European Company (Societas Europaea, SE)

Content

A European company is a European form of business enterprise for carrying on business on a cross-border basis in the form of a limited liability company. The company is a legal entity with a share capital divided into shares. Each shareholder is liable only for the amount of the share capital that he or she has subscribed for. The share capital must be stated in Euro and must amount to a minimum of 120 000 Euro. The registered office and the head office must be in the same member state. The registered office can be transferred from one member state to another without having to dissolve the company in the first state and having to register once again in the other. Special rules apply for banks, insurance and financing companies.

Background

A body of legal rules and regulations for the EC within the company law area has been developed as a part of the implementation of the inner market. In the autumn of 2000 an agreement was accomplished both on a regulation on European companies, the Council Regulation (2157/2001/EC) and a directive on employee involvement in European companies, SE Directive (2001/86/EC). Both legal documents were adopted by the Council on 8th October 2001, and both came into force on 8th October 2004.

The Council Regulation contains references to the national legislation, applying to public limited companies in the member state where the European company has its registered office. As regards Sweden, Riksdagen (the Swedish Parliament) has passed an Act on European Companies (2004:575) and an Ordinance (2004:703) belonging to it, complementary to the Council Regulation. The Swedish act and the ordinance came into force on 8th October 2004.

Where neither the Council Regulation, the EC Directives, the Act on European Companies, nor any other legislation contain special regulations for the European companies the legislation for public limited companies in the member state where the European company has its registered office must apply, see Article 9 of the Council Regulation.

How to form a European company

A European company can be formed in five different ways. A general rule for all the different ways is that the formation must be carried out by already existing national legal entities. Natural persons cannot be founders.

1. Public limited liability companies domiciled in at least two different member states can merge and become a European company. The merger can take place either by absorption, i.e. one or more companies merge into another, or by combination, i.e. two or more companies merge by forming a new company. The Council Regulation refers to Third Council directive 78/855/EEC of 9th October 1978, the so-called Merger Directive, which includes regulations on the control by auditors and authorities that need to be exercised in connection with the merger.

2. Two or more private or public limited liability companies may together form a holding company in the form of a European company. The condition is that at least two of the companies are governed by the legislation of different member states, or that they have had a subsidiary or a branch office in another member state for at least two years. The shareholders of the participating companies must approve of the proposal to forming the holding company, and the proposal must be scrutinized by one or more independent experts (auditors) and be published in accordance with the current legislation of the member states.

3. Two or more companies can form a common subsidiary in the form of a European company. Even in this case the requirement is that at least two of the companies are governed by the legislation of different member states, and that they have had a subsidiary or a branch office in another member state for at least two years.

4. A national public limited liability company can be transformed into a European company, provided that the company has for at least two years had a subsidiary, governed by the legislation in another member state.

5. A European company may itself set up one or more subsidiaries in the form of a European company.

The general rule of the Council Regulation is that only companies which have their registered office and head office within the EEA may participate in the formation of a European company, see proposition 2003/04:112 European companies, page 119. The Council Regulation Article 2.5 gives the possibility of a member state to allow a company which does not have its head office within the EEA to participate in the formation of a European company. Section 4 in the Act on European Companies provides certain possibilities for this.

Registration

When a European Company has been formed it needs to be registered. The registration must be published through announcement in the Swedish Official Gazette (Post- och Inrikes tidningar) as well as in the Official Journal of the European Communities. Furthermore, a European company must meet certain requirements in order to be registered, e.g. as regards questions of employee involvement, see Article 12.2 – 12.4, Council Regulation. In addition the company must fulfil the general requirements stipulated for public limited liability companies in the member state in which the company has its registered office. Bolagsverket registers European companies with registered office in Sweden.

Conversion

A European company may be converted into a national public limited liability company, see Article 66 of the Council Regulation. A conversion cannot take place earlier than two years after the registration of the European company, and not until the two first sets of annual accounts have been approved.

Company name

The company name of a European company must include the abbreviation SE either before or after the company name, see Article 11, Council Regulation and Section 3, Act on European Companies. Only European companies may include the abbreviation SE in the company name. The company name shall distinctly differ from other company names, entered into the European companies register. European companies with registered office in Sweden are subject to Swedish national provisions on company names. General regulations on company names are stipulated in the Trade Names Act.

Signatory power

For European companies with registered office in Sweden provisions for respective form of business enterprise apply as regards signatory power of the administrative organ or the management organ (depending on the European company being a joint-stock banking company, an insurance company or an ordinary public limited liability company).

The provisions for limited liability companies mean inter alia that the administrative/management organ may authorize a board member, Managing Director or any other person to represent the company and sign on behalf of the company, see Chapter 8, section 37, the Companies Act. At least one of the persons authorized to represent the company and sign on behalf of the company must be resident within the EEA. The board may at any time revoke such an authorization. The administrative/management organ may further decide that the right to represent the company and sign on behalf of the company may be performed by two or more persons jointly, see Chapter 8, section 39, the Companies Act.

In accordance with Chapter 8, section 36, the Companies Act, the Managing Director is always entitled to represent the company and sign on behalf of the company, as regards his so called normal business activities.

Auditors

The provisions in Chapter 9, the Companies Act, apply to the auditors, appointed for European companies with the registered office in Sweden. Briefly the following applies: Only approved accountants, approved accountants with examination of professional competence, authorized public accountants and registered public accounting firms, registered by Supervisory Board of Public Accountants (Revisorsnämnden), are allowed to audit limited liability companies. Besides the ordinary auditors, layman auditors may be appointed. For banking companies, insurance and financing companies special provisions apply.

