was the idea for a European Company, which was first proposed as early as 1959. After decades of exchange of information, academic and practical research and the preparation of a complete reorganisation of business in Europe on a Community scale, the Council of the European Union took action to improve and better the economic and social situation throughout the Community in order to remove barriers that obstruct trade. However, not only the removal of barriers was a main goal, while setting up the framework for a European Company, but the complete reorganisation of the business sector, which was supposed to prevent issues such as legal, psychological and taxation matters.
When the first modern proposal for the Societas Europaea was put forward by Prof. Dr. Pieter Sanders, the Treaty of Rome which created the European Community had just been signed. In its purest form, the European Corporation did not even intend to harmonise or unify national company laws, but rather aimed at the creation of a supra-national form of organization which circumvented national business vehicles. Prof. Dr. Pieter Sanders together with company law experts from each Member State produced in 1966 the Preliminary Draft of a Statue for a European Company, which has been taken up by the European Commission a few years later in 1970 and has been submitted as the first formal proposal to the Member States.
The proposal faced considerable criticism by the Member States and therefore the adoption of the proposal was highly unlikely. Not only because the Societas Europaea was a concept that was very forward thinking. Especially the complexity of the proposal proved to be a serious problem. The statue would attempt to regulate every aspect of the Societas Europaea and thereby introduce legal concepts to Member States, these could be foreign to them and they would therefore encounter problems with comprehending and incorporating those concepts into the national legal systems. Some of those concepts would be the obligatory two-tier structure of the SE with a management board and a supervisor board as well as the European Workers Council and the board-level representation. Especially the role of workers and their part in various supervisory and decision-making functions was a considerable point of discussion.
The deadlock on the SE question remained mainly unchanged until 1997 where to overcome the problems the Council of Ministers set up an expert group on workers involvement. This group produced a report known as the ‘Davignon-report’. In this report the experts agreed that due to social, economic and political circumstances the task at hand was a rather difficult one to achieve. They acknowledged the fact that every Member State would have a rather practical approach and cultural differences that would therefore make it very difficult to harmonise through all Member States. Instead of pushing to convince the European Community to fully harmonise the Societas Europaea throughout the Member States, they pleaded for a negotiated solution which would be tailored to the varying aspects in the Member States and the diversity of their situations. Furthermore, the experts provided consultation points on issues that had seen limited success in establishing common ground.
The Davignon-report had a positive effect on the drafting process of the Council Regulation which was deemed acceptable to all 15 Member States for establishing the Societas Europaea. The adoption of the European Company Statute set an end to a debate which was started more than 40 years ago.
The final regulation is the primary instrument, which functions only as the framework providing tool of this legislative package. The Regulation is structured into seven parts, which include the General Provisions, Formation and Structure of the SE to the Annual Accounts and Consolidated Accounts, the Winding up, liquidation, insolvency and cessation of payments as well as other provisions.
The Directive in addition to the Regulation has a strong focus on the establishment of the SE and more particularly a special negotiating body representative of the employees of the companies who engage into the negotiations and preparations for the forming or transformation of the companies into a SE. To be able to work in the form of a Societas Europaea both the Regulation and the Directive rules must be respected. They are two pieces of legislation that exist as complementary to each other rather than provide exceptions.
The official entry into force of the new SE legislation was only four years later, on the 8th of October 2004. By 2007 approximately 70 companies had transformed into or formed a Societas Europaea. Even though by 2010 the Societas Europaea had been registered over 500 times in the European Union, this number is rather misleading as only approximately a quarter of those SE’s are companies that are fully functioning. By fully functioning is meant that the company both possesses employees and conducts business at the same time, as opposing to so called “empty” and “shelf” Societas Europaea. Those are SEs where either the company has no employees, or it has no business which it conducts. Since 2004 the number of registered SE’s has risen to roughly 600 new registrations per year in 2012, but since then has fallen in 2017 to a record low that can be compared to the years of 2006-2007 of approximately 60 Societas Europaea. In the first quarter of 2017, 2757 Societas Europaea registered in total in the whole of the European Union including Norway, Liechtenstein and Iceland.
The road from the initial idea of the Societas Europaea to the present day was challenging and how it was presented by the European Commission and thought out by Pieter Sanders has taken a considerably different shape. Harmonisation has only partially taken place and the referring back and forth between the supranational and national legislation, the national aspect has still a stronger presence then it was anticipated. The Societas Europaea has not been born as an independent supranational entity, but instead 28 hybrids came into being that demand significant changes in order to be properly functioning and competitive in the future to the national equivalents.
Written by Stojan Bakalov