Untitled

The European Company
The European Company (‘SE’) is a legal entity offering a European

perspective for businesses. Its purpose is to allow businesses that wish
to extend their activities beyond their home Member State to operate
throughout the EU on the basis of one set of rules and a unified manage-
ment system. The book explains how to set up and organise a European
Company, as well as setting out the text of the EC instruments (a Reg-
ulation and a Directive) serving as its legal basis, and a list of national
implementing laws.
This second volume reports on the countries that have legislated during
2005 and 2006. Divided into two sections, it first offers critical review of
the usefulness of, and the opportunities presented by, this new vehicle;
analyses the Regulation and the Directive; and examines the tax aspects
of the SE. The second part reports on each of the Member States.
dirk van gerven is a Partner at NautaDutilh, Brussels, and is a

member of the Brussels Bar and the New York Bar. He has extensive
experience in all areas of corporate law, including litigation, international
arbitration, securities regulation and finance. He is Head of Continuing
Legal Education for the Dutch Speaking Bar of Brussels, a research fellow
at the University of Leuven, and has published widely in the fields of
corporate and financial law. Since 2003 he has been a member of the
Supervisory Board of the Banking, Finance and Insurance Commission
of Belgium.
paul storm is a retired partner of NautaDutilh, and is Emeritus Pro-
fessor of Law at Universiteit Nyenrode. Until 2005 he was Chair of the
Combined Committee on Company Law instituted by the Royal Dutch
Notarial Society and the Netherlands Bar Association. He is co-author of
one of the leading Dutch textbooks on business organisations.
Law Practitioner Series
The Law Practitioner Series offers practical guidance in corporate and commer-
cial law for the practitioner. It offers high-quality comment and analysis rather
than simply restating the legislation, providing a critical framework as well as
exploring the fundamental concepts which shape the law. Books in the series
cover carefully chosen subjects of direct relevance and use to the practitioner.
The series will appeal to experienced specialists in each field, but is also accessible
to more junior practitioners looking to develop their understanding of particular
fields of practice.
The Consultant Editors and Editorial Board have outstanding expertise in the
UK corporate and commercial arena, ensuring academic rigour with a practical
approach.
Consultant editors
Charles Allen-Jones, retired senior partner of Linklaters
Mr Justice David Richards, Judge of the High Court of Justice, Chancery Division
Editors
Chris Ashworth – O’Melveny & Myers LLP
Professor Eilis Ferran – University of Cambridge
Nick Gibbon – Allen & Overy
Stephen Hancock – Herbert Smith
Judith Hanratty – BP Corporate Lawyer, retired
Keith Hyman – Clifford Chance
Keith Johnston – Addleshaw Goddard
Vanessa Knapp – Freshfields Bruckhaus Deringer
Charles Mayo – Simmons & Simmons
Andrew Peck – Linklaters
Richard Snowden QC – Erskine Chambers
Richard Sykes QC
William Underhill – Slaughter & May
Sandra Walker – Rio Tinto
Books in the series
Stamp Duty Land Tax
Michael Thomas; Consultant Editor David Goy QC
Accounting Principles for Lawyers
Peter Holgate
The European Company: Volume I
General editors Dirk Van Gerven and Paul Storm
The European Company: Volume II
General editors Dirk Van Gerven and Paul Storm
Capital Markets Law and Compliance: The Implications of MiFID
Paul Nelson
VOLUME II
General editors
D I R K VA N G E RV E N
PAUL STORM
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Contents
Contributors vii
Preface ix
d i r k va n g e r v e n, NautaDutilh
Part I
The SE in its sixth year: some early impressions 3
p a u l s t o r m , NautaDutilh
Part II Application in each Member State
National reports from EU Member States

1 Bulgaria 19
r a i n a d i m i t r o va , Borislav Boyanov & Co.
2 Cyprus 63
a l e x a n d r o s t s a d i r a s , Andreas Neocleous & Co.
3 Czech Republic 85
j a n z r z av e c k ý , j a n d ě d i č , Kocian Šolc Balaštı́k
4 France 114
j e a n - m a r c d e s a c h é , Gide Loyrette Nouel
5 Greece 152
s t e f a n o s c h a r a k t i n i o t i s , Zepos & Yannopoulos
6 Ireland 174
m i c h a e l a . g r e e n e , k e av y r ya n, A&L Goodbody
7 Italy 203
f r a n c e s c o g i a n n i , Gianni, Origoni, Grippo & Partners
8 Latvia 231
d a c e s i l ava - t o m s o n e , i v e ta m i k e l s o n e , j u r g i ta
s p i g u l e , Lejinś, Torgāns & Partners
v
Contents
9 Luxembourg 252
p at r i c i a f e r r a n t e , m a r c m e y e r s , NautaDutilh
10 Malta 287
r o s a n n e b o n n i c i , Fenech & Fenech Advocates
11 Portugal 289
m a r g a r i d a p e r e i r a b a r r o c a s , Barrocas Sarmento Neves
12 Romania 315
c a r m e n p e l i , g e o r g e ta d i n u , Nestor, Nestor, Diculescu,
Kingston, Petersen Attorneys & Counselors
13 Republic of Slovenia 336
m at e j a o g r i č , j u r i j d o l ž a n, e va p e r g a r e c , Odvetniki
Jurij Dolžan, Vidmar & Zemljarič
14 Spain 362
m i g u e l l i r i a p l a ñ i o l , Uria Menéndez
National reports from EEA Member States

15 Liechtenstein 393
a n d r e a s s c h u r t i , a l e x a n d e r a p p e l , Walch & Schurti
16 Norway 411
l a r s k r i s t i a n s a n d e , Telenor
Part III Annexes
Annex Ia Council Regulation (EC) No 2157/2001 of
8 October 2001 on the Statute for a European Company (SE) 441
Annex Ib Public limited-liability companies referred to in
Article 2(1) of the Regulation 464
Annex Ic Public and private limited-liability companies
referred to in Article 2(2) of the Regulation 467
Annex II Council Directive 2001/86/EC of 8 October
2001 supplementing the Statute for a European Company
with regard to the involvement of employees 471
Annex III List of national laws implementing the
Regulation and the Directive 485
Index 491
vi
Contributors
BULGARIA Marc Meyers

Raina Dimitrova NautaDutilh
Borislav Boyanov & Co. MALTA
CYPRUS Rosanne Bonnici
Alexandros Tsadiras Fenech & Fenech Advocates
Andreas Neocleous & Co. PORTUGAL
Margarida Pereira Barrocas
CZECH REPUBLIC
Barrocas Sarmento Neves
Jan Zrzavecký
Jan Dědič Joana Neto
Kocian Šolc Balaštı́k José Aves do Carmo
José Miguel Oliveira
FRANCE Barrocas Sarmento Neves
Jean-Marc Desaché
Gide Loyrette Nouel ROMANIA
Carmen Peli
GREECE Georgeta Dinu
Stefanos Charaktiniotis Nestor, Nestor, Diculescu, Kingston,
Zepos & Yannopoulos Petersen
IRELAND SLOVENIA
Michael A. Greene Mateja Ogrič
Keavy Ryan Jurij Dolžan
A&L Goodbody Eva Pergarec
Dolžan, Vidmar & Zemljarič
ITALY
SPAIN
Francesco Gianni
Miguel Liria Plañiol
Gianni, Origoni, Grippo & Partners
Uria Menéndez
LATVIA LIECHTENSTEIN
Dace Silava-Tomsone Andreas Schurti
Iveta Mikelsone Alexander Appel
Jurgita Spigule Walch & Schurti
Lejinś, Torgāns & Partners
NORWAY
LUXEMBOURG Lars Kristian Sande
Patricia Ferrante Telenor
vii
Preface
This is the second volume of the book on the European Company or Societas
Europaea (SE). The first volume, containing general reports on the SE Regu-
lation and Directive and national reports from those Member States which had
already adapted their legislation, was published by Cambridge University Press
in 2006. The aim of this book is to present the legal framework and rules appli-
cable to the SE throughout the European Union and the European Economic
Area.
The first volume included reports from Austria, Belgium, Denmark, Finland,
Germany, the Netherlands, Estonia, Hungary, Lithuania, Poland, Slovak Repub-
lic, Sweden and the United Kingdom as well as Iceland.
Volume two contains reports from Bulgaria, Cyprus, the Czech Republic,
France, Greece, Ireland, Italy, Latvia, Luxembourg, Portugal, Slovenia, Roma-
nia and Spain, as well as the EEA countries of Liechtenstein and Norway. In
addition, a short report from Malta is included, even though this country has
yet to adapt its legislation to meet the requirements of the Regulation.
Thus, taken together, volumes one and two contain reports on the legal frame-
work in all twenty-seven EU Member States and the three EEA countries. It will
permit business leaders and lawyers to better understand the rules applicable
to the SE throughout the European Union and the European Economic Area,
facilitate comparison and help them select a country in which to incorporate an
SE in accordance with their specific project or business needs.
This book was made possible thanks to contributions from distinguished law
firms in the EEA member countries. A list of these contributors is included at
the beginning of this book.
I wish to thank not only the contributors but also all those whose names are
not mentioned herein, in particular Katherine Raab, Bianca Porcelli and Claire
Platteuw, all of whom work at NautaDutilh, for their continuing support.
Dirk Van Gerven

Brussels, 14 August 2007
ix
PA RT I
The SE in its sixth year: some early impressions
paul storm
NautaDutilh
I Implementation by Member States 3

II SEs created thus far 4
III Why opt for an SE? 6
IV Some employee participation issues 10
V Conclusion 14
I Implementation by Member States

On 8 October 2007 it will be six years since the Statute for a European Company
was adopted.1 It is early days yet to come up with an assessment, but certain
trends are already taking shape. First, however, it is worth looking at the imple-
mentation at national level of the relevant Community instruments. Although
a regulation is directly applicable throughout the EC and need – indeed must –
not be transposed into national law, Council Regulation of 8 October 2001
on the Statute for a European Company (SE) (the ‘Regulation’ or ‘Reg.’)
leaves so many options to the Member States that it was necessary for the
latter to enact their own laws to enable SEs to be registered in their terri-
tories. In addition, Article 64 Reg. imposes certain obligations on Member
States to create legislation with respect to SEs. As to Council Directive of
8 October 2001 supplementing the Statute for a European company with regard
to the involvement of employees (the ‘Directive’ or ‘Dir.’), this – of course – had
to be transposed by each Member State. Due to the extremely convoluted word-
ing of this directive, this turned out to be a very difficult and time-consuming
job. Consequently, only eight of the (then) 25 EU Member States and one of
the additional three EEA Member States managed to meet the deadline for
transposition: 8 October 2004. This was also the date on which the Regulation
entered into force and on which the first SEs could be registered in Member
States where the implementing national legislation was in place. In January
2007, Ireland was the last Member State (apart from Romania, which had just
acceded to the EU) to transpose the Directive. Thus, at the time of finalis-
ing this contribution (July 2007), 29 out of 30 EEA Member States had their
1
In the form of Council Regulation (EC) 2157/2001 on the Statute for a European company (SE)
and Council Directive 2001/86/EC supplementing the Statute for a European company with
regard to the involvement of employees.
3
SE legislation in place.2 As the national chapters in this and the previous volume
of this book show, the 32 options given to Member States by the Regulation;
the eight options given by the Directive; the 65 references to national law in the
Regulation including the very broad Article 10, plus five such references in the
Directive; and the obligations imposed on Member States to draw up their own
rules of SE-law (three by the Regulation, see Art. 64, and 10 by the Directive)
have – of course – resulted in substantial differences between the SE-laws of
the various Member States.
II SEs created thus far

In spite of the publicity provided for in Articles 13 and 14 Reg., it is impos-
sible to establish with any accuracy the number of SEs formed.3 However,
thanks to research carried out by the European Trade Union Institute (ETUI-
REHS) (Project SEEurope – Worker participation at board level in the Euro-
pean Company (SE), www.worker-participation.eu) it is reasonably safe to say
that at the end of June 2007 some 81 SEs had been formed and were still in
existence.
A quick analysis of the available data reveals a few interesting statistics. The 81
SEs in question were registered in 17 different EEA Member States. 34 were
formed in Germany,4 11 in the Netherlands,5 7 in Belgium, 7 in Austria, 5 in
Sweden and one, two or three in each of the other 12 Member States. Only to
a limited extent can these differences be explained by the respective delays in
producing implementing legislation.
From the data collected by ETUI it would appear that, of the 81 SEs, there are
around 13 ‘shelf companies’ with no activity at all,6 and around 30 SEs ‘active’
in various service industries (e.g. financial or real estate services), mostly
without any employees. According to these data, 27 SEs had no employees
2
It should be noted that, as at July 2007, Bulgaria had not passed any legislation to make use of
the options and comply with the obligations under the Regulation.
3
This is mainly due to two factors: (a) the lack of communication between the national registrars
and the Office of Official Publications of the EC, and (b) the inaccessibility of the national
registers. As to the lack of communication, experience with the European Economic Interest
Grouping (EEIG) has shown that, in spite of Art. 39(2) of the EEIG Regulation (which is in
essence identical to Art. 14 Reg.), national registrars do not always forward particulars of EEIGs
or SEs with the required punctuality, if at all, while the Office of Official Publications apparently
does not follow up glaringly incomplete communications by the registrars. Consequently, any
statistic produced by the EC on EEIGs and SEs is unreliable. About 40% of the publications
on SEs in the Supplement to the Official Journal of the EU do not even contain all of the (few)
essentials required by Art. 14 Reg. As to inaccessibility, a search for all SEs in a particular
Member State (in particular in another Member State than one’s own) is, if at all feasible, an
extremely cumbersome and costly activity.
4
Three of these transferred their registered offices to other Member States and one was liquidated.
5
Of these 11 SEs, one was transferred to Hungary, another to Germany and two were liquidated.
6
See Section IV below.
4
when they were formed. Of another 27 SEs it was not known whether they had
any employees. Only some 17 SEs appear to have more than 10 employees.
These include:
Alfred Berg SE Sweden 320 C7 Banking

8
Allianz SE Germany 133000 M9 Insurance
Conrad Holding SE Germany 2300 M Trade in electronics
Elcoteq SE Finland 7500 C Electronics manufactur-
ing services
Graphisoft SE Hungary10 250 C IT
Hager SE Germany 9500 C Electric equipment
MAN Diesel SE Germany 6400 C Metal industry
Mensch und Maschine
Software SE (MuM) Germany 350 C IT
PCC SE Germany 3750 C Chemicals, energy
Plansee SE Austria 1420 C Metal industry
SE Sampo Life Insurance
Baltic11 Estonia 120 M Life insurance
Strabag SE Germany 33000 C Construction
To these should be added five listed companies whose shareholders have already
decided to convert into an SE:
BASF Germany 65500 C Chemicals

Fresenius Germany 104000 C Medical care
Porsche Automobil Holding Germany 11500 C Automotive
SCOR France 700 C Reinsurance
Surteco Germany 2100 C Paper/Plastics
7 C means that the relevant SE was formed by conversion.

8 Where I was able to ascertain, the number represents the employees of the SE and its branches
and subsidiaries in the EU at the time of the SE’s formation. The numbers for MAN and Fresenius
are in any event for employees worldwide.
9 M means that the relevant SE was formed by means of a merger.
10 Formed in the Netherlands in 2005, it transferred its registered office to Hungary five months
later. Interestingly, Graphisoft SE was the first to form an SE by means of a division. In 2006
it spun off its real estate business to a new company, Graphisoft Park SE. The Regulation does
not provide for the formation of an SE by division, but under Art. 9(1)(c)(ii) and 10 Reg. an
SE can divide if the law of the Member State where it has its registered office allows public
limited-liability companies to do so.
11 Part of a large Finnish insurance group.
5
It is interesting to note that all these ‘large’ SEs/future SEs (except Sampo and
SCOR) have or will have their registered office in a country with some form of
employee participation.12 In addition, all of them (except Allianz, Conrad and
Sampo) were/will be formed by conversion. In the case of the three exceptions,
these were formed by merging two or more companies belonging to the same
group. Therefore, the existing regime of employee participation either did not
change at all (see Article 4(4) Dir. and Part 3(a) of the standard rules in the
annex to the Directive) or changed in favour of the companies involved in
that the number of supervisory board members could be reduced.13 In any
event, all these companies (SCOR to a lesser extent) were already familiar with
employee participation rules, an aspect of the SE that may constitute a deterrent
for companies from the 15 Member States where employee participation does
not apply to companies – other than the SE – that are not state-owned or
privatised.
III Why opt for an SE?

As discussed in my contribution to the first volume of this book, one of the
main reasons for adopting the SE Statute has always been the desire expressed
by (some) business people to have at their disposal an EU-wide corporate form
for cross-border restructurings by means of mergers. To the extent that it was
envisaged that these would be mergers between previously unrelated companies,
there is as yet no evidence that the SE is fulfilling that desire. On the contrary,
two recent developments seem to have rendered the SE redundant as a vehicle
for cross-border mergers. Both events occurred after the first volume of this
book had gone to press.
On 13 December 2005, the Court of Justice of the EC (‘the Court’) delivered
a groundbreaking judgment14 enabling all companies to merge across borders
within the EU without having to comply with the complicated and burden-
some provisions of the Regulation and the Directive. Meanwhile, on 26 Octo-
ber 2005, the European Parliament and the Council adopted the long-awaited
directive on cross-border mergers15 (‘the CBM Directive’). Member States must
transpose this Directive by 15 December 2007. It should be noted that the
12
By ‘employee participation’ I mean the influence of representatives of employees in the structure
of a company, in particular, the composition of the supervisory board or, in the case of a company
with a one one-tier board structure, the composition of the board (see Art. 2(k) Dir.).
13
German law requires a supervisory board to consist of 20 members if the number of employees
is in excess of 20,000. Under the Directive (see in particular Part 3(b) of the standard rules)
no fixed minimum applies. Both Allianz and BASF reduced their number of supervisory board
members from 20 to 12, which of course is a more manageable number. MAN Diesel reduced
the number from 12 to 10.
14
Case C-411/03, SEVIC Systems AG (‘SEVIC’).
15
Directive 2005/56/EC on cross-border mergers of limited liability companies (Official Journal,
L 310, 25.11.2005, p.1).
6
rules on employee involvement are somewhat less cumbersome under the CBM
Directive than they are under the Directive. To begin with, unlike the latter, the
CBM Directive deals only with employee participation, and not with informa-
tion and consultation. Secondly, although the participation regime laid down
in the CBM Directive is largely copied from the Directive, there are situa-
tions where under the CBM Directive this regime does not apply or where the
procedure may be simplified.16
Until 15 December 2007,17 the Court’s judgment in SEVIC applies to any
cross-border merger, tempered only by the possible application of the ‘rule
of reason’.18 The judgment essentially allows companies from different Mem-
ber States to merge if each of them complies with its own country’s law on
mergers and provided that the merger does not constitute an abuse of the rights
of shareholders, creditors or employees. For a Member State to be justified in
preventing such a merger, it would have to establish such abuse on a case-by-
case basis.19 To determine what constitutes abuse, reference may be made to the
common principles underlying the national provisions implementing Article 11
Dir. and, to some extent, those reflecting the last sentence of recital 18 of the
Directive.20
What, then, has motivated the managements and shareholders of companies to
opt for the SE so far? The Regulation requires companies that form a holding
SE or convert into an SE to publish draft terms including a report that explains
and justifies the legal and economic aspects of the SE’s formation and indicates
the implications for the shareholders and employees.21 However, due to the
inaccessibility of the national registers, in many cases (particularly in those
of smaller SEs), it is almost impossible to trace such reports and, thus, the
motives for the creation of the relevant SE. I therefore propose to give a short
survey of the motives published by the promoters of 12 of the 17 ‘large’ SEs
(or future SEs) referred to above.22 Most of these are or will be listed on a stock
exchange. It should, of course, be borne in mind that there are wide differences
in the circumstances of each company at the time of its decision to create an
SE.
16
See Art. 16 of the CBM Directive and Paul Storm, ‘Cross-border Mergers, the Rule of Reason
and Employee Participation’, European Company Law, 2006/3, pp.130–138.
17
or, in any Member State where the implementing legislation is in place at an earlier date, until
that date,
18
See the contribution referred to in footnote 16.
19
See the Court’s rulings in Inspire Art (Case C-167/01, para. 143 and operative part) and Centros
(Case C-212/97, operative part).
20
See Section IV below.
21
See Arts. 32(2) and (3) and 37(4) and (5) Reg. Strangely, no such requirement applies in the
event of formation by merger, even though it is laid down in Art. 9 of the Third Directive to which
Art. 18 Reg. refers. This casts doubt upon the exhaustive nature of Art. 20(1) Reg., which sets
out the contents of the draft terms of merger in such detail that it would appear to be exhaustive.
22
I could not trace the motives of Graphisoft, Hager, Porsche, Sampo and Surteco.
7
{ For nine out of twelve companies, the European and transnational image
of the SE figures prominently among the reasons stated (a ‘European
identity’).
{ Other abstract reasons for opting for the SE include:
• being seen to be a pioneer by adopting the new legal form
• strengthening the company’s economic, social and cultural position in
Europe
• enhancing an international and open enterprise culture
• a perception that the SE is more conducive to thinking and acting on
an international scale
• a perception that the SE helps management to concentrate on critical
strategic issues.
{ Eight companies explicitly mention simplification of the organisational
structure (e.g. a unified managing and reporting system).
{ Other business reasons include:
• enhancing corporate governance (management structure, including a
reduction of the number of management/supervisory board members)23
• enhancing efficiency and competitiveness
• facilitating the raising of capital
• involving all European employees (in these cases not just those in
Germany) in employee participation.
The future will show to what extent these motives are realistic. Personally, I tend
to question a number of them. For example, MuM expects the SE to simplify
not only its legal and organisational structures, but also its operational business.
How? Strabag states that the SE will meet Europe-wide legal acceptance and
that it will make it easier to attract capital, especially for cross-border projects.
I wonder whether banks will have more confidence in the rather obscure mix
of European and national rules governing an SE than in the familiar national
legal regimes.
Reverting to the envisaged role of the SE as an instrument for cross-border
structural change, it would seem that this motive for creating an SE has been
relevant only for Allianz, the Baltic subsidiaries of Sampo and the subsidiaries
of SCOR. Allianz SE was created through a merger between Allianz AG and
its Italian subsidiary RAS Holding SpA. Sampo merged its subsidiaries in three
Baltic countries into an SE with registered office in Estonia. SCOR SA decided
to merge some of its group companies in France, Germany and Italy to form
two more SEs, SCOR Global P&C SE and SCOR Global Life SE, each with
about 500 employees. Conversion into an SE per se has nothing to do with
cross-border structural change.
23
Interestingly, three German companies (Conrad, MuM and PCC) and one Austrian company
(Plansee) changed their board structure from two-tier to one-tier.
8
Have other reasons having to do with cross-border mobility been given? The
yield of my search for reasons is scant. Allianz and a company that wishes to
remain anonymous stated that the SE would facilitate future cross-border merg-
ers. After SEVIC and the implementation of the CBM Directive this no longer
seems to be relevant. Elcoteq, SCOR and Strabag stated that the SE would
facilitate future acquisitions, without indicating how. Only Strabag mentioned
that the SE form would simplify a transfer of seat. Under current European law
and most national laws, it is impossible for a company to transfer its registered
office to another Member State. However, under European law,24 which over-
rides national law, a transfer of the head office25 of a company under national
law is permitted. The Regulation (Article 8) expressly permits transfer of the
registered office of an SE, albeit after a rather cumbersome procedure.26 There-
fore, where a company wishes to transfer both its registered office and its head
office, the SE offers for the time being the only certain Europe-wide way to
achieve this. In fact, apart from the formation by means of a merger, the ability
to transfer the registered office is the only element of cross-border mobility
offered by the SE. It is therefore somewhat surprising that Strabag was the only
company to mention this as a motive for creating an SE. Or do companies with
many employees and a system of employee participation fear that industrial
unrest will ensue if they state that one of their motives for opting for the SE is to
transfer their registered office and, by implication, their head office to another
Member State?
Tax considerations have not been mentioned by any of these ‘large’ SEs. To the
extent that they were formed by way of conversion, the reason is obvious: there
was no change in the tax position. In the case of Allianz (the merger with RAS
Holding SpA), tax issues do not seem to have posed serious obstacles. However,
it is not known whether they were a motive for the formation of the SE.27 Tax
considerations may well have played a very significant part in the formation of
the more than 60 SEs that have kept themselves out of the limelight.
My conclusion from the foregoing is that, on the rather scant evidence available
so far and contrary to expectations, cross-border mobility does not appear to
be the driving force behind the formation of SEs. Rather, the motives are of a
more abstract (image) and/or an organisational nature.
24
See Chapter 1 of the first volume of this book, p. 5 and 6.
25
Also called ‘real seat’, see Chapter 1 of the first volume of this book.
26
As has been shown on at least seven occasions, the difficulties can be overcome, but this was
achieved by SEs that probably did not have any employees (the exception being Graphisoft
SE which, with some 250 employees, transferred its registered office from the Netherlands
to Hungary). The other SEs that transferred their registered offices are Afschrift SE (from
Belgium to Luxemburg), Joh. A. Benckiser SE (from Germany to Austria), BIBO Zweite
Vermögensverwaltungsgesellschaft SE and Bolbu Beteiligungsgesellschaft SE (both from
Germany to Wales), Jura Management SE (from the Netherlands to Germany) and Narada
Europe SE (from Norway to the UK).
27
See Chapter 4 of the first volume of this book.
9
IV Some employee participation issues

In my chapter in Volume 1 of this book, I addressed the possibility of avoidance
of employee participation in an SE. As the data collected by ETUI show, at
least one-third but probably well in excess of half of the 81 SEs covered by
the research have no employees. At least 13 have no activities at all and seem
to have been formed for the purpose of being sold to parties that either do not
meet the prerequisites for forming an SE or have no time (or think they have no
time) to create, and negotiate with, a special negotiating body (‘SNB’). Another
possibility is that such parties do not wish to comply with the rules on employee
involvement. They might contemplate purchasing the shares of a ‘shelf SE’ in
order to avoid the creation of an SNB and then causing the empty SE to acquire
a company with a large number of employees or the assets and employees of
such a company. One could also think of a company with employees setting up
in different Member States two subsidiaries without employees, causing these
subsidiaries to form an SE by means of a merger, and then causing that SE
to acquire a company with many employees. It should be noted that for the
purposes of creating an SNB only the employees of the ‘participating compa-
nies’ and their ‘concerned subsidiaries or establishments’28 are relevant, and
not any employees of the parent company or of other companies in the same
group.
What restraints can be put in place against these mischievous but of course
purely academic ideas? Let us first consider the scenario of the formation of an
SE by companies that have no employees at all. In that event, it is impossible to
comply with Article 3 Dir., which requires the participating companies to take
the necessary steps as soon as possible to start negotiations with the representa-
tives of the companies’ employees. However, Article 12(2) Reg. provides that
an SE may not be registered unless negotiations with those representatives have
resulted in some (positive or negative) outcome. Does the absence of employees
in the participating companies/company imply that the SE cannot be registered?
Or does it not make sense to require the creation of, and conduct of negotiations
with, an SNB when there are no employees?
At the request of the Hans Böckler Stiftung, a foundation allied to the Ger-
man trade unions, the German professor Dr Thomas Blanke has written a legal
opinion29 on ‘Reserve-SE’s’ (shelf SEs) in which he concludes that such an
SE without employees cannot ‘acceptably’ be registered. His principal argu-
ment appears to be that, according to the express wording of Article 12(2) and
(3) Reg., providing for employee involvement is a mandatory prerequisite for
28
See Art. 2(b) and (d) Dir.: ‘participating companies’ means the companies directly participating
in the establishing of the SE and ‘concerned subsidiary or establishment’ means a subsidiary or
establishment (branch) of a participating company which is proposed to become a subsidiary
or establishment of the SE upon its formation.
29
Publication 2005, nr 161 of the Hans Böckler Stiftung.
10
registration. This seems to be a petitio principii that ignores the fact that there
are no, and may never be, employees to negotiate with. In addition, Article
12(3), quoted by Professor Blanke, provides for the possibility of registering
an SE without employees in that it expressly provides for an exception to the
requirements laid down in Article 12(2) for registration of an SE30 in the event
that none of the participating companies had been governed by participation
rules prior to the SE’s registration.31
What Professor Blanke in fact appears to aim at is the conclusion of some
agreement, prior to the registration of the SE, which lays down procedures for
‘renegotiation’ of that agreement in the event that the ‘Reserve-SE’ is activated
at some time in the future. However, Professor Blanke does not explain with
whom the participating companies should conclude such an agreement. This
very problem seems to be the reason why he considers registration of an SE
without employees to be ‘unacceptable’ (he stops short of finding it impossible).
As I will show below, the aim pursued by Professor Blanke has been largely
achieved by way of legislation of the Member States.
It should be noted that, according to ETUI’s data, there has been at least one
case, in Germany, where the registration of an SE was refused on the ground
that the company in question (which wanted to register as a subsidiary SE)
could not submit an agreement on the involvement of employees because it
had no employees.32 On the other hand, the commercial registry court in Berlin
accepted the registration of Go East Invest SE, which had no employees, ruling
that the objects of the SE could be achieved by the chairman of the management
organ, without any employees being required.33 Meanwhile, courts in Aachen,
Berlin, Dusseldorf and Munich also accepted the formation of SEs without
employees. In addition, such SEs were formed in a number of other Member
States, including Austria, the Netherlands, Norway and Sweden. It should be
borne in mind, however, that the absence of employees in an SE does not
necessarily mean that there were no negotiations with an SNB. The participating
companies and their ‘concerned subsidiaries or establishments’ may have had
employees from among whom an SNB was elected. This can only apply where
the ‘empty’ SE was formed as a holding or a subsidiary (Article 2(2) and (3)
Reg.). Where an SE was formed by means of a merger or by conversion and
started without any employees, it by definition follows that the participating
30
In a Member State that has made use of the option referred to in Art. 7(3) Dir. Incidentally, in
so far as I have been able to ascertain, no Member State has made use of this option.
31
Apparently, in that event there is no requirement that there be any arrangement for other forms
of employee involvement.
32
Zoll Pool Hafen Hamburg SE which, in 2005, was intended for the custom clearance of transit
containers. In the end, it was decided to form an AG instead.
33
The objects were the giving of advice on (re)location of industrial sites and development of
new markets, as well as the provision of services on site in the Middle East and the Far East.
11
companies or the converted public limited-liability company, as the case may

be, cannot have had employees at the time the SE was formed.
As stated above, there may well be some 50 SEs without any employees and
probably more without any employee participation. Is this a justified reason for
concern among those who are anxious to defend employees’ rights to involve-
ment in the SE? I do not think so, because all Member States have either some-
how implemented Article 11 Dir. or created some provision reflecting the spirit
of the last sentence of recital 18 to the Directive.34 Article 11 reads as follows:
‘Misuse of procedures
Member States shall take appropriate measures in conformity with
Community law with a view to preventing the misuse of an SE for the
purpose of depriving employees of rights to employee involvement or
withholding such rights.’
The last sentence of recital 18 to the Directive reads:
‘Consequently, that approach [securing employees’ acquired rights as

regards involvement in company decisions] should apply not only to the
initial establishment of an SE but also to structural changes in an existing
SE and to the companies affected by structural change processes.’
On close analysis, there is not all that much difference between these two
provisions. In fact, ‘structural changes’ is a neutral term covering all changes
whether or not made with the intention of depriving the employees of their
rights, and therefore includes ‘misuse’. Consequently, many Member States
focus on changes/structural changes rather than misuse. Both misuse and
structural change may take place prior to and after registration of the SE. In the
scenario of misuse referred to in the first paragraph of this section (section IV),
the intention of depriving employees of their rights will have arisen prior to
registration of the SE but the relevant action (e.g. in the form of the acquisition
of a company with a substantial number of employees) will have taken place
after the SE’s registration. In such a case, as well as in all bona fide cases
where the idea to acquire a company with a large number of employees arises
only after the SE has been formed, the call for corrective measures will only be
made after registration. I will therefore first deal with cases where the demand
for correction is made after registration of the SE.
Structural changes, as well as misuse, may take various forms. The first one
that comes to mind is a substantial increase in the number of employees after
the representative body has been established, as a result of which the ‘new’
employees are not properly represented. In fact, many national implementing
laws include a significant change in the number of employees of the SE and its
34
See Chapter 1 of the first volume of this book, page 22.
12
subsidiaries or establishments in the definition of ‘structural changes’, or put