Structure

The decision right of the shareholders in a European company is exercised by the shareholders' meeting. The company may be structured in two different ways, a one-tier system or a two-tier system. The company itself decides which of the organisation systems must apply.

The one-tier system means that in addition to shareholders' meeting you have a decision-making organ, the administrative organ that exercises the management and administration of the company. The administrative organ almost corresponds to the board of directors in a Swedish company. In accordance with the Act of European Companies the provisions in the Companies Act and other statutes on the board or board members shall apply to the administrative organ or its board members, provided nothing else is stipulated in the Council Regulation. The administrative organ must have at least 3 members, see Section 23, the Act on European Companies. According to Section 24 of the same Act a Managing Director must be appointed by the administrative organ.

In the two-tier system the management organ is responsible for the management and administration of the company. Furthermore, a supervisory organ shall appoint and dismiss board members of the management organ, as well as supervise the work of the management organ.

The board members of the supervisory organ are appointed by the shareholders' meeting. The management organ in a European company with the two-tier system must have at least 3 members and the supervisory organ at least 5 members. A Managing Director must be appointed by the management organ. The Managing Director cannot be a member of the supervisory organ.

The provisions for a two-tier system for European companies are stipulated in Section 16-21, the Act on European Companies. Section 16 mentions that certain provisions of the Companies Act, Chapter 7-10, 16, 21, 25, 27 and 29 shall apply to the supervisory organ or its members.

In accordance with Section 17 the supervisory organ may determine that consent of the supervisory organ is needed for certain decisions made by the management organ or the Managing Director. Such a decision from the supervisory organ must be notified to Bolagsverketfor registration, and the decision is valid from the date of registration.

In Sweden it is not possible for a legal entity to be a board member in a limited liability company. This is stipulated in Chapter 8, section 10, the Companies Act. Therefore, a legal entity cannot be a board member in a European company with registered office in Sweden.

Change of registered office

According to Article 8 of the Council Regulation the registered office of a European company may under certain circumstances be transferred to another member state. Such a change does not mean that the company is wound up or that a new legal entity has been formed.

The fact that a company moves its registered office from one country to another does not mean that the creditors of the company loose their right to claim their demands against the company. Therefore, certain protection provisions for creditors in connection with transfer of the registered office of a European company are established. Provisions in this respect are described in Article 8 of the Council Regulation and in Section 8-15, the Act on European Companies.

A proposal to transfer the registered office must be drawn up by the management or administrative organ and must be published in the way which is prescribed in the country of the registered office. Section 8, the Act on European Companies, stipulates that the proposal must be notified to Bolagsverket for registration and publication in the Swedish Official Gazette (Post- och Inrikes tidningar).

In accordance with Article 8.6 of the Council Regulation a decision to transfer the registered office cannot be made until earliest two months after the publication. After the decision has been taken the company shall notify its known creditors in writing of the decision. The notification shall contain information on the rights of the creditors to obtain certain documents as well as of the possibilities of the creditors to oppose to the decision.

The creditors have the possibility to file a statement with Bolagsverket that they oppose to the decision of the transfer in connection with summons of the company's creditors, issued by Bolagsverket.

If no creditor opposes to the transfer of the registered office, Bolagsverket will give the company permit to transfer the registered office. If a creditor opposes to the transfer of the registered office, Bolagsverket shall transfer the matter to the district court (tingsrätten). Permit for the transfer may then be granted, only if the company can show that the creditors, who have opposed to the transfer, have been granted full compensation or security for the demands which have arisen before a given date.

Bolagsverket shall issue a certificate, confirming that documents and formalities needed for the transfer of the registered office have been filed with the authority. Thereafter, the company may be registered in the new country. Provisions to protect the interests of the shareholders also exist; inter alia that the decision of the shareholders' meeting to transfer the registered office must be taken with two thirds majority.

Winding-up, liquidation and bankruptcy

Provisions concerning winding-up, liquidation, insolvency and cessation of payments for European companies are stipulated in the national legislation, adopted in respective countries for public limited liability companies, see Article 63, the Council Regulation.

The registered office and head office of a European company must be located in the same state. If this requirement is not fulfilled, appropriate measures must be taken in order to remedy the situation, see Article 7 compared to Article 64 of the Council Regulation. A European company which does not comply with the requirements may be subject to compulsory liquidation. The Swedish proceedings are stipulated in Section 29, the Act on European Companies.

If the head office is situated abroad and the registered office is in Sweden, Bolagsverket must by a special decision determine that the company does not fulfil the obligations in Article 7 of the Council Regulation. When the decision has gained legal force, the company will receive an order to report a correction. The order will contain a reminder that the company will be subject to compulsory winding-up if a correction is not reported. If the company does not comply with the order, Bolagsverket shall decide on liquidation. Both decisions may be appealed with the district court (tingsrätten). A decision on liquidation may not be enforced until the decision has gained legal force.

The member state where the European company in question has its head office is also liable to react, inter alia through reporting to the member state where the registered office is situated, in the cases where it is discovered that the head office and the registered office are located in different member states.

References

The most important statutes in this area are:

• The Council Regulation (EC) No 2157/2001 of 8 October 2001 on the statute for a European Company (SE).
• The Act (2004:575) on European Companies.
• The Ordinance (2004:703) on European Companies.
• The Companies Act (2005:551).
• The Ordinance (2005:559) on Limited Liability Companies.
• The Act on Insurance Business (1982:713).
• The Ordinance on Insurance Business (1982:790).
• The Act (2004:297) on Banking Business and Financing Operations.
• The Ordinance (2004:329) on Banking Business and Financing Operations.
• The Act (2004:559) on Employee Involvement in European Companies.
• The Trade Names Act (1974:156).

Nr 21 e, 20 July, 2010