Council Regulation (EC) No. 2157/2001 of 8 October 2001 on the European Company Statute (SE) and Council Directive 2001/86/EC of 8 October 2001 supplementing the European Company Statute with regard to the involvement of employees gave rise to a new legal form of Companies that may exist within the EU, namely, the European company (SE – “Societas Europaea”). These EU regulations facilitate the cross-border establishment of an SE and they came into force on 8 October 2004. Consequently, the aim of the regulations is to provide a uniform set of EU corporate law rules that would be applicable to a company incorporated as an SE seeking to operate across Europe.

According to the SE Regulation, existing public or private companies operating in different Member States, provided that they meet the requirements of the Regulation, shall be given the opportunity to convert themselves in SEs, which would infer to them certain advantages. Companies will be able to operate under a single legal structure and unified management and reporting system, to restructure speedily, and to transfer corporate head offices from one Member State to another, without the obligatory winding up of the company in the Member State where its head office was first established and re-registration of the company in a different Member State. Consequently, companies doing business in more than one Member State are given the opportunity to significantly save both time and money.

An SE may be established in the form of a European public limited-liability company, with a share capital and limited liability of its shareholders. The registered office of an SE must be situated within the Community, and the same Member State should host both the registered office and the head office. SEs and local companies are being registered on the same register, however, SE registration shall be published in the Official Journal of the EU. Accordingly, an SE shall be treated in every Member State in the same way as a public limited liability company incorporated in that Member State. Its minimum subscribed capital shall be EURO 120,000, and its name shall be preceded or followed by the abbreviation “SE”. An SE in practice for two years may be transformed into a public limited liability company in accordance with the provisions of the law of the Member State where it is registered.

Companies can be transformed into SEs, given that they pre-existed in a Member State. An SE is distinguished by the transborder element that is characterized by. Four ways have been identified as to their formation. Public limited liability companies, established according to the laws of a Member State, with registered offices and head offices in the Community, may form an SE by way of a merger, given that at least two of the parties involved are governed by the law of different Member States. Public and private limited liability companies, incorporated in accordance with the laws of a Member State, with registered offices and head offices in the Community, may establish a holding SE, given that each of at least two of them is regulated by the law of a different Member State or has for at least two years had a subsidiary company regulated by the law of another Member State or a division established in another Member State. Companies and firms created in accordance with the law of a Member State, with registered offices and head offices in the Community, may form a subsidiary SE by subscribing for its shares, provided that each of at least two of them is governed by the law of a different Member State, or has for at least two years had a subsidiary company governed by the law of another Member State or a division established in a different Member State. Public limited liability companies established under the law of a Member State with registered offices and head offices in the Community may be transformed into an SE if for at least two years it had a subsidiary company regulated by the law of a different Member State.

Accordingly, a Member State may allow a company with its head office located outside the EU, to take part in the creation of an SE given that the company is established according to the law of a Member State, has its registered office in that Member State and has a real and continuous link with that Member State’s economy.

The Regulation does not provide for taxation, competition, intellectual property or insolvency, and consequently the relevant provisions of Member State law and Community law will be applicable to such areas of law.

Upon Cyprus’s accession to the EU in 2004, the Cyprus Companies Law as well as all relevant subsidiary legislation and forms had to be amended as to include provisions on the European Company. Recently, the necessary amendments have been made and it is now possible to register Cypriot SE’s.

Cyprus is a well known international business centre and it is surely expected to become one of the most wanted jurisdictions to host SEs. The key aspect one would look for before choosing a location for an SE is the tax system of the host country. Subsequently, the tax system of Cyprus makes is an exceptionally smart and striking location for an SE, as it comprises low tax rates, which is most favorable, as well as a vast network of double tax treaties and a straight-forward, easy, and most importantly up to date tax legislation. Nonetheless, following the complete implementation of the EU Merger Directive by Cyprus, companies that pre-existed in other Member States can, by way of a merger, transform into a Cypriot SE devoid of any tax charge. Thus, the reincorporation of an SE in Cyprus may as well prove to be most profitable, advantageous and beneficial from a business perspective.

Sophie Stylianou, LL.B, LL.M
Tax & Legal Department
Email:sophie.stylianou@eurofast.com.cy
Tel. +357 22 699222