the two on a par. Many Member States specify that a change is ‘structural’ or
‘essential’ where after the change the employees do not have the involvement
rights (e.g. the number of representatives on the SNB or the representative
body) they would have had if the change had occurred prior to registration of
the SE and the rules applicable to the formation of the SE (negotiations with
an SNB, etc.) had been complied with. 1135 of the 1936 EEA Member States
that focus only on misuse (10) or apply both misuse and structural changes as
criteria for corrective measures (9), have introduced a rebuttable presumption
of the existence of misuse whenever a change/structural change occurs within
one37 year of registration of the SE. In all cases the consequence of misuse
is that the SE must start (new) negotiations with a newly composed SNB or
representative body. At least 11 Member States38 that focus on misuse provide
for criminal sanctions. In the case of structural change without misuse (or
presumption of misuse), new members of the representative body must be
appointed or elected or the seats must be reallocated between representatives of
the relevant Member States. I refer to Chapter 1 in Volume 1 of this book (page
23) to remind the reader of the tax risk connected with any change in employee
participation caused by the formation of an SE involving a German company.
15 EEA Member States39 provide for measures in the event of misuse or
structural changes prior to registration of the SE. Such measures can range
from a reallocation of seats in the SNB to new negotiations or even criminal
sanctions.40
I would emphasise that in this day and age an employer of a large workforce, in
whichever Member State his enterprise may be located, cannot allow himself
to ostensibly misuse an SE for the purpose of depriving his employees from
involvement rights. What may well happen, however, is that shortly after an
SE has been formed an opportunity presents itself for an important acquisition
involving many employees. In such an event the entrepreneur and his advisers
must be aware of the rules and of the risks attached to non-compliance.
It will be clear from the above that even on these two issues (Article 11 Dir.
and recital 18 to that directive) no two Member States have made the same
35
Austria, Denmark, Estonia, Finland, Germany, Luxembourg (non-rebuttable presumption),
Sweden, the UK, Iceland, Liechtenstein (non-rebuttable presumption?) and Norway.
36
Apart from the ones referred to in the previous note, these are Cyprus, Greece, Ireland, Italy,
Lithuania, Malta, Poland and Spain. In Lithuania all essential changes occurred ‘shortly’ after
formation of the SE are taken into account.
37
In the case of Denmark two years.
38
Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Iceland, Luxembourg, Poland
and Spain.
39
Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Estonia, the Netherlands, the Slovak
Republic, Slovenia, Spain, Sweden, the UK, Iceland, Liechtenstein and Norway.
40
Criminal sanctions in Slovenia in addition to the countries referred to in note 37.
13
implementing provisions. The same applies with respect to almost all other pro-
visions of the Directive. The implementing Acts, decrees or other instruments
vary enormously in size and detail. The shortest one (the Norwegian) comprises
31 articles and some 4,100 words, the longest one (the British) 37 provisions
and some 10,600 words. It will therefore always be necessary to consult local
lawyers in all Member States where there are participating companies or
‘concerned subsidiaries or establishments’.
V Conclusion
It is my impression that European businesses are still testing the waters and
that the massive hunt for the €30,000 million annual savings in legal and
administrative costs41 has not yet started. Nevertheless, some major businesses
have adopted the new legal form, most through conversion, some by means of
a merger with a group company. To them, employee participation was familiar
and therefore no deterrent. Their choice for the SE form appears not so much
to be inspired by a desire for cross-border mobility as by more abstract (a
‘European identity’) and organisational considerations.
Looking at where – i.e. in which Member States – SEs of any significant size
have thus far been registered (mainly in Germany), it seems fair to conclude that
employee participation still remains an obstacle for many large companies that
are not already familiar with this phenomenon. The scope for escaping employee
participation is very limited. The SEs that have escaped so far appear, for the
most part, to exist on the fringes of the European business community.
Under Article 15 Directive, the Commission must, by 8 October 2007, in consul-
tation with the Member States and with management and labour at Community
level, review the procedures for applying the Directive, with a view to proposing
suitable amendments ‘where necessary’. It would be helpful if the Commission
proposed some simplification of the very complicated procedures under the
Directive and clarify a number of ambiguities some of which I mentioned in
my chapter in Volume 1. The Commission cannot compel Member States to
bring more uniformity in their implementing laws, but it can and must compel
Member States to amend or supplement their laws where these are not com-
plying with the Directive. Article 69 of the Regulation calls for a report on the
application of the Regulation and proposals for amendments by 8 October 2009
‘at the latest’. It would appear that experience with the SE is not yet sufficiently
widespread to require any amendments being proposed already in 2007.
41
See Chapter 1 in Volume One of this book, page 15.
14
PA RT I I
Application in each Member State
National reports from EU Member States
1
Bulgaria
r a i n a d i m i t r o va
Borislav Boyanov & Co.
I Introduction 20
II Formation 22
1 General remarks 22
A Founding parties 22
B Name 23
C Registered office and transfer 24
D Corporate purpose 25
E Capital 25
2 Different means of formation 26
A Formation by merger 26
B Formation of a holding SE 29
C Formation of a subsidiary SE 30
D Conversion into an SE 31
3 Acts committed on behalf of an SE in formation 32
4 Registration and publication 32
5 Acquisition of legal personality 33
III Organisation and management 34
2 General meeting of shareholders 34
A Decision-making process 34
B Rights and obligations of shareholders 36
3 Management 38
A One-tier management system 38
B Two-tier management system 40
C Liability of management 43
D Additional requirements for the management of a
public AD 43
IV Employee involvement 44
V Transposition of the Directive of 8 October 2001 45
VI Annual accounts and consolidated accounts 47
1 Accounting principles 47
A Non-application of the requirement to prepare
consolidated accounts 49
B Annual report 50
2 Auditor 51
VII Supervision by the national authorities 52
19
VIII Dissolution 53
1 Winding up 53
2 Liquidation 53
A Liquidation rules 53
B Commencement of liquidation 53
3 Insolvency proceedings 54
4 Cessation of payments 57
IX Governing law 57
X Tax treatment 57
1 Income Tax 57
A Profit and income from sources inside Bulgaria 58
B Special provision implementing the Regulation with
regard to the transfer of the registered office of an SE 59
2 Other taxes 61
XI Conclusion 61
I Introduction
Council Regulation (EC) No 2157/2001 on the Statute for a European com-
pany (the ‘Regulation’) has been directly applicable in Bulgaria as of 1 January
2007, while Council Directive 2001/86/EC of 8 October 2001 supplementing
the Statute for a European company with regard to the involvement of employees
(the ‘Directive’) has been transposed into national law by the Law on Informa-
tion and Consultation with Employees in Multinational Undertakings, Groups
of Undertakings and European Companies of 2006 (‘LICE’), which entered
into force on 1 January 2007.
In compliance with the Regulation, an SE that has its registered office in Bulgaria
shall be treated in Bulgaria as an akzionerno druzhestvo (a joint stock company,
JSC or AD),1 formed in accordance with Bulgarian law. This follows from
Council Regulation No 1791/2006 of 20 November 2006 adapting certain EU
regulations and decisions, including those in the field of company law, by reason
of the accession of Bulgaria and Romania to the EU.2
In determining Bulgaria’s aim to become an EU Member State, acceptance of
the acquis communautaire started. Thus, most national legislation currently in
effect corresponds to the regulations and directives in force within the European
Union, and the accession of Bulgaria on 1 January 2007 to the European Union
was the step needed to confirm the conformity of Bulgarian law with Community
legislation.
1
The Bulgarian abbreviation for an AD.
2
Amending Annex I to the Regulation to include the AD and Annex II to the Regulation to include
the AD and the limited-liability company (OOD).
20
Bulgaria
The Bulgarian legislature has not adopted a special law to implement the Regu-
lation or enacted any statutory provisions applying expressly to SEs registered
in Bulgaria and implementing the options provided for in the Regulation. As
of June 2007, there was no bill to that effect pending before Parliament or any
officially stated intention to introduce such a bill. However, the Commerce Act,
applicable to commercial companies including the AD, and the Public Offer-
ing of Securities Act, as a lex specialis covering national public companies
offering their securities to the public, already regulate most of the matters cov-
ered by the options contained in the Regulation. Pursuant to Article 9(1)(c)(ii)
of the Regulation, these national acts shall apply to all SEs registered in
Bulgaria.
It should also be noted that the options contained in Articles 2(5), 8(5), 8(14),
12(4), 19, 34, 39(2), 39(3), 48(2), 50(3) and 59(2) of the Regulation have not
been transposed into Bulgarian law.
In Bulgaria, issues surrounding the incorporation, existence and winding up
of companies, in particular joint-stock companies, are regulated mainly by the
following laws:
• The Commerce Act of 1991 as amended (‘CA’) – the main legislation

regulating the legal status of companies and their incorporation, as well
as mergers, conversions, acquisitions, the sale of shares in limited-liability
companies and joint stock companies, the transfer of ongoing concerns,
commercial transactions, insolvency proceedings, etc.
• The Commercial Register Act of 2006 (‘CRA’) – this legislation will
enter into force on 1 January 2008 and will regulate the registration of
companies, the Commercial Register, etc.
• The Obligations and Contracts Act of 1950 as amended (‘OCA’) – this law
covers all matters not covered by the Commerce Act, as well as transfers of
assets, transfers and novation of contracts, assignment, etc. It also governs
some general issues, such as the invalidity of civil contracts.
• The Public Offering of Securities Act of 1999 as amended (‘POSA’) –
this law regulates the legal status and special requirements applicable to
publicly traded joint stock companies, the procedures for acquiring their
dematerialised shares, the obligation to launch a tender offer once certain
shareholding thresholds have been reached, etc.
• The Labour Code of 1986 as amended (‘LC’) – this law regulates
all aspects of the employer-employee relationship, the organisation of
employees and employers, etc.
• The Law on Information and Consultation with Employees in Multina-
tional Undertakings, Groups of Undertakings and European Companies
of 2006 (‘LICE’) – this law implements in Bulgaria the Directive of 8
October 2001 supplementing the Statute for a European company with
regard to the involvement of employees.
21
The abovementioned laws are supplemented by relevant secondary legisla-

tion, i.e. ordinances adopted in implementing specific provisions. In addition, it
should be noted that other legislation sets out additional rules and requirements
for specific types of companies with respect to their activities, i.e. the Insurance
Code, the Credit Institutions Act, the Special Purpose Investment Companies
Act, etc.
II Formation
1 General remarks
A Founding parties
Pursuant to the Regulation, only a joint stock company (‘AD’) shall be con-
sidered a public limited-liability company in Bulgaria (Art. 2(1) Reg.). An AD
is a company whose capital is divided into shares (which can be either regis-
tered or dematerialised). The AD is a traditional example of a capital company.
One of the features of the AD (which is not obligatory, as all shares in an
AD can be held by a single shareholder) is that many of its shareholders are
often legal entities. An AD is not liable for the obligations of its shareholders,
and the shareholders are only liable for the obligations of the AD up to the
amount of their participation in the AD’s share capital. As a rule, shares in
an AD may be transferred freely. However, POSA provides for certain obliga-
tions to be performed by shareholders that acquire registered shares in a public
company.
According to the Bulgarian legislation in force, there are two main types of
ADs:
(i) the so-called classic AD under the CA – shares in such an AD are in
materialised form; the regulatory framework is much less restrictive and
shareholders have no special obligations;
(ii) the public AD under POSA – shares in such an AD are dematerialised; the
AD may not issue preferred shares entitling their holder(s) to more than
one vote or to an extra share of the liquidation proceeds in the event of
winding up; additional requirements and procedures exist for the transfer
of shares, the decision-making process, etc. According to POSA, a public
AD is an AD (i) which has issued shares in the context of an initial public
offering; (ii) whose shares have been registered with the Financial Super-
visory Commission (‘FSC’) for the purpose of being traded on a regulated
securities market; or (iii) which had more than 10,000 shareholders on
the last day of two consecutive calendar years. Public companies must be
registered in the FSC’s registry of public companies and other issuers of
securities. Any newly incorporated or surviving company that has become
public as the result of a merger involving a public company is also subject
to this registration requirement.
22
Bulgaria
The transfer of shares in an AD (provided the shares are not dematerialised)

is a very simple procedure and requires no registration with a governmental
authority, thus no fees need be paid.
The AD allows for various flexible instruments to be issued in order to attract
investors, such as corporate bonds and special types of shares (e.g., non-voting
shares where the investor acquires a stake in the capital but has no say in the
management of the company, shares with a fixed dividend or shares with a right
of redemption by the company, etc.)
An AD may be incorporated by one or more natural persons or legal entities by
way of an incorporation meeting; the incorporation must be certified by signing
minutes. The incorporation meeting must (i) adopt articles for the company
and (ii) elect a supervisory board (if the company has a two-tier management
structure) or a board of directors (if it has opted for a one-tier system).
After execution of the requisite documents and as soon as the capital (or at least
25% thereof for a non-public AD) has been deposited with a bank in Bulgaria, an
application shall be submitted to the regional court of the place where the AD’s
registered office is located. An AD is deemed established upon the issuance of
a court order calling for its registration with the court’s commercial register.3 If
the company is a public entity, it must also be registered with the FSC’s register
of public companies and other issuers of securities.
Bulgarian law does not allow a company with its head office outside the EU
to participate in the formation of an SE in Bulgaria unless the conditions listed
under Article 2(5) of the Regulation are fulfilled.
B Name
In general, the corporate identity of an AD must indicate: (i) its name; (ii) the
address of its head office and registered office; (iii) its company number; and
(iv) its BUSLTAT registration number. An AD’s name must be unique, i.e. no
two ADs can have the same name in the district of the regional court where the
AD’s head office and registered office are located. After the entry into force of
the new CRA, the name of an AD must be unique throughout Bulgaria.
An AD must include the abbreviation ‘AD’ and other identifying information
on all corporate documents. This obligation also applies to other forms of
communication, such as websites, email and other audio-visual means.
3
On 1 January 2008, a new Commercial Register Act shall enter into force. According to
the new act: (i) the commercial register shall be kept by the Registry Agency of the Min-
istry of Justice and publications in the State Gazette shall no longer be made; (ii) all applica-
tions may be submitted via the Internet; and (iii) actions by officials shall be subject to over-
sight by the respective regional courts further to a request by an interested party or a public
prosecutor.
23
Bulgarian law does not contain any specific rules regarding an SE’s name.
However, according to the Regulation (Art. 11(1)), the name of an SE must
consist of the company’s name preceded or followed by the abbreviation
‘SE’.
C Registered office and transfer
The head office of an AD is the place (i.e. city or village) where its registered
office is located. Under the CA (Art. 12), the head office of a company is the
place where its effective management is located. The official address of an AD
is the address of its management. Consequently, the registered office is the place
where an AD’s central management and administration are located. Bulgarian
law does not allow the head office and registered office of an AD (including
SEs) to differ from the place of its effective management.
An AD is established by way of registration with the commercial register kept
by the regional court of the place where its head office is located.
Under the new CRA, the Commercial Register shall take the form of a standard
centralised electronic database operated by an information system. Registration
shall be based on the location of the company’s head office.
With respect to the transfer of a company’s head office and registered office,
there are two possibilities:
(i) transfer of the head office and/or registered office of an AD to a location
within the jurisdiction of the same regional court – an application to the
regional court where the head office is located must be filed and the court
shall register the new head office and/or registered office;
(ii) transfer of an AD’s head office and registered office to a location outside
the jurisdiction of the regional court where it is registered – an application
with the regional court where the AD’s head office was located prior to
the transfer must be filed; the court shall register the new address and
send the company’s file to the regional court within whose jurisdiction
the new head office and registered office are located.
The procedure to transfer the head office and registered office is standard. It
should be noted, however, that such a transfer must be approved by the general
meeting of shareholders by a two-thirds majority of the share capital represented
at the meeting, provided at least half the company’s share capital is present or
represented.
Bulgaria has not adopted specific provisions designed to protect minority share-
holders who oppose the transfer of an SE’s registered office (Art. 8(5) Reg.).
In view of the above rules, however, shareholders representing more than one-
third of the share capital of an AD can block a resolution to transfer its head
office and registered office.
24
Bulgaria
Publication of the transfer proposal may be proved by producing a copy of the

State Gazette containing the relevant information. With the entry into force of
the CRA, publication in the State Gazette shall be replaced by the filing of an
announcement of the proposal with the Commercial Register.
Article 8(14) of the Regulation has not been transposed into Bulgarian law,
i.e. the Bulgarian authorities are not entitled to oppose the transfer of an SE’s
registered office on grounds of public interest.
D Corporate purpose
Bulgarian law does not contain any specific provisions regarding the corporate
purpose of an SE. According to general rules of Bulgarian company law, a
company may be formed for any commercial purpose.
E Capital
Bulgaria has not yet joined the economic and monetary union. Therefore, in
accordance with the option contained in Article 67(1) of the Regulation, the
share capital of an SE with its registered office in Bulgaria must be expressed in
Bulgarian lev (BGN).4 According to the Regulation (Art. 4(2)), the subscribed
share capital of an SE may not be less than €120,000. Consequently, the capital
of an SE registered in Bulgaria must be expressed in Bulgarian lev (i.e. a
minimum of BGN 234,700) but may also be expressed in euros.
The capital of an AD is divided into shares, with the minimum nominal value
of one share being BGN 1. The capital must be fully subscribed. An AD may
not subscribe for its own shares. Should this prohibition be violated upon the
incorporation of an AD, the founders shall be jointly liable for the subscribed
shares. If any person subscribes for shares on behalf and at the expense of an
AD, the shares in question shall be deemed to be purchased entirely at the
expense of that person. Before submitting an application for registration with
the court, at least 25% of the value of each share must be paid up.
With respect to the incorporation of a public AD, an initial public offering
(IPO) of securities must be made. An IPO is an offer of securities made to 100
or more persons or to an unrestricted circle of persons in any form and by any
means whatsoever, in which sufficient information on the terms of the offer and
the securities to be offered is presented so as to enable investors to decide to
subscribe to or purchase the securities (a special prospectus must be issued and
approved by the FSC).
Special legislation, such as the Special Purpose Investment Companies Act,
the Insurance Code, the Credit Institutions Act, etc. may provide that a higher
4
In accordance with the Bulgarian National Bank Act of 1997, as amended, the fixed exchange
rate of the Bulgarian lev (BGN) to the euro (EUR) is BGN 1.95583 to EUR 1.
25
percentage of the share capital must be registered and paid up in the case of
banks, insurance companies, etc. (Art. 4(3) Reg.).
2 Different means of formation

A Formation by merger
Annex I to the Regulation lists only a joint stock company (akzionerno druzh-
estvo or AD) with reference to Bulgaria. Therefore, only this type of company
can form an SE by merger in Bulgaria, provided the requirements of Article
2(1) of the Regulation have been met.
Matters concerning the formation of an SE by merger which are not covered by
the Regulation shall be governed by the provisions of national law applicable
to mergers involving public limited companies.
Two types of mergers may be performed under Bulgarian law: (i) a merger by
absorption (one or more companies merge into another (acquiring) company,
which becomes their legal successor while the merged entities cease to exist)
or (ii) a merger by incorporation (two or more entities combine to establish a
new one, which becomes their legal successor and all of the combined entities
cease to exist). In both cases, liquidation does not occur.
If at least one public AD is involved in a merger, the surviving AD or the new
AD, as the case may be, shall also be a public company. The registration of
such a merger with the commercial register is allowed only after presentation
of the FSC’s decision approving the merger.
Bulgarian law does not contain express rules in the event of a merger between
an SE and an AD. However, the legislation may be interpreted to provide that
an SE shall be considered an AD and, therefore, the rules governing a merger
between two ADs and the provisions of the Regulation shall apply.
Due to the harmonisation of Bulgarian law with the EU merger rules, the pro-
cedure in Bulgaria to perform a merger follows on the whole the same statutory
requirements.
Prior to taking a decision on the merger, the companies involved must enter
into a merger agreement. In accordance with the Regulation (Art. 20), the
management bodies of the companies involved in the merger shall draw up
draft terms of merger.
Currently, Bulgarian law requires publication in the State Gazette of a notice
that the merger proposal (merger agreement) has been filed with the competent
commercial court at least 30 days prior to the date of the general meeting(s)
scheduled to vote on the merger. According to the new CRA, presentation of the
required information on the draft terms of merger to the commercial register
shall be sufficient. In view of the lack of any special provisions in the CRA
26
Bulgaria
and the CA, and taking into account the Regulation’s requirement (Art. 21)
regarding publication in the national gazette, it can be concluded that since the
Regulation has direct effect, the companies involved in the merger can effect
publication in the State Gazette.
Bulgarian law does not regulate the issuance of a certificate attesting to the
completion of all pre-merger acts and formalities. Under the CA, the merger
agreement should be signed by persons authorised to represent the companies
involved and their signatures notarised. The merger agreement is subject to
review by an auditor appointed by each company involved in the merger or by
common accord of the companies involved. The court or Registration Agency
(after 1 January 2008) may also appoint a single auditor for all companies.
The auditor must review the merger documents and to prepare a report on the
share-exchange ratio.
Notwithstanding the possibility provided for by Article 31(2) of the Regulation,
the CA requires a merger agreement (plan) and an auditor’s report for each
merger.
The auditor’s report cannot replace the certificate attesting to the completion
of all pre-merger acts and formalities. Consequently, in the absence of special
rules in Bulgaria and pursuant to Article 25(2) of the Regulation, a notary must
issue a certificate conclusively attesting to the completion of all pre-merger acts
and formalities. Pursuant to Article 27(2) of the Regulation, a merger certificate
from the competent court registry is required to record an SE in the national
(court) register.
Under Bulgarian law, the formation of an SE by merger must be approved by a
qualified majority of at least three-quarters of the voting shares represented at
the general meeting(s) of the companies involved. If the AD (SE) has different
classes of shares, the decision must be approved by each class.
Bulgarian law does not allow the national authorities to oppose the participation
of a Bulgarian company in the formation of an SE by merger (Art. 19 Reg.).
However, certain rights are granted with respect to the approval of business
transactions (such as mergers) to some special authorities, such as the FSC, the
Competition Commission and the Bulgarian National Bank if the participants
in a merger are companies whose activities are regulated by special legislation,
e.g. banking, insurance, etc.
(i) Protection of minority shareholders

The CA contains several rules designed to protect minority shareholders in the
event of a merger (Art. 24(2) Reg.).5
5
Applicable in the case of a merger with an AD or an SE.
27
Any shareholder can appeal the merger before the courts for violation of the
merger rules if it feels that its interests have been impaired (e.g., lack of a
merger agreement, violation of the applicable statutory provisions, the merger
decision contradicts the company’s articles, etc.). Such an appeal can be filed
until registration of the merger, at the latest. If an appeal is lodged, the merger
cannot be registered.
After the merger date, any shareholder can file a claim to invalidate the newly
established company under the general rules set forth in this regard in the CA.
Such an action can also be brought for violation of the rules of law or provi-
sions of the company’s articles that pertain to convening the general meeting
at which the merger decision was taken (if the petitioner did not attend this
meeting).
In view of the provisions of Article 30(1) of the Regulation, however, this sort of
action cannot be brought in the case of an SE registered in Bulgaria. However,
Article 30(2) of the Regulation can be applied for violation of Articles 25 or 26
of the Regulation.
Within three months from the date of the merger, any shareholder can file a
claim for cash settlement, against the newly established or acquiring company,
as the case may be, if it considers the exchange ratio in the merger agreement
to be unreasonable.
In essence, minority shareholders who voted against the merger may request
redemption of their shares. A shareholder may exit the company by giving
notarised notice to the company within three months from the date of the merger.
Such a shareholder is entitled to receive the cash value of its shares, determined
in accordance with the share-exchange ratio stipulated in the merger agreement,
and can also seek a cash settlement, as mentioned above.
(ii) Protection of creditors

The CA does not contain special rules for the protection of creditors of an SE
formed by merger; however, it does contain rules designed to protect creditors in
general in the event of a merger. The newly established or acquiring company is
obliged to manage the assets of each company involved in the merger separately
for a period of six months after registration of the merger. Within this same
six-month period, any creditor of a participating company can request either
satisfaction of its claim or security.
Registration of the merger is done by the regional court with jurisdiction over
the acquiring or newly established AD. Registration may not be made within
14 days following the filing date. Any changes to the articles, capital, etc. of
the acquiring company or newly established AD are also subject to registration.
Bulgarian law does not allow the possibility provided for by Article 12(4)
28
Bulgaria
of the Regulation, i.e. the general meeting is the only body that can amend
the company’s articles. According to the general rules of Bulgarian company
law, a clause in a company’s articles that violates a statutory provision shall
be deemed null and void and shall be replaced by operation of law with the
respective statutory provision.
If a public AD is involved in the merger, the FSC’s approval must be obtained
before registering the changes with the commercial register. To this end, the
FSC will examine the agreement, reports and any other documents necessary.
Pursuant to Article 12 of the Regulation, an SE must be registered in the Member
State in which its registered office is located. According to Article 27 of the
Regulation, the merger and subsequent formation of the SE become effective
only upon registration.
If the assets of the non-surviving companies include real property and/or mov-
ables subject to registration formalities, the respective pre-registrations and
recordations in the relevant registers should be made.
Any permits, licences or concessions held by the companies that shall cease to
exist shall be transferred to the newly established or acquiring AD.
B Formation of a holding SE
Pursuant to Annex II to the Regulation, as amended, two types of Bulgarian
companies may participate in the formation of a holding SE: (i) the AD and (ii)
the limited-liability company (LLC) (druzhestvo s ogranichena otgovornost or
‘OOD’ in Bulgarian). The AD and the OOD are entitled to participate in the
formation of a holding SE, provided the conditions set forth in Article 2(2) of
the Regulation are fulfilled.
The holding AD is the most suitable form for managing and controlling other
companies. A holding AD can participate in the share capital and/or manage-
ment of other companies (subsidiaries), regardless of whether it carries on any
other manufacturing or commercial activities.
According to the CA, at least 25% of a holding AD’s share capital must be
invested directly in its subsidiaries. A subsidiary is a company in which the
holding AD owns or controls, directly or indirectly, at least 25% of the shares
and is in a position to appoint, directly or indirectly, the majority of the members
of its management organs.
Under the CA, a holding AD may be incorporated for the following purposes:
• the acquisition, management, evaluation and sale of interests in Bulgarian

or foreign companies;
• the acquisition, management and sale of debentures;
29
• the acquisition, evaluation and sale of patents and the assignment of

licences for the use of patents to companies in which the holding AD
has an interest;
• the financing of companies in which the holding AD has an interest.
The holding AD may not:
• participate in a partnership that is not a legal entity;
• acquire licences that are not intended to be used by companies controlled
by the holding AD;
• acquire real property that is not required for its needs; the acquisition of
shares in real estate companies is permitted.
There are two possibilities to establish a holding AD:

(i) A holding AD can be formed and incorporate subsidiaries, subscribing
for at least 25% of their share capital. This is possible when the holding
AD and the subsidiaries are formed concurrently. The first step is for the
holding AD to be incorporated; then, upon registration of the subsidiaries,
the holding AD must prove that it owns at least 25% of their capital.
(ii) Members of one or more companies can establish a holding AD by trans-
ferring their shares to the capital of a newly formed holding company;
thus, the promoting companies become subsidiaries of the holding AD.
It should be noted that, according to the CA, such a transfer of shares is
deemed a contribution in kind; therefore, a valuation of the shares must
be performed prior to establishment of the holding AD so as to determine
the number of shares in the holding AD to be granted each shareholder.
The holding AD’s name must inform third parties of its special corporate iden-
tity, and the CA expressly provides for such wording.
If the second option is used and a newly formed AD is established as a holding
SE with its registered office in Bulgaria (with the participation of two or more
public and/or private limited-liability companies, each with its registered office
in the European Union), the relevant rules of the Regulation shall apply, basically
Articles 2(2), 32 and 33.6
Despite Article 34 of the Regulation, which allows the introduction of measures
intended to protect creditors or employees, Bulgarian law does not envisage any
protection in addition to that already afforded under Community or Bulgarian
law.
C Formation of a subsidiary SE
Bulgarian law does not stipulate any particular provisions with respect to the
creation of a subsidiary SE. In accordance with Article 36 of the Regulation, the
6
See pages 36 through 43 of the general report; Chapter 2 of the first volume of this book.
30
Bulgaria
legal entities participating in the formation of a subsidiary SE shall be subject

to the provisions governing the formation of a subsidiary in the form of a public
limited-liability company under national law.
If the registered office of a subsidiary SE shall be located in Bulgaria, Bulgarian
rules on the creation of a joint stock company shall apply in accordance with
Article 15 of the Regulation (see Section II.1 of this report).
D Conversion into an SE
Pursuant to Article 2(4) of the Regulation, a Bulgarian joint stock company may
be converted into an SE, provided the conditions specified in the Regulation
are met, i.e. both its registered office and head office are located within the
European Union and it has had a subsidiary governed by the laws of another
EU Member State for at least two years.
Bulgarian law does not contain any special provisions regarding the formation
of an SE by conversion. Consequently, matters not covered by the Regulation
shall be governed by national law, i.e. the provisions of the CA on changes to
the corporate form of a Bulgarian AD.
The CA requires the preparation of a draft conversion plan by the management
body and of a report by an independent auditor, appointed by the management
body. The plan must be presented to the court (Commercial Register) and pub-
lished in the State Gazette no less than 30 days before the date of the general
meeting scheduled to vote on the conversion. After the entry into force of the
CRA, the Commercial Register will have to be notified of the plan at least 30
days before the date of the general meeting scheduled to vote on the conver-
sion. The plan, together with the proposed SE’s articles, must be approved by
three-quarters of the voting shares represented at the general meeting.
The option contained in Article 37(8) of the Regulation has not been approved
in Bulgaria, i.e. there is no requirement that the conversion be approved by
the body of the converting company within which employee participation is
organised.
In a conversion, the converting company continues to exist and function, but in
another corporate form. All rights and obligations of the converted company are
automatically transferred to the new company. Simultaneously with the change
in corporate form, no new shareholders may be accepted into the company.
The conversion may not be registered before the expiry of 14 days following
the filing date of an application with the competent court or the Commercial
Register.
The change in corporate form takes effect as from its registration in the com-
mercial register. Shareholders in the converting company become shareholders
in the new company.
31
If the assets of the converting company include real property and/or movables
subject to registration formalities, the respective records in the relevant registers
must be made. Any permits, licences or concessions held by the converted
company shall be transferred to the new company.
3 Acts committed on behalf of an SE in formation

According to the CA, any acts performed by a company’s founders in its name
prior to incorporation (i.e. when the company lacks legal personality) create
rights and obligations for the persons who carried out the acts in question.
When transactions are effected, it must be noted that the company is in the pro-
cess of incorporation. The persons who effected the transactions shall be liable
jointly and severally for any obligations arising therefrom. When a transaction
is effected by the founders or a person authorised by them, all rights and obli-
gations are transferred by operation of law to the company immediately upon
its incorporation (Art. 69 CA).
The above rule contradicts Article 16(2) of the Regulation, which stipulates
that persons acting in the name of an SE in formation shall be held jointly and
severally liable for any liabilities incurred during this time unless the company
assumes these obligations upon registration. In this case, the provisions of the
Regulation (Art. 16(2) Reg.) prevail over Bulgarian law.
4 Registration and publication

An SE with its registered office in Bulgaria must be recorded in the commercial
register and acquires legal personality upon registration.7
For the purposes of court registration, certain documents must be executed, and
the capital of the AD (or at least 25% of the nominal value of each share) must
be deposited with a local bank.
For the purposes of registering with the court/Registration Agency, information
on the following must be provided:
• the AD’s name – it should not contain words that refer to investment,
banking, insurance, or pension activities unless the AD has been granted
a special licence to perform such activities; the name should be unique in
the judicial district where the company is registered;
• the address of the head office and registered office of the AD’s manage-
ment;
• the scope of the AD’s business;
• the AD’s initial capital;
7
This register was previously kept by the regional courts, but has been kept by the Registration
Agency since 1 July 2007.
32
Bulgaria
• the members of the AD’s management body or bodies;

• the certificate(s) of incorporation of the AD’s shareholder(s) if the latter
are legal entities.
The AD’s articles, as well as all other documents and declarations needed
to provide the information listed above, shall be submitted to the competent
regional court, i.e. where the AD’s head office is located. The amount of time
needed to register an AD depends on two factors: (i) the time necessary to
prepare all documents required to be filed with the application to the court and
(ii) how long it takes the court to process the application to register the AD. At
present, the courts are not bound by any mandatory timetable when issuing a
ruling for registration. Under the new CRA, however, time limits will be strictly
determined, and the relevant official will be obliged to process the application
by the end of the business day following the submission date of the application,
unless another time period is provided for by law.
After registration with the Commercial Register, the AD/SE with its registered
office in Bulgaria must be registered with the Registration Agency (the BUL-
STAT register) in order to receive a unique identification number to be used for
tax purposes, as well. If needed, any other special registrations should be made
under the tax legislation (for example, VAT registration).
Apart from the publication of a notice of the SE’s registration in the Official
Journal of the European Communities, a notice of registration of the com-
pany should be published in the Bulgarian State Gazette in accordance with
the requirements of the CA and the State Gazette Act. Under the new CRA,
announcement of the company’s registration with the Registration Agency’s
Commercial Register will be sufficient.
Currently, under the CA, publication of information in the State Gazette is
only necessary if expressly required by law. Until 15 days after publication of
registered information, it is not enforceable against third parties who can prove
it was impossible for them to be acquainted with the publication.
Information recorded in the Commercial Register pursuant to the new CRA
shall be effective vis-à-vis third parties as from the time of its recordation.
Until 15 days after recordation, the information cannot be enforced against
third parties who can prove it was impossible for them to be acquainted with
the recordation.
5 Acquisition of legal personality

The AD, like any other Bulgarian corporate form, is considered to exist as a
separate legal entity as from the date of the court ruling calling for its registration
in the Commercial Register. The same is true for an SE registered in Bulgaria.
33
No specific issues exist, but it should be noted that for some activities, such as
banking, insurance, etc., special approval must be obtained from the relevant
authorities prior to registration in the Commercial Register.
III Organisation and management

1 General remarks
The organisation and management of an AD do not differ substantially from
the solutions applicable in most Member States. The general meeting is the
supreme and final body, which decides on any and all matters with respect to the
development and existence of the AD, while the management bodies handle day-
to-day issues and implement the resolutions of the general meeting. The CA sets
forth the main powers of the general meeting and expressly states which powers
may not be transferred by the general meeting to the management bodies.
Bulgarian law allows an AD to choose between a one-tier and a two-tier
management system (except in cases where the AD performs specific activities,
in which case closer control is necessary to protect the public interest and the
AD must thus have a two-tier system). Therefore, the possibilities provided
for in Articles 39(5) and 43(4) of the Regulation already existed in Bulgarian
law (Arts. 241–244 et seq. CA).
2 General meeting of shareholders

A Decision-making process
The general meeting resolves on the most important matters regarding the activ-
ities of the AD, such as amendments and supplements to its articles, capital
increases and decreases, changes in corporate form, mergers, etc.
The general meeting must be convened at least once a year, no later than six
months after the close of the financial year. In addition, and in accordance with
the option contained in Article 54(1) of the Regulation, the CA states that the
first general meeting shall be held within 18 months following the incorporation
of a company (including an SE) (Art. 222(2) CA).
The general meeting shall be convened by the AD’s management bodies. The
management bodies must convene an extraordinary general meeting if the AD’s
losses exceed half its capital. In accordance with the option contained in Article
55(1) of the Regulation, the CA provides that the general meeting may be
convened at the request of shareholders that have held, for more than three
months, shares representing 5% of the subscribed capital. If such a request is
not granted within one month or if a general meeting has not been held within
three months after submission of such a request, the regional court shall convene
34
Bulgaria
the general meeting or authorise those shareholders who requested the general
meeting to do so. POSA contains a similar provision with regard to public
companies offering their securities to the public.
The process of convening the general meeting includes publication of a notice
to shareholders in the State Gazette. The notice shall mention the date and
place of the meeting, the agenda, etc. Under the new CRA, the notice should
be submitted to the Commercial Register
Similarly, the option contained in Article 56 of the Regulation has been adopted
by the Bulgarian legislature. According to amendments to the CA, adopted in
2006 and effective as from Bulgaria’s accession to the European Union, the CA
provides for a reduced proportion of the subscribed capital, i.e. 5%, that must
be held by shareholders for more than three months in order to allow them to
include additional items in the agenda of a general meeting (Art. 223a CA). No
later than 15 days before the general meeting, the shareholders must file with
the Commercial Register a list of items to be added to the agenda, together with
any draft resolutions and all related documents. The effect of such a filing is
inclusion of the proposed items on the agenda. No later than the next business
day, the shareholders shall make the information described above available at
the company’s registered office and place of effective management.
POSA stipulates that shareholders holding jointly at least 5% of the capital of
a public company can petition the regional court to include additional items on
the agenda of a general meeting. For that purpose, they must submit a list of
additional items, together with draft resolutions and all related documents to the
FSC and the regulated market on which the company’s securities are admitted
to trading no later than on the business day following the date of the court’s
ruling calling for the inclusion of these items.
The general meeting may not be held prior to one month from publica-
tion/submission to the Commercial Register of the notice.
All documents related to the agenda of a general meeting must be placed at
the disposal of shareholders no later than the publication date of the notice
of the meeting. If the agenda includes the election of members of the board
of directors or supervisory board, as the case may be, the documents should
also mention the names, permanent addresses and professional qualifications
of the candidates. All documents must be made available free of charge to any
shareholder upon request.
The general meeting is entitled to:
• amend the company’s articles;

