European Parliament amends proposal on private company statute

In March 2009, the European Parliament adopted the report on the Statute for a European Private Company. The objective of the proposed European Private Company (EPC) is to encourage cross-border activities of small and medium-sized enterprises. Like the European company statute, it is expected to contain provisions to protect employee involvement. Amendments proposed by the Parliament aim to avoid that companies use the EPC statute to circumvent rules on workers’ rights.

The report on the European Private Company (EPC) Statute adopted by the European Parliament on 10 March 2009 welcomes the European Commission proposal for a single set of rules for establishing a company under Community law. The EPC aims to reduce costs arising from disparities between Member States’ national laws and to facilitate the formation and operation of companies.

According to the Commission proposal, the EPC statute is suitable for any company having legal status and limited-liability share capital that does not offer its shares to the public. An EPC would be able to have its offices in any Member State and transfer it to any other Member State, without having to also move its central headquarters, as is currently required to comply with national rules.

Improvements in worker participation

The report by the Parliament also proposes amendments that are ‘essentially aimed at responding to the debates that are to be anticipated within the Council [of the European Union] and to counteract blockages within the Council’.

Compared with the Commission proposal, the Parliament’s report is more focused on ensuring that workers’ rights are not undermined. Thus, a set of amendments seek to avoid that companies use the EPC statute to circumvent such rights.

The proposed text states that each EPC should apply the rules on employee participation applicable in the Member State in which it has its registered office.

In the event of a company transfer, the rules of the country of registration shall continue to apply, unless one fourth of the employees – for companies with more than 1,000 employees – habitually work in a Member State or Member States that provide a greater level of employee participation. For companies with fewer than 1,000 workers, this threshold is set at one third of the workforce.

In this case, the Parliament’s report envisages negotiations between the management of the company and employee representatives aiming to reach an agreement on employee involvement. At this point, the report explicitly refers to the European company (Societas Europaea, SE) Directive (Directive 2001/86/EC).

Obligation to demonstrate a cross-border component

In order to avoid misuse, in particular with regard to workers’ participation, the European Parliament’s report includes the obligation for the EPC to demonstrate a cross-border component. A cross-border component could mean, for example, having a business objective covering more than one Member State or subsidiaries established in several EU countries.

The Parliament clarified that the cross-border component should not be an obstacle for the founding of an EPC. The Commission and Member States should, however, within two years of registration, conduct ex-post monitoring in order to examine whether the EPC has the required cross-border component.

Minimum capital and checks on registration

Further amendments that aim to avoid misuse relate to minimum capital requirements and checks on registration.

The European Parliament agreed that starting capital should not be an obstacle for companies. The starting capital of the EPC should be at least €1, provided that the articles of association require that the executive management body signs a solvency certificate to show that the EPC is able to pay its debts. Where the articles of association contain no provision to that effect, the minimum capital requirement would be set at €8,000.

Finally, the Parliament also proposed the lodging of documents in a European central register.

Commentary

The European Trade Union Confederation (ETUC) welcomes the report adopted by the European Parliament. ETUC Deputy General Secretary Reiner Hoffmann stated: ‘The proposal of the Parliament aims to ensure that workers’ rights are not undermined. It is a step forward and an important improvement to the draft statute presented by the Commission.’ Mr Hoffmann urges the Council to stick to the compromise of the Parliament and to ensure that the EPC statute must respect workers’ participation rights.

In the view of the European Association of Craft, Small and Medium-sized Enterprises (UEAPME), the EPC will be helpful for small and medium-sized enterprises (SMEs) only if it is designed as a fully flexible, simple tool adapted to their needs. UEAPME’s Legal Affairs Adviser, Maria Cimaglia, stated: ‘The EPC statute must be reserved to SMEs and should not be used by large corporations. This would entail the insertion of requirements that are not necessary for “real” SMEs. Consequently, the EPC would become more demanding, less flexible and not likely to be endorsed by European SMEs.’

Volker Telljohann, IRES Emilia-Romagna, Bologna

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