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European Commission Presents Proposal for New European Private Company - International Law Office

International Law Office

Company & Commercial - European Union

European Commission Presents Proposal for New European Private Company

September 15 2008

Following a year-long consultation process, on June 25 2008 the European Commission presented its proposal for a Council Regulation on the Statute for a European Private Company (COM [2008] 396). With the objective of making the single market more accessible to small and medium-sized enterprises, the proposal offers a uniform yet flexible corporate vehicle which is aimed at enabling these companies to use the same company form across the European Union.

In order to ensure a high degree of uniformity, the European private company (Societas Privata Europaea (SPE)) will be governed by the directly applicable mandatory provisions of the regulation and, in respect of a number of matters which are listed in Annex 1 to the proposed regulation, by the SPE’s articles of association. Matters to be covered by the articles of association include:

  • the SPE’s name;
  • its initial capital;
  • its founding shareholders; and
  • a number of matters relating to its shares, including:
    • rights attaching to the shares;
    • transfer approval requirements; and
    • pre-emptive and drag-along rights in case of share transfers.

National law will be relevant only where specified in the regulation (eg, to restructurings, nullity, winding-up, liquidation, insolvency and liability of the SPE’s directors), and with regard to those matters that are not covered by the regulation or the articles of association (eg, labour and tax law).

An SPE may be set up from scratch by any number of natural persons or legal entities, or by way of transformation, spin-off or merger of one or more existing companies (including, but not limited to, Societas Europaeas (SEs) and SPEs). Unlike for the SE, the formation of an SPE will be subject to no cross-border requirement.

As regards incorporation and registration formalities, the proposal explicitly provides that registration applications for SPEs may be filed electronically. Furthermore, registration will occur subject only to control and review of the legality of the submitted documents by an administrative or judicial body, or certification of such documents.

The SPE will acquire legal personality upon registration in the competent register of the member state in which it has its registered seat. Its company name must be followed by the abbreviation ‘SPE’. While the registered seat and central administration or principal place of business of an SPE must both be located within the European Union, they need not be located in the same member state. Furthermore, the SPE’s registered seat may be moved cross border to another member state (as is the case for the SE).

Under the proposal, the minimum share capital of an SPE is €1. In order to provide protection for an SPE’s creditors, distributions to shareholders may be made only if the SPE’s assets would fully cover its liabilities after such distribution.

In keeping with the limited company concept, shareholders of an SPE will be liable for no more than the amount that they subscribed to or agreed to subscribe to. Furthermore, shareholders of an SPE must be entered on a list of shareholders kept by the SPE’s directors. The SPE's shares may not be offered to the public or publicly traded. Shares carrying the same rights and obligations will constitute the same class of share. The proposal also allows for the expulsion and withdrawal of shareholders for important reasons.

The (internal) organization of an SPE may to a large extent be determined by its shareholders. As is the case for the SE, the shareholders of an SPE are free to choose between a two-tier management system (consisting of a management body and a supervisory body) and a one-tier management system (consisting of only one administrative body). The SPE is represented by its directors. The directors will further be (jointly and severally) liable to the SPE for any act or omission in breach of their duties which results in loss or damage to the company.

Certain measures are reserved for and must be decided by the shareholders, including, corporate measures such as mergers, spin-offs, transformations and capital increases and reductions, as well as the appointment and dismissal of directors and auditors. The proposed regulation further requires certain of the listed matters to be resolved by a qualified majority of no less than two-thirds of the total voting rights attaching to the shares issued by the company. Shareholder resolutions may be passed at a shareholders’ meeting or by way of circular resolutions.

The European Commission’s proposal provides for certain minority rights for shareholders, including information rights regarding management. Shareholders holding at least 5% of the voting rights have the right to: (i) request that the management submit a proposal for a shareholders' resolution; and (ii) request the competent court or registry to appoint an independent expert (in case of suspicion of serious breach of the law or the articles of association).

As regards employee participation, an SPE is in principle subject to the applicable rules of the member state in which it has its registered office.

For further information on this topic please contact Florian Kusznier or Anna Platzer at Schönherr Rechtsanwälte GmbH by telephone (+43 1 53 43 70) or by fax (+43 1 53 43 76100) or by email (f.kusznier@schoenherr.at or a.platzer@schoenherr.at).

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