• resolve on any capital increase or decrease;
• resolve on changes in corporate form and termination of the company;
35
• elect and remove members of the board of directors or the supervisory

board, as the case may be;
• determine the remuneration of members of the supervisory board or the
board of directors, as the case may be, including their right to share in
the AD’s profits and to acquire the AD’s shares and debentures;
• appoint and remove registered auditors;
• approve the annual financial statements, certified by a chartered auditor,
and take decisions concerning the allocation of profits, replenishment of
the statutory reserve and the payment of dividends;
• resolve on the issuance of debentures;
• appoint liquidators upon termination of the company, except in the event
of bankruptcy;
• release from liability the members of the supervisory and management
boards or of the board of directors, as the case may be;
• resolve on any other matters, which by law or pursuant to the company’s
articles fall within its exclusive powers.
In general, there is no quorum required for a general meeting, but the AD’s arti-
cles may provide for one. However, the CA states that the decisions mentioned
under bullet points 1 through 3 above may only be taken if at least half the share
capital is present or represented at the general meeting. If the quorum required
(by law or pursuant to the company’s articles) is not met, a new meeting shall
be held no earlier than 14 days after the first general meeting; at this second
meeting, no quorum is required. The date of the second meeting, if any, may
be stated in the notice of the first meeting.
Resolutions are adopted by a majority of the votes cast by those shares present or
represented at the general meeting, unless the law or the company’s articles pro-
vide otherwise. The resolutions mentioned under bullet points 1 through 3 above
(for termination only) must be approved by a two-thirds majority of the share
capital represented. The articles may provide for higher majorities, however.
Resolutions of the general meeting take effect immediately, unless effect is
deferred. Resolutions on a capital increase or decrease, a change in corporate
form, the election or removal of board members, and the appointment of
liquidators enter into effect upon recordation in the Commercial Register.
If the AD is a public company, the notice of its general meeting must be
submitted to the Central Depository of Securities, where the shareholders’
registers of public JSCs are kept. It should also be noted that a shareholder
may exercise its right to vote only if it has been a registered shareholder in the
public AD for at least 14 days before the general meeting.
B Rights and obligations of shareholders

The rights of shareholders can be divided into several categories.
36
Bulgaria
(i) Non-material rights in connection with the management of an AD:

• right to participate in the management of the AD;
• right to vote at general meetings;
• right to be elected to the management bodies.
(ii) Non-material rights in connection with the control of an AD:

• right to receive information;
• right to request that the general meeting repeals decisions of the manage-
ment bodies;
• right to petition the competent court to have resolutions of the general
meeting invalidated.
(iii) Economic rights:

• right to dividends;
• right to interest for contributions to the company’s capital (only if the
articles so provide);
• right to receive newly issued shares;
• right to receive shares in the event of a capital increase using the AD’s
own funds;
• right to a share in liquidation proceeds.
The law provides for rights that may be exercised by minority shareholders
owning a certain percentage of shares in the AD:
• Shareholders holding at least 5% of the capital have the right to convene
a GM;
• Shareholders holding at least 10% of the capital may file a claim
against members of the board of directors or the supervisory board or
the management board, as the case may be, for damage caused to the
AD;
• Shareholders holding at least 10% of the capital may request that the
general meeting or the court appoint an expert to examine the company’s
annual financial statements;
• Shareholders holding at least 5% of the capital of a public AD may com-
mence legal proceedings on the AD’s behalf against third parties should
the AD’s management bodies fail to do so and if the omission in question
jeopardises the AD’s interests;
• Shareholders holding at least 5% of the capital of a public AD may bring
an action before the competent regional court for indemnification for any
harm caused the AD, wilfully or by gross negligence, through acts or
omissions by any members of the company’s management or supervisory
bodies or by any managerial agent;
• Shareholders holding at least 5% of the capital of a public AD may ask
the general meeting or petition the competent regional court to appoint
37
auditors to examine all accounting documents of the AD and report on

their findings;
• Shareholders holding at least 5% of the capital of a public AD may petition
the competent regional court to convene a general meeting or to autho-
rise a representative to convene a general meeting with an agenda set by
themselves.
One material obligation of shareholders is to pay for the shares they subscribe. In
the event of a contribution in kind, three experts are appointed by the competent
court to examine the contribution in order to determine its monetary value. The
AD is not entitled to release a shareholder from the obligation to pay for its
shares, except when a capital decrease is made. A shareholder may not set off
its obligation to pay for its subscribed shares from any receivables which it is
entitled to receive from the AD.
If a shareholder does not pay for its shares, a right to interest or compensation
may arise, as the case may be. A shareholder who fails to pay for its shares may
be excluded from the AD with one month’s notice.
3 Management
In terms of management, the AD may choose between two different manage-
ment structures, which choice should be made in its articles.
A One-tier management system

In this system, the permanent management body is the board of directors, which
must have at least three and may have no more than nine members (in accordance
with the option contained in Article 43(2) of the Regulation). All matters that
do not fall within the powers of the general meeting (by law or pursuant to
the company’s articles) are handled by the board of directors. A member of
the board may be any natural person with legal capacity (i.e. in Bulgaria, any
person of at least 18 years of age). If a legal entity is appointed to the board of
directors, it must appoint a permanent representative to perform its duties. The
legal entity bears unlimited liability and is jointly and severally liable with the
other directors for any harm caused by the acts of its representative. A person
may not be a member of the board of directors if he/she (i) has been a member
of a managing or controlling body of a company terminated due to bankruptcy
within the two years immediately preceding the date of the adjudication in
bankruptcy and there are any unsatisfied creditors; or (ii) does not meet any
other requirements provided for by the AD’s articles.
The board of directors adopts rules on its functioning and elects a chair and
deputy chair from amongst its members. The board meets at least once every
three months in order to discuss the development of the AD’s business. Any
38
Bulgaria
member of the board of directors may request that the chair call a meeting to
discuss particular matters. The board assigns day-to-day management of the
AD to one or more executive directors elected from amongst its members.
The number of executive directors must be less than the remaining number of
members of the board of directors.
Relations between the AD and its executive directors are regulated by a man-
agement agreement, which must be executed in writing and signed on behalf of
the company by the chairperson of the board of directors. Relations with other
members of the board of directors are governed by an agreement executed on
behalf of the AD through a person so authorised by the general meeting.
(i) Appointment and removal
Members of the board of directors may be appointed and removed by the general
meeting only. Board members may be elected for a maximum five-year term,
although the articles may provide for a shorter term. There is no limit set by
law on the re-appointment of board members.
Members of the board of directors must submit declarations as to the absence
of certain facts, as well as a certified specimen of their signatures. The general
meeting has the right to remove a member of the board of directors from office
at any time. A person nominated to the board must, prior to the elections, notify
the general meeting of: (i) any shareholdings in other companies as a general
partner with unlimited liability; (ii) any shareholding of more than 25% in the
capital of another company; and (iii) any participation in the management of
other companies or cooperatives as a proxy, manager or board member. If such
circumstances arise after such a person has been elected to the board, he or she
must issue a written notice forthwith.
Members of the board of directors do not have the right, on their own behalf or on
behalf of another, to execute business transactions or participate in companies
or cooperatives as proxies, managers or board members if the company or
cooperative in question performs activities that compete with those of the AD.
This restriction does not apply if the articles expressly allow such participation
or transactions or if the general meeting has given its express consent.
(ii) Representation
Members of the board of directors represent the AD jointly, unless the articles
provide otherwise. The board may delegate its power to represent the AD to one
or more of its members. Such a delegation of authority may be revoked at any
time. Any restrictions on the representative powers of the board are not binding
on or enforceable against third parties, unless expressly provided otherwise by
law or in the company’s articles.8
8
That is, the possibilities set forth in the First Company Law Directive (Art. 9) have not been
implemented in Bulgarian law.
39
The articles may provide that certain transactions require the unanimous
approval of the board of directors. According to the CA, the following
operations may be undertaken only pursuant to a resolution of the general
meeting:
• transfer or provision of the use of the AD’s entire business;
• disposal of assets having a total value in excess, in the current year, of half
the value of the AD’s assets as per its most recent audited annual financial
statements;
• assumption of liabilities or the provision of collateral to a person or to
related parties, the amount of which exceeds, in the current year, half the
value of the AD’s assets as per its most recent audited annual financial
statements.
However, the AD’s articles may expressly provide that some or all of the trans-
actions described above can be undertaken with the prior unanimous consent
of the board of directors. It should be noted that even if these rules are violated,
any transaction concluded will still be valid, but the person who concluded it
without a shareholder resolution or board decision shall be liable to the AD for
any damage caused.
Members of the board of directors have equal rights and obligations, regardless
of any internal division of powers amongst them. Members must exercise their
functions with the care expected of a good businessperson and in the interests
of the AD and its shareholders.
The board of directors may take decisions if at least half its members are present.
Decisions are passed by a simple majority of votes cast, unless otherwise pro-
vided by law or the company’s articles. The articles may provide that the board
can take decisions in absentia, if all members have stated in writing that they
approve the relevant resolution. No later than the start of a meeting, any board
member must inform the chairperson in writing if he or she or a related party
has a conflict of interest with the company in a matter raised for discussion and
therefore cannot participate in the deliberations or vote on this matter.
B Two-tier management system

The two-tier vehicle is more suitable for a large AD with a substantial number
of shareholders. In this system, the supervisory board acts as a kind of repre-
sentative for shareholders, overseeing the management board on their behalf.
Under this system, there are two boards – a supervisory board and a
management board. The supervisory board must have at least three and may
have no more than seven members, while the management board must have
between three and nine members. Thus, the Bulgarian legislature has already
40
Bulgaria
implemented the options contained in Articles 39(4) and 40(3) of the Reg-
ulation. The AD is managed by its management board. All matters that fall
outside the scope of the general meeting’s powers (as defined by law or the
AD’s articles) are handled by the management board.
According to the CA, the supervisory board may not participate in the man-
agement of the AD and only represents the AD before the management board
and supervises the latter’s activities. Thus, the management board is obliged
to report on its activities to the supervisory board at least once every three
months. In addition, Article 243(3) of the CA stipulates that the supervisory
board may at any time require the management board to provide information
or a report on any matter concerning the company. Article 243(4) of the CA
further provides that the supervisory board may also carry out any necessary
investigations in the performance of its duties, and its members can access all
necessary information and documents. For the purposes of such investigations,
the supervisory board may employ experts. Certain material decisions may not
be taken by the management board unless first approved by the supervisory
board.
Bulgaria has not expressly adopted the option contained in Article 41(3) of the
Regulation to the effect that ‘the supervisory organ may require the management
organ to provide information of any kind which it needs to exercise supervision
(. . . )’. A Member State may provide that each member of the supervisory organ
also be entitled to this facility. The options contained in Article 243(3) and (4)
of the CA are thus open to contradictory interpretations. On the one hand, some
commentators take the view that in order for the supervisory board to function
effectively, its individual members must be able to request the information they
deem necessary. In other words, this right supplements, rather than replaces,
the supervisory board’s right to collectively request information. Others are of
the opinion that the right to request information and documents may only be
exercised by the supervisory board collectively, notwithstanding the right of
each member to review any information and documents received. To date, this
matter is still open to debate.
Any natural person with legal capacity (i.e. in Bulgaria, any person of at least
18 years of age) may be a member of the supervisory or management board.
If a legal entity is appointed to the board, it must designate a permanent rep-
resentative to perform its duties. The legal entity bears unlimited liability and
is jointly and severally liable with the other board members for any damage
caused by its representative’s acts. A person may not be a board member if he
or she (i) has been a member of a managing or controlling body of a company
terminated due to bankruptcy within the two years immediately preceding the
date of the adjudication in bankruptcy and there are any unsatisfied creditors;
or (ii) does not meet any other requirements provided for in the AD’s articles.
41
No person may simultaneously be a member of the supervisory board and

management board of an AD. Bulgaria has not adopted the option contained in
Article 39(3) of the Regulation, i.e. a member of the supervisory board cannot
temporarily (for a period determined by law) fill a vacancy on the management
board. The management board shall adopt rules governing its functioning, which
must be approved by the supervisory board.
Relations between the AD and the members of its management board are regu-
lated by a management agreement, which must be executed in writing on behalf
of the company by the supervisory board’s chairperson.
The supervisory board adopts rules on its functioning and elects a chair and
deputy chair from amongst its members. The supervisory board meets at least
once every three months in order to discuss the development of the AD’s busi-
ness. Any member of the supervisory board may request that the chair call
a meeting to discuss particular matters. Relations between the AD and the
members of its supervisory board are governed by a management agreement,
executed in writing on behalf of the company by a person so authorised by the
general meeting.
(i) Appointment and removal

Members of the supervisory board are appointed and removed by the general
meeting and may be appointed for a maximum five-year term, although the
articles may provide for a shorter term. There is no limit set by the law on the
re-appointment of supervisory board members.
All members of the supervisory board must submit declarations on the absence
of certain facts, e.g. participation in management bodies of companies in
bankruptcy, etc. The general meeting has the right to remove a member of
the supervisory board from office at any time.
Members of the management board are appointed by the supervisory board
for a maximum five-year term, although the articles may provide for a shorter
term. There is no limit set by law on the re-appointment of management board
members. All members of the management board must submit declarations
on the absence of certain facts, as well as a certified signature specimen. The
supervisory board has the right to remove a member of the management board
from office at any time. The option contained in Article 39(2) of the Regulation
has not been transposed into Bulgarian law, i.e. members of the management
board may only be appointed by the supervisory board and not by the general
meeting.
The principles set forth in Section 3.A.(i) apply, as well.
(ii) Representation
Members of the management board represent the AD jointly, unless the com-
pany’s articles provide otherwise. The management board may delegate, with
42
Bulgaria
the supervisory board’s approval, its power to represent the AS to one or more
of its members. For more information in this regard, please refer to Section
3.A.(ii).
C Liability of management
All board members must deposit a management guarantee in an amount deter-
mined by the general meeting, but in any case no less than three months’ gross
salary. All board members are jointly and severally liable to the AD for damage
caused through any fault of their own. A member of the board of directors or
management board may be released from liability by the general meeting if that
member was not at fault. This possibility represents, to a certain extent, imple-
mentation of the options contained in Articles 39(1) and 43(1) of the Regulation,
i.e. board members may be released from liability and only the executive mem-
bers (executive directors) responsible for the current (day-to-day) management
of the company shall be held liable.
By law, shareholders holding at least 10% of the capital may bring legal pro-
ceedings, demanding that members of the board of directors, supervisory board
or management board, as the case may be, be held liable for damage caused to
the AD.
POSA provides that members of the board of directors of a public company
offering its securities to the public must deposit their management guarantee
within seven days following their election by the general meeting. The general
meeting is entitled to determine the exact amount of the deposit; however, as in
the CA, it shall not be less than three months’ gross salary. Furthermore, under
POSA, shareholders holding 5% of the subscribed capital of a public company
may file claims for acts or omissions committed by members of the board of
directors.
D Additional requirements for the management of a public AD
Any person who, at the time of his or her election, has been effectively sentenced
for property-related offences, economic offences, financial offences, or tax-
related or social security offences, committed in Bulgaria or abroad, is ineligible
to be a member of the management board or supervisory board of a public AD,
unless rehabilitated.
At least one-third of the members of the board of directors or the supervisory
board of a public AD must be independent. To be independent, a board member
may not be:
• a person employed by the AD;
• a shareholder holding, directly or through related persons, at least 25%
of the rights to vote at general meetings, or a person related to the AD;
• a person in a permanent business relationship with the AD;
43
• a member of a management or supervisory body, a managerial agent or

a person employed by any commercial corporation or other legal entity
that controls or is in a permanent business relationship with the AD;
• a person connected with another member of a management or supervisory
body of the AD.
Any person elected to the management or supervisory body of a public AD is
obliged to notify the company’s management body immediately if any of the
abovementioned circumstances occur after the date of the election. In such a
case, this person must cease to perform his or her functions.
Without being expressly authorised by the general meeting, the management
of a public AD may not effect transactions as a result of which:
• the public AD acquires, transfers, receives or surrenders for use or fur-
nishes as security in any form whatsoever any fixed assets with a value
exceeding:
(a) one-third of the lesser of the following values – the net asset value
according to the public AD’s last audited or last prepared balance
sheet;
(b) 2% of the lesser of the following values – the net asset value according
to the balance sheet of the public AD as last audited or last prepared,
if interested9 parties participate in the transaction;
• the public AD incurs obligations to a single person or to related persons
having an aggregate value in excess of the value referred to in (a) above or
where the obligations are incurred with respect to or in favour of interested
parties, with an aggregate value in excess of the value referred to in (b)
above;
• any transactions of a public AD in which interested parties participate,
other than those specified above, are subject to the prior approval of the
management body. If a transaction is performed in violation of the above
provisions, it shall be deemed null and void.
IV Employee involvement
In general, labour relations within an SE are governed by the national law of the
Member State in which the SE is registered. In Bulgaria, the relevant legislation
9
‘Interested parties’ are members of the management and supervisory bodies of the public AD,
the managerial agents thereof, as well as any persons holding, directly or indirectly, at least 25%
of the rights to vote at general meetings of the public AD or controlling the public AD, where
these persons or any persons connected with them: (i) are a party, a representative of a party
or an intermediary to the transaction or the transactions or acts are effected in favour of these
persons, or (ii) hold, directly or indirectly, at least 25% of the rights to vote at general meetings
of the AD or control any legal entity that is a party, a representative of a party or an intermediary
to the transaction or the acts are effected in favour of any such legal entity.
44
Bulgaria
includes: (i) the Labour Code of 1986, as amended; and (ii) the Law on Informa-
tion and Consultation with Employees in Multinational Undertakings, Groups
of Undertakings and European Companies of 2006 (‘LICE’), transposing into
Bulgarian law the Directive of 8 October 2001 supplementing the Statute for a
European company with regard to the involvement of employees in the man-
agement of an SE.
According to the Labour Code, both employees and employers are entitled to
form freely, on their own initiative and without prior permission, unions and
join and leave such organisations voluntarily. Trade unions represent and protect
the interests of employees before the governmental authorities and employers,
through collective bargaining agreements and participation in tripartite coop-
eration, as well as the organisation of strikes and other actions permitted by
law. Employers’ organisations represent and protect the interests of employers
through collective bargaining agreements, participation in tripartite coopera-
tion, and other actions permitted by law.
Furthermore, trade unions are entitled to participate in the preparation, discus-
sion and drafting of all internal rules and regulations of an enterprise relating to
labour relations, and the employer is obliged to invite them to take part. Trade
unions and their divisions are also entitled, at the employees’ request, to serve
as their authorised representative before the courts.
The essence of tripartite cooperation is mutual consultation between the state,
national trade unions and employers’ organisations with a view to adopting
draft laws, regulations and others norms by the government or governmental or
local authorities. Such consultation rounds regard labour relations, association
rights, social and cultural services to employees, supervision of compliance
with labour law, social security, living standards, etc.
A collective bargaining agreement (CBA) is an agreement based on the min-
imum standards set out in the Labour Code and deals with labour and social
security issues not regulated by mandatory provisions of the Labour Code.
A CBA may not contain clauses that are less favourable to employees than
the applicable statutory provisions or the provisions of a collective agreement
binding on the employer. The CBA serves as a minimum set of standards upon
which an individual labour agreement (ILA) may be concluded. Thus, if a CBA
is more advantageous to employees and is concluded at a later date than an
ILA, the provisions of the CBA shall be substituted by operation of law for the
respective provisions of the ILA.
V Transposition of the Directive of 8 October 2001

LICE was recently adopted to transpose into Bulgarian law the provisions of
the Directive of 8 October 2001. Bulgaria has chosen to adopt the following
options from the Directive.
45
Firstly, with regard to the method to be used to elect or appoint members of

the special negotiating body (SNB), LICE provides that election/appointment
may be made by the general meeting of employees in accordance with the
Labour Code. The Labour Code provides that the general meeting of employ-
ees comprises all employees in an enterprise and may be convened by the
employer or the trade union management as well as at the initiative of one-
tenth of the employees. The quorum required for the meeting is at least half
the employees. Resolutions to elect SNB members are approved by a simple
majority of votes cast. The meeting may delegate the election of SNB mem-
bers to representatives appointed by the management of the union(s) or to
the employee representatives as defined in the Labour Code.10 Candidates for
seats on the SNB may be nominated by any employee or group of employ-
ees as well by as the trade unions. The central management or the manage-
ment of the enterprise participating in the incorporation of the SE shall deter-
mine the number of SNB members in such a way that each Member State in
which a multinational has one or more establishments or one or more con-
trolled enterprises or a controlling enterprise is represented by at least one
member.
Secondly, as to the possibility for trade union representatives to serve as SNB
members (regardless of whether they are employed by the participating com-
pany or concerned subsidiary or establishment, Article 3(2)(b), para. 2 of the
Directive), Article 13(4) of LICE provides that candidates for employee repre-
sentatives to the SNB may be nominated by any individual employee or group
of employees as well as by the trade unions within the undertaking. As men-
tioned above, under the Labour Code, employees are entitled to freely form,
at their own initiative, trade unions and to join and leave these organisations.
Neither LICE, in its capacity as a lex specialis, nor the Labour Code expressly
prohibit the election of trade union representatives to the SNB.
Therefore, interpretation of the relevant provisions of LICE leads to the conclu-
sion that trade union representatives employed by an undertaking participating
in the creation of an SE may stand for SNB membership. On the other hand,
trade union representatives who are not employed by such an undertaking can-
not be candidates for SNB membership.
With respect to the option contained in Article 3(7) of the Directive (the option
for the Member States to lay down budgetary rules with regard to the operation
of the SNB and, in particular, to limit the funding to the costs of a single expert),
Article 14(10) of LICE provides that all costs incurred within the SNB shall
be borne by the participating companies and that the SNB may be assisted
10
According to the Labour Code, the general meeting of employees may choose representatives
to participate in the decision-making process with respect to issues relevant to the management
of the company, if such participation is provided for by law.
46
Bulgaria
by experts and representatives from EU trade unions as it sees fit (Art. 14(5)
LICE).
LICE does not contain rules governing the situation whereby the SNB fails to
select a form of employee participation from amongst those existing within the
various participating companies to be applied to the newly established SE (i.e.
there are no alternative rules in the absence of a specific decision by the SNB).
Similarly, the Bulgarian legislature did not adopt the options contained in:
(i) Article 7(3) of the Directive, i.e. the possibility to provide for non-
application of the standard rules of participation set out in Part III of
the Annex to the Directive for an SE formed by merger;
(ii) Article 8(3) of the Directive, i.e. the possibility to adopt particular pro-
visions pursuing directly and essentially the aim of ideological guidance
with respect to information and the expression of opinions within an SE;
(iii) Article 13(4) of the Directive, i.e. the opportunity to guarantee that the
structures of employee representation existing within the Bulgarian par-
ticipating companies that will cease to exist as separate legal entities
remain even after registration of the SE.11
In accordance with Article 8(2) of the Directive, which gives the Member States
the possibility to release the SE’s or the participating company’s supervisory or
administrative organ from its obligation to disclose information to the SNB, the
employee representative body or its assistants if the nature of the information,
according to objective criteria, is such that disclosure could seriously harm the
functioning of the company or would be prejudicial to it, LICE (Art. 29(3)
and (4)) gives management the right to withhold any sensitive information. If
disclosure is refused, the parties may seek assistance in settling their dispute
through mediation and/or voluntary arbitration with the National Institute of
Conciliation and Arbitration.
Currently, Bulgarian law does not contain any provisions on employee participa-
tion. Therefore, if SNB negotiations fail, the standard rules on participation shall
apply to an SE registered in Bulgaria, but only up to the level of participation
existing within the other companies participating in the creation of the SE (Art.
19 LICE).
VI Annual accounts and consolidated accounts

1 Accounting principles
In accordance with Article 61 of the Regulation, the preparation of annual
and/or consolidated accounts, including an annual report, as well as the auditing
11
See Articles 16(3) and (4), 29 and 30 LICE.
47
and publication of these accounts, for an SE with its registered office in Bul-
garia, shall be governed by the provisions of Bulgarian law applicable to public
limited-liability companies.
Companies in Bulgaria, with certain exceptions referred to in Article 22b of the
Accountancy Act,12 must prepare and present their annual financial statements
on the basis of International Accounting Standards. Consequently, this also
holds true for an AD, unless the company in question is a small or medium-
sized enterprise (SME) benefiting from a statutory exemption.
Enterprises referred to in Article 38(1), items (2) and (3), of the Accountancy
Act, i.e. public enterprises within the meaning of POSA, credit institutions,
insurance and investment undertakings, companies for supplementary social
security schemes and funds managed by them, are also obliged to prepare and
present their annual financial statements on the basis of International Account-
ing Standards.
Any enterprise which has, in a given reporting period, prepared and presented
its annual financial statements on the basis of International Accounting Stan-
dards may not apply the National Financial Reporting Standards for Small and
Medium-sized Enterprises.
Consolidated and interim financial statements are prepared and presented on
the basis of the accounting standards used to produce the enterprise’s annual
financial statements.
According to Article 23 of the Accountancy Act, all companies are obliged to
draw up their annual financial statements and consolidated financial statements
as of 31 December,13 denominated in Bulgarian levs. Bulgaria has yet to join
EMU, i.e. in accordance with Article 67(2) of the Regulation, accounts must
be denominated in the national currency. However, an SE registered in Bul-
garia may prepare and publish its accounts in euros, as well. Annual financial
statements must give a true and fair view of the company’s assets and finan-
cial situation, its reported financial results and any changes in cash flow and
owner’s equity. The annual financial statements consist of the balance sheet, a
profit and loss statement, a statement of cash flow, an owner’s equity account
and notes. The company’s management bodies are responsible for drawing up
and preparing in a timely manner the company’s financial statements as well as
the content and publication thereof.
12
Small and medium-sized enterprises are those which, for at least one of two preceding financial
years have not exceeded two of the following criteria: (i) a balance sheet total as of 31 December
of BGN 8 million; (ii) net income from sales for the year of BGN 15 million; and (iii) 250
employees on average for the year.
13
In Bulgaria, the financial year is equal to the calendar year, namely 1 January through 31
December.
48
Bulgaria
The consolidated financial statements consist of a consolidated balance sheet,

a consolidated profit and loss statement, a consolidated statement of cash flow,
a consolidated owner’s equity account and notes.
All companies are obliged to prepare annual financial statements by 31 March
of the following year.
Consolidated financial statements are prepared only by parent companies. A
company is a parent company if it:
(i) controls more than half the voting rights of shareholders or partners in
another company (i.e. a so-called controlled company), including under
a contractual relationship, provided it is a shareholder or partner in that
enterprise;
(ii) has the right to appoint or remove more than half the members of the
management and/or supervisory body of another company (a controlled
company), including under a contractual relationship, provided it is a
shareholder or partner in that enterprise;
(iii) has the right to determine the financial and/or operational policies of
another enterprise under a contractual relationship;
(iv) is a shareholder or partner holding 20% or more of the voting rights in
another company (a controlled company) and solely through the exer-
cise of such rights it has appointed more than half the members of
the controlled company’s management and/or supervisory body, which
operated during the reporting period, during the previous reporting
period and until the date of preparation of the consolidated financial
statements and consolidated financial statements, as defined above, are
not drawn up in which the rights specified in items (i) through (iii)
above, with respect to the controlled enterprise, are held by another
company.
A parent company and its subsidiaries are subject to consolidation regardless
of where the registered offices of the subsidiaries are located.
A Non-application of the requirement to prepare consolidated accounts
A parent company need not prepare consolidated financial statements if, for
all companies within the group subject to consolidation, taken as a whole,
according to their annual financial statements as of 31 December of the current
year, two of the following three criteria are not met:
(i) balance sheet total as of 31 December of BGN 3 million;
(ii) net income from sales for the year of BGN 6 million;
(iii) 80 employees on average for the year.
Moreover, a parent company need not prepare consolidated financial statements
if it is also a subsidiary of a domestic parent company or of a parent company
49
from another Member State of the European Union, in any of the following
cases:
(i) the domestic parent company or parent company from another Member
State holds all shares in the domestic (subsidiary) parent company; in
establishing the ownership of shares in the domestic (subsidiary) parent
company, shares or stock held by members of the management and/or
supervisory body under statutory provisions or the company’s articles of
association or charter are not taken into account; or
(ii) the domestic parent company or parent company from another Member
State owns 90% or more of the shares in the domestic (subsidiary) parent
company and the other partners or shareholders have given their con-
sent in writing that no consolidated financial statements need be drawn
up.
The Accountancy Act also stipulates other possibilities for exemption from the
obligation to prepare consolidated accounts.
Consolidated financial statements and the annual consolidated management
report are drawn up by the domestic parent company and are subject to an inde-
pendent financial audit under the terms and in accordance with the procedure
set out under point 2 below or, if prepared by the parent company from another
Member State, are subject to an independent financial audit in accordance with
the legislation of that state.
Consolidated financial statements, the annual consolidated management report
and the auditor’s report for the domestic parent company are published under
the terms and in accordance with the procedure set out under point 2 below or,
if prepared by the parent company from the other Member State, published in
Bulgarian by the domestic parent company under the terms and in accordance
with the procedure set out under point 2 below.
B Annual report
No later than the last day of February of each year, the board of directors or
the management board of the company, as the case may be, shall draw up the
annual report and financial statement for the previous financial year and submit
these to the auditors appointed by the general meeting.
The annual report comprises a review of the company’s activities over the
course of the year and its current state of affairs, as well as the notes to
the annual financial statements. The annual report must contain the following
information:
(i) the total remuneration paid to board members for the year;
(ii) the company’s own shares and debentures acquired, held and transferred
by board members during the year;
50
Bulgaria
(iii) the rights of board members to acquire shares and debentures in the
company;
(iv) participation of board members in any companies (including as general
partners with unlimited liability), ownership of over 25% of the capital
of any other company, and participation in the management of other
companies or cooperatives as proxy holders, managers or board members;
(v) the existence of any contracts referred to in Article 240b of the CA exe-
cuted during the year, i.e. contracts with board members or persons related
to them.
The annual report must also state the company’s business policy for the coming
year, including anticipated investments and personnel development, the antic-
ipated return on its investments, the development of the company’s business,
and any forthcoming transactions of material significance for the company.
2 Auditor
The annual financial statements are subject to review by auditors appointed
by the general meeting. If the general meeting fails to appoint auditors by the
end of the calendar year, auditors shall be appointed by the competent court
further to a petition filed by the board of directors, the management board or
the supervisory board, as the case may be, or by an individual shareholder. The
auditors are responsible for ensuring the bona fide and unbiased performance
of their audit and the nondisclosure of confidential information.
According to the Accountancy Act and unless otherwise provided for by law, the
annual financial statements of the following enterprises must be independently
audited by a chartered auditor:
(i) joint stock companies;
(ii) issuers within the meaning of POSA;
(iii) credit institutions, insurance and investment undertakings, companies for
the provision of supplementary social security and funds managed by
them;
(iv) enterprises for which this requirement is provided for by a special law;
(v) all other entities not mentioned in points 1 through 4 above, with the
exception of enterprises that apply a simplified form of financial reporting
and budget-funded enterprises.
Consolidated financial statements and individual financial statements included
in the consolidation are subject to an independent audit.
In their report, auditors who carry out an independent audit of financial state-
ments are obliged to express an opinion on whether the annual (consolidated)
management report corresponds to the annual (consolidated) financial state-
ments for the same reporting period.
51
Upon receipt of the auditors’ report, the management board shall submit it to
the supervisory board, together with the annual financial statements and annual
report. The management board shall also submit a draft resolution on the distri-
bution of profits to be discussed by the general meeting. The supervisory board
checks the annual financial statements, the annual report and the draft resolution
and, upon approval thereof, resolves to call an ordinary general meeting.
Under the one-tier system, the draft resolution on the distribution of profits is
prepared by the board of directors, which then convenes the general meeting.
The annual financial statements may not be approved by the general meeting
without first being audited by chartered auditors. The verified and adopted
annual financial statements are then submitted to the Commercial Register.
By 30 June of the following year, companies must publish their annual financial
statements, consolidated financial statements, annual management report and
annual consolidated management report, as adopted by the general meeting or
relevant body. Merchants, within the meaning of the CA (i.e. including ADs),
publish their annual financial statements by filing and submitting them for
notification purposes to the Commercial Register.
VII Supervision by the national authorities

