Societas Europaea – good but not great

It seemed a good idea, back in the days when European integration was proceeding apace and the euro was becoming the currency of so many countries. With implementation of the single market in many aspects of life in the European Union, one barrier in this increasingly borderless market was that of incorporation. To do business in what soon thereafter became 27 member states required an awful lot of paperwork. The solution was "The European Company," also known by its neutral, Latin name: Societas Europaea, legal form created in 2001 and available since 2004 – well, in eight member states; the others were slow in letting it happen. Among major listed companies, there's been a serious lack of interest, at least outside Germany. For small companies it allowed a single corporate entity to employ and conduct business. Now the European Commission has published a commentary on an "external study" – that is, conducted externally but perhaps not entirely independently – into how it works. The conclusion could be summed up as good but not great. Most worrisome is this: The statute created 27 different types of SE, not one. The commission's summary notes – sadly without the statistics and detail – that "more SEs have been set up in countries that allow only the two-tier corporate governance system, rather than in countries that allow only the one-tier system, and very few SEs are set up in countries that already allow both systems". Nonetheless, here are some "pluses" the report found:

• Transfer of seat: The European Company has made it possible for companies with a European dimension to transfer the registered seat across borders, facilitating movement and competition. It also makes tax and regulatory arbitrage easier, an aspect not particularly highlighted in this report.
  
• Organisation design: The device makes it easier to "reorganise and restructure and to choose between different board structures, while maintaining the rights of employees to involvement and protecting the interests of minority shareholders and third parties". Note the language: "while maintaining the rights of employees". The reference here is to German and Austrian co-determination rules, while can't be breached by changing legal form, though they can change the character of the board, as Puma recently did. Some see this preservation of worker rights as a drawback of the compromises that allowed the legislation to pass and contributed to its differentiated adoption in different member states.
  
• Image: The report suggests that the SE form gives companies access to a "European image and supra-national character". Perhaps it just makes small companies look bigger than they are.

Six years of experience with the SE Regulation show that "application of the Statute poses a number of problems in practice", the report suggests. "The SE Statute does not provide for a uniform SE form across the European Union, but 27 different types of SEs. The Statute contains many references to national law and there is uncertainty about the legal effect of directly applicable law and its interface with national law. Furthermore, the uneven distribution of SEs across the European Union shows that the Statute is not adapted to the situation of companies in all Member States."

Source document: The SE report is an 11-page pdf file.