The European Company Statute and the European Public Limited Liability Regulations 2004 became available for use in the UK on 8th October 2004; over 30 years after the Commission first proposed it.

This is a new legal instrument based on European Community law that gives companies the option of forming a European Company known formally by its Latin name of Societas Europaea (SE). An SE will be able to operate on a European-wide basis. The European Company Statute is established by two pieces of legislation, namely a Regulation EC 2157/2001 (establishing the company law rules) and a Directive 2001/86/EC (on worker involvement).

The provisions of the related Directive concerning worker involvement in European Companies were also implemented in the UK on 8th October.

Only a small number of the 28 EU and EEA Member States have implemented these Regulations at national level. This is necessary to allow the establishment of these SEs. This is despite the fact that the European Company Statute was adopted at EU level in 2001.

The Internal Market Commissioner Frits Bolkestein said of this Statute:

“The European Company Statute makes it easier and cheaper for companies to expand and to manage cross-border operations without the red tape of having to set up a network of subsidiaries. Not only will that encourage more companies to exploit cross-border opportunities; the reduced costs should ultimately lead to downward pressure on prices and boost Europe’s overall competitiveness. But this is pie in the sky unless Member States live up to their commitments and put the framework in place to allow SEs to be set up. Until they do that, they are holding their own businesses and the European economy back. That is unacceptable”

Under the Statute, an SE can be set up by the creation of a holding company or a joint subsidiary or by the merger of companies located in at least two Member States or by the conversion of an existing company set up under national law.

Under the accompanying Directive on employee involvement, the creation of an SE requires negotiations on the involvement of employees with a body representing all employees of the companies concerned. If it proves impossible to negotiate a mutually- satisfactory arrangement, then a set of standard principles will apply, the exact nature of which depends on the format for worker participation in the companies concerned before the European Company was set up.

In order for European Company Statute to become operational in Ireland a Statutory Instrument needs to be enacted through secondary legislation. The necessary transposition legislation relating to the Regulation is close to finalisation and should come into operation shortly. As yet, the Department of Enterprise, Trade & Employment does not have a specific date for its implementation.

This commentary on certain provisions of the legislation is not intended to be a legal or comprehensive interpretation. Professional advice should be sought in specific circumstances. For further information on statutory requirements, or any provision of the Companies Acts, 1963 to 2003, please contact our Company Secretarial Department on;