Bulgarian law does not specifically indicate or refer to the national authorities
competent to supervise the activities of an SE. Therefore, an SE incorporated
in Bulgaria shall be subject to control or supervision as provided under Bul-
garian law, including stock exchange rules and specific legislation pertaining
to financial services, banking, trade, communications, media, labour relations,
the environment, the construction industry, taxes and customs duties, the social
security system, public procurement and other regulated areas.
A Bulgarian SE may be subject to supervision by the national competition
authority (Competition Commission) and/or the national consumer protection
authority (Consumer Protection Commission), insofar as the company’s activ-
ities affect the market.
The Bulgarian National Bank (BNB) supervises the business of banks (including
activities carried on through branches or directly on the territory of a Member
State or third country), financial holding companies and mixed-activity holding
companies which have a bank as a subsidiary, in terms of their compliance with
the rules set forth in the Credit Institutions Act (CIA) and the instruments for its
application, to ensure reliable and sound management of banks and to determine
the risks to which they are or may be exposed in order to ensure the maintenance
of funds adequate to cover such risks. The FSC and its deputy chairperson
exercise on-going supervision of insurers and re-insurers exercising activities
in Bulgaria regarding their overall operations under the Insurance Code. On-site
52
Bulgaria
inspections may be conducted jointly with the Financial Investigations Agency,

the FSC and other competent bodies.
VIII Dissolution
Winding up, liquidation, insolvency, cessation of payments and similar proce-
dures for Bulgarian SEs are governed by Bulgarian law, more specifically Parts
II and IV of the CA.
1 Winding up
An AD may be dissolved:
• by a resolution of its general meeting;
• upon expiry of the period for which it was incorporated; prior to expiry
of this period the general meeting may pass a resolution to continue the
AD;
• upon a declaration of bankruptcy;
• by court order at the request of the public prosecutor if the AD’s corporate
purpose is forbidden by law;
• when its net asset value (the ratio between the AD’s assets and liabilities)
falls below the amount of its registered capital and, within a period of one
year, the general meeting fails to pass a resolution to decrease the capital,
to change the company’s corporate form or to dissolve the AD;
• if, for a period of six months, the number of members of any of the AD’s
boards is less than the minimum number specified by law;
• upon the occurrence of any conditions provided for by the company’s
articles.
An AD with a sole shareholder is not automatically dissolved upon the death
of this shareholder or the entry of another shareholder into the company.
2 Liquidation
A Liquidation rules
The liquidation process is regulated by the CA. Liquidation can take place only
if the company’s assets exceed its liabilities, thus not if bankruptcy proceedings
have been started. The purpose of liquidation is to convert the company’s assets
into cash, settle the company’s liabilities, and distribute any remaining proceeds
to shareholders in accordance with their participation in the AD’s capital.
B Commencement of liquidation
Liquidation starts when a decision to dissolve the company is approved. The
term for the completion of liquidation is determined by the general meeting
53
or the regional court if the liquidators have been appointed by the latter. Liq-
uidators must be registered with the Commercial Register and submit notarised
consent to their appointment as well as a signature specimen. The court may, if
important reasons exist, appoint or remove liquidators further to an application
by shareholders owning at least one-twentieth of the shares.
Upon declaring the dissolution of an AD, liquidators must invite the com-
pany’s creditors to submit their claims. A notice is sent in writing to all known
creditors and is posted in the Commercial Register and published in the State
Gazette (as of 1 January 2008, an announcement in the Commercial Register
shall suffice).
The liquidators are obliged to finalise any pending transactions, gather all pay-
ments due, convert the company’s assets into cash and satisfy the company’s
creditors. They must also inform the National Revenue Agency of the start of
liquidation.
Liquidators represent the company and have the rights and obligations of its
management organ. Liquidators may represent the company, but only jointly. A
single liquidator may accept legal statements addressed to the AD. Liquidators
draw up a balance sheet valid as of the moment of termination of the AD and
explanatory notes thereto. At the end of each year, the liquidators close the
accounts and present a financial statement and annual report to the company’s
management body, which approves the report and releases the liquidators from
liability.
Once all claims have been settled, the liquidators may distribute any remaining
cash only if six months have passed since the publication of the notice to
creditors in the State Gazette. Once all assets (including cash) have been
distributed and all claims settled, the liquidators file an application to delete
the company’s entry from the Commercial Register.
When a company is terminated due to expiry of the term of existence specified
in its articles or further to a resolution of its general meeting, the general
meeting may decide to continue the company’s activities unless the distribution
of assets has commenced. This resolution must be approved by at least three-
quarters of the shares represented at the general meeting. The liquidators shall
then file the resolution with the Commercial Register.
If during settlement of the company’s obligations, the liquidators learn that the
company’s assets are insufficient to cover its obligations, the competent court
must be notified immediately and insolvency proceedings started.
3 Insolvency proceedings
Insolvency proceeding are regulated by the CA and aimed at satisfying creditors
and creating opportunities for reorganisation, if possible.
54
Bulgaria
Insolvency proceedings are commenced by filing a petition with the regional

court of the place where the AD’s head office is located. The petition can be filed
by the AD’s management, a liquidator (if the company is already in liquidation)
or a creditor which has a commercial relationship with the AD. If the company
has defaulted on a public obligation, the National Revenue Agency can also file
a petition.
Together with its petition, the petitioner must submit any additional documents
tending to prove that the AD is insolvent. If the petition is filed by either the
company or a creditor, a corporate restructuring plan and the name of a proposed
interim trustee may also be provided. The documents and evidence that must
be presented are designed to enable the court to adjudicate on the question of
whether the company is insolvent. Insolvency, for these purposes, means the
AD:
(i) is unable to meet its matured monetary obligations under commercial
transactions;
(ii) is unable to meet a public (state or municipal) obligation related to its
commercial activities or a purely commercial obligation to the state;
(iii) is overburdened with debt (i.e. the value of its assets is less than its
monetary obligations).
Once the court has established that the company is insolvent, in its ruling it shall:
(i) declare the insolvency and determine the initial date thereof; (ii) institute
insolvency proceedings; (iii) appoint a temporary trustee in insolvency; (iv) rule
on the provision of security (attachment, injunction with respect to immovable
property or other measures, if necessary); and (v) fix a date for the first creditors’
meeting, which may not be later than one month following the date of the ruling.
The insolvency estate comprises all property rights and any and all takings
of the AD. The insolvency estate shall be used to satisfy all creditors of the
AD with commercial and non-commercial claims. Claims for statutory or con-
tractual interest on unsecured claims, due after the date of the ruling; loans
extended to the debtor by shareholders; gratuitous transactions; and creditors’
expenses incurred in relation to their participation in the bankruptcy proceed-
ings shall be satisfied only after all other creditors have been satisfied in full.
Foreign creditors shall have the same rights as domestic creditors in bankruptcy
proceedings.
Upon the commencement of insolvency proceedings, the debtor shall continue
its activities under the supervision of the trustee in insolvency. The debtor may
conclude new transactions with the prior approval of the trustee only and in
accordance with the measures set forth in the ruling on insolvency. The court
may deprive the debtor of the right to manage and dispose of its assets and grant
this right to the trustee, should it establish that, by its actions, the debtor could
jeopardise the interests of creditors.
55
Furthermore, upon the commencement of insolvency, all judicial and arbitral

proceedings in civil and commercial matters pending against the debtor, with
the exception of labour disputes involving monetary claims, shall be suspended.
Suspended proceedings shall be resumed and continue only if certain conditions
specified in the CA are met.
The trustee in insolvency may terminate any contract to which the AD is a
party, provided it has not been performed in whole or in part. Upon termination
of a contract, the other contracting party shall be entitled to compensation
for any damage caused. Maintaining a contract under which the debtor must
make regular payments shall not bind the trustee to effect payments that were
overdue on the date of the court ruling on the commencement of insolvency
proceedings.
After the date of the court ruling, a creditor may set off claims only if certain
conditions specified in the CA are met (the claims existed prior to the date of
the ruling, the creditor’s and the AD’s claims are mutual, etc.).
The trustee (or any creditor if the trustee fails to act) may file a petition with the
insolvency court to have certain transactions (gratuitous transactions, exercise
of a right of setoff, etc.) declared void or set side. Applications must in all cases
be filed prior to expiry of one year from the opening of insolvency proceedings.
When payments to creditors are made after realisation of the insolvency estate,
certain claims have priority and must be satisfied ahead of all others. In descend-
ing order of priority, these are claims the following:
(i) debts secured by a pledge, mortgage, distraint or prohibition registered
pursuant to the procedure set forth in the Special Pledges Act;
(ii) debts for which the creditor is exercising a right of lien (these claims
have priority only in relation to proceeds from the sale of assets over
which the lien is exercised);
(iii) expenses of the insolvency proceedings;
(iv) debts arising from employment relations existing before the date of the
court’s decision to open insolvency proceedings;
(v) statutory allowances owed by the debtor to third parties;
(vi) public debts existing before the date of the court’s decision to open
insolvency proceedings;
(vii) debts that came into existence after the date of the court’s decision
to open insolvency proceedings and which are unpaid upon maturity
(other than amounts due to employees in respect of that period); and
(viii) any remaining unsecured debts existing before the date of the court’s
decision to open insolvency proceedings.
All actions of the AD, its creditors, the creditors’ committee, the creditors’
meeting, the trustee in insolvency and the court shall be entered in a separate
register, which shall be made publicly available at the insolvency court. Rulings
56
Bulgaria
and resolutions of the court of first instance, the court of appeal and the Supreme
Court on appeals against the insolvency court’s decisions shall be entered in
the same register. The register may be kept and stored in electronic form.
4 Cessation of payments
When a debtor ceases paying its commercial creditors, insolvency is presumed
under the CA and any creditor can start insolvency proceedings.
IX Governing law
In principle, SEs registered in Bulgaria shall be governed mainly by the Reg-
ulation and, where permitted, by the provisions of Bulgarian law applicable to
the SE and public limited-liability companies as well as the national legislation
transposing the Directive (LICE).
However, if no special rules regarding SEs are contained in Bulgarian law, the
general provisions of Bulgarian company law shall apply.
X Tax treatment
1 Income Tax
The taxation of the income of a joint stock company is regulated by the Corporate
Income Tax Act of 22 December 2006 (CITA). CITA regulates:
(i) the profit of resident legal entities;
(ii) the profit of resident legal entities that are not merchants, including
income earned by religious organisations from commercial transactions;
(iii) the profit of non-resident legal entities from a permanent establishment
in Bulgaria;
(iv) the Bulgarian-source income of resident and non-resident legal entities;
(v) the expenses of companies;
(vi) the activities of organisers of games of chance;
(vii) the income of publicly financed enterprises from any type of commercial
transaction;
(viii) the operational activities of entities that carry out maritime merchant
shipping;
(ix) determination of the tax base.
Under CITA, taxable entities include:
(i) resident legal entities;
(ii) non-resident legal entities that carry out an economic activity in Bulgaria
via a permanent establishment or that receive Bulgarian-source income;
57
(iii) employers and commissioning entities under management and control

agreements: in respect of the tax on expenses on fringe benefits.
For the purposes of taxing Bulgarian-source income, any non-resident with an
organisationally and economically distinct formation (such as a trust fund, etc.)
that independently carries on an economic activity or performs and manages
investments shall likewise be deemed a taxable person if the owner of the income
cannot be identified.
Any resident legal entity shall be subject to tax under CITA on profits and
income attributed to it from all sources inside and outside Bulgaria. Resident
legal entities are:
(i) any legal entities incorporated under Bulgarian law;
(ii) any company (SE) incorporated under the Regulation and any coopera-
tive society incorporated under Council Regulation No 1435/2003, whose
registered office is in Bulgaria and which is entered in a Bulgarian com-
mercial register.
Non-resident legal entities are entities that are not resident entities. They are
subject to tax under CITA on profits realised through a permanent establishment
in Bulgaria and on Bulgarian-source income.
There are several types of taxes under CITA:
(i) corporate tax – 10% of profits;
(ii) withholding tax – 7% or 10% of income earned by any resident or non-
resident legal entity, as specified in CITA, depending on the source (for
example, dividends or the sale of real property);
(iii) tax on expenses – 10% of expenses, as specified in CITA;
(iv) an alternative corporate tax (the tax base is determined on different prin-
ciples) at a rate of 10% is levied on:
(a) the activities of organisers of games of chance (gambling);
(b) income attributed to publicly financed enterprises from any commer-
cial transactions;
(c) the operating activities of vessels.
A Profit and income from sources inside Bulgaria

The following shall be deemed profit and income accrued from sources inside
Bulgaria:
(i) Any profit and income earned by non-resident legal entities, deriving
from an economic activity carried out through a permanent establishment
in Bulgaria or from the disposition of property of any such permanent
establishment;
(ii) Any income from financial assets issued by resident legal entities, the
Bulgarian state or a municipality;
58
Bulgaria
(iii) Any income from dividends and shares in liquidation proceeds from a
participating interest in a resident legal entity;
(iv) Any income from agriculture, forestry and the management of hunting
grounds and fisheries within the territory of Bulgaria;
(v) Any income from immovable property or transactions in immovable prop-
erty, including an undivided interest or a limited right in rem to any
immovable property situated in Bulgaria;
(vi) The following income, charged by resident legal entities, resident sole
proprietors or non-resident legal entities and sole proprietors through a
permanent established or fixed base in the country or paid by resident
individuals or non-resident individuals with a fixed base in Bulgaria in
favour of non-resident legal entities, shall be deemed Bulgarian-source:
(a) any interest payments, including interest paid under a financial lease
agreement;
(b) any income from rent or other provision for the use of movable or
immovable property;
(c) any copyright and licence royalties;
(d) any technical assistance fees;
(e) any payments received under franchising agreements and factoring
contracts;
(f) any compensation for management or control of a Bulgarian legal
entity.
It should be noted that if an effective treaty for the avoidance of double taxation
exists, its provisions shall prevail over the provisions of CITA.
B Special provision implementing the Regulation with regard to the transfer of the registered office
of an SE
Following the need for changes in the tax law, the provisions of the Regulation
on the transfer of the registered office of an SE have been implemented in CITA.
Article 152 of CITA provides for the non-dissolution of an SE that transfers
its registered office from one Member State to another. When the registered
office is transferred from Bulgaria to another Member State, the assets and
liabilities of the company must remain effectively connected with a permanent
establishment in Bulgaria, and any proceeds from the use of these assets must
be taken into account when determining the company’s taxable income.
On the other hand, when the registered office is transferred from another Mem-
ber State to Bulgaria, the assets and liabilities of the company must be effectively
connected with the company that commences its legal existence as a result of
this operation, and any proceeds from the use of these assets must be taken into
account when determining the company’s taxable income.
According to the Tax and Social Insurance Procedure Code (effective 1 January
2006) a ‘permanent establishment’ is:
59
(i) a fixed place (whether owned, rented or used on other grounds) through
which a non-resident carries on business inside the country, in whole
or in part, such as a place of management, a branch, a representative
office registered in the country, an office, a bureau, studio, plant, work-
shop (factory), retail shop, wholesale storage facility, post-sale services
establishment, installation, building site, mine, quarry, prospecting drill,
oil or gas well, water spring or any other place of extraction of natural
resources;
(ii) the conduct of business inside the country by persons authorised to con-
tract on behalf of non-resident persons, with the exception of the business
of independent agents, as stipulated in the CA;
(iii) sustained commercial transactions performed inside the country, even if
the non-resident person has no permanent representative or fixed base
within the country.
Article 153 of CITA provides for the legal succession of an entity in the event
of a transfer of its registered office, as described above with respect to Article
152 of CITA. Thus, for tax purposes, upon the transfer of an SE’s registered
office from Bulgaria to another Member State:
(i) all acts performed by the company for the current and prior tax periods,
including adjustments to its taxable income, shall be considered as having
been performed by the permanent establishment;
(ii) corporate tax shall not be levied on the company for the period commenc-
ing at the start of the year and ending on the date of the transfer;
(iii) corporate tax shall be levied on the permanent establishment for the period
commencing at the start of the year in accordance with the standard
procedure, and activities carried out by the company in the year of the
transfer shall be considered as having been carried out by the permanent
establishment;
(iv) the permanent establishment shall have the right to carry forward any
tax losses not carried forward by the company, in accordance with the
standard procedure.
On the other hand, upon the transfer of an SE’s registered office from another
Member State to Bulgaria:
(i) all acts performed by the permanent establishment for the current and prior
periods, including adjustments to taxable income, shall be considered as
having been performed by the company;
(ii) corporate tax shall not be levied on the permanent establishment for the
period commencing at the start of the year and ending on the date of the
transfer;
(iii) corporate tax shall be levied on the company for the period commenc-
ing at the start of the year in accordance with the standard procedure,
and activities carried out by the permanent establishment in the year
60
Bulgaria
of the transfer shall be considered as having been carried out by the

company;
(iv) the company shall have the right to carry forward any tax losses not carried
forward by the permanent establishment, in accordance with the standard
procedure.
Furthermore, CITA provides that its provisions on assets and liabilities, profits
and losses, and temporary tax differences in the event of a change in corporate
form shall also apply to the transfer of an SE’s registered office, in particular
Articles 140 to 145.
Assets and liabilities not taken into account prior to the transfer and which,
consequently, must be taken into account for the purpose of determining taxable
income under CITA, shall be valued for tax purposes by the receiving companies
at their value under national accounting legislation. Any such depreciable assets
shall be posted in the tax depreciation schedule in accordance with the standard
procedure.
Upon the transfer, the receiving companies shall not have the right to carry
forward the transferring companies’ tax losses.
Any tax losses not carried forward at the time of the transfer, recorded by a
permanent establishment of a local company in another Member State, may not
be deducted.
In determining taxable income, the accounting results shall be credited against
tax losses carried forward at the time of the transfer, recorded by a permanent
establishment of a local company in another Member State and which have not
been deducted from the permanent establishment’s profits.
2 Other taxes
Other taxes a company may owe differ depending on its area of activity or assets
(e.g. value added tax, local taxes on real property and means of transport, excise
tax on certain goods, such as spirit drinks, fuels, tobacco products, etc.). Thus,
it is not possible to cover all possible variations under the tax legislation in this
report.
It should be noted, however, that under the Bulgarian Constitution, taxes can
only be imposed by statute or code. Therefore, the administration is not entitled
to impose any taxes not expressly provided for by law or a code.
XI Conclusion
In conclusion, certain amendments to the Bulgarian Commerce Act and the
approval of the Law on Information and Consultation with Employees in Multi-
national Undertakings, Groups of Undertakings and European Companies of
61
2006 create the basis for the incorporation and registration of an SE with its
registered office in Bulgaria.
In addition, the entry into force of the new Commercial Register Act, effective
1 January 2008, will simplify and speed up the registration process.
The low rate of corporate tax (10%) is also an important incentive to register
SEs in Bulgaria.
Finally, as stated in Part IV of this report, LICE can be further amended in order
to implement certain of the options provided for in the Directive.
62
2
Cyprus
dr alexandros tsadiras
Andreas Neocleous & Co
I Introduction 64
II Application 64
III Definition and characteristics 65
1 Definition 65
2 Legal personality 65
3 Public company 65
4 Comparison with the European economic interest grouping 66
IV Identity 66
1 Name and corporate form 66
2 Registered office 66
V Capital 67
VI Formation 67
B Formation by merger through acquisition by a parent
company holding at least 90% of the share capital of a
subsidiary 70
C Formation by merger through the acquisition of a
wholly owned subsidiary 71
D Formation by incorporation as a holding company 71
E Formation by incorporation as a subsidiary 72
F Formation by conversion 73
A Registration 73
B Publication 74
C Effects of publication 74
5 Subsidiaries 75
VII Articles of an SE 75
VIII Organisation and management 76
A Powers 76
B Organisation 76
C Quorum and voting requirements 77
63
D Amendments to an SE’s articles 77

3
Management (two-tier system/one-tier system) 77
A Powers and functioning 77
B Appointment, removal and liability 78
C One-tier system 80
IX Annual accounts and consolidated accounts 80
X Transfer of registered office 80
XI Termination 81
XII Conversion into a national company 82
XIII Applicable law 83
XIV Conclusion 83
I Introduction
1. EC Regulation No 885/2004 of 26 April 20041 extends to Cyprus the appli-
cation of Council Regulation No 2157/2001 of 8 October 20012 on the Statute
for a European company (the ‘Regulation’) and Council Directive 2001/86/EC
of 8 October 20013 supplementing the Statue for a European company with
regard to the involvement of employees (the ‘Directive’). The European Public
Limited-Liability Company Regulations 2006 (the ‘EPLLC Regulations’) and
Law 277(I)/20044 were introduced in order to harmonise Cypriot and Commu-
nity law. Given that the European company (commonly referred to by its Latin
name, Societas Europaea or SE) has only existed since mid-2006, there is as
yet no Cypriot case law on the subject.
As noted at no. 2 of the general report, the Regulation and the Directive apply
throughout the European Economic Area (EEA), and references in this chapter
to the European Union or to its Member States should be construed to include
Norway, Iceland and Lichtenstein.
II Application
2. Cyprus came under an obligation to bring its legislation into line with the
Regulation and the Directive when it acceded to the European Union on 1 May
2004. The EPLLC Regulations facilitate the application of the Regulation and
were introduced via Section 387(1)(e) of the Cypriot Companies Law, Chapter
113 (the ‘CCL’).
The Directive was incorporated into Cypriot law by Law 277(I)/2004, which
was adopted on 31 December 2004. In the event of inconsistency between
Community and national legislation, the former shall prevail, and the Member
1 Official Journal L 168/1 of 1 May 2004. 2 Ibid., L 294 of 10 November 2001.

3
Council Directive supplementing the Statute for a European company with regard to the involve-
ment of employees, Official Journal L 294/22 of 10 November 2001.
4
Official Gazette of the Republic of Cyprus, 3940, 31 December 2004.
64
Cyprus
State lays itself open to proceedings brought pursuant to Article 226 EC Treaty
as well as to extra contractual liability.
It is interesting to note that the Cyprus legislature followed the British and Irish
tradition of adopting subsidiary legislation to implement the Regulation and the
Directive rather than introduce a new ‘stand-alone’ Companies Law.
III Definition and characteristics

1 Definition
3. An SE is a public limited-liability company with legal personality and a real
link with the European Union, as evidenced by a registered office and centre of
administration on the territory of a Member State. The types of companies that
qualify for this definition in Cyprus are listed in the Annex to Regulation No
885/2004 of 26 April 2004.
The EPLLC Regulations define an SE as a European public limited-liability
company within the meaning of the Regulation which, unless otherwise stated,
is, or shall be, registered in the Cypriot Republic.5
4. The Regulation contemplates four different means of forming an SE. First,
an SE may be established by a merger of two or more public limited-liability
companies from different Member States. Second, an SE can be set up as a
holding company for European limited-liability companies. Third, an SE can
be formed as a subsidiary. Fourth, a national company can be converted into an
SE. Specific conditions apply for each of the above options.
2 Legal personality
5. An SE is a legal entity endowed with legal personality (Art. 1(3) Reg.). This
means that an SE may sue in its own name to enforce its rights and that it may
be sued if it does not abide by its obligations. Legal personality is acquired
upon the registration of, or conversion into, an SE (see no. 27).
3 Public company
6. As an SE is a public company (Art. 1(1) Reg.), its share capital is open to
the public. The implications of the public character of an SE are determined by
the CCL, which includes provisions pertaining to the offer for subscription and
payment of share capital,6 the amounts that must be paid up on shares,7 capital
increases and reductions,8 and shareholders’ rights and variations therein.9
5 Reg. 2(2) EPLLC Regulations. 6 Art. 47a CCL.

7 Ibid., Art. 58. 8 Ibid., Arts. 60A and 64. 9 Ibid., Art. 69a.
65
4 Comparison with the European economic interest grouping

7. Council Regulation No 2137/8510 introduced the European economic interest
grouping (EEIG) into Community law. The main characteristics of the EEIG
are set out in Section III(4) of the general report. The EEIG presents certain
similarities with the SE but differs from the SE in many important respects.
As far as the similarities are concerned, both the EEIG and the SE formed by
merger require the participation of two or more companies located in at least
two Member States. With respect to their differences, the special features of the
EEIG render it easy to distinguish from the SE. These differences mainly relate
to the nature of the two entities, their organisation and management, the liability
of their members or shareholders, and finally their tax treatment. A detailed
discussion of these issues can be found in Section III(4) of the general report.
IV Identity
1 Name and corporate form
8. An SE’s name must be preceded or followed by the abbreviation SE (Art.
11(1) Reg.). Only legal entities formed as an SE in accordance with the Regu-
lation are entitled to include the abbreviation ‘SE’ (or Eυρωπ αϊκ ή ∆ηµóσ ια
Eτ αιρεία Περιoρισ µένης Eυθ v́νης in Greek) in their names (Art. 11(2)
Reg.). Nevertheless, a legal entity incorporated in Cyprus before 1 May 2004
whose name contains the abbreviation ‘SE’ shall not be required to change it.
Failure to comply with the aforementioned obligation shall trigger the applica-
tion of Article 374 of the CCL on the use of company names.
2 Registered office
9. Cyprus follows the incorporation theory to determine whether a legal entity
is regulated by Cypriot law. The head office and registered office of an SE
incorporated in Cyprus need not be at the same place, so long as both are
situated in Cyprus.11 The registration formalities are determined by the EPLLC
Regulations and the CCL.
An SE cannot have its registered office outside the European Union. A company
whose registered office is located in the European Union but whose head office
is not may participate in the formation of an SE if it has been formed under the
laws of a Member State and has a real and continuous link with the economy
of a Member State.12
10. If an SE ceases to meet the requirements of Article 7 of the Regulation
regarding the location of its head office and registered office, the Registrar
10 Official Journal L 199 of 31 July 1985. 11 Reg. 15 EPLLC Regulations.

12
Ibid., Regs. 2(5) and 14.
66
Cyprus
of Companies can order the SE to regularise its situation in accordance with

Article 64(1)(a) and (b) of the Regulation within a specified period of time. The
Registrar can petition the competent district court for an order if the SE fails to
comply with these instructions. If the SE does not comply with the court order
it can be involuntarily wound up pursuant to Article 211 of the CCL on the
ground that it is no longer conducting business.13
V Capital
11. An SE must have issued and paid-up share capital of at least €120,000 (Arts.
1(2) and 4(2) Reg.). Pursuant to EPLLC Regulation 28, an SE is subject to the
provisions of national law applicable to public limited-liability companies as
regards the denomination of its share capital. This means that in Cyprus, where
the euro has yet to be introduced as the sole currency, an SE must in principle
denominate its capital in Cypriot pounds. Nevertheless, an SE registered in
Cyprus can also express its capital in euros (Art. 67(1) Reg.). The conversion
rate will be that of the last day of the month preceding that in which the SE was
formed (Art. 67(1) Reg.).
VI Formation
1 General remarks
12. As mentioned above, both the registered office and head office of an SE must
be situated in the same Member State. The Regulation sets out four different
ways of establishing an SE, namely by merger, as a holding company, as a
subsidiary or by conversion. Special provisions apply where an SE is formed
by merger (i) through acquisition by a parent company holding at least 90%
of the share capital of a subsidiary and (ii) through the acquisition of a wholly
owned subsidiary.
13. The conclusion of an agreement on employee involvement is a prerequisite
for the registration of an SE. Moreover, at least two of the companies involved
must be subject to the laws of different Member States (Art. 2 Reg.). A list of
qualifying corporate forms in Cyprus is annexed to Regulation No 885/2004 of
26 April 2004 and includes ∆ηµóσ ια Eτ αιρεία Π εριoρισ έµνης Eυθ v́νης
µε µετ oχ ές (public company limited by shares) and ∆ηµóσ ια Eτ αιρεία
Περιoρισ µένης Eυθ v́νης µε εγγv́ηση (public company limited by guarantee
with share capital).
14. An SE acquires legal personality upon registration and the issuance of a
certificate of incorporation (see no. 27). Any formalities not dealt with in the
Regulation are governed by the provisions of national law applicable to public
13
Ibid., Reg. 36.
67
limited-liability companies of the Member State in which the SE’s registered

office is situated (Art. 15(1) Reg.).
Pursuant to EPLLC Regulation 10, the Registrar of Companies shall register
an SE formed pursuant to Articles 2 and 3 of the Regulation or an SE whose
registered office is transferred to Cyprus pursuant to Article 8 of the Regulation,
if it is satisfied that all the requirements of the Regulation and the EPLLC
Regulations in respect of the formation, conversion or transfer, as the case
may be, have been met. Subject to any limitations or qualifications specified in
the Regulation, the provisions of the CCL apply with respect to the treatment
of documents delivered to the Registrar of Companies,14 the registration or
deletion of the registration of an SE, and the Registrar’s functions in respect of
such registration or deletion.15 It is also provided that any person who knowingly
makes a false statement in any registration form submitted to the Registrar, any
document attached to such a form or any other document sent to the Registrar
under the EPLLC Regulations can be sentenced to a prison term of up to two
years, ordered to pay a fine of up to CYP 20,000 (approximately €34,500) or
both.
15. The registration of an SE must be made public (Art. 15(2) Reg.). The
publication formalities are regulated by the First Company Law Directive of 9
March 1968 and its implementing legislation. Pursuant to EPLLC Regulation
33(2), the Registrar shall cause to be published in the Official Gazette of the
Republic of Cyprus (the ‘Official Gazette’) a notice of the registration and
receipt of any related documents and particulars. The formation of an SE must
also be published in the Official Journal of the European Communities. For this
purpose, the Registrar shall send the relevant notice to the Office for Official
Publications of the European Communities.16
16. With respect to employee participation, the procedure to elect or appoint
members of the special negotiating body (SNB) is set out in Articles 6 and 7 of
Law 277(I)/2004. Trade union representatives may sit on the SNB if they are
employees of a participating company or relevant subsidiary or establishment.17
Specific budgetary rules regarding the operation of an SNB apply. The partic-
ipating companies are required to bear the costs of (i) electing or appointing
SNB members; (ii) organizing SNB meetings; and (iii) one expert to assist the
SNB with its tasks.18
No particular provisions for SEs have been laid down in Cyprus so that structures
allowing employee representation in participating companies that will cease to
exist as separate legal entities shall be maintained after registration of the SE.19
14 Ibid., Reg. 11. 15 Ibid., Reg. 12. 16 Ibid., Reg. 34.

17
This can be inferred from Article 7 of Law 277(I)/2004. An option to the contrary is granted by
Article 3(2)(b) of the Directive.
18
Art. 8(7) of Law 277(I)/2004, exercising the option granted by Art. 3(7) Dir.
68
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Nor have any provisions been introduced to provide ideological guidance with
respect to information and the expression of opinions, as permitted by Article
8(3) of the Directive.

17. An SE may be formed by merger of two or more public limited-liability
companies situated in at least two different Member States (Art. 2(1) Reg.).
The types of Cypriot companies that can participate in the formation of an SE
by merger are listed in Annex I to the Regulation, as amended by Regulation
No 885/2004 of 26 April 2004, and are the following: (i) ∆ηµóσ ια Eτ αιρεία
Περιoρισ µένης Eυθ v́νης µε µετ oχ ές (public company limited by shares);
and (ii) ∆ηµóσ ια Eτ αιρεία Περιoρισ µένης Eυθ v́νης µε εγ γ v́ησ η (pub-
lic company limited by guarantee with share capital).
The Third Company Law Directive on mergers of public limited-liability com-
panies (the ‘Third Company Law Directive’)20 stipulates two different methods
of merger: (i) by acquisition; and (ii) by formation. Each method is regulated
by a different set of rules.
18. The process that ultimately leads distinct legal entities to merge is clearly
and extensively outlined in Section VI(2)(A) of the general report. The EPLLC
Regulations and Law 277(I)/2004 complement the Regulation with respect
to the formation of an SE by merger in Cyprus. To register an SE formed
by merger, the EPLLC Regulations state that a form E1 must be delivered
to the Registrar, along with the documents required by the Third Company
Law Directive.21 Articles 5 through 10 of Law 277(I)/2004 regulate employee
involvement in the formation process. The reference provisions in part 3 of the
Annex to the Directive (standard rules for participation) do not apply where an
SE is formed by merger.22
The authority competent to scrutinise the legality of a merger in Cyprus, as
regards the participation of each merging company, is not the Registrar of
Companies but rather the district court, which issues a certificate conclusively
attesting to the completion of the requisite pre-merger acts and formalities.
The district court is also competent to scrutinise the legality of completion of a
merger and formation of an SE. To that end, each merging company must submit
to the court a pre-merger certificate within six months of its issuance together
with a copy of the approved draft terms (Art. 26(2) Reg.). The district court is
required to ensure that the provisions of the Directive have been complied with
19 Pursuant to Art. 13(4) Dir. 20 Official Journal L 295 of 20 October 1978.

21
Reg. 3 EPLLC Regulations.
22
Art. 11(2) of Law 277(I)/2004, exercising the option granted by Art. 7(3) Dir.
69
and that the requirements of the CCL have been met. The absence of scrutiny
of the legality of a merger is not a ground for winding up an SE, however.
A company registered in Cyprus of a type specified in Annex 1 to the Regu-
lation, and which is subject to Cypriot law, may not take part in the formation
of an SE by merger if the Registrar expresses its opposition to participation by
this company on grounds of public interest before the issuance of the certifi-
cate referred to in Article 25(2) of the Regulation.23 In this case, the merging
company may petition the district court for judicial review.24
Cyprus has not introduced any specific provisions to protect minority share-
holders who oppose the formation of an SE by merger.25
19. The merger takes effect on the date the SE is recorded in the national registry
of a Member State. Each merging company registered in the Cypriot Republic
is required to publish in the Official Gazette information on the corporate form,
name and registered office of each company involved in the merger; the national
registry in which information on each company is made available to the public;
an indication of the arrangements under national law on the protection of cred-
itors (Art. 24 Reg.) for the exercise of creditors’ rights and the address at which
complete information on these arrangements may be obtained free of charge; an
indication of the arrangements under national law for the protection of minority
shareholders; and the proposed name and address of the SE’s registered office.
Further information specified in Article 201C of the CCL, including reports by
the directors and independent experts on the financial implications and mechan-
ics of the merger, must also be published.26 The merging companies must notify
the Registrar of Companies of any such publication. If the Registrar deems the
notice insufficient or deficient in any manner, republication may be required.
Upon completion of the merger, the participating entities cease to exist and
the totality of their assets and liabilities is automatically transferred to the new
company.
Where an SE is formed by merger, regardless of whether its registered office
is in Cyprus or another Member State, and a public company registered in
Cyprus has taken part in the procedure, the Registrar of Companies is required
to publish a notice to this effect in the Official Gazette in accordance with the
provisions of Section 365A of the CCL.27
B Formation by merger through acquisition by a parent company holding at least 90% of the
share capital of a subsidiary
20. Cypriot law contains special provisions for a merger where at least 90% of
the shares and voting securities of a public limited-liability company are already
23 Reg. 18 EPLLC Regulations. 24Ibid., Reg. 37(1)(b).

25 Pursuant to Art. 24(2) Dir. 26 Reg. 30 EPLLC Regulations.
70
Cyprus
held by another public limited-liability company.28 For example, a directors’

or expert’s report is not required in such cases.29 Cyprus has also exercised the
option granted by Article 31(2) of the Regulation and applies Article 31(1) of
the Regulation to cases where a company holds shares conferring 90% or more
but not all the voting rights in a subsidiary.30
C Formation by merger through the acquisition of a wholly owned subsidiary

21. This special case applies when a company absorbs another company, all of
whose shares and voting securities it owns (Art. 31(1) Reg.). Both companies
must be on the list of qualifying companies annexed to the Regulation, as
amended by Regulation No 885/2004 of 26 April 2004. In this case, the merger
procedure is simplified as, for example, no report by an independent expert is
required and the draft terms of merger need not indicate the terms for allocating
shares in the SE.
D Formation by incorporation as a holding company
22. A holding SE may be established by public and private limited-liability

companies formed under the laws of a Member State with their registered
offices and head offices within the European Union. A holding SE may only be
formed if at least two of the participating companies are governed by the laws
of different Member States and have, for at least two years, maintained a sub-
sidiary governed by the laws of another Member State or a branch in another
Member State (Arts. 32(1) and 2(2) Reg.). The types of companies that can
participate in the formation of a holding SE are listed in Annex II to the Reg-
ulation, as amended by Regulation No 885/2004 of 26 April 2004, and are the
following: (i) ∆ηµóσ ια Eτ αιρεία Περιoρισ µένης Eυθ v́νης µε µετ oχ ές
(public company limited by shares); (ii) ∆ηµóσ ια Eτ αιρεία Π εριoρισ µένης
Eυθ v́νης µε εγ γ v́ησ η (public company limited by guarantee with share cap-
ital); and (iii) ιδιωτ ικ ή ετ αιρεία (private company). The resulting company is
a legal entity separate from the promoting companies, with its own assets and
liabilities.
23. The formation of a holding SE is regulated by Articles 32 to 34 of the
Regulation. Section VI(1)(D) of the general report outlines the steps involved.
There are a number of issues that should be mentioned with respect to the
implementation of these provisions under Cypriot law.
Firstly, pursuant to EPLLC Regulation 29(2), where draft terms of formation
for a holding SE have been drawn up, regardless of whether the SE’s registered
office will be in the Republic of Cyprus or another Member State, pursuant to
Article 32(2) of the Regulation a copy of the draft terms must be submitted to
27 Ibid., Reg. 33. 28 Art. 201A(1) CCL.

29 Ibid., Art. 201C. 30 Reg. 19 EPLLC Regulations.
71
the Registrar of Companies together with a form E2(I), set out in the Schedule
to the EPLLC Regulations, and the Registrar is required to ensure that a notice
of receipt of the draft terms is published in the Official Gazette.
Secondly, in accordance with EPLLC Regulation 4, with a view to registering
a holding SE the promoting companies must deliver to the Registrar an E2
form together with the necessary documents.
Thirdly, pursuant to EPLLC Regulation 32, upon fulfilment of the conditions
for the formation of a holding SE, regardless of whether the SE’s registered
office will be in Cyprus or another Member State, the promoting company
must deliver to the Registrar of Companies within 14 days a notice to this effect
on an E2(II) form, set out in the Schedule to the EPLLC Regulations. If the
company fails to do so, it shall be liable in summary proceedings for a default
fine in accordance with Article 375 of the CCL.
Upon receipt of the E2(II) form, the Registrar of Companies shall cause a
notice to be published in the Official Gazette to the effect that the requirements
for incorporation have been fulfilled in accordance with the provisions of Article
365A of the CCL. The notice must also be published in the Official Journal of
the European Communities.
An SE acquires legal personality upon registration and is regulated by the laws
of the Member State in which its registered office is located.
The Member States may adopt provisions designed to ensure protection for
creditors, employees and minority shareholders who oppose the operation.31
Cyprus has not adopted any such provisions, however.
E Formation by incorporation as a subsidiary

24. Companies and firms within the meaning of Article 58(2) of the EC Treaty
and other legal entities governed by public or private law, formed under the laws
of a Member State, with their registered and head offices within the Community
may form a subsidiary SE by subscribing for its shares, provided two or more
are governed by the laws of different Member States or have maintained for at
least two years a subsidiary governed by the laws of another Member State or
a branch in another Member State (Art. 2(3) Reg.).
The conditions and formalities for incorporation of a subsidiary SE are deter-
mined by the national law of the Member State where the SE’s registered office
is located. A subsidiary SE must be registered in that Member State. To register
a subsidiary SE in Cyprus formed in accordance with Article 2(3) of the Reg-
ulation, the founders must provide the Registrar of Companies with an E3
form (set out in the schedule to the EPLLC Regulations) together with the
31
Art. 34 Reg.
72
Cyprus
required accompanying documents.32 The registration must also be published

in the Official Journal of the European Communities.
The functioning of a subsidiary SE is governed by the laws applicable to public
limited-liability companies of the Member State in which its registered office
is located (Art. 10 Reg.).
F Formation by conversion
25. A public limited-liability company formed under the laws of Cyprus

(∆ηµóσ ια Eτ αιρεία Περιoρισ µένης Eυθ v́νης) can be converted into an
SE if, for at least two years, it has had a subsidiary governed by the laws of
another Member State (Art. 2(4) Reg.). It follows that conversion may not take
place if the public limited-liability company does not have a subsidiary in a
different Member State. Conversion does not lead to the establishment of a new
legal entity but rather the continuation of an existing company in a different
form.
26. The conversion process is detailed in Article 37 of the Regulation, and the
key features are set out in Section VI(2)(F) of the general report. With respect
to Cypriot law, three main issues should be noted.
Firstly, in accordance with EPLLC Regulation 29(3), when the draft terms of
conversion are drawn up by the management or administrative organ, a copy of
the draft terms together with an E4(I) form must be submitted to the Registrar
of Companies, who shall cause a notice of receipt to be published in the Official
Gazette.
Secondly, in order to be registered as an SE formed by conversion, the company
must deliver an E4 form, as set out in the Schedule to the EPLLC Regulations,
to the Registrar of Companies together with all specified documents.33 A notice
of the conversion must also be published in the Official Gazette and in the
Official Journal of the European Communities.
Thirdly, Cypriot law does not require the approval of a qualified majority or
unanimity in the organ of the company to be converted within which employee
participation is organised as a precondition for the conversion.34

A Registration
27. An SE must be registered in the Member State in which its registered office
is located, in a register designated by the laws of that state in accordance with
32 Reg. 5 EPLLC Regulations. 33 Ibid., Reg. 6.

