EU to create new kind of plc

Proposed European rules are expected to enable the creation of a new kind of pan-European company by 2004, simplifying compliance for multinationals operating within the EU, says international law firm Morrison & Foerster LLP. The Council of Ministers is expected to adopt a new regulation and directive in May that will create a new limited liability corporate form, the “Societas Europeae”. Businesses converting to this structure would carry the letters SE after their name in place of plc, AG, etc.

The lawyers say the key advantages of the new structure are that an SE would be able to operate under a single legal structure and unified management and reporting system; be able to restructure quickly; and be able to transfer corporate headquarters from one EU member state to another without having to wind-up.

The SE won’t be an option for companies setting up in the EU for the first time. It will only be available for pre-existing companies with cross-border operations. There are four ways that a business can become an SE:

– a public company based in the EU may convert to SE status if it has had a subsidiary in another member state for at least two years

– some public companies can form an SE through a merger, provided that the merging companies are based in different EU member states

– a holding SE can be established in certain circumstances provided at least two of the companies involved are based in different member states or there has been a subsidiary in a different member state for two years

– a subsidiary SE may be formed, with similar prerequisite requirements.

The rules make specific provision for either a one-tier board of directors (with an “administrative organ” or two-tier (with a management organ and a supervisory organ). Tax, competition, intellectual property and insolvency matters will be determined by the laws of the member state in which the SE is headquartered. SEs will also have to comply with national rules regarding public company accounts.

The new laws also provide for worker participation in SEs, with a formula put in place for businesses to negotiate with a specially-created workers’ representative body.