34
Such a possibility was contemplated by Article 37(8) of the Regulation.
73
the First Council Directive (68/151/EEC) of 9 March 1968.35 Legal personality

cannot be acquired without registration.
An SE can only be registered if: (i) an arrangement for employee involvement
pursuant to Article 4 of the Directive has been reached; or (ii) a joint decision
not to proceed with negotiations on employee involvement pursuant to Article
3(6) of the Directive has been taken; or (iii) the period for negotiations under
Article 5 of the Directive has expired without an agreement having been reached
(Art. 12(2) Reg. and Art. 7(1)(b) Dir.).
The Registrar of Companies will register an SE formed by conversion or oth-
erwise under the provisions of Articles 2 and 3 of the Regulation or an SE
whose registered office is transferred to Cyprus pursuant to Article 8 of the
Regulation once all the requirements of the Regulation and the EPLLC Reg-
ulations in respect of the formation, conversion or transfer, as the case may
be, have been met.36 The Registrar is required to retain any document submit-
ted pursuant to any provision of the Regulation or the EPLLC Regulations in
accordance with the provisions of the CCL.37 These provisions also apply with
respect to the registration or deletion of the registration of an SE under the
Regulation and the functions of the Registrar in respect of such registration or
deletion.38
B Publication
28. Publication of documents and particulars concerning an SE is effected in

the manner laid down in the national law of the Member State in which the SE’s
registered office is located, in accordance with Directive 68/151/EEC (Art. 13
Reg.). EPLLC Regulation 33 provides that where an event must be publicised,
the Registrar of Companies shall publish a notice of receipt of particulars of the
event in the Official Gazette in accordance with the provisions of Article 365A
of the CCL.
A notice of an SE’s registration or deletion of a registration must also be pub-
lished in the Official Journal of the European Communities, after publication
in the official gazette of the Member State where the SE is or was registered.
Publication in the Official Journal is for information purposes only (Art. 14(1)
Reg.). The Registrar shall send the relevant notice to the Office for Official
Publications of the European Communities.39
C Effects of publication
29. The First Company Law Directive determines the effects of publication of
documents relating to an SE. In principle, if a document must be published it
35 Official Journal L 65 of 14 March 1968. 36 Reg. 10 EPLLC Regulations.

37 Ibid., Reg. 11(1). 38 Ibid., Reg. 12. 39 Ibid., Reg. 34.
74
Cyprus
cannot be enforced against third parties prior to its publication. Section VI(3)(C)
of the general report contains an informative discussion of the effects of publi-
cation.

30. Until the process of incorporation of an SE is complete, the SE does not
enjoy legal personality and therefore may not create rights or incur obligations
in its own name. A party may act on behalf of an SE prior to its registration only
if the SE accepts the rights and obligations arising out of such acts following
registration. If acts are committed in an SE’s name before its registration and the
SE does not subsequently assume the obligations arising out of these acts, the
natural persons, companies, firms or other legal entities that committed them
shall be jointly and severally liable, without limitation, in the absence of an
agreement to the contrary (Art. 16(2) Reg.).
5 Subsidiaries
31. Like any other legal entity, an SE may set up one or more subsidiaries,
which may themselves take the form of an SE. Provisions of national law of
the Member State in which a subsidiary SE has its registered office that require
a public limited-liability company to have more than one shareholder shall not
apply to a subsidiary SE. However, provisions of national law implementing
the Twelfth Company Law Directive (89/667/EEC) of 21 December 1989 on
single-member private limited-liability companies shall apply to SEs mutatis
mutandis (Art. 3(2) Reg.).
Pursuant to EPLLC Regulation 7, if it is proposed to register an SE formed as
the subsidiary of an SE, an E3 form (set out in the Schedule to the EPLLC
Regulations) must be submitted to the Registrar along with any necessary docu-
ments. The registered office of an SE whose subsidiary is to be registered under
the Regulation may be situated in another Member State.
VII Articles of an SE
32. For the purposes of the Regulation, the term ‘statutes’ has a two-fold mean-
ing. Firstly, it denotes an SE’s instrument of incorporation and, secondly, where
they are the subject of a separate document, the company’s articles of associa-
tion (Art. 6 Reg.).
Amendments to an SE’s articles must be published (Art. 59 Reg.). For this
purpose, an SE must submit any amendments to its articles to the Registrar of
Companies, along with an E10 form, set out in the Schedule to the EPLLC
Regulations, within 14 days following their adoption.40
40
Ibid., Reg. 43(1)(a).
75
If it appears that an SE’s articles conflict with the arrangements for employee
involvement determined in accordance with Article 12 of the Regulation, and
the articles have not been amended to the extent necessary, the Registrar can
order the SE to amend its articles accordingly within a specified period of time.
The Registrar can seek to enforce any such order by petitioning the competent
district court.41
VIII Organisation and management

1 General remarks
33. An SE can have either a one-tier or a two-tier management structure. In
the former, there is a general meeting of shareholders and an administrative
organ. In the latter, a management organ and a supervisory board replace the
administrative organ while the general meeting of shareholders is retained (Art.
38 Reg.).

A Powers
34. The general meeting of shareholders takes decisions on matters for which it
is given sole authority by the Regulation, the Directive and provisions of national
law applicable to public limited-liability companies of the Member State where
the SE’s registered office is located (Art. 52 Reg.). Section VIII(2)(A) of the
general report provides an indicative list of such matters.
B Organisation
35. General meetings of an SE are governed by Articles 124 et seq. of the

CCL, subject to specific rules laid down in the Regulation. At least one general
meeting must be held each calendar year (Art. 125(1) CCL). A newly formed
company must hold its first annual general meeting within eighteen months
of its incorporation, meaning that there may not be a meeting in the year of
incorporation or the following year (Art. 125(1) CCL).
General meetings may be called at any time by the management or adminis-
trative organ and the supervisory board (Art. 54(2) Reg.). One or more share-
holders holding jointly at least 10% of an SE’s subscribed capital may ask the
SE to convene a general meeting, in which case they should draw up an agenda
(Art. 55(1) Reg.). This threshold may be reduced by either the SE’s articles
or national law. Cyprus currently applies the 10% threshold.42 If, following a
request, a general meeting is not held in due time and, in any event, within
two months, the Registrar of Companies may order that a general meeting be
41 Ibid., Reg. 39. 42 Art. 126 CCL.
76
Cyprus
convened within a given period of time or authorise either the shareholders

who have so requested or their representatives to convene the meeting (Art.
55 Reg.). Although Article 55 is silent on who bears the costs of the meet-
ing in this case, the court will most likely order the SE to do so. One or
more shareholders holding at least 10% of an SE’s subscribed capital may
request that items be placed on the agenda (Art. 56 Reg.). Cyprus has not
exercised the option contained in Article 56 of the Regulation to set a lower
threshold.
C Quorum and voting requirements

36. In general, decisions of the general meeting are taken by a simple majority
of the votes validly cast (Art. 57 Reg.), not including votes attached to shares in
respect of which the shareholder has abstained or has returned a blank or spoilt
ballot (Art. 58 Reg.).
While the Regulation does not provide for a quorum, the SE’s articles may do
so in certain cases.
D Amendments to an SE’s articles

37. In keeping with the CCL, amendments to an SE’s articles must be approved
by a majority of at least 75% of the votes cast at a general meeting43 (higher
than the two-thirds majority stipulated in Article 59 of the Regulation). The
same majority is required even when at least half the SE’s subscribed capital is
present or represented.44
If the articles of an SE conflict with the arrangements for employee involvement,
the management or administrative organ is not entitled to proceed to amend the
articles without the approval of the general meeting.45
As mentioned above, amendments to an SE’s articles must be publicised as
required by law in order to take effect.
3 Management (two-tier system/one-tier system)

A Powers and functioning
38. In the one-tier system, an SE is managed by its administrative organ. In
the two-tier system, there is a management organ, which is overseen by a
supervisory board.
43
Reg. 27 EPLLC Regulations.
44
Article 59(2) of the Regulation states that a Member State may provide that a simple majority
shall suffice when at least half an SE’s subscribed capital is represented, but this option was not
adopted in Cyprus.
45
An option to the contrary is provided in Article 12(4) of the Regulation but was not adopted in
Cyprus.
77
In both cases, unless otherwise provided by the Regulation or the SE’s articles,
the required quorum is at least half the members of the administrative or man-
agement body. A majority of the members must be present or represented (Art.
50(1) Reg.). The chair casts the deciding vote in the event of a tie, unless the
articles provide otherwise. There can be no provision to the contrary in the arti-
cles, however, where half the members of the supervisory organ are employee
representatives (Art. 50(2) Reg.).
39. The supervisory or administrative organ of an SE or of a participating
company established in Cyprus is not obliged to transmit information to the
members of the special negotiating body or to the employee representative body
if to do so would, according to objective criteria, seriously harm the functioning
of the SE (or, as the case may be, the participating company) or its subsidiaries
and establishments or would be prejudicial to them.46 This dispensation is not
subject to prior administrative or judicial approval.47
B Appointment, removal and liability

40. Members of the administrative and supervisory organs are appointed for
a term stated in the SE’s articles, which may not exceed six years (Art. 46(1)
Reg.). They may be reappointed one or more times, unless the articles provide
otherwise (Art. 46(2) Reg.). If a company or other legal entity is appointed,
it must designate a natural person to exercise its functions on its behalf (Art.
47(1)(1) Reg.).
41. Persons who are disqualified from serving on the organs of a public limited-
liability company of the Member State where the SE’s registered office is
located, either by law or pursuant to a judicial or administrative order delivered
in the European Union, may not be appointed to an SE’s organs (Art. 47(2)
Reg.).
The SE’s articles may stipulate special eligibility requirements for members
representing certain shareholders, in accordance with the law of the Member
State where the SE is registered.
42. The members of an SE’s organs are subject to a duty of confidentiality which
continues in effect even after they have ceased to hold office and covers any
information concerning the SE the disclosure of which could be prejudicial to
the company’s interests, except where such disclosure is required or permitted
under provisions of national law applicable to public limited-liability companies
(Art. 49 Reg.).
43. In the two-tier system, the management organ is responsible for managing
the SE (Art. 39 Reg.) and is overseen by a supervisory board (Art. 40(1) Reg.).
46
Art. 16(2) Law 277(I)/2004.
47
This option is contained in Article 8(2) of the Directive.
78
Cyprus
There are no provisions of national law to the effect that a managing director or
directors shall be responsible for the day-to-day management of an SE under
the same conditions applicable to public limited-liability companies with their
registered office in Cyprus.48
44. Details of the two-tier system are set out in Articles 39 to 42 of the Regulation
and a detailed discussion can be found in Section VIII(3)(C) of the general
report. With respect to the application of these provisions in Cyprus, a number
of points should be noted.
Firstly, pursuant to EPLLC Regulation 20,49 the articles of an SE may
provide that the member or members of the management organ shall be
appointed and removed by the general meeting under the same conditions
applicable to public limited-liability companies with their registered office in
Cyprus.
Secondly, in the event of a vacancy on the management organ, a member of
the supervisory organ may be appointed to fill the vacancy, in accordance with
Article 39(3) of the Regulation, for a period not to exceed six months.50
Thirdly, the minimum number of members of an SE’s management organ and
supervisory organ is two.51
Fourthly, the management organ is required to provide each member of the
supervisory organ with any information that member needs in order to exer-
cise his or her supervisory functions in accordance with Article 40(1) of the
Regulation.52
Fifthly, the supervisory organ may make certain categories of transactions sub-
ject to its authorisation.53 The EPLLC Regulations do not specify any such
categories to be indicated in an SE’s articles. Thus, the option contained in
Article 48(2) of the Regulation has not been adopted in Cyprus.
Sixthly, an SE with a two-tier management structure is required to keep at
its registered office a register of the members of its supervisory organ. The
register must contain the particulars required by Article 192 of the CCL.
The SE is required to notify the Registrar of Companies of any changes in
these particulars on an E7 form, set out in the Schedule to the EPLLC
Regulations.
Finally, where employee participation is provided for in accordance with the
Directive, the supervisory organ’s quorum and decision-making are, by way
48
This option is contained in Art. 39(1) of the Regulation.
49
Exercising the option granted by Art. 39(2) Reg.
50
EPLLC Regulation 21, exercising the option granted by Art. 39(3) Reg.
51
Ibid., Regs. 22 and 23, exercising the options granted by Arts. 39(4) and 40(3) Reg., respectively.
52
Ibid., Reg. 24, exercising the option granted by Art. 41(3) Reg.
53
79
of derogation from the provisions referred to in Article 50(1) and (2) of the
Regulation, subject to the rules applicable, under the same conditions, to public
limited-liability companies under the CCL.54
C One-tier system
45. In the one-tier system, management is entrusted to an administrative organ

(Art. 43(1) Reg.). The EPLLC Regulations do not specify a minimum or maxi-
mum number of members.55 Furthermore, there is no provision of national law
to the effect that a managing director or directors shall be responsible for the
day-to-day management of an SE, as is the case with public limited-liability
companies with their registered office in Cyprus.56
The administrative organ is supervised by the general meeting.
Details of the one-tier system are set out in Articles 43 to 45 of the Regulation
and discussed in Section VIII(3)(D) of the general report. It should be noted
that the members of the administrative organ are normally appointed by the
general meeting but that the first administrative organ may be appointed in the
SE’s articles (Art. 43(3) Reg.). The administrative organ elects a chair from
amongst its members (Art. 45 Reg.).
IX Annual accounts and consolidated accounts

46. As regards the preparation of its annual and, where appropriate, consol-
idated accounts, including the accompanying annual report and the auditing
and publication of its accounts, an SE is governed by the national law of the
Member State in which its registered office is located (Art. 61 Reg.).
In Cyprus, which has yet to introduce the euro as its sole currency, an SE’s
annual and consolidated accounts must in principle be prepared and published
in Cypriot pounds. However, an SE registered in Cyprus can publish its accounts
in both the national currency and in euros (Art. 67(2) Reg.).
X Transfer of registered office

47. The registered office of an SE may be transferred to another Member State
without having to wind up the SE or create a new legal entity (Art. 8(1) Reg.).
48. The transfer of an SE’s registered office is regulated by Article 8 of the
Regulation. With respect to the application of this provision in Cyprus, a number
of points should be noted.
54
55
Such an option is contained in Art. 43(2) of the Regulation.
56
Such a possibility is contemplated by Art. 43(1) of the Regulation.
80
Cyprus
Firstly, where it is proposed to transfer to Cyprus the registered office of an SE

from another Member State in accordance with the Regulation, the company
must provide the Registrar of Companies with an E5 form, set out in the
Schedule to the EPLLC Regulations, together with the specified documents.57
Secondly, a copy of any transfer proposal drawn up pursuant to Article 8(2) of
the Regulation, together with an E6(I) form, set out in the Schedule to the
EPLLC Regulations, must be submitted to the Registrar of Companies, who
shall cause a notice of receipt of the proposal to be published in the Official
Gazette.58
Thirdly, an SE that plans to transfer its registered office from Cyprus to another
Member State must submit an E6 form, set out in the Schedule to the EPLLC
Regulations, together with the specified documents,59 to the Registrar of Com-
panies to apply for the certificate referred to in Article 8(8) of the Regulation.
If the proposed transfer of the SE’s registered office would result in a change in
the law applicable to the SE, the Registrar of Companies may, within the two-
month period referred to in Article 8(6) of the Regulation, oppose the transfer
on grounds of public interest.60
Finally, where an SE proposes to transfer its registered office to another Member
State it must satisfy the Registrar of Companies that the interests of creditors
and the holders of other rights (including public bodies) have been adequately
protected with respect to any liabilities that arose or that may arise up to the date
of the transfer.61 To this end, the SE must make a declaration of solvency on an
E9 form, in accordance with the provisions of Article 266 of the CCL. The
declaration of solvency must be approved by a simple majority of all members
of the administrative organ, if the SE has a one-tier structure, or by a simple
majority of the members of the management organ, if the SE has a two-tier
management structure.
The Member States are free to adopt provisions to protect minority shareholders
who oppose the transfer of an SE’s registered office.62 Cyprus has not adopted
any provisions in this respect.
XI Termination
49. As regards winding up, liquidation, insolvency, suspension of payments and
similar procedures, an SE registered in Cyprus is subject to Articles 203 et seq.
of the CCL.
57 Reg. 8 EPLLC Regulations. 58 Ibid., Reg. 29(1). 59 Ibid., Reg. 9.

60
Ibid. Reg. 17, exercising the option granted by Art. 8(14) Reg.
61
Ibid., Reg. 35 in conjunction with Reg. 16, exercising the option granted by Art. 8(7) Reg.
62
Art. 8(5) Dir.
81
The initiation and termination of winding up, liquidation, insolvency or sus-

pension of payment procedures for an SE must be published in accordance with
Article 13 of the Regulation (Art. 65).
XII Conversion into a national company

50. An SE may be converted at any time into a public limited-liability company
governed by the laws of the Member State where its registered office is located
(Art. 66(1) Reg.).
Conversion is regulated by Article 66 of the Regulation, complemented by
EPLLC Regulations 45 to 49. Pursuant to EPLLC Regulation 45, an SE that
wishes to be converted into a public company must submit to the Registrar
of Companies an E8 form, set out in the Schedule, together with the spec-
ified documents. For the purposes of registering a former SE which has been
converted into a public company, the relevant provisions of the CCL apply.
The draft terms of conversion must be submitted to the Registrar of Companies
along with an E8(I) form and published in accordance with Article 365A
of the CCL. The SE must publish a notice of receipt by the Registrar of its
draft terms in the Official Gazette and simultaneously notify the Registrar of
Companies of such publication.63
As soon as the E8 form has been submitted to the Registrar of Companies,
Articles 14, 15, 17, 102 and 124 of the CCL shall automatically apply, as if
the requirements of the CCL in respect of registration of a public company had
been met. On registration of the memorandum and articles of association of the
former SE, the Registrar of Companies shall issue a certificate attesting that the
company is incorporated and retains the legal personality it enjoyed as an SE;
that its memorandum and articles of association have been validly registered;
and that it is a public company limited by shares. This certificate is conclusive
evidence that all requirements of the CCL in respect of registration and matters
preceding and incidental thereto have been satisfied and that as of the date of
registration, the former SE is a public company limited by shares.64
The provisions of the CCL shall take effect on or after registration of a former
SE as a public company. Pursuant to Article 19 of the CCL, a former SE shall
be known by the name indicated in its memorandum of incorporation. The
persons named on the E8 form shall be deemed the company’s first directors
and secretary, effective upon registration.65
Once a former SE has been registered as a public company, records of the SE
relating to any period prior to its registration shall be treated, for the purposes
of the CCL, as records of that public company.66
63 Reg. 46 EPLLC Regulations. 64 Ibid., Reg. 47.
65 Ibid., Reg. 48. 66 Ibid., Reg. 49.
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Cyprus
XIII Applicable law

51. An SE with its registered office in Cyprus is governed by the Regulation
and the Directive. Any areas not covered by the aforementioned legislation are
regulated by the CCL and the SE’s articles, to the extent they do not conflict
with Community law.
XIV Conclusion
52. The introduction of the SE is undoubtedly a positive step towards a bet-
ter and more unified entrepreneurial environment in the European Union.
The harmonisation of company law across the European Union is an ambi-
tious undertaking, and the Community legislature has devised a pan-European
approach to transnational corporate management and governance by establish-
ing a distinct set of rules that transcends domestic obstacles to cross-border
cooperation.
It is important, however, to bear in mind that the current Community legal frame-
work constitutes the end product of a long and laborious negotiation process
to reconcile divergent national views on basic concepts of company law with
different approaches to fundamental principles of labour law,67 which makes
the compromises contained in the Community legislation easier to understand
and places the foregoing discussion of the SE and the Cypriot implementing
measures into the proper conceptual context.
53. By adopting this new corporate form, companies with a presence in more
than one Member State, which may be subject to differing constraints under
national law, can operate as a single entity throughout the internal market with
a single set of rules and a unified management and reporting system.
For undertakings operating in more than one EU Member State, the SE could
significantly lower operating costs and increase profits. Companies will be able
to elect where to register as they can move between jurisdictions without the
need for a takeover or a transfer of assets. By adopting the form of an SE, a
business can restructure quickly and easily in order to take the best possible
advantage of the trading opportunities offered by the internal market. SEs with
commercial interests in more than one Member State will be able to move across
borders easily, as the need arises, in response to the changing needs of their
business.
For many years, international businesses have chosen Cyprus as a base for a host
of reasons, including its transparent legal system, excellent communications
network, world-class professional and banking services, and favourable tax
67
On this point see J. Kenner, ‘Worker Involvement in the Societas Europaea: Integrating Company
and Labour Law in the European Union?’ 24 Yearbook of European Law, 2005, 223.
83
environment, with a corporate tax rate of only 10% and an extensive network
of double tax treaties. Cyprus has already implemented the Merger Directive,
thereby allowing companies from other Member States to re-form in Cyprus
without adverse tax consequences. Cyprus also has particular advantages for
holding and finance companies. The enactment of the SE legislation in Cyprus
is a major step forward which will surely enhance Cyprus’s attractiveness as a
location for international business.
84
3
Czech Republic
j a n z r z av e c k ý a n d j a n d ě d i č
Kocián Šolc Balaštı́k
I Introduction 86
II Formation 86
B Name 86
E Capital 88
2 General meeting 94
3 Management and supervision 97
A Two-tier system/One-tier system 97
B Appointment and removal 100
C Representation 100
D Liability 101
1 Special negotiating body 102
2 Employee participation 102
3 Duty of confidentiality 103
V Annual accounts and consolidated accounts3 103
2 Auditors 105
VI Supervision by the national authorities 106
VII Dissolution 107
1 Winding up 107
85
2 Liquidation 107
3 Insolvency 107
VIII Applicable law 108
IX Tax treatment6 108
1 Income tax 108
2 Value added tax 112
3 Other taxes 112
X Conclusion 112
I Introduction
1. The Regulation and the Directive have been implemented into Czech law by
the Act on the European Company No. 627/2004 Coll., effective 14 December
2004 (the ‘SE Act’), and by Regulation No. 293/2005 Coll., effective 21 July
2005, issued by the Ministry of Justice, on documents that must be presented to
a notary public for the issuance of a certificate in the event of the relocation of
the registered office of a European company or the establishment of a European
company by merger.
II Formation
1 General remarks
A Founding parties
2. An SE whose registered office will be located in the Czech Republic may

be founded by a company whose head office is not located in a Member State,
provided it is founded in accordance with the laws of a Member State and has
its registered office in that state as well as a permanent and effective link with
the economy of a Member State (Art. 2(5) Reg.).
B Name
3. An SE shall be referred to as an evropská společnost in Czech.

(i) Registered office
4. Pursuant to the Regulation, the registered office of an SE should be located
in the same Member State as its head office (Art. 7 Reg.). Under Czech law, if
an SE has its registered office in the Czech Republic, its head office should be
at the same location as its registered office. If this is not the case, the competent
Commercial Register shall issue a notice asking the SE to rectify the situation.
If the SE fails to do so and does not implement the remedies ordered pursuant
86
Czech Republic
to Article 64(1) of the Regulation within the specified time limit, the court has
the power to wind up the SE at its own initiative and to appoint a liquidator.
Although an SE’s articles need not set out the exact details of its registered
office (the city in which the registered office is located will suffice), its full
address must be provided in order to register with the Commercial Register.
5. A legal entity whose registered office is located in the Czech Republic will
be treated in the same way as Czech legal entities and hence will be governed
by all commercial law provisions in force in the Czech Republic.
(ii) Transfer of registered office

6. Where, in conjunction with the transfer of an SE’s registered office, already
recorded in a public register, from one jurisdiction to another, there is a change
in the governing law applicable to the internal relations of the SE as well as to
the company’s nationality, the relatively complex provisions of Article 8 of the
Regulation shall apply. Further provisions governing issues in connection with
the transfer of an SE’s registered office are set out in Sections 10 through 14 of
the SE Act.
7. A transfer proposal, drawn up by the SE’s management or administrative
organ, must be filed with the Commercial Register’s documents registry and
published in the Commercial Bulletin at least two months prior to the date of
the general meeting scheduled to approve the transfer (Sec. 10 SE Act).
8. The proposal must be approved by the general meeting by a qualified majority
of two-thirds of the votes cast. The articles may provide for a higher majority.
The resolution must take the form of a notarised instrument (since it effectively
constitutes an amendment to the articles). As soon as practicable following
approval of the general meeting’s resolution, the SE’s board of directors or
administrative organ must file an application to amend the existing entry in the
Commercial Register (Sec. 11 SE Act).
9. Shareholders who voted against the transfer are entitled to protection under
Article 8(5) of the Regulation, as in the case of a merger involving pub-
lic limited-liability companies. The SE has a duty to make a public offer to
purchase the shares of dissenting shareholders within one month following
the date of the general meeting that approved the transfer proposal. Compli-
ance by the company with this obligation is overseen by the Czech National
Bank.
10. Creditors of an SE that is transferring its registered office from the Czech
Republic are protected pursuant to Article 8(7) of the Regulation by application
of the provisions of the Czech Commercial Code on the protection of creditors
during mergers of public limited-liability companies, insofar as relevant. Cred-
itors who file their claims within three months following the publication date
of the transfer proposal, and whose claims are not yet due and whose position
87
is liable to worsen as a result of the transfer, may request adequate security.

In practice, it could be difficult to demonstrate that certain receivables will be
more difficult to collect as a result of the relocation, however.
11. The certificate referred to in Article 8(8) of the Regulation, attesting to com-
pletion of the requisite pre-transfer acts and formalities, is a public document
issued by a Czech notary upon presentation of the required documents. Prior
to issuance of the certificate, the SE must provide the notary with an affidavit
from members of its board of directors, confirming that they are not aware of
any application filed to invalidate the general meeting’s resolution approving
the transfer or any document showing that proceedings in connection with such
an application have been brought with legal effect or that an application has
been rejected with legal effect and/or that any and all authorised persons have
waived their rights to file such an application.
12. Article 8(14) of the Regulation provides that the Member States may object
to the transfer of an SE’s registered office on grounds of public interest. As yet,
there is no provision of Czech law granting the national authorities the right to
object to relocation of an SE’s registered office on grounds of public interest
and hence such an objection is inadmissible.
13. In addition to the documents specified by the Regulation, other documents
must be filed with the documents registry by any SE with its registered office in
the Czech Republic, including a transfer application and the general meeting’s
resolution approving the application to relocate the registered office.
D Corporate purpose
14. Like any other public limited-liability company in the Czech Republic, an
SE may be established to carry on a business or for other purposes. There are
no SE-specific rules in this respect. Acts that fall outside an SE’s corporate
purpose, i.e. ultra vires acts, are still valid, unless the other party acted in error
and seeks to have the act declared invalid on this ground under Section 49a of
the Czech Civil Code. An SE is bound to third parties by acts committed by
its statutory (i.e. representative) body (even where, in acting thus, the company
exceeded its corporate purpose), unless the act in question exceeds the scope
of authority of the statutory body in question. Restrictions on the authority
of a statutory body imposed by a decision of another corporate organ are not
enforceable against third parties, even if the restriction has been made public
(Sec. 40 SE Act and Sec. 13 Commercial Code).
E Capital
15. The minimum share capital of an SE is €120,000. Contributions in kind

must be made prior to the date on which the company comes into being. Cash
contributions must be fully paid up within one year of this date. Contributors
88
Czech Republic
have a duty to pay up in cash any share premium, together with at least 30%
of the nominal value of their shares, no later than commencement of the first
general meeting. Shares may be bearer or registered, in certificate or book-entry
form.

(i) Procedure and publication requirements
16. The only Czech corporate form allowed to participate in the formation of
an SE by merger is the public limited-liability company or akciová společnost
(‘akc.spol.’ and ‘a.s.’ are the accepted abbreviations). However, other forms of
commercial companies may be converted into a public limited-liability com-
pany and subsequently participate in the formation of an SE by merger.
The management of each merging company must prepare draft terms of merger.
The authors believe the list of requirements for the draft terms of merger set out
in Article 20(1) of the Regulation is exhaustive, meaning it is impossible for
the Member States to impose additional requirements. Czech law imposes no
language requirements with respect to the draft terms of merger. The merging
companies need only ensure that the notary in charge of recording the decisions
of the general meetings in a notarised instrument understands the language of the
documents. If any document which is to be filed with the Commercial Register’s
documents registry is drafted in a foreign language, a Czech translation must
be filed as well.
If an SE whose registered office is located in the Czech Republic is to issue
new shares as a result of a merger, the assets of the absorbed company must
be valuated by a court-appointed expert (Sec. 69a(6) Commercial Code). Each
company participating in a merger in which a new company is formed must
have its assets valuated by a court-appointed expert.
The draft terms of merger must be reviewed by an expert (or experts) appointed
by a Czech court in accordance with Section 220c of the Czech Commercial
Code or, within the meaning of Article 22 of the Regulation, by one or more
independent experts appointed further to a joint proposal of the merging com-
panies in the Member State of any merging company or where the future SE’s
registered office will be located. The court authorised to appoint the expert is
the general court with jurisdiction over the Czech merging company, i.e. the
regional court of the place where the company’s registered office is located. The
board of directors of a Czech public limited-liability company participating in
the formation of an SE by merger is obliged to draft a detailed merger report
(Sec. 220b, subsection 1 Commercial Code), and its supervisory board must
review the contemplated merger, based on the draft terms of merger and the
experts’ reports, and draft a report thereon (Sec. 220b, subsection 2 Commercial
89
Code). Czech law does not require that these reports be drafted if all sharehold-
ers of the merging company so agree or if the company is to merge with its sole
shareholder (Sec. 220b(4) Commercial Code).
The draft terms of merger must be filed with the Commercial Register’s docu-
ments registry and made available at the registered offices of the Czech merging
companies at least one month before the general meeting scheduled to vote on
the merger (Sec. 220d Commercial Code). Furthermore, the draft terms of
merger, the experts’ reports, the opening balance sheet, the annual accounts
and the management reports for the last three years of each merging company
should be made available to shareholders at the registered offices of the Czech
merging companies at the same time. The information referred to in Article 21
of the Regulation must be published in the Czech Commercial Bulletin. Under
Czech law, there are no additional publication requirements applicable to Czech
merging companies.
17. The merger must be approved by the general meeting of each merging
company. The resolutions must include (i) consent to the draft terms of merger
and to assumption of the assets of the absorbed companies, (ii) approval of the
final financial statements and opening balance sheet, (iii) a decision to issue new
shares or to acquire the company’s own shares, if required to exchange shares
in the merging company for shares in the SE, and (iv) a mention of the form,
class, type, nominal value and number of shares and the amount of registered
share capital of the merging company following the merger.
If the latest annual accounts relate to a financial year that ended more than six
months prior to the date of the draft terms of merger, the merging companies
shall prepare interim financial statements.
The board of directors or the management organ must inform the general meet-
ing and the management or administrative organs of the other merging compa-
nies of any material changes to the company’s assets, liabilities and profit/loss
that have arisen since the decision to merge (Sec. 220e(2) Commercial Code).
18. The general meeting’s decision on the merger must be approved by at least
three quarters of the shareholders present. The company’s articles may require a
higher majority or compliance with other terms and conditions. If the company
has issued several classes of shares, the decision must be approved by three-
quarters of those shareholders present in each class. The general meeting’s
resolution on the merger must be recorded in a notarial instrument, with the
draft terms of merger attached. In drafting the notarial instrument, the notary
confirms that the decision complies with applicable law and the company’s
corporate documents.
19. The certificate mentioned in Article 25(2) of the Regulation constitutes a
public document and must be issued by a notary. There is no provision of Czech
law granting the Czech competent authorities the right to oppose the merger
90
Czech Republic
before the certificate referred to in Article 25(2) of the Regulation (see Art. 19
Reg.) has been issued.
An SE whose registered office will be in the Czech Republic must be registered
in the Commercial Register; the information recorded and the content of the
documents filed shall be published in the Commercial Bulletin. The authority
in charge of reviewing whether the requirements of Article 26 of the Regulation
have been met is the registration court; the review shall be carried out as part
of the procedure to register the SE in the Commercial Register (Sec. 18(1) SE
Act).
(ii) Minority shareholders

20. Shareholders who did not vote in favour of the merger and whose legal
status changed due to the merger (e.g. because such shareholders exchanged
their shares for shares of another class) have the right to protection pursuant
to the provisions of the Commercial Code applicable to share purchases upon
mergers of public limited-liability companies. An SE shall make a binding
public offer to the above shareholders within two weeks following the effective
date of the merger.
(iii) Rights of creditors

21. If the registered office of an SE formed by merger will be outside the Czech
Republic, creditors of the Czech merging companies may request the provision
of adequate security at the conditions set forth under number 10 above.
(iv) Acquisition by a company holding 90% or more of the shares

in another company
22. Czech law provides no exemptions from the reporting requirements for a
merger by acquisition by a company that already holds at least 90% of the shares
in another company. However, a simplified procedure exists for a merger by
acquisition of a wholly owned subsidiary. In that case, no merger reports are
required (Sec. 220b(4) Commercial Code).
(v) Avoidance of a merger

23. Under Czech law, every shareholder or member of a company’s board may
petition the competent court to set aside a resolution of the general meeting
approving a merger if the resolution is contrary to statutory provisions or the
company’s articles. This right shall expire if it is not exercised within three
months from the date of the general meeting. However, the court shall not
invalidate a resolution if, pursuant to an effective ruling, entry of the merger in
the Commercial Register has been permitted (Sec. 131 Commercial Code).
91

24. In the Czech Republic, the only corporate forms entitled to participate in
the creation of a holding SE are public limited-liability companies (akciová
společnost) and private limited-liability companies (společnost s ručenı́m
omezeným).1 The board of directors or executives2 of each promoting company
shall prepare draft terms of formation. Czech law imposes no requirements
with respect to the language in which the draft terms of formation must be
drafted. The promoting companies need only ensure that the notary respon-
sible for drafting the notarial instruments on the general meetings’ decisions
understands the language of the documents to be approved. The draft terms of
formation must be approved by at least three-quarters of the votes cast by those
shareholders present at the general meeting.
25. The board of directors or the executives of each promoting company with
its registered office in the Czech Republic shall file a petition for registration in
the Commercial Register, attesting to compliance with the terms and condition
for formation of a holding SE under Article 33(3) of the Regulation, without
undue delay after the shareholders of the promoting companies have assigned
the minimum percentage of shares in each company in accordance with the
draft terms of formation and if all other conditions are fulfilled.

26. The provisions of the Czech Commercial Code on the protection of minority
shareholders on the occasion of a merger shall reasonably apply to the minority
shareholders of a Czech promoting company who voted against the formation
of a holding SE.
27. The Czech legislature has not provided any special rules in this respect.
28. In the Czech Republic, the only type of company that can be converted into an
SE (Art. 2(4) Reg.) is the public limited-liability company (akciová společnost).
The draft terms of conversion shall be filed with the Commercial Register’s
documents registry and a filing notice shall be published in the Commercial
Bulletin at least one month before the general meeting scheduled to vote on the
conversion.
1
Annex II to the Regulation.
2
Private limited-liability companies (společnost s ručenı́m omezeným) are managed by one or
more executives.
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Czech Republic
29. The provisions of the Czech Commercial Code applicable to mergers

shall reasonably apply to the appointment of one or more independent experts
to draw up a report on the conversion. The Czech Republic did not enact
the option contained in Article 37(8) of the Regulation to make conver-
sion subject to a favourable vote of a qualified majority or unanimity in the
organ of the company to be converted within which employee participation is
organised.
30. The draft terms of conversion, which shall include the new articles, must
be approved by three-quarters of the votes cast by shareholders present at the
general meeting (unless the articles require a higher majority). If the company
has issued several classes of shares, the draft terms must be approved by three-
quarters of the votes cast by shareholders present in each class.

31. If acts are performed in an SE’s name prior to its registration, the persons
that performed the acts shall be held jointly and severally liable. The SE shall
only be liable if the general meeting approves the acts within three months of
its registration. Upon approval, the SE shall be deemed by operation of law to
have entered into the acts from the outset.

32. An SE with its registered office in the Czech Republic must be recorded
in the Commercial Register; the information recorded and the content of the
documents filed shall be published in the Commercial Bulletin. In addition,
the SE’s articles must be filed with the Commercial Register’s documents
registry.

33. An SE shall acquire legal personality on the date on which it is recorded in
the Commercial Register (Art. 16(1) Reg.). This corresponds to the generally
applicable principle of Czech law with respect to other types of legal entities.

1 General remarks
34. The organisation of an SE whose registered office is in the Czech Republic
is governed by the Regulation, the Czech SE Act, the provisions of the Czech
Commercial Code applicable to public limited-liability companies and the com-
pany’s articles. Traditionally, Czech law recognises only a two-tier system of
management for public limited-liability companies. It is therefore not possi-
ble to establish a company with a one-tier management structure in the Czech
93
Republic. The only exception is the SE. Rules for a one-tier SE are set out in
the Czech SE Act and only apply to SEs.
If an SE with a one-tier structure is to be governed by Czech law and if there
are no special rules in the SE Act, then – depending on the circumstances –
the functions of the chairman of the administrative organ, also acting as man-
aging director (chairman-managing director), the managing director or the
delegated managing director shall be governed by the provisions of the Czech
Commercial Code applicable to the board of directors of a public limited-
liability company. The administrative organ shall be governed by the provisions
of the Commercial Code applicable to the supervisory board of a public limited-
liability company or the board of directors of such a company, depending on
the nature and powers of these bodies. If Czech law applies to a one-tier SE
in matters where authority in a company with a two-tier management structure
would be split between the board of directors and the supervisory board, and
the Czech SE Act sets out no special rules in this regard, then the functions
of the chairman-managing director, managing director or delegated managing
director shall be governed by the provisions of the Czech Commercial Code
applicable to the board of directors of a public limited-liability company and
the functions of the administrative organ shall be governed by the provisions
of the Czech Commercial Code applicable to the supervisory board of a public
limited-liability company (Sec. 4(2) and (3) SE Act).
2 General meeting
35. The general meeting of an SE (with either a one-tier or a two-tier manage-
ment structure) is governed by the provisions of the Czech Commercial Code
on the general meeting of a public limited-liability company, except where
otherwise stated in the Regulation and the SE Act.
A general meeting must be held at least once a year within the time limit
specified in the articles and, in any event, no later than six (6) months following
the close of the company’s accounting period (Sec. 184(3) Commercial Code).
The first general meeting of an SE may be held at any time during the first
eighteen months of its existence (Sec. 43(2) SE Act). The SE Act contains no
provisions requiring a mandatory agenda for the general meeting.
The general meeting is convened by the board of directors (in the two-tier sys-
tem) or the managing director (in the one-tier system). If the board of directors
fails to take a prompt decision on whether to call a general meeting but is
obliged to do so by law and/or if the board has been unable to take decisions
on a long-term basis, a member thereof may convene the general meeting. In
the two-tier system, the general meeting may also be called by the supervisory
94
Czech Republic
board if the interests of the company so require. In the one-tier system, this
power is reserved to the administrative organ. Pursuant to Section 43(1) of the
SE Act, the shareholders of an SE are entitled to request that a general meeting be
held and to determine the agenda at the conditions set forth in the Commercial
Code. In accordance with Section 181(1) of the Commercial Code, a share-
holder or shareholders of a company whose registered share capital exceeds
CZK 100,000,000, holding shares with an aggregate nominal value of more
than 3% or 5% of the registered share capital, as the case may be, can petition
the board of directors to call an extraordinary general meeting to discuss the
matters proposed. If the board fails to comply with its duty to call a general
meeting, the court, further to a petition filed by the shareholders concerned,
may approve a decision allowing these shareholders to call an extraordinary
general meeting.
The general meeting is called in the manner specified in the Czech Commercial
Code and the company’s articles. A company with registered shares must make
public its notice of a general meeting by sending it to all shareholders at their
registered office or home address, as set out in the shareholders’ register, at
least thirty days before the date scheduled for the meeting. A company with
bearer shares shall cause a notice of its general meeting to be published in the
Commercial Bulletin and in another suitable manner, as specified in its articles,
in at least one national daily newspaper. This time limit is shortened to fifteen
days if the general meeting is to be held at the request of shareholders or if it is
a general meeting on second call (Sec. 184(4) Commercial Code).
If a company has issued book-entry shares, the articles or a decision taken
prior to the general meeting may designate an effective date for participation
in the meeting, which cannot be more than seven calendar days before the date
scheduled for the meeting. If no effective date is expressly designated, it shall
be deemed to be the seventh calendar day before the general meeting (Sec.
184(2) Commercial Code).
36. The general meeting can only deliberate on matters that fall within its
powers by law or pursuant to the company’s articles (Sec. 187 Commercial
Code). The general meeting does not have the power to approve decisions on
any other matters. If, notwithstanding this prohibition, it nevertheless does so,
the decision will have no legal effect according to settled case law of the Czech
Supreme Court.
The general meeting’s quorum requirement is met if shareholders holding 30%
or more of the nominal value of the registered share capital are present, unless
the articles require a higher threshold (Sec. 185(1) Commercial Code). If the
general meeting fails to meet this quorum, a substitute (i.e. second) general
meeting will be called. Notice of the (second) general meeting must be sent
and made public no later than fifteen days from the date on which the original
95
general meeting was scheduled to have taken place. The second general meeting
must be held no later than six weeks from the date of the first general meeting.
The agenda of the meeting must remain unchanged, and the required quorum
will be deemed met, regardless of the number of shareholders present and the
nominal value of their shares (Sec. 185(3) Commercial Code).
The general meeting approves decisions by a majority of the votes cast by
those shareholders present, unless a greater majority is required by law or the
company’s articles (Sec. 186(1) Commercial Code). A qualified majority (two-
thirds or three-quarters of the shareholders present) is required by law to approve
resolutions on important matters (e.g. amendments to the articles, an increase
or reduction in the registered share capital, conversion of the company, etc.).
37. The applicable provisions of the Czech Commercial Code on the approval
of amendments to the articles of a public limited-liability company apply to
an SE, unless a greater majority is required under Article 59 of the Regulation
(Sec. 44 SE Act). An amendment to the articles of a public limited-liability
company must be approved by two-thirds of the votes cast by those sharehold-
ers present, assuming the required quorum is met (Sec. 186(2) Commercial
Code). A resolution of the general meeting approving a change in the type or
class of shares, rights attached to a particular class of shares or restrictions
on the transferability of registered shares must be approved by at least three-
quarters of the shareholders present. If amendment to the articles constitutes
an item on the agenda, the notice of the general meeting must at least set
out the nature of the proposed amendments, which must be made available
to shareholders for inspection at the company’s registered office within the
time limit specified to call the general meeting. Any shareholder may request
a copy of the proposed amendments at its own expense. Shareholders must be
informed of their rights in this respect in the notice of the meeting (Sec. 184(8)
Commercial Code).
38. The rights and obligations of shareholders are governed by the Regulation,
the Czech SE Act, the Czech Commercial Code and the company’s articles. By
law and pursuant to a company’s articles, shareholders are entitled to share in
the company’s profits and in its liquidation proceeds upon winding up.
Shareholders are entitled to participate in and vote at general meetings and to
ask questions and receive explanations pertaining to any corporate matters, if
such explanations are necessary to the matter under discussion at the general
meeting, and to make proposals and counterproposals (Sec. 180(1) Commercial
Code). Shares with multiple voting rights are not permitted under the Czech
Commercial Code. The articles must specify the number of votes attached to
the company’s shares so that shares with the same nominal value carry the same
number of votes. If a company issues shares with different voting rights, the
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Czech Republic
number of votes of such shares must be expressed pro rata in accordance with
their nominal value. The articles may place restrictions on the exercise of voting
rights by specifying the highest number of shares a shareholder can vote, which
can be either the same number for all shareholders or for all shareholders and
any entities controlled by them (Sec. 180(2) Commercial Code).
Shareholders entitled to call a general meeting can also request that (i) a particu-
lar matter be included on the agenda (Sec. 182 Commercial Code and Sec. 43(1)
SE Act); (ii) the supervisory board (administrative organ) review the exercise
of powers by the board of directors (managing director) on matters set out in
the request; (iii) the supervisory board (administrative organ) file a claim for
damages on the company’s behalf against a member of the board of directors
(managing director); and (iv) the board of directors (managing director) file a
claim for payment of the subscription price of shares. If the supervisory board
(administrative organ) or the board of directors (managing director) fails to
comply with the shareholders’ request promptly, the latter may exercise their
right to claim damages or payment of the subscription price on the company’s
behalf.
3 Management and supervision

A Two-tier system/One-tier system
(i) General remarks
39. The founders of an SE may opt for either a one-tier or a two-tier management
structure. In the two-tier system, the SE is managed by its board of directors and
supervisory board. In the one-tier system, there must be at least an administrative
organ and a managing director, but certain powers may be delegated to other
directors.
Members of the board of directors, the supervisory board and the administrative
organ, as well as the managing director and other directors, are not employees of
the SE. Their relationship with the company is a commercial relationship gov-
erned by the provisions of the Czech Commercial Code on agency agreements,
insofar as appropriate (Sec. 66(2) Commercial Code and Sec. 35(4) SE Act).
(ii) One-tier system

40. The provisions of Czech law on the one-tier SE are based on French law.
The one-tier system introduced by the SE Act comprises two models, which
differ depending on the degree of executive involvement by the chairman of the
administrative organ. In the traditional model, the chairman of the administra-
tive organ also serves as the managing director (chairman-managing director),
while in the other model, these two roles are separate. In the latter model,
the chairman of the administrative organ is predominantly concerned with
representation and coordination but also wields other (supervisory/regulatory)
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powers typically reserved to an ordinary member of the administrative organ.

In both models, powers are reserved to the administrative organ for matters
involving the conceptual management of the company. Hence, although the
administrative organ cannot interfere in the management of the company’s
business, in particular it cannot give the statutory body (the chairman or
managing director) specific instructions on how to engage in business, it does
have conceptual power to manage the company.
The choice between these two models is reserved (at the conditions set forth
in the company articles) to the administrative organ (Sec. 35(2) SE Act),
which also has the power to decide whether its elected chairman shall serve
concurrently as managing director. This decision is notified to shareholders and
third parties by recordation in the Commercial Register. If the administrative
organ opts for a separate model, it will be responsible for appointing the
managing director and can remove the latter from office at any time.
The administrative organ determines the scope of the SE’s activities and
supervises the performance thereof. Save for those powers expressly reserved
to the general meeting and that fall within the company’s corporate purpose,
the administrative organ has the power to deal with any other basic matter
significant to the proper functioning of the SE and to approve resolutions with
respect to these matters (Sec. 40(1) SE Act). The administrative organ also
inspects and verifies the management of the SE and the company’s business
and operations, insofar as necessary (Sec. 40(3) SE Act).
An SE’s administrative organ must have at least three and may have no more
than eighteen members. The articles shall specify the maximum number of
members (within the above limits).
If the administrative organ so decides, its chairman shall be responsible
for managing the company’s business. In this case, the chairman acts as
a chairman-managing director. If the administrative organ does not entrust
its chairman with this function, it must appoint another natural person to
the position of managing director. The chairman-managing director and the
managing director have authority to act on behalf of the SE.
The Czech SE Act adopted the concept of ‘delegated managing director’
from the French model. A delegated managing director can be appointed by
the administrative organ at the recommendation of the managing director in
order to assist the latter. In addition the administrative organ can, with the
managing director’s consent, specify the scope of the delegated managing
director’s powers. The articles shall indicate the maximum number of delegated
managing directors, which cannot exceed five. The position of delegated
managing director corresponds to that of managing director. The managing
director also acts as a statutory body of the SE and, vis-à-vis third parties,
his or her scope of authority is identical to that of the managing director. If
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the managing director can no longer perform his or her duties (or ceases to
do so), the delegated managing director shall remain in office pending the
appointment of a new managing director, unless the administrative organ, in
specific circumstances, decides otherwise.
Only a natural person can serve on an SE’s statutory bodies. Natural persons
must meet the requirements of the Czech Commercial Code for membership
on the board of directors of a public limited-liability company. One person
cannot simultaneously be a member of more than five administrative organs
or boards of directors in SEs or public limited-liability companies (Sec. 28(2)
SE Act).
(iii) Two-tier system

41. Under the two-tier system, the board of directors approves decisions on all
corporate matters, except those reserved to the general meeting or the supervi-
sory board by the SE Act or the company’s articles (Sec. 191(1) Commercial
Code). The board of directors is responsible for managing the company’s
business, including ensuring that its accounts are properly kept (Sec. 192(1)
Commercial Code). The board of directors has a duty to abide by the instruc-
tions of, and principles approved by, the general meeting, provided these are
consistent with the law and the company’s articles. Unless provided otherwise
by law, no one has authority to issue instructions to the board of directors relat-
ing to management of the company’s business (Sec. 194(4) Commercial Code).
The board of directors must have at least three members, although this rule
does not apply to single-member companies (Sec. 194(3) Commercial Code).
If a vacancy arises on the board of directors, the supervisory board must
decide which of its members shall temporarily fill the vacancy. This member
is authorised to sit on the board of directors only until the next meeting of the
body empowered to elect or appoint a new director. This body must elect or
appoint a new director at its next meeting. If it fails to do so, the powers of the
supervisory board member sitting on the board of directors shall expire at that
time, and a new director shall be appointed by the court in accordance with
the relevant provisions of the Czech Commercial Code (Sec. 24 SE Act).
42. The supervisory board is responsible for supervising the exercise by
the board of directors of its powers and implementation of the company’s
business activities (Sec. 197(1) Commercial Code). The supervisory board
reviews ordinary, extraordinary, consolidated and interim accounts and drafts
proposals for the distribution of profit and the coverage of losses, which it
submits for approval to the general meeting (Sec. 198 Commercial Code).
In those instances specified by law or the company’s articles, the approval
of the supervisory board is required for certain acts taken by the board of
directors, and the supervisory board has the power to veto particular acts. The
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supervisory board must have at least three members, and its total number of
members must be divisible by three (Sec. 200(1) Commercial Code).
Every member of the supervisory board is entitled to request information from
the board of directors if necessary for his or her activities on the supervisory
board and if an important interest of the company so requires. In the event of a
dispute, the extent of a supervisory board member’s right to obtain information
shall be determined by the court, further to an application by this board
member or by a member of the board of directors (Sec. 25 SE Act).
Only natural persons can be members of an SE’s board of directors and
supervisory board.
B Appointment and removal
43. Members of the board of directors are elected and removed by the super-
visory board. The SE’s articles, however, may provide that members of the
board of directors are elected and removed by the general meeting (Sec. 23 SE
Act). Members of the supervisory board are elected and removed by the general
meeting, unless provided otherwise in the agreement on employee involvement.
Minority shareholders and other persons have no power to appoint or remove
members of the board of directors or the supervisory board. Only if a direc-
tor dies, resigns, is removed from office or his or her term of office otherwise
comes to an end can the competent corporate organ elect a new member within
three months’ time. If, for this reason, the board of directors cannot perform
its duties, the vacancies shall be filled by court appointments further to a rec-
ommendation of an interested party, who must prove his or her interest, until
(a) new member(s) are elected by the competent corporate organ. Otherwise,
the court can take the initiative of ordering that the company be wound up and
liquidated.
Members of the administrative organ are elected and removed by the general
meeting, unless otherwise indicated in the agreement on employee involve-
ment. The chairman-managing director or the managing director is appointed
and removed by the administrative organ. Delegated managing directors are
appointed and removed by the administrative organ further to a proposal of the
chairman-managing director or the managing director.
C Representation
44. In the two-tier system, the board of directors acts on behalf of the com-
pany. Unless otherwise indicated in the articles, each member of the board of
directors has authority to bind the company vis-à-vis third parties (Sec. 191(1)
Commercial Code).
In the one-tier system, an SE is validly represented by the chairman of its admin-
istrative organ acting as the managing director or by its managing director.
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Delegated managing directors and the administrative organ have the same
authority (Sec. 26(2) SE Act). Unless the articles indicate otherwise, every mem-
ber of the administrative organ has authority to bind the company vis-à-vis third
parties.
D Liability
45. The liability of members of the management and supervisory bodies, the
chairman-managing director, the managing director and delegated managing
directors is governed by the Czech Commercial Code. The aforementioned
are liable to the SE for any damage they cause through breach of their statu-
tory duties, including their duty to act with the care expected of a prudent
business person and their duty of confidentiality. In the event of a dispute as
to whether a particular individual has acted as a prudent business person, the
board member in question bears the burden of proof in this regard (Sec. 194(5)
Commercial Code). In all other cases, the SE bears the burden of proof. Mem-
bers of the board of directors, the supervisory board and the administrative
organ who have caused loss or damage to the SE owing to breach of their statu-
tory duties while in office shall be jointly and severally liable for such loss or
damage.
Where the prior consent of the supervisory board (administrative organ) is
required by law or pursuant to the company’s articles for certain acts to be
taken by the board of directors (managing director), and the supervisory board
(administrative organ) does not grant such approval or exercises its right to
prohibit the board of directors (managing director) from engaging in particu-
lar conduct on behalf of the company, the members of the board of directors
(managing director) shall not be liable to the company for any loss or damage
caused to it as a result of abiding by the supervisory board’s decision. Members
of the supervisory board (administrative organ) who failed to act with the care
expected of a prudent business person in the decision-making process shall
be held jointly and severally liable. If the supervisory board (administrative
organ) has approved the acts or conduct in question, those members of the
board of directors (managing director) and the supervisory board (administra-
tive organ) who failed to act with the care expected of a reasonably prudent
business person during the decision-making process shall be held jointly and
severally liable for any damage caused as a result (Sec. 201(3) Commercial
Code).
46. The SE Act transposes the Directive into Czech law. The Czech Republic
has not enacted the option to adopt measures pursuant to Article 13(4) of the
Directive.
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1 Special negotiating body

47. The following individuals may serve as employee representatives of Czech
participating companies, subsidiaries or establishments on the special negoti-
ating body (SNB): employees of a participating company, subsidiary or estab-
lishment or individuals who are not employed by a participating company,
subsidiary or establishment but have been duly authorised or empowered by
the unions of such a company (Sec. 48(8) SE Act; Art. 3(2)(b) Dir.).
If the employees of a Czech participating company, subsidiary or establishment
are unionised, the employee representatives must be appointed to the SNB by
the union organisation(s) at a joint meeting. If there are no unions in a Czech
participating company, subsidiary or establishment, the employees shall elect
their representative to the SNB directly from amongst their number.
Seats on the SNB reserved for employee representatives of the participating
companies, concerned subsidiaries and establishments on the territory of the
Czech Republic shall be filled as follows: employees of each participating
company, concerned subsidiary or establishment on the territory of the Czech
Republic shall be allotted, if possible, at least one direct representative (Sec.
48(5) SE Act; Art. 3(2)(b) Dir.).
Participating companies must provide the SNB and its members with sufficient
financial, material and organisational means for the proper performance of their
activities. SNB members are in particular entitled to reimbursement of reason-
able expenses arising from their activities, although they shall not receive a fee
for these activities. Participating companies must budget in advance sufficient
funds to cover necessary costs, such as the costs of organising SNB meetings,
translation and interpreting costs, travel and accommodation expenses, meals,
and experts’ and advisors’ fees. Regardless of the actual number of advisors
employed, the participating companies shall, in accordance with Article 3(7)
of the Directive, be obliged to reimburse the costs of only one expert in each
area of expertise.
2 Employee participation
48. Czech law provides for employee participation on the supervisory boards of
public limited (joint stock) companies. If a public limited-liability company has
over 50 employees working in excess of one-half of weekly working time, the
employees shall be entitled to elect one-third of the supervisory board members
(Sec. 200(1) Czech Commercial Code).
If the SE was formed through conversion of a public limited-liability company,
its employees have the right to influence composition of the SE’s bodies in
the same way and to the same extent as in the former public limited-liability
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company, in accordance with the statutory provisions applicable upon conver-

sion. Pursuant to Article 7(2) of the Directive, if the SE was established by any
other means, its employees shall have the right to influence the composition
of its corporate bodies in accordance with the broadest form of participation
applicable in any participating company on the date the SE was established.
If the employees had no participation right, the SE’s employees shall not have
such a right either (Sec. 64 SE Act).
The Czech Republic has not enacted the option contained in Article 7(3) of the
Directive.
If the SE’s articles conflict with the agreement on employee involvement, the
management or administrative organ is obliged to harmonise the articles with
the agreement without undue delay. This is not a decision for the general meeting
(Sec. 6 SE Act; Art. 12(4) Reg.).
3 Duty of confidentiality
49. SNB members, the employee representative body and their expert advisors
shall keep confidential any information disclosed to them in connection with
the negotiations to reach an agreement on employee involvement and which
is labelled as confidential. Moreover, they need not disclose certain informa-
tion, in whole or in part, if disclosure could result in harm to the company or
if confidential or secret information or trade secrets are involved (Sec. 50(3)
SE Act; Sec. 180(4) Commercial Code; Art. 8(2) Dir.). If the employee repre-
sentative body of a participating company labels certain information disclosed
in connection with negotiations as confidential, the SNB may request that the
company’s supervisory body or, as the case may be, a court rule on whether
the information has been reasonably labelled confidential. The Czech Republic
has not adopted any special provisions within the meaning of Article 8(3) of
the Directive.
V Annual accounts and consolidated accounts3

50. There are no special rules governing SEs under Czech accounting law.
Pursuant to Article 61 of the Regulation, SEs are governed by the provi-
sions of national law applicable to public limited-liability companies in this
respect.
51. The SE qualifies as an accounting unit and has a duty to keep accounts
under the Czech Commercial Code, Regulation No. 500/2002 Coll. giving
3 This section was written by Helena Navrátilová, a tax partner with Kocián Šolc Balaštı́k.
103
effect to certain provisions of the Accounting Act governing accounting units

(businesses) that keep double-entry books of account. The Czech accounting
standards for businesses specify in more detail the scope of individual entries
in (simplified and full) financial statements; these standards also govern the
accounting methods for assets, equity, loans (from outside sources) and any
changes therein, profit and loss as well as certain transactions (e.g. contribution
or lease of an undertaking and liquidation) and obligations in connection with
bookkeeping and the compiling of annual financial statements, including valu-
ation methods (hereinafter the ‘accounting regulations’). Special implementing
regulations and accounting standards apply to SEs that are financial institutions,
insurance companies or banks. In addition, the National Accounting Council
publishes interpretations of selected questions regarding methods. Although,
unlike accounting regulations, these interpretations are not legally binding, in
practice they are generally observed by auditors as well as, in most cases, for
corporate tax purposes. If an SE has issued shares or other securities listed on a
regulated market in a Member State, its accounting methods and the compilation
of its financial statements must be in accordance with International Accounting
Standards (IAS) applicable within the European Union.4 In such circumstances,
however, the profit or loss used to assess the SE’s Czech corporate tax base must
be adjusted and disclosed as if it were calculated under the Czech Accounting
Act and accounting standards.
52. SEs have an obligation to keep double-entry books of accounts using the
accrual method and to use prescribed valuation and accounting methods. An
SE’s accounts must provide a fair and prudent view of the company’s assets
and liabilities, equity, profit and loss, and financial position. A faithful view of
accounts reflects their true position, using the methods prescribed by account-
ing law; an honest view uses accounting methods to produce a faithful picture
of the accounts. In exceptional cases, an SE may derogate from the methods
prescribed by law, provided in doing so it provides a faithful and honest view of
its financial situation. An SE’s accounts are based on the premise that the com-
pany will continue its activities without interruption, unless it becomes aware
of circumstances indicating that the opposite is true. An SE has a duty to keep
transparent accounts and to make chronological entries of all accounting events
in its books of account. Turnover indicated in the individual accounts must be
consolidated in a central book of accounts at least once a month. SEs must pre-
pare financial statements (or consolidated financial statements) and an annual
report (or consolidated annual report) and publicise these by filing them with the
documents registry of the appropriate Commercial Register. The relevant parts
of these documents must be made publicly accessible. The accounting period is
4
Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002
on the application of international accounting standards.
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Czech Republic
the calendar year or business year, although special rules apply when determin-
ing the accounting period for an SE formed by merger (through incorporation
of a new company or by absorption) or conversion. An SE must denominate
its accounts in Czech crowns (koruna). Accounting documents may be drafted
in a language other than Czech, provided the company complies with other
requirements intended to ensure the comprehensibility of its accounts.
The accounts of an SE comprise a balance sheet, profit and loss statement and
schedules and may also include a cash-flow chart or a chart indicating changes
to the SE’s equity. If the SE is required to appoint an auditor (see no. 55 below),
it is also obliged to prepare an annual report or consolidated annual report. The
body responsible for preparing the accounts is the SE’s statutory body, (which
also has a duty to submit the final accounts for approval to the SE’s general
meeting of shareholders).
53. Accounts and annual reports must be archived for at least ten years. Other
documents must be kept for five years or for as long as necessary in order to
meet certain obligations, e.g. the company bears the burden of proof in the event
of an audit, etc.
54. If an SE acts as a managing or controlling entity, becomes part of a consol-
idated group, is managed or controlled by another entity or becomes an entity
subject to significant influence5 it must prepare consolidated accounts if two
of the following three criteria are met: (a) the gross value of the company’s
assets as indicated on its balance sheet is more than CZK 350,000,000; (b) the
company’s net annual turnover is more than CZK 700,000,000 (if the SE has
existed for less than twelve months, its turnover will be adjusted accordingly);
and (c) the average adjusted number of employees during an accounting period
is more than 250. These criteria do not apply if the SE is a bank or insurance
or reinsurance company or has issued securities listed on a regulated market. If
the SE is part of a consolidated group, it has a duty to furnish the group with its
accounts and all other documents necessary to prepare consolidated accounts.
The same applies with regard to a consolidated annual report.
2 Auditors
55. An SE’s accounts must be audited if in a given tax period, as well as during
the preceding tax period, at least one of the following criteria applies: (a) the
gross value of the company’s assets as indicated on its balance sheet is greater
than CZK 40,000,000; (b) the company’s net annual turnover is more than
5
Under the Czech Commercial Code, significant influence means a considerable influence on the
management or operation of the business that is not decisive. Unless demonstrated otherwise, a
significance influence shall be deemed to exist in dealings involving 20% or more of the voting
rights.
105
CZK 80,000,000 (if the SE has existed for less than twelve months, its turnover
will be adjusted accordingly); and (c) the average adjusted number of employ-
ees during the accounting period is more than 50. The auditor is selected and
appointed by the SE’s statutory body.
56. The auditor can be either a natural person or a legal entity (accounting firm)
but, in any case, must be registered with the Czech Chamber of Auditors. The
auditor must also meet the requirements of the Auditors Act (No. 254/2000
Coll., as amended). The auditor’s report must set out a statement of the scope
of the audit, an assessment of the accounting methods used and an indication
of the evidentiary value of the accounts and annual report. The report must also
state whether the accounts comply with the applicable accounting legislation
or International Accounting Standards and whether they provide a faithful and
honest view of their subject matter and the SE’s financial position. The auditor
must also confirm that the annual report is consistent with the accounts. Similar
requirements apply to consolidated accounts and the consolidated annual report.
In its report, the auditor has a duty to set out all matters not included in the
annual report which the auditor considers it appropriate to raise, in particular
significant material uncertainties and matters that could have a significant effect
on the continued existence of the SE, owing to its financial position. The auditor
will then discuss the auditor’s report with the SE’s statutory body.
57. The auditor must be independent of the company, and the Auditors Act sets
out the circumstances under which an auditor cannot act for an SE as well as
the instances in which the auditor must comply with accounting guidelines and
other rules of professional conduct, in particular the ethical code. An auditor
may not give instructions to change or adjust entries in an SE’s accounts. An
auditor is bound by a duty of confidentiality, except in those instances specified
by law, but has a duty to notify in writing the competent regulatory or banking
authorities or, in other instances, the SE’s statutory or supervisory body if it
becomes aware of matters that give rise to a suspicion of violation of the special
legislation governing SEs or matters that could have a negative fundamental
effect on the company’s business, endanger its unlimited term of existence or
result in the refusal to provide a report or the provision of a negative report or
one subject to reservations.
VI Supervision by the national authorities

58. The national authority competent to supervise application of the Regula-
tion depends on the provision in question. Pursuant to Article 68(2) of the
Regulation, the competent national authorities in the Czech Republic are:
(i) Czech notaries (for the purposes of Articles 8(8) and 25(2)) and (ii) the
competent registration court (for the purposes of Articles 26(1), 54, 55(3) and
64(4)).
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VII Dissolution
1 Winding up
59. There are no special provisions of Czech law relating to the winding up,
liquidation, insolvency, cessation of payments and similar procedures for SEs.
Therefore, an SE with its registered office in the Czech Republic shall be gov-
erned by the provisions of national law applicable to public limited-liability
companies formed in accordance with Czech law.
60. A company can be wound up with or without liquidation. Winding up with-
out liquidation is only possible if the company’s assets are transferred to its
legal successor (i.e. as the result of a merger, division or transfer of assets to
the majority shareholder). The body in charge of deciding whether to wind
up the company is the general meeting. A decision to wind up a company by
liquidation must be approved by two-thirds of the votes cast by those sharehold-
ers present, while a decision to wind up a company without liquidation must
be approved by at least three-quarters of the votes cast by those shareholders
present. Certain conversions require an even higher majority. Under expressly
listed circumstances, when a company violates certain of its duties and fails to
rectify the situation when called upon to do so by a court, it may be wound up
by court order.
61. If a company is to be wound up pursuant to a decision of the general meeting,
it shall be wound up on the date set out in the decision or, as the case may be,
the date on which the decision is adopted. If a company is wound up by court
order, it shall be wound up on the date set out in the order or on the date on
which the order takes effect.
2 Liquidation
62. A company enters liquidation on the date on which it is wound up. The start
of liquidation shall be recorded with the Commercial Register. If the liquidation
is voluntary, the company’s statutory body shall appoint the liquidator. If the
company is involuntarily liquidated pursuant to a court order, the court that
issued the order shall appoint the liquidator.
3 Insolvency
63. An SE can be declared bankrupt. A legal entity shall be considered bankrupt
if (i) it has several creditors and has been unable to discharge its outstanding
obligations on a long-term basis or (ii) if it is overburdened with debt. If a
debtor ceases to make its payments, it shall be deemed unable to discharge its
outstanding obligations on a long-term basis.
107
If an SE goes bankrupt its statutory body must file a petition in bankruptcy. If

it fails to do so, the members of the statutory body shall be held jointly and
severally liable to creditors for any damage resulting there from.
64. The Czech Republic’s new Insolvency Act will enter into effect on 1 January
2008. The Act will introduce new ways of dealing with bankruptcy under Czech
law. In addition to the standard bankruptcy proceedings, it will be possible for
large companies to resolve bankruptcy issues through reorganisation. Reor-
ganisation basically means any measure on which creditors agree, including,
without limitation, waiver of a portion of the debt, sale of the debtor’s entire
assets, transfer of the debtor’s assets to a new company owned by the creditors
or merger of the debtor with another entity. Pursuant to the new provisions, a
debtor shall be deemed bankrupt if (i) it has several creditors; (ii) it has cash
liabilities which are more than thirty days past due; and (iii) it will not be able
to meet its payment obligations. Legal entities overburdened with debt shall
also be deemed bankrupt.
65. Cessation of payments is one of two cumulative conditions for bankruptcy.
If a debtor ceases to make its payments as they fall due and simultaneously
has several creditors, it shall be deemed bankrupt and will be obliged to file a
petition in bankruptcy.
The new insolvency provisions (effective 1 January 2008) provide that a debtor
shall be deemed unable to meet its payment obligations if, for example, it has
ceased to pay a substantial portion thereof or if they are over three months past
due.
VIII Applicable law

66. SEs registered in the Czech Republic shall be governed by the Regulation
and by Czech law.
IX Tax treatment6
1 Income tax
67. The Czech Income Tax Act does not provide for special tax treatment
for SEs or their permanent establishments in the Czech Republic. Under Act
No. 586/1992 Coll. on income tax (‘ITA’), as amended, the same approach is
used to determine the tax base, tax losses and tax liability of SEs and public
6 This section was written by Helena Navrátilová, a tax partner with Kocián Šolc Balaštı́k.
108
Czech Republic
limited-liability companies.7 The permanent establishment (branch) of an SE

is subject to the same tax treatment as similar Czech entities. Generally, an
SE qualifies as a taxable entity and must report its worldwide income for the
purposes of determining its tax base if its registered office or administrative
headquarters are located in the Czech Republic. Hence there is no risk of dis-
crimination against an SE or its permanent establishment for tax purposes. The
taxation of a group of companies as a single entity is inadmissible under the
ITA, as is, perforce, the consolidation of losses incurred by a foreign SE with
its Czech parent company. The Czech tax authorities have not indicated any
interest in allowing group taxation for Czech companies.
68. Income included in a company’s general tax base is taxed at a rate of 24%,
although profit shares, dividends, liquidation proceeds and settlement shares
(paid upon termination of a participation in a limited-liability company) in
subsidiaries included in a separate tax base are taxed at a rate of 15%, unless
the income is tax exempt (on certain conditions). A similar approach applies
when determining the tax base of the permanent establishment of an SE if the
latter is not a tax resident of the Czech Republic, in which case the applica-
ble tax rate is also 24%. The methods used to attribute profits to a permanent
establishment are based on the principles set out in the OECD Model Con-
vention on Taxation of Income and Capital. The Czech tax authorities gen-
erally regard the permanent establishment of an SE as a relatively separate
entity for tax purposes and will attribute to it profit and expenses incurred in
connection with supplies relating to the SE if the latter is located in a differ-
ent country. For this purpose, it is essential to ensure that supplies between
an SE’s permanent establishment and its head office are priced similarly to
those between unrelated parties at similar conditions and at the same time and
place.
69. In determining their profit and/or loss, SEs in the Czech Republic may,
like any other Czech taxpayer, include income and expenses relating to foreign
permanent establishments in their tax base. Hence, an SE may de facto take
into account a tax loss, even one determined in accordance with the ITA, in
determining its tax base or, in other words, set off income and/or corporate tax
paid abroad up to the Czech corporate tax threshold in proportion to the foreign
permanent establishment’s income.
70. Council Directive 2003/123/EC of 22 December 2003 amending Directive
90/435/EEC on the common system of taxation applicable to mergers, divisions,
transfers of assets and exchanges of shares concerning companies of different
Member States, as amended by Council Directive 2005/19/EC of 17 February
2005, was fully incorporated into the ITA effective 1 May 2004. As a result, this
enables, in certain circumstances, the tax-neutral treatment of the formation of
7
Sec. 37(5) ITA.
109
an SE (i) by merger; (ii) as a subsidiary whose shares are subscribed for by

way of a contribution in kind (e.g., an undertaking or part thereof); and (iii) as
a holding company.
71. The formation of an SE in one of the ways referred to under number 70
at the conditions set forth under number 73 will be neutral for tax purposes.
The successor company (in the event of a merger) or the company assuming
the contribution (in the event of a contribution of an undertaking or part of an
undertaking) may assume (a) statutory reserves and adjustments (provisions)
by the creation of a transferring company at terms otherwise applicable to
the contributing company; (b) hitherto unused tax losses or portions thereof
from the contributing company (in the event of a merger, all tax losses will be
contributed, while in the event of a transfer of an undertaking or any part thereof,
only the documented or proportional losses attributable to the undertaking or
part of an undertaking will be transferred), which may be used to reduce the
receiving company’s tax base within the period specified by law;8 and (c) items
deductible from the tax base in respect of which an entitlement has arisen on
the part of the company that will cease to exist or the transferring company, if
such items have not already been claimed for tax purposes. The successor or
receiving company shall continue to depreciate tangible and intangible assets in
the same way as the company that ceases to exist or the transferring company.
Any income that would have appeared on the accounts of the successor company
or receiving company in connection with the valuation of assets and liabilities
during the merger or transfer of an undertaking or part thereof is not included
in corporate tax base of any company taking part in any form of the formation
of an SE.
72. The capital of a member of or shareholder in a company that will cease to
exist owing to a revaluation of assets and liabilities during a merger, if shown
on the accounts, is not included in the member’s or shareholder’s tax base if this
member or shareholder is a tax resident of the Czech Republic or (if this is not the
case) holds a stake in the company that will cease to exist through a permanent
establishment in the Czech Republic. The acquisition price of the interest in the
successor company will be equal to the value of the member’s interest in the
company that ceases to exist for tax purposes on the day immediately preceding
the effective date of the merger. The acquisition price in the receiving company
is the price of the transferred undertaking or part thereof, as valued for the
purposes of a contribution in kind in accordance with the Czech Commercial
Code or, in other instances, as determined in accordance with the Property
Valuation Act.
8
Tax losses arising prior to 1 January 2004 may be used for seven tax periods immediately
following the period in which they were assessed. Tax losses arising after this date may only be
used for five tax periods.
110
Czech Republic
73. The tax treatment set out briefly under number 72 will apply if: (a) the
participating company takes one of the corporate forms set out in the Annex
to Council Directive 90/435/EEC, i.e. it is a public limited-liability company
or a private limited-liability company existing in accordance with the Czech
Commercial Code; (b) the SE is a tax resident of a Member State (one condition
of tax residency is that the company’s income must be subject to tax, as set out in
the Annex to Council Directive 90/435/EEC, meaning the company cannot be
exempt from the payment of tax or in a position to avail itself of any exemption);
(c) (i) the company that ceases to exist or the transferring company is a tax
resident of the Czech Republic or another Member State and the successor
company or receiving company is a tax resident of another Member State, and
the assets and liabilities passed on further to the merger or transferred upon
the contribution of an undertaking or part thereof form part of a permanent
establishment or of the receiving company located in the Czech Republic; or
(ii) the company ceasing to exist or the transferring company is a tax resident
of another Member State and the successor company or receiving company is
a tax resident of the Czech Republic, and the assets and liabilities passed on
upon the merger or transferred further to the contribution of an undertaking or
part thereof do not form part of a permanent establishment of the successor
company or the receiving company located outside the Czech Republic. In
effect, pursuant to this last condition, assets and liabilities passed on upon a
merger or transferred upon a contribution will effectively remain connected
with the permanent establishment of the participating company located in the
Czech Republic or another Member State or with the SE having its registered
office in the Czech Republic. Hence the Czech Republic will retain the power
to tax income arising from dealings in such assets and liabilities. If moveable
assets or other types of (intellectual or industrial) property are contributed to
a company registered abroad as a separate asset item, the Czech Republic will
not levy input tax in the event these assets are subsequently transferred.
74. National tax and accounting legislation will apply to changes in the corporate
form of an SE and will ensure that any such conversion has no effect on the
SE’s tax base.
75. Under the ITA, no capital gains or losses are recognised in connection
with the contribution of ownership interests or shares to a holding company
that could affect the tax base. The same therefore holds true for the establish-
ment of a holding SE. The acquisition price of a holding SE is the acquisition
price of the contributed ownership interests or shares (which in general can
differ from the acquisition price as determined under the applicable accounting
regulations).
76. Czech tax law contains no express provisions on the tax effects of transfer-
ring an SE’s registered office to another Member State. If an SE’s activities in the
111
Czech Republic are discontinued in connection with the transfer of its registered
office abroad, it seems that Act No. 337/1992 Coll. on the administration of
taxes and fees, as amended, would apply to the termination of the permanent
establishment’s activities. On the other hand, if the SE continues to do business
in the Czech Republic, the taxable entity will continue to be the SE’s perma-
nent establishment in this country, without any tax consequences i.e. at the
conditions set out under number 71 above.
2 Value added tax

77. An SE engaged in economic activity is liable for VAT like any other entity
in the same position. Hence, is has a duty to abide by the applicable provisions
of the Czech VAT Code in the same way as any other entity subject to tax in the
Czech Republic. Generally speaking, all rules of the Sixth VAT Directive have
been transported into Czech law, and the interpretation of these rules closely
follows the ECJ’s case law.
3 Other taxes
78. Like other taxable entitles, an SE has other tax obligations, in particu-
lar a duty to withhold and remit advance payments of income tax and pay
employer’s and deduct employees’ mandatory social security contributions and
health insurance contributions. In practice, this means a further increase in the
cost of labour. In recent years, a frequent subject of debate at the national level
has been whether to set an upper limit on such contributions since, to date,
there is no such ceiling for either employers or employees. An SE also has a
duty, where applicable, to pay real estate tax, real estate transfer tax and other
relatively insignificant property taxes.
79. The Czech Republic imposes no tax on contributions to the capital of a
company, unlike some other Member States.
X Conclusion
80. Several major Czech corporate groups have realised the potential of the SE
and the possibilities for cross-border mergers.
Moreover, as a result of the media coverage of several mergers involving lead-
ing Czech industrial and financial groups, the Czech business community has
become aware of the SE in general terms.
Despite the somewhat delayed implementation of the Regulation, Czech law
does not impose any obstacles on successful completion of transactions involv-
ing the formation or relocation of an SE. Furthermore, the Czech judiciary is
accustomed to such transactions. However, the extent to which the traditionally
112
Czech Republic
pragmatic Czech business environment will regard the SE as a high-quality

‘brand’ remains uncertain.
The authors are rather sceptical in this respect and believe the SE will be
viewed as less attractive and gradually forgotten over time in the Czech Repub-
lic, despite the potential it provides for migration within the European Union,
following full implementation of the Merger Directive.
113
4
France
jean-marc desache
Gide Loyrette Nouel
I Introduction 115
II Reasons to opt for an SE 116
III Formation 117
B Name 117
E Capital 121
IV Organisation and management 130
A General remarks 133
B One-tier system 135
C Two-tier system 136
D Appointment and removal 137
E Representation 138
F Liability 138
V Employee involvement 139
2 Special negotiating body (SNB) 139
A Composition of the SNB 140
B Protection of employee representatives 141
C Duty of confidentiality 141
D Negotiations within the SNB 141
114
France
3 Standard rules 142

A Information and consultation 142
B Employee participation 142
4 Reconvention/reorganisation in the event of substantial
changes 143
5 Complaints procedure 144
1 Annual accounts 144
2 Consolidated accounts 145
3 Auditors 145
VIII Dissolution 147
1 Winding up 147
2 Liquidation 148
IX Applicable law 148
X Tax treatment 148
1 Income tax 148
3 Other taxes 150
XI Conclusion 150
I Introduction
1. The Regulation and the Directive have been implemented in France by the law
of 26 July 2005 on the promotion of confidence and economic modernisation
(the ‘Law’).
As the Regulation is directly applicable in France, France only enacted a limited
number of provisions implementing certain options contained in the Regulation
in order to ensure consistency with French company law.
Thus, fifteen articles (Arts. L.229-1 to L.229-15) were inserted in a new Chapter
IX on the SE (De la société européenne) in Title II of Book II of the French
Commercial Code (the ‘Commercial Code’) and a new Chapter IV bis was
added to Title IV on the violation of rules applicable to the SE (Des infractions
concernant les sociétés européennes).
The Directive, on the other hand, had to be transposed into French law. Thus, a
new Chapter XI was added to Title III of Book IV of the French Labour Code
on employee involvement in the SE and on the SE’s works council (Implication
des salariés dans la société européenne et comité de la société européenne).
The general provisions of the Law are supplemented by Decree No. 2006-
448 of 14 April 2006 and Decree No. 67-236 of 23 March 1967 on commercial
companies, as well as by the decree of May 30 1984 on the French trade register
115
and Decree No. 2006-1360 of 9 November 2006 on employee involvement in

the SE.
2. Article L.229-1 of the Commercial Code provides that the rules applicable to
French limited-liability companies (société anonyme or SA) shall apply to SEs
registered in France, unless they contradict the provisions of the Regulation or
provisions of national law specifically enacted for the SE.
In order to ensure the enforceability of provisions typically found in shareholder
agreements, Articles L.229-11 to L.229-15 of the Commercial Code allow the
articles of association of a private (closely held) SE to provide for transfer
restrictions on shares or the exclusion of certain shareholders. These provisions
are based on those applicable to French simplified joint stock companies (société
par actions simplifiée or SAS) (see Section IV.2.B: Rights and obligations
of shareholders). Some commentators believe that the French legislature took
too much liberty with the provisions of Article 9 of the Regulation in this
respect.1
As a result, various sets of rules are applicable to SEs registered in France, and
problems of consistency may arise, which shall be pointed out, when applicable,
in this report.
II Reasons to opt for an SE

3. The advantages of the SE most often mentioned are its European nature
(meaning a symbolic European dimension and the gradual elimination of
national roots), the ability to transfer its registered office to another Member
State without the loss of legal personality and, finally, the ability to take part in
cross-border mergers.
The Tenth Company Law Directive (2005/56/EC) of 26 October 2005 on cross-
border mergers of limited-liability companies has yet to be implemented in
France2 and, consequently, the SE is the only corporate form that currently
provides an autonomous legal framework to realise such mergers.
The SE provides adequate tools for the organisation of European corporate
groups. Thus, it can be formed as a single-member company, a subsidiary or a
holding company.
An SE can be public or private and, in the latter case, its articles of associ-
ation may include, as mentioned above, tailor-made provisions organising
1
Notably the Movement of French Enterprises (Mouvement des entreprises de France or
MEDEF), the largest employers’ union in France, Société européenne (aspect de droit des
sociétés), Company Law Committee (Commission Droit de l’Entreprise), December 2006,
unpublished.
2
Pursuant to Article 19 of this directive, the Member States shall bring into force laws, regulations
and administrative provisions necessary to comply with it by 15 December 2007.
116
France
relations among shareholders (see Section IV.2.B: Rights and obligations of

shareholders).
III Formation
1 General remarks
A Founding parties
4. France has not enacted the option contained in Article 2(5) of the Regulation
and, under French law, an SE can only be formed by companies having their
registered office and head office within the Community.
As mentioned above, an SE can offer its securities to the public3 and can thus
be either public or private. Its shareholders can be either legal entities or natural
persons, but if an SE has only one shareholder, this shareholder must be an SE.4
B Name
5. Article 11 of the Regulation and Article R.229-21 of the Commercial Code
provide that the name of an SE must be preceded or followed by the abbreviation
‘SE’ on all acts and documents issued by the company. If an SE fails to comply
with this obligation, the public prosecutor or any interested party can petition the
president of the competent commercial court, ruling as in summary proceedings,
to order the SE to comply or pay a penalty.5 The same sanction can be imposed
on a company other than an SE that uses the abbreviation ‘SE’ in its name.6

6. The right of third parties to rely on the location of a company’s head office
is a general principle of French company law,7 which appeared to the French
legislature even more important when dealing with an SE, which can transfer
its registered office abroad without losing legal personality.
Therefore, France has enacted the option contained in Article 7 of the Regulation
to require the head office and registered office of a French SE to be at the same
place.8
3
Paragraph 12 of the preamble to the Regulation.
4
This SE, a sole shareholder, cannot itself be a single-member company (see Section III.2.C:
Formation of a subsidiary SE).
5 Art. L.238-3 Commercial Code. 6 Ibid., Art. L.238-3-1. 7 Ibid., Art. L.210-3.
8
Ibid., Art. L.229-1. This provision has been criticised as requiring an SE registered in France
to hold meetings of its corporate organs at its registered office, which is not the case for an SA
(see the report by Noëlle Lenoir to the Justice Minister, ‘La Societas Europaea ou SE – Pour une
citoyenneté européenne de l’entreprise’, 19 March 2007, and the example of LCL SA, whose
registered office is in Lyon but whose corporate organs meet in Paris).
117
If an SE registered in France transfers its head office abroad while its registered
office remains in France or transfers its head office to another location in France,
the competent public prosecutor shall be informed by the competent authority of
the relevant Member State,9 and any interested party may petition the president
of the commercial court to force the SE, subject to a penalty and within a fixed
period of time, to rectify the situation by either transferring its registered office
or by re-establishing its head office at the place where its registered office is
located. If the SE does not comply with this court order, it may be liquidated
(see Section VIII.2: Liquidation).10
These provisions aim to discourage SEs from transferring their head office
abroad without complying with the applicable rules.
(ii) Transfer
7. According to the provisions of French company law applicable to the société
anonyme, the transfer abroad of an SA’s registered office and the subsequent
change in its nationality11 must be approved by all shareholders12 or an extraor-
dinary general meeting, where France and the host country have entered into
an international treaty to that effect.13
From this point of view, although the procedure is still cumbersome, the SE
greatly facilitates the transfer of a company’s registered office from one Member
State to another by providing specific protection for (i) shareholders who object
to the transfer and (ii) creditors.
In order to carry out such a transfer pursuant to Article L.229-2 of the Commer-
cial Code, the SE’s management must draft both a report under the conditions
set forth in Article 8(3) of the Regulation and a transfer proposal under the
conditions set forth in Article 8(2) of the Regulation. Two months prior to the
general meeting scheduled to vote on the transfer, the transfer proposal must
be filed with the clerk of the competent commercial court and published.14
8. Pursuant to Article 8(14) of the Regulation and Article L.229-4 of the Com-
mercial Code, during the period between publication of the transfer proposal
and the date of the general meeting scheduled to vote on the transfer, which
must be at least two months,15 the competent national authorities are entitled to
object to the transfer on grounds of public interest (see Section VII: Supervision
by the national authorities).
9 Ibid., Art. L.229-9. 10 Ibid.

11
Pursuant to Article L.210-3 of the Commercial Code, ‘companies with their registered offices
on the French territory shall be subject to French law’.
12
Art. L.225-96 Commercial Code; Art. 1836 Civil Code.
13
Art. L.225-97 Commercial Code.
14 Ibid., Art. R.229-3 sets forth the publication procedure to be followed. 15 Art. 8(6) Reg.
118
France
Pursuant to Article 8(4) of the Regulation, shareholders and creditors of the SE

shall have the right, at least one month prior to the general meeting scheduled
to vote on the transfer, to examine and obtain, free of charge, a copy of the
transfer proposal and the management report.
9. The transfer of an SE’s registered office requires an amendment to its articles
of association16 which, according to French law, must be approved by at least
75% of the company’s shareholders.17
Within one month of its adoption, a notice of the decision taken by the extraor-
dinary general meeting must be published under the same conditions applicable
to the notice of the transfer proposal.18
Article L.229-2 of the Commercial Code also specifies that, in accordance
with French company law (Arts. L.225-99 and L.228-35-6),19 when an SE
has different categories of shares, the decision to transfer its registered office
must be approved by 75% of each class at an extraordinary general meet-
ing. Similar rules apply to particular types of securities, such as investment
certificates.20
10. France enacted the option contained in Article 8(5) of the Regulation and has
adopted provisions designed to ensure specific protection for minority share-
holders who oppose the transfer of an SE’s registered office from France to
another Member State. These shareholders can oblige the SE to buy back their
shares.21
According to Article R.229-7 of the Commercial Code, the purchase offer must
be sent to every objecting shareholder by registered mail within 15 days from
receipt of their request. The offer must indicate the price per share, the means
of payment and the offer period, which cannot exceed 20 days.
16 Ibid. 17 Art. L.225-96 Commercial Code. 18 Ibid., Art. R. 229-5.

19
With respect to securities granting access to share capital issued by an SE prior to the transfer of
its registered office, Article L.229-2 of the Commercial Code does not contain any specific rules,
but we recommend following the provisions of Article L.228-103 and submitting the transfer
proposal to an extraordinary general meeting of the holders of such securities for approval.
20
Article L.229-2 of the Commercial Code expressly provides that the general meeting of
investment-certificate holders must approve the transfer, unless the SE proposes to acquire
their certificates upon request and such acquisition has been accepted by the general meeting
of investment-certificate holders. The particularities of these securities no doubt led the French
legislature to enact a specific provision, whereby their issuance has not been possible since the
entry into force of the order of 24 June 2004, i.e. since 27 June 2004. Article R.229-9 of the
Commercial Code sets forth the applicable procedure in this regard.
21
Pursuant to Articles L.229-2 and R.229-6 of the Commercial Code, the objection and request for
redemption must be made within one month from publication of the notice of the extraordinary
general meeting’s decision to transfer the company’s registered office and sent to the SE by
registered mail.
119
If the shares to be repurchased by the SE are listed, the purchase price shall be
determined in accordance with Article L.433-4 of the Monetary and Financial
Code, applying the multi-variable approach used in the event of a squeeze-out.22
The offer price may be challenged during the offer period, in which case the
price shall be determined by an independent expert appointed by the parties or,
failing an agreement, by the competent commercial court.23
Although some commentators maintain that Article 236-6 of the General Reg-
ulation of the French Market Authority (‘AMF’), which enables the AMF to
require majority shareholders to launch a squeeze-out in the event of inter alia
significant changes to a company’s articles of association, could apply to the
transfer of an SE’s registered office,24 the authors believe that any procedure
imposing additional requirements on the transfer of an SE’s registered office is
not valid.
11. Creditors of a French SE transferring its registered office abroad benefit from
the same protection as in the merger of an SA (see Section III.2.A: Formation
by merger).
Thus, in accordance with Articles L.229-2 and L.228-65 of the Commercial
Code, the transfer proposal must also be submitted to the general meeting
of bondholders of the SE, unless the SE proposes to acquire the bonds upon
request.25
If the general meeting of bondholders agrees to the transfer, the process will
continue and they shall remain bondholders of the SE. If the bondholders oppose
the transfer26 and management decides nonetheless to go ahead, the bondholders
can refer the matter to the competent commercial court, which can either reject
their petition or rule on the adequacy of the guarantees offered by the SE.
Any failure to comply with a court order in this regard renders the transfer
unenforceable and ineffective against bondholders and other creditors.
It should be noted that France has enacted the option set forth in Article 8(7)
of the Regulation to extend the protection described above to creditors whose
22
This approach is based on objective methods used to value an assignment of assets, taking into
account the weighted value of the assets, the profit realised, their market value, the existence of
subsidiaries and commercial prospects.
23
Art. R.229-8 Commercial Code.
24
C. Cathiard, ‘La société européenne en droit français, 2ème partie: Les modalités de fonction-
nement d’une SE immatriculée en France’, J.Cl. Droit des sociétés, January 2006, 7. The AMF
applied Article 236-6 of its General Rules upon the formation of EADS N.V. and decided not to
require the majority shareholder of ASM (a French company contributed to EADS) to launch a
squeeze-out, as the articles of association of EADS had been amended in a way that the AMF
considered sufficient to protect the interests of minority shareholders.
25
Article R.229-10 of the Commercial Code sets forth the various steps in the procedure.
26
120
France
claims arise after publication of the transfer proposal but prior to the transfer
itself.27
Notwithstanding the foregoing, Article L.229-2 of the Commercial Code pro-
vides that any creditor may lawfully insert in a credit agreement an acceleration
clause in the event the debtor decides to transfer its registered office abroad.
12. The final step in the transfer process described in Article L.229-2 of the
Commercial Code is verification by a notary, who did not take part in the trans-
fer,28 of completion of the requisite pre-transfer acts and formalities (including
observance of all the protective measures described above) and issuance of a
certificate in this respect.
D Corporate purpose
13. There are no SE-specific rules and, consequently, as with any SA, the
corporate purpose of an SE must, pursuant to general principles of French
company law, be identified in its articles of association29 and be lawful.30
Any act that falls outside an SE’s corporate purpose shall be binding on the
company unless the third party was aware, or should have been aware under the
circumstances, of the ultra vires nature of the act. Publication of the articles of
association of an SE does not constitute sufficient proof of such knowledge.31
E Capital
14. Article 4(2) of the Regulation states that the subscribed share capital of an
SE shall amount to at least €120,000.32
If the shares of an SE are offered to the public, French law provides that the
registered capital shall amount to at least €225,000.33

15. Pursuant to the Regulation, France has enacted provisions aimed to allow
the formation of an SE by merger, the creation of a holding or subsidiary SE,
and conversion of an SA into an SE.
The twelfth recital to the Regulation, which provides that an SE can seek public
financing under the same conditions as an SA, could lead to the conclusion
27
Application of Article R.229-11 of the Commercial Code, however, results in a mismatch, and
the period for objecting to the transfer expires before the transfer itself occurs.
28
29 Art. L.210-2 Commercial Code. 30 Art. 1833 Civil Code.
31
Arts. L.225-35 para. 2 and L.225-64 para. 2 Commercial Code.
32
The third phase of economic and monetary union applies to France, and thus Article 67 of the
Regulation cannot apply in France.
33
Art. L.224-2 para. 1 Commercial Code.
121
that an SE can be formed through an initial public offering. However, this

interpretation goes beyond the Regulation, which clearly sets forth four limited
means of forming an SE.34
16. Article 17 of the Regulation states that an SE may be formed by a merger

through acquisition, in which the acquiring company takes the form of an SE,
or through the formation of a new company that takes the form of an SE.
In both cases, the only types of companies that can participate in the merger
are the SA and the SE.35
With respect to mergers, matters not covered by the Regulation are governed
by the provisions of the third Council Directive of 9 October 1978 and its
implementing legislation under French law.
Due to the limited number of provisions in the Regulation and French law36
on the formation of an SE by merger, the rules of French law applicable to
mergers involving SAs shall apply, which is fully consistent with the spirit of
the Regulation and the fact that such a merger can only involve an SA and/or
an SE.37
Thus, the board of directors or the management board of each merging company
must draw up draft terms of merger, containing the relevant information set forth
in Article 20 of the Regulation and Article R.236-1 of the Commercial Code,
and issue a report detailing the draft.38
One month prior to the general meeting scheduled to vote on the merger, the
management report and the draft terms of merger must be made available to
shareholders at the merging SA’s registered office. The draft terms of merger
shall then be submitted to the clerk of the commercial court in the district
where the SA’s registered office is located, and two notices relating to the
draft terms shall be published pursuant to French law and to Article 21 of the
Regulation.39
34
M. Menjucq and S. Guilcart, La société européenne, Thèmexpress, éd. Francis Lefebvre 2005,
no. 31. MEDEF [Société européenne (aspect de droit des sociétés), Company Law Committee
(Commission Droit de l’Entreprise), December 2006, unpublished] if of the opinion that an SE
cannot be created ex nihilo, but see F. Collin and J.P. Dom, ‘Enjeux et perspectives de la Société
Européenne’, Actes pratiques société, November – December 2005.
35
Article 3 of the Regulation states that for the purposes of Article 2(1) on mergers, an SE shall
be regarded, as far as France is concerned, as an SA and shall thus be entitled to take part in the
formation of an SE by merger under the same conditions.
36 Art. L.229-3 Commercial Code. 37 Pursuant to Annex I and Art. 3 Reg.
38
39
One notice containing the information set forth in Article 21 of the Regulation shall be published
in the Official Gazette for Civil and Commercial Announcements (Bulletin Officiel des Annonces
Civiles et Commerciales or ‘BODACC’) by the clerk of court and one notice containing the
122
France
17. Furthermore, one or more independent experts (commissaires à la fusion)40

appointed by the competent commercial court shall examine the draft terms of
merger and issue a report, which must be made available to all shareholders of
the merging SA.41
18. The extraordinary general meeting of each merging company must approve
the proposal by at least 75% of those shareholders present or represented or, if
there are different classes of shares, by at least 75% of each class.42
The general meeting of each merging company may make registration of the
SE contingent on its approval of the agreement on employee involvement, if
such an agreement has not been reached at the time the general meeting is held.
Article 31(1) of the Regulation provides for a simplified merger procedure when
the absorbing company holds 100% of the shares and other securities conferring
the right to vote at general meetings of the absorbed company (the ‘simplified
procedure’).
In this case, the Regulation provides that there is no need to establish a share-
exchange ratio, appoint an independent expert and issue a report,43 insofar as
these exemptions are consistent with French law. Although French law grants
an exemption from the obligation to appoint an independent expert to determine
the fairness of the share-exchange ratio (commissaire à la fusion) and to have
the board of directors or the management board of the acquired company issue a
specific report, it is still necessary to have an independent expert44 (commissaire
aux apports) assess the value of any contribution in kind.45
Under the simplified procedure, Article 23(1) of the Regulation provides that
the general meeting of each merging company shall approve the draft terms
of merger. In this respect, the simplified procedure to form an SE by merger
is less flexible than French law46 which, very reasonably, does not require the
information set forth in Article R.236-2 of the Commercial Code shall be published in an official
newspaper entitled to publish legal notices in the département where the participating SA is
registered. If one of the SAs is a public company, the notice must also be published in the
Bulletin des Annonces Légales Obligatoires (Balo).
40
41
Pursuant to Article 22 of the Regulation and Article R.236-6 of the Commercial Code, the
participating SAs may jointly petition the competent commercial court to appoint a single
expert to examine their draft terms of merger and draw up one report for all shareholders.
42
43
This interpretation prevails, although Article 31(1), which refers to Article 22 of the Regulation,
is worded ambiguously.
44
45
This procedure was applied in France when SCOR Global P&C absorbed its wholly owned
subsidiaries (E. Rousseau and A. Grumberg, ‘Scor, la première société française cotée à adopter
le statut de société européenne: principaux avantages de la Societas Europaea’, Option Finance,
4 September 2006, no. 896).
46
Arts. L.236-2, L.236-11 and L.236-23 Commercial Code, implemented pursuant to the Third
Company Law Directive.
123
approval of the general meeting of the absorbed company in this instance, since
the absorbing company already holds 100% of the latter’s voting rights.
France did not adopt the option contained in Article 31(2) of the Regulation to
extend the simplified procedure to a merger carried out by a company holding
at least 90%, but not all, of the shares and other securities granting the right to
vote at general meetings of the absorbed company.
19. Bondholders and other creditors enjoy the same protection as in the merger
of an SA under French law, thus ensuring the same level of protection as when
an SE’s registered office is transferred abroad (see Section III.1.C.(ii)).
20. France has ruled out the option contained in Article 24(2) of the Regulation
to grant specific protection47 to minority shareholders of an SA promoting the
formation of an SE by merger. Thus, the merger process is easier than the
procedure to transfer an SE’s registered office (see Section III.1.C (ii)) where
minority shareholders request redemption of their shares. This is consistent with
the general approach of French law to mergers, in that minority shareholders
cannot prevent a merger from going through or force the company to repurchase
their shares.
21. Once the merger has been approved by the general meeting of each merg-
ing company, Article L.229-3 of the Commercial Code provides that those
companies registered in France must file with the relevant trade register a
statement of all steps carried out to proceed with the merger, confirming that
the merger has been carried out in accordance with the applicable laws and
regulations.
The clerk is responsible for verifying proper performance of the pre-merger
procedure,48 while a French notary,49 who has not taken part50 in the merger,
shall review51 completion of the merger and establishment of the SE.52
47
Pursuant to French law and subject to certain criteria, the shareholders of listed companies can
create an association to represent their interests (Art. L.225-120 Commercial Code). Sharehold-
ers also have a right to convene a general meeting, to add resolutions to the agenda of a meeting,
to be informed, etc. (see Section IV.2.A: Decision-making process and Section IV.2.B: Rights
and obligations of shareholders).
48
Art. 25 Reg.; Arts. L.229-3 and L.236-6 Commercial Code.
49
Art. 26 Reg.; Art L.229-3 and Art. R.229-13 Commercial Code.
50
51
Within six months from issuance of the clerk’s certificate, each merging company shall submit
this certificate, as well as inter alia a copy of the draft terms of merger approved by the general
meeting, to a French notary.
52
M. Menjucq, S. Guilcart, La société européenne, Thèmexpress, éd. Francis Lefebvre 2005,
no. 31. MEDEF [Société européenne (aspect de droit des sociétés), Company Law Committee
(Commission Droit de l’Entreprise), December 2006, unpublished] considers that it would have
been be more efficient to designate the clerk of the relevant commercial court as the national
authority competent to scrutinise completion of a merger and the formation of an SE.
124
France
The notary will ensure that all merging companies have approved the draft
terms of merger under the same conditions, that the provisions on employee
involvement have been adhered to, and that French law has been fully applied
before delivering a certificate attesting to completion of the merger and the
concomitant procedural formalities.
According to Article 19 of the Regulation, the competent authorities (see Sec-
tion VII: Supervision by the national authorities) can oppose a merger until the
notary delivers the abovementioned certificate.
The merger and formation of the SE take effect upon registration of the SE
pursuant to Article 29 of the Regulation.
22. Pursuant to Article 2(2) of the Regulation, both an SA and a société à

responsabilité limitée (SARL) can participate in the formation of a holding SE
provided another public or private limited-liability company governed by the
laws of a different Member State is involved or if the SA or SARL has for at
least two years had a subsidiary governed by the laws of another Member State
or a branch located in another Member State.
As mentioned in Article 2(2) of the Regulation, a company will be considered
a subsidiary of another if more than half its share capital is directly held by that
company.53
According to Article L.229-5 of the Commercial Code, the companies promot-
ing the formation of a holding SE shall draw up terms of formation and offer
all shareholders the opportunity to contribute their shares to the holding SE.
The agreement shall state inter alia54 the proportion of shares in each promoting
company to be contributed to the holding SE, which must result in the SE holding
directly more than 50% of the voting rights of each company promoting its
formation.
No less than one month prior to the first general meeting scheduled to vote on
the formation of a holding SE, each participating company shall file its draft
terms of formation with the trade register in which it is registered55 and publish
a notice to this effect.56
23. Pursuant to Article 32(4) of the Regulation, Article L.229-5 of the Com-
mercial Code provides that one or more independent expert(s)57 appointed by
53 Art. L.233-1 Commercial Code. 54 Art. 32(2) Reg.

55
Art. 32(3) Reg.; Art. L.229-5 Commercial Code.
56
Article R.229-15 of the Commercial Code sets forth the publication procedure to be followed.
57
Commissaires à la constitution de la société européenne holding pursuant to Article R.229-16
of the Commercial Code.
125
the president of the competent commercial court shall examine the draft terms
of formation of the holding SE and issue a report containing the information set
forth in Article 32(5) of the Regulation as well as, pursuant to Article R.229-17
of the Commercial Code, the date of the accounts used to determine the value
of the shares contributed to the holding SE. The promoting companies may ask
the experts to draw up a single report for all shareholders.
Article L.229-5 of the Commercial Code refers to the provisions applicable to
mergers of SAs, according to which the board of directors or the management
board of each company taking part in the formation of a holding SE shall draw
up a report detailing and justifying the formation.58
24. The general meeting of each company promoting the formation of the
holding SE must approve the draft terms of formation by the quorum and
majority required at an ordinary general meeting, since the formation of a
holding SE does not necessitate an amendment to the articles of association of
the promoting companies.59
It should be noted that the general meeting of each promoting company may
make registration of the SE contingent on its approval of the agreement on
employee involvement, if no agreement has been reached at the time the general
meeting is held.
25. The creation of a public limited-liability company through a contribution of
shares is well known under French law;60 however, presumably in order to ensure
shareholders, investment-certificate holders, bondholders and other creditors
the same degree of protection as when an SE is formed by merger, French law
refers to the provisions of national law designed to protect shareholders and
creditors in the event of a merger when a holding SE is formed61 (see Section
III.2.A: Formation by merger).
Thus, France did not enact the option contained in Article 34 of the Regu-
lation allowing the Member States to grant additional protection to minority
shareholders in this instance.
26. Within one month following the general meeting’s decision to approve the
formation of a holding SE, a notice to this effect shall be published. The notice
must inter alia indicate to shareholders how they can inform the company of
their ‘intention to contribute their shares’.62
Article 33(1) of the Regulation states that the shareholders of each company
promoting the formation of a holding SE shall have three months, starting on
58 Art. L.236-9 para. 4 Commercial Code. 59 Ibid., Art. L.225-98.

60
Ibid., Art. L.225-8 (on contributions in kind).
61
Referring to Arts. L.236-9, L.236-13 and L.236-14 Commercial Code.
62
Ibid., Art. R.229-18.
126
France
the date on which the terms of formation are approved, to inform the company
if they intend to contribute their shares to the holding SE.
This provision is reflected in Article R.229-18 of the Commercial Code, which
provides for a three-month period that starts to run when the general meeting’s
decision to approve the formation of a holding SE is first published.
Upon expiry of this three-month period, the holding SE may be formed, subject
to a contribution of at least the percentage fixed in the draft terms, which cannot
be less than 50% of the voting rights of the promoting companies.
According to Article R.229-19 of the Commercial Code, once the conditions to
form a holding SE are fulfilled, each French promoting company shall publish
a notice to this effect.63
Shareholders that have not yet decided whether to contribute their shares shall
have an additional month to contribute their shares to the holding SE.
Upon expiry of this additional one-month period, the holding SE is formed, and,
once it is shown that the formalities referred to in Article 32 of the Regulation
have been completed, it shall be registered in accordance with Article 33(5) of
the Regulation.
27. Any company in France may participate in the formation of a subsidiary

SE in accordance with Article 3(2) of the Regulation, as long as an entity from
a different Member State is involved.
Article L.229-6 of the Commercial Code allows an SE to be the sole shareholder
of a subsidiary SE registered in France, subject to the restriction that it cannot
itself be a single-member company.64
Accordingly, Article L.229-6 of the Commercial Code makes clear that the
sole shareholder shall exercise the powers of the general meeting. Furthermore,
the subsidiary SE’s directors or supervisory board members need not hold any
shares in the company.
Subsidiary SEs are governed by the provisions of the Regulation and the rules
applicable to French single-member SARLs.
Taking advantage of implementation of the Regulation in France, Senator
Marini proposed introducing a single-member SA. His proposal was rejected,
however.65
63
The notice shall be published in a newspaper entitled to publish national legal notices and in
the BODACC.
64
Art. L.223-5 para.1 Commercial Code.
65
Bill on the European company of 9 October 2003, proposal of Senator Philippe Marini.
127
28. Pursuant to Article 2(4) of the Regulation, a public limited-liability com-

pany, i.e. an SA, which has both its registered office and head office in France
may be converted into an SE, if for at least two years, it has had a subsidiary
governed by the laws of another Member State.
Once again, the provisions of the Regulation must be read in conjunction with
the national rules applicable to the conversion of a French SA. Consequently
an SA may only be converted into an SE if, at the time of conversion, it has
been in existence for at least two years and has drawn up balance sheets for
its first two financial years and had them approved by its general meeting of
shareholders.66
According to Article L.225-245-1 of the Commercial Code, the board of direc-
tors or the management board of the French SA must prepare draft terms of
conversion.67 One month prior to the general meeting scheduled to vote on the
conversion, the draft terms must be filed with the trade register of the place
where the SA is registered and a notice to this effect published.68
29. In addition, one or more independent experts appointed by the president
of the competent commercial court shall prepare a report and certify that the
net assets of the company to be converted are ‘at least equivalent to its share
capital’,69 which is slightly different from the wording of Article 37(6) of the
Regulation, which provides that the net assets of the company shall be ‘at least
equivalent to its capital plus those reserves which must not be distributed under
the law or the articles of association’. As the Regulation is more stringent, we
recommend following its provisions,70 especially since it appears to be more
protective of shareholders and creditors.
The company SCOR is the first French listed SA to have started the process to
be converted into an SE.71 It chose to abide by the provisions of the Regulation,
and two independent experts certified that the company’s net assets were ‘at
least equivalent to its capital plus those reserves which must not be distributed
under the law or the articles’.72
66
67
As well as a report explaining and justifying the conversion, pursuant to Article 37(4) of the
Regulation.
68
Article R.229-20 of the Commercial Code sets forth the publication procedure.
69
Ibid., Art. L.225-245-1.
70
C. Cathiard, ‘La société européenne en droit français, 1ère partie: Les modalités de constitution
d’une SE en vue de son immatriculation en France’, J.Cl. Droit des sociétés, December 2005,
no. 25.
71
By a decision of its board of directors of 4 July 2006.
72
E. Rousseau and A. Grumberg, ‘Scor, la première société française cotée à adopter le statut de
société européenne: principaux avantages de la Societas Europaea’, Option Finance, 4 Septem-
ber 2006, no. 896.
128
France
30. Implementing Article 37(7) of the Regulation, Article L.225-241-1 of the

Commercial Code provides that the general meeting must approve the conver-
sion under the same conditions required to approve the formation of an SE by
merger (i.e., a 75% majority).
France did not adopt the option set forth in Article 37(8) of the Regulation,
allowing the corporate body responsible for organising employee involvement
within the company to oppose the conversion by a unanimous vote or a qualified
majority.
In any case, pursuant to Article 37(9) of the Regulation, rights and obligations
regarding terms and conditions of employment in the converted company shall
be maintained in the SE.
Rights relating to terms and conditions of employment existing on the date of
registration of the SE are transferred to the SE by operation of law through
such registration. The Regulation and French law provide that all agreements
and undertakings regarding employees shall not be affected by the conversion,
subject, however, to the provisions of any agreement on employee participation
that may have been reached during the negotiation process.73
According to Article R.229-22 of the Commercial Code, the decision to convert
an SA into an SE must be approved by the same (75%) majority required to
amend the company’s articles of association and published accordingly.74
31. As a general rule and pursuant to Article L.210-6 of the Commercial Code,
persons who have acted in the name of a company in formation before it has
acquired legal personality shall be jointly and severally liable for obligations
incurred in the company’s name, unless, following its registration, the com-
pany assumes the obligations incurred by the founding parties on its behalf.
These obligations shall then be deemed to have been entered into by the
company.
It should be noted that the option contained in Article 16(2) of the Regulation
to derogate from the above principle by way of arrangement, while contrary to
general principles of French company law, should nevertheless apply.75
32. In France, an SE must file with the trade register of the place where it intends
to establish its registered office the same information as any French company.76
73
Art. 439-32 Labour Code.
74
The notice shall be published in an official newspaper entitled to publish legal notices in the
département where the SE’s registered office is located. The entry in the trade register shall be
modified, and the clerk shall cause this amendment to be published in the BODACC.
75 Art. 16(2) Reg. 76 Art. R.123-35 et seq. Commercial Code.
129
It must also file, within 15 days of the first filing, two certificates issued by a
notary (for an SE formed by merger) or a copy of its draft terms of formation
and an independent expert’s report (for a holding SE).77
With respect to the transfer of an SE’s registered office to France, French law
provides that within one month following the decision of the extraordinary
general meeting to transfer the registered office, the SE must inter alia provide
the clerk of the commercial court of the place where its registered office is
located with two copies of its articles of association and a certificate issued
by the competent national authority confirming completion of the requisite
pre-transfer acts and formalities.78
Filing is only possible if the rules on employee involvement have been observed
or, if no agreement has been reached by the SNB, if the board of directors or
the management board agrees to apply the standard rules.79
Once the SE is registered, the clerk shall cause a notice to be published in the
BODACC80 and in the Official Journal of the European Communities pursuant
to Article 14 of the Regulation. A notice shall also be published in an official
newspaper entitled to publish legal notices in the département where the SE
has its registered office.

33. According to Article 16 of the Regulation and Article L.229-1 of the Com-
mercial Code, an SE acquires legal personality upon registration.
IV Organisation and management

1 General remarks
34. The organisation and management of an SE, as set out in the Regula-
tion, as well as the rules on general meetings largely mirror the relevant
provisions of French company law applicable to SAs. In addition, the Reg-
ulation provides that, when not contrary to its own provisions, the organisa-
tion and management structure, as well as general meetings,81 of an SE shall
be governed by the relevant provisions of national law applicable to SAs.82
Consequently, implementation of the Regulation in France did not require
substantial changes to French company law, with the few exceptions noted
below.
77 Ibid., Art. R.123-118. 78 Ibid., Arts. R.123-72, R.123-73 and R.123-74.

79
Art. 12(2) Reg.; Arts. L.439-34 and R.439-17 Labour Code.
80 Art. R.123-155 Commercial Code. 81 Ibid., Art. L.229-8. 82 Ibid., Art. L.229-7.
130
France
2 General meeting
35. At least one general meeting must be held each year, within six months
from the close of the financial year, to approve the annual accounts. France did
not adopt the option to allow an SE to hold its first general meeting at any time
during the first 18 months of its existence (Art. 54(1) Reg.).
Pursuant to Article 54(2) of the Regulation, French company law applies and
thus the management board, the board of directors and/or the supervisory board
have authority to call a general meeting.
According to Articles 55(1) and 56 of the Regulation, one or more shareholders
who jointly hold at least 10% of an SE’s subscribed capital may request that
the company convene a general meeting and draw up an agenda for the same.
According to the Regulation, the articles of association or national law may
stipulate a lower percentage under the same conditions applicable to public
limited-liabilities companies.
In this respect, French law provides for a 5% threshold,83 but shareholders
are not entitled to directly convene the general meeting and must request the
competent commercial court to appoint a representative to do so if the board of
directors or the management board fails to act.
Moreover, if the board of directors or the management board fails to convene
the general meeting, the company’s auditor, a representative84 appointed by the
president of the competent commercial court at the request of any interested
party upon a showing of urgency, the liquidators or a majority shareholder
(following a takeover bid, a share exchange offer or a change in control) can
all convene a general meeting.85
The agenda of the general meeting is determined by the parties who called it,
but one or more shareholders holding at least 5% of the SE’s subscribed capital
may add a resolution.86
36. Pursuant to the Regulation and French law, which refers to the rules applica-
ble to SAs, resolutions that do not amend the articles of association are approved
by the ordinary general meeting by a majority vote87 where the shareholders
present or represented hold at least one-fifth of the voting shares.88 Amendments
83
Or an association of shareholders if the company is listed, under the conditions set forth in
Article L.225-120 of the Commercial Code.
84
The authority referred to in Article 55(3) of the Regulation.
85
86
Ibid., Art. L.225-105. This percentage is reduced if the company’s share capital is increased.
87
Art. 57 Reg.; Art. L.225-98 Commercial Code.
88
If the meeting is adjourned and subsequently reconvened, resolutions can be passed regardless
of the percentage of share capital present or represented.
131
to the articles of association, on the other hand, must be approved at an extraordi-

nary general meeting by two-thirds89 of the votes cast, where those shareholders
present or represented hold at least one-quarter of the voting shares.90
However, unlike under French law,91 abstentions and blank or spoilt ballots are
not considered negative votes pursuant to the Regulation.92
France opted out of the option contained in Article 59(2) of the Regulation to
provide that where at least half of an SE’s subscribed capital is represented at
a meeting, a simple majority vote is sufficient to amend the company’s articles
of association.
Article 12(4) of the Regulation allows the Member States to provide that if the
articles of association of an SE require amendment due to a conflict with the
new arrangements for employee involvement required by the Directive, the SE’s
management shall be entitled to amend the articles without a decision of the
general meeting. France chose not to exercise this option, and the SE’s organs
must, in such a case, convene an extraordinary general meeting to amend the
articles.

37. Shareholders have a right to be informed about the general course of the
company’s business. This right can be exercised in the context of a general
meeting93 or at any time during the year.94
Furthermore, in addition to access to specific documents, such as the annual
accounts, management reports, auditor’s reports, etc., shareholders have a right
to submit questions to the board of directors or to the management board and
to receive answers to their questions at general meetings95 or any time during
the year with regard to specific management decisions,96 or twice a year with
regard to any event liable to compromise the company’s activity.97
In addition, the articles of association or applicable law can also impose specific
obligations on shareholders, such as in listed companies where shareholders
may be required to notify certain thresholds98 relating to voting rights or share
capital and, subject to certain conditions, launch a takeover bid or a squeeze-out.
89
Art. 59 Reg.; Art. L.225-96 Commercial Code.
90
One-fifth if the meeting is adjourned and subsequently reconvened.
91
Arts. L.225-96 and L.225-98 Commercial Code.
92
Articles 57 and 59 of the Regulation refer to votes ‘validly cast’, and only votes in favour or
against a resolution are counted.
93 Art. L.225-108 Commercial Code. 94 Ibid., Art. L.225-117. 95 Ibid., Art. L.225-108.
96
Article L.225-231 of the Commercial Code provides that this possibility is open to one or
more shareholders holding jointly at least 5% of a company’s share capital. In the absence of
a satisfactory answer within one month, these shareholders can petition the competent court to
appoint an expert to draft a report on one or more management transactions.
97 Art. L.225-232 Commercial Code. 98 Ibid., Art. L.233-7.
132
France
As the Regulation does not contain any specific rules regarding relations
between an SE’s shareholders, France has enacted various rules for private
SEs in order to ensure the same type of freedom as within an SAS.
38. As mentioned above, Articles L.229-11 to L.229-15 of the Commercial
Code, applicable to the SE, are based on Articles L.227-13 to L.227-19, which
apply to the SAS.
Article L.229-11 of the Commercial Code provides that the articles of asso-
ciation of a private SE can provide for transfer restrictions on the company’s
shares, although any such restriction cannot prevent a shareholder from selling
its shares for more than ten years.
Any sale of shares in violation of transfer restrictions set forth in the company’s
articles shall be deemed invalid and can be voided with respect to the assignee
or its successors, unless a decision ratifying the sale is taken unanimously by
the remaining shareholders.
The articles of a private SE may also contain provisions aimed at excluding cer-
tain (types of) shareholders or identifying a change in control of a shareholder;
both cases can be sanctioned by suspending the voting rights of the shareholder
in question.99
The validity of such provisions has been questioned since they are based directly
on provisions of domestic (French) law applicable to the SAS and not on pro-
visions of Community law, contrary to what is stated in Article 9(c) of the
Regulation.100
In any case, since these specific clauses are aimed at increasing the obligations
of shareholders, they can only be included in the articles of association by a
unanimous vote.101

A General remarks
39. An SE may choose either a one-tier or a two-tier management system, both
of which previously existed under French law.102
99
100
F. Collin and J.P. Dom, ‘Enjeux et perspectives de la Société Européenne’, Actes pratiques
société, November-December 2005; C. Cathiard ‘La société européenne en droit français, 2ème
partie: Les modalités de constitution d’une SE en vue de son immatriculation en France’, J.Cl.
Droit des sociétés, December 2005; MEDEF, Société européenne (aspect de droit des sociétés),
Company Law Committee (Commission Droit de l’Entreprise), December 2006, unpublished.
101
102
Ibid., Art. L.229-7. Thus, France did not have to enact any of the specific options contained
in Articles 39(5) and 43(4) of the Regulation when national law does not recognise a two-tier
management structure.
133
The initial choice is not final, and nothing prevents an extraordinary general
meeting from amending the articles of association in order to change from one
system to the other. This right, unlike under French law,103 is not expressly laid
down in the Regulation and seems to be based on the principle of freedom of
contract expressed therein.104
Pursuant to Article 46 of the Regulation, the members of an SE’s board of
directors, management board and supervisory board (the ‘organs’) are appointed
for a maximum term of six years, which must be stated in the company’s
articles of association. This provision derogates from the rules applicable to
SAs.105
Article 47(1) allows legal entities to be members of an SE’s organs unless
national law provides otherwise.106 Thus, with respect to SEs registered in
France, legal entities can be members of the board of directors and the super-
visory board but not the management board.107
Article 50 of the Regulation provides that decisions of the organs shall be
approved by a majority of their members, where at least half the members are
present or represented, unless the SE’s articles provide otherwise.
This rule gives the SE with great flexibility compared to the SA, as the quorum
required in the latter is one half the management or supervisory board members
attending physically or by videoconference.108 In that respect, France decided
not to apply the option contained in Article 50(3) of the Regulation allowing
a Member State to apply the quorum and majority rules applicable to public
limited companies in that state to an SE’s organs.
Article 48(1) of the Regulation states that an SE’s articles of association shall list
the categories of transactions that require the authorisation of the supervisory
board, in the two-tier system, or an express decision by the board of directors,
in the one-tier system.
40. Contrary to Article 48(1) of the Regulation, the supervisory board of an
SE registered in France cannot decide to make certain categories of decisions
subject to its approval.
103 Ibid., Art L.225-57. 104 Arts. 9 and 38(b) Reg.

105
The first directors or members of the supervisory board of a private SA are appointed in
the articles of association for a term not to exceed three years (Arts. L.225-18 and L.225-75
Commercial Code). Members of the management board may be appointed for a two- to six-year
term, depending on the applicable provisions in the articles of association. In the absence of
such provisions, they shall remain in office for four years (Art. L.225-62 Commercial Code).
106
Unlike the Regulation, French law does not make the appointment of a legal entity to an
SA’s board of directors (Art. L.225-20 Commercial Code) or supervisory board (Art. L.225-76
Commercial Code) subject to the existence of a provision allowing such an appointment in the
company’s articles.
134
France
France decided,109 further to Article 48(2) of the Regulation, to require all SEs
registered in France to set forth rules in substance equivalent to those applicable
to SAs,110 providing that any agreement concluded directly or indirectly between
the company and any member(s) of its management board or board of directors,
any other company with the same member(s) of the management board or
board of directors, or any shareholder holding more than 10% of the company’s
share capital, shall be subject to the prior approval of the board of directors or
supervisory board. The members involved in the transaction cannot take part
in the decision,111 and any such agreement must be approved by the general
meeting of shareholders.
41. The board of directors or management board has the right to refuse to
disclose to third parties information concerning the SE’s trade secrets or any
information that may be prejudicial to the company’s interests, except where
such disclosure is required by French law or is in the public interest.112
The French legislature, opting out of the option contained in Article 8(2) of
the Directive, does not require an administrative authorisation for, and thus
leaves up to management, the choice of whether to disclose to the employee
representatives any information that could seriously harm or be prejudicial to
the functioning of the SE.
France did not lay down any particular provisions, as proposed by Article 8(3)
of the Directive, for SEs established on its territory that pursue directly and
essentially the aim of ideological guidance with respect to information and the
expression of opinions. Therefore, the same confidentiality rules shall apply to
SEs and SAs in France.
B One-tier system
42. In the one-tier system, the board of directors is entrusted with overall man-
agement of the SE.
Pursuant to Article 43(2) of the Regulation, Article L.229-7 of the Commercial
Code provides that the rules applicable to SAs with respect to the minimum
and maximum number of directors113 shall apply to SEs registered in France,
notwithstanding employee representation rules.114
109 Ibid. 110 Ibid., Arts. L.225-38 to L.225-42 and L.225-86 to L.225-90.
111
Article L.229-7 of the Commercial Code provides that in the case of a single-member SE,
authorisation shall be deemed granted once the decision is recorded in the specified registry.
112
Art. 49 Reg.
113
Art. L.225-17 Commercial Code. Thus, the board of directors of an SE registered in France
shall have three to eighteen members, depending on the relevant provisions of the SE’s articles
of association.
114
Ibid., Arts. L.225-23 and L.225-27 para. 2.
135
Pursuant to French law, the board of directors shall decide, in accordance with
the SE’s articles of association, if the chair wields both executive (directeur
général, the equivalent of a CEO) and non-executive (président du conseil
d’administration) powers or if the company shall be run by a general manager
and a board, supervised by the chair.
Both systems are consistent with Article 43(1) of the Regulation, which provides
that a general manager or director(s) shall be responsible for the day-to-day
management of an SE.115
Article 44(1) of the Regulation provides that the board of directors shall meet
at least once every three months in accordance with the company’s articles of
association. French law does not stipulate the required intervals between board
meetings, but Article L.225-36-1 of the Commercial Code states that if the
board has not met for more than two months, at least one-third of the directors
may oblige the chair to convene a meeting with a specific agenda. The general
manager may also oblige the chair to convene a board meeting with a specific
agenda.
C Two-tier system
43. The two-tier structure comprises a management board and a supervisory
board. Pursuant to the Regulation and French law, it is not possible to sit simul-
taneously on both the management board and the supervisory board.116
In contrast to the rules applicable to the SA, Article L.229-7 of the Commercial
Code provides, pursuant to Article 39(3) of the Regulation, that if there is a
vacancy on the management board, it can be filled for a period not to exceed six
months by a member of the supervisory board, whose functions as a member
of the latter body shall then be suspended.
As mentioned above, in applying most of the SA’s organisational and man-
agement structure to the SE, France enacted the option in Article 39(1) of the
Regulation, thus providing that the general manager or members of the man-
agement board shall be responsible for day-to-day management of the company
under the same conditions as for an SA.
Under French law, the management board of an SA must have at least two
members (or one if the company’s share capital is less than €150,000)117 and
115
Art. L.225-51-1 Commercial Code. However, MEDEF [Société européenne (aspect de droit
des sociétés), Company Law Committee (Commission Droit de l’Entreprise), December 2006,
unpublished] considers the reference in Article 43(1) to ‘day-to-day management’ to differ
from ‘general management of the company’ within the meaning of the Commercial Code.
Moreover, it is of the opinion that the Regulation may be interpreted as not allowing the chair
of the board of directors to exercise such managerial functions. The authors, however, believe
there is no basis for this opinion.
116 Art. 39(3) Reg.; Art. L.225-74 Commercial Code. 117 Art. L.225-58 Commercial Code.
136
France
may have up to seven members if the SA is listed. However, pursuant to Article

39(4) of the Regulation, France provided in Article L.229-7 of the Commercial
Code that the management board of an SE may count up to seven members,
even if the company’s shares are not listed.
According to Article 41(1) of the Regulation and to French law,118 the manage-
ment board shall, no less than once every three months, report to the supervisory
board on the company’s current business and the foreseeable evolution thereof.
Moreover, according to Article 41(2) of the Regulation, the management board
shall promptly pass on to the supervisory board any information about events
likely to have a significant effect on the SE.
This obligation echoes the right of each member of the supervisory board to
request from the management board any information deemed necessary to per-
form his or her duties. Indeed, Article L.229-7 implements the option contained
in Article 41(3) of the Regulation and gives a statutory basis for the right of the
individual members of an SA’s supervisory board to be informed.
With reference to the rules applicable to SAs, France enacted the option con-
tained in Article 40(3) of the Regulation, and the supervisory board of an SE
may have, in accordance with the company’s articles of association, anywhere
from three to eighteen members.119 This limit is not applicable, however, when
the supervisory board’s members include employee representatives.120
D Appointment and removal

(i) One-tier-system
44. Under French law, directors are appointed by the general meeting of share-
holders121 and must hold the number of shares provided for in the articles of
association.122
The Regulation does not provide any specific rules regarding the removal of
directors, and thus the rules of French company law applicable to SAs shall
apply to SEs registered in France.
(ii) Two-tier system

45. The procedure to appoint and remove supervisory board members is similar
to that applicable for directors.
Pursuant to Article 39(2) of the Regulation, members of the management board
are appointed and removed by the supervisory board.123
118
Ibid., Art. L.225-68 para. 4.
119 Ibid., Art. L.225-69. 120 Ibid., Arts. L.225-69, L.225-79, and L.229-7 para. 3.
121 Ibid., Art. L.225-18 para. 1. 122 Ibid., Art. L.225-25.
123
Whereas French law (Art. L.225-61 Commercial Code) provides that the power to remove
members of the management board is wielded by the general meeting of shareholders and can
be granted to the supervisory board only if the company’s articles of association so provide.
137
Article 39(2) of the Regulation provides that a Member State may require or
permit an SE’s articles of association to provide that members of the manage-
ment board shall be appointed and removed by the general meeting under the
same conditions as for public limited-liability companies with their registered
offices on that Member State’s territory.
Thus, pursuant to French law,124 the general meeting of an SE registered in
France shall be granted the power to remove members of its supervisory
board.
E Representation
46. In the one-tier system, an SE is represented by its general manager, who
may, but need not, be the chair of the board of directors.125
In the two-tier system, the chair of the management board or, where applicable
in small companies, the sole member of the management board represents the
SE. However, an SE’s articles of association can allow the supervisory board
to grant the same power of representation to one or more other members of the
management board.126
F Liability
47. According to Article 51 of the Regulation and Article L.244-5 of the Com-
mercial Code, the liability of members of the board of directors, the management
board and the supervisory board of an SE registered in France is governed by
the rules applicable to SAs.
France has added a new chapter to the Commercial Code on violation of the
rules applicable to SEs. Article L.244-5 of the Commercial Code extends to SEs
the provisions applicable to violation of the rules on formation, management,
the general meeting of shareholders, changes to share capital and liquidation of
an SA.
In the one-tier system, the directors127 and general manager shall be individually
or jointly and severally liable to the SE and to third parties for violations of
the laws or regulations applicable to SEs, for breach of the SE’s articles of
association and for tortious or negligent acts of management. The courts can
determine the share of liability of the general manager and each director.128
In the two-tier system, members of the management board can be held liable
in the same way as directors.129
124
125 Ibid., Arts. L.225-56 and L.225-51-1. 126 Ibid., Art. L.225-66.
127
Article L.248-1 of the Commercial Code expressly provides that the rules on the liability of
general managers shall apply to directors.
138
France
Members of the supervisory board can be held liable for negligent or tortious
acts committed in the performance of their duties to oversee the company’s
management.
In principle, members of the supervisory board cannot incur liability for acts of
management or as a result thereof, insofar as they are not personally involved
in management. However, they may be held civilly liable for criminal offences
committed by other members of management if they were aware of such
offences and did not report them to the general meeting.130
V Employee involvement
1 General remarks
48. The Directive has been transposed into French law by the law of 26 July
2005, supplemented by the decree of 9 November 2006 on employee involve-
ment in the SE.
These provisions are applicable to (i) SEs with their registered offices in France;
(ii) companies with their registered offices in France that take part in the forma-
tion of an SE; (ii) subsidiaries and establishments of an SE located in France
but with their registered offices in other Member States.131
The imposition of any restrictions on (i) the formation of an SNB, (ii) the
appointment of SNB members or (iii) SNB operations is a criminal offence,
pursuant to Article L.483-1 of the Labour Code.
Provisions of French law on the European works council and the information
and consultation procedures provided for by Articles L.439-6 to L.439-24 of
the Labour Code do not apply to SEs.132
The structure of employee representation in French promoting companies that
will cease to exist as separate legal entities following the registration of an SE
shall be maintained in the newly formed SE, provided the criteria are still valid
and that no agreement to the contrary has been reached133 (Art. 13(4) Dir.).
2 Special negotiating body (SNB)

49. Article 12 of the Law provides for a negotiation procedure to reach an
agreement on employee involvement in an SE.
Negotiations are held between the SNB and the boards of directors or manage-
ment boards of the promoting companies.
130 Ibid., Art. L.225-257. 131 Art. L.439-25 Labour Code.

132 Ibid., Art. L.439-43. 133 Ibid.
139
A Composition of the SNB
50. An SNB is established as soon as possible after: (i) publication of the draft
terms of merger; (ii) formation of a holding SE; (iii) approval of the draft terms
of formation for a subsidiary SE; or (iv) conversion into an SE, as the case may
be.134
The SNB enjoys legal personality135 and represents the workers of the promoting
companies and concerned subsidiaries and establishments.
Articles L.439-27 and L.439-28 of the Labour Code set forth, in accordance
with Article 3 of the Directive, rules to determine the number of seats available
on the SNB and the distribution of these seats amongst employee representatives
from the various Member States.
If French companies, subsidiaries or establishments participating in the forma-
tion of an SE have trade unions, seats on the SNB are distributed amongst the
union members employed by the promoting companies and sitting on the works
council (at the company or establishment level), if any, or amongst trade union
representatives (représentants syndicaux).136
France did not exercise the option contained in Article 3(2) of the Directive
to allow trade union representatives, regardless of whether they are employees
of a promoting company, concerned subsidiary or establishment, to sit on an
SNB.
If there is no trade union in an SE with its registered office in France
or in any French subsidiary or establishment, the employee representatives
(représentants du personnel) to the SNB shall be appointed by the employees
directly in accordance with the same rules used to appoint employee representa-
tives (représentants du personnel) to the works council.137 Thus the SNB mem-
bers may include both union representatives and employee representatives.138
Negotiations on employee involvement in the SE begin as soon as the SNB
is established and can last, in principal, for up to six months, unless the
parties exercise their option to extend the negotiations for a further six-month
period.
Members of the SNB are entitled to reasonable paid time-off to perform their
duties and to the assistance of experts. However, pursuant to Article 3(7) of the
Directive, Article L.439-31 of the Labour Code provides that the promoting
companies need bear the costs of only one expert.
134
Ibid., Art. L.439-26 para. 2.
135 Ibid., Art. L.439-26 para. 1. 136 Ibid., Arts L.439-29 and R.439-6.
137 Ibid., Art. L.439-30. 138 Ibid., Art. R.439-7.
140
France
B Protection of employee representatives
51. Pursuant to Article 10 of the Directive and Article L.439-47 of the Labour
Code, SNB members enjoy the same degree of protection against dismissal as
employee representatives under French law, which is quite high. Thus, their
dismissal is subject to an opinion of the works council and prior approval of
the competent state employment agent (inspecteur du travail).
C Duty of confidentiality
52. Members of an SNB or European works council and employee represen-
tatives, as well as the experts who assist them, are bound by a duty of con-
fidentiality with regard to any information received from management that is
identified as confidential.139
D Negotiations within the SNB
53. Throughout negotiations, the SNB shall be updated regularly on the forma-
tion of the SE. The SNB’s decision-making process, as set forth in Article 3(4)
of the Directive, has been adapted into French law by Article L.439-33 of the
Labour Code.
According to Article L.439-32 of the Labour Code, the agreement on employee
involvement shall mention the information set forth in Article 4 of the Directive.
French law also requires information regarding the ‘scope of the agreement’,
namely the companies, subsidiaries and establishments to which the agreement
applies.
Where an SE is formed by conversion, the agreement shall provide for a level of
information, consultation and participation at least equivalent to that prevailing
in the company to be converted into an SE. The phrase ‘at least equivalent’
is likely to raise some interpretative difficulties since neither the Law nor the
Directive provides any guidance in this respect.140
If no agreement is reached during the time period mentioned above, or if the SNB
did not, at any time during negotiations, decide that the employees should benefit
from the rules on employee involvement applicable in the Member State where
the SE shall employ them,141 Article 12 of the Law provides for application of
the standards rules,142 which require the information of and consultation with
employees and their participation in the SE’s decision-making process.
139 Ibid., Art. L.439-21. 140 Ibid., Art. L.439-32.

141
Art. 3(6) Dir.; Art. L.439-33 Labour Code.
142
Even when an SE is formed by merger, as France opted out of the derogation contained in
Article 7(3) of the Directive not to apply the standard rules to certain cases where an SE is
formed by this means.
141
3 Standard rules
A Information and consultation
54. As mentioned above, in the absence of an agreement, the Law provides for
the application of specific information and consultation rules to SEs. Thus, a
works council shall be established in order to be informed and consulted by
management.
Like the SNB, the works council shall enjoy legal personality and is made
up inter alia of the SE’s manager or representative (chairperson of the works
council) and employee representatives from the promoting companies and con-
cerned subsidiaries and establishments,143 appointed under the same conditions
as SNB members.144
The employee representatives shall have (under the same conditions as
employee representatives on a French works council) training in economics
and, for the duration of their term, shall be paid by the SE.145 Any documents
distributed to members of the works council which are not in French shall
include a French translation.146 Furthermore, the works council can be assisted
by experts of its choosing, but the SE need only bear the costs of one expert per
year.147
The works council is competent for any matters relating to the SE and its
subsidiaries or establishments located in other Member States as well as for
any matters that exceed the powers of the employee representative body of a
company in a given Member State.148
The works council shall meet at least once a year149 or more often if it is in
the interest of the employees to do so or within eight days of an initial public
offering.150
Within four years and six months of its formation, the works council shall
begin negotiations with the aim of concluding with management an agreement
on employee involvement.151
B Employee participation
55. Employee participation is defined by Article L.439-25 of the Labour Code

as the exertion of influence by employee representatives on the composition of
an SE’s organs.
143 Art. L.439-35 Labour Code. 144 Ibid., Arts. L.439-37 and L.439-38.
145 Ibid., Art. L.439-40. 146 Ibid., Art. L.439-40 para. 4.
147 Ibid., Art. L.439-40 para.1. 148 Ibid., Art. L.439-35.
149 Ibid., Art. L.439-39. 150 Ibid. 151 Ibid., Art. L.439-48.
142
France
The degree of employee participation in an SE shall be determined by the SNB

in accordance with various procedures, depending on whether the SE is formed
by conversion or by other means.152
When an SE is formed by conversion, the level of employee participation in
the converted SA shall apply to the SE. If an SE is formed by other means, the
form of employee participation applicable to the SE shall be determined by the
SNB, after examining employee participation in the promoting companies.153
In the absence of an agreement within the SNB, French law provides, pursuant to
Article 7(2) of the Directive, that the management board or board of directors of
the SE shall determine the form of employee participation,154 it being understood
that, in any case, the highest level of employee representation in the organs shall
be retained.
Under French company law, an SA may provide in its articles of association for
employee participation155 on its board of directors or supervisory board, and
such a provision is mandatory for a listed SA.156
In that respect, prior to any general meeting, the management board or board
of directors of the SA shall consult with the employees holding shares in the
company, through an employee savings plan or mutual fund, so that they can
appoint one or more representatives to attend the meeting.157
4 Reconvention/reorganisation in the event of substantial changes

56. If substantial changes occur during negotiations, in particular relocation of
the SE’s registered office or a restructuring of the SE, the composition of the
SNB shall be adjusted accordingly.158
If such changes occur after the SE is registered, the agreement on employee
involvement shall be amended under the same conditions as when it was orig-
inally drafted. In the absence of a new agreement, the standard rules shall
apply.159
152
Ibid., Art. L.439-42.
153
Participation will only be examined by the SNB if it meets the thresholds set forth in Article
L.439-33 of the Labour Code, i.e. for an SE formed by merger, if participation covers at least
25% of the total number of employees of the participating companies or, for a holding or
subsidiary SE, if participation covers at least 50% of the total number of employees of the
promoting companies.
154
Art. L.439-42 para. 4 Labour Code.
155
156
Pursuant to Articles L.225-23 and L.225-71 of the Commercial Code, one or more members
of the board of directors or the supervisory board shall then be elected by employees holding
more than 3% of the company’s share capital.
157 Art. L.225-106 Commercial Code. 158 Art. L.439-31 Labour Code.
159
Ibid., Art. L.439-50.
143
5 Complaints procedure
57. Complaints regarding the appointment of SNB members or members of a
European works council shall be brought before the tribunal d’instance (district
court) of the place where the SE’s or any promoting company’s or subsidiary’s
registered office is located or where the establishment is situated.

1 Annual accounts
58. According to Article 61 of the Regulation, the rules governing public limited
companies in France shall apply to SEs registered in France as regards the
preparation, auditing and publication of their annual and (where applicable)
consolidated accounts.
French law provides that annual accounts must be honest and truthful and ensure
a fair overview of the company’s assets, financial situation and results. If, in
exceptional cases, application of a particular accounting rule proves unsuitable
to ensure a fair view of the company’s assets, financial situation or results, an
exception must be made. This exception shall be indicated in the annex to the
accounts and duly justified, with an indication of its effect on the reporting of
the undertaking’s assets, financial situation and results.160
At the end of each financial year, the board of directors or management board
shall prepare a statement of assets and liabilities and the company’s annual
accounts,161 consisting of a balance sheet, income statement and an annex,
which shall form an inseparable whole. Management shall also prepare a report
on the annual accounts, which must be made available to shareholders at least
fifteen days prior to the annual general meeting.162
An SE’s accounts must be approved by its general meeting of shareholders and
filed with the clerk of the competent commercial court within one month of
their approval.163
In addition, within four months following the close of the financial year and
at least fifteen days prior to the annual general meeting, listed companies must
publish in the Balo draft annual accounts for the year and their proposed allo-
cation of profits to the annual general meeting164 and, within forty-five days
following this general meeting, the documents approved by shareholders.165
Furthermore, within four months following the close of the first half of the
financial year, listed companies must publish in the Balo an interim financial
160
161 Ibid., Art. L.232-1. 162 Ibid., Art. R.225-89. 163 Ibid., Art. L.232-23.
164 Ibid., Art. R.232-10. 165 Ibid., Art. R.232-11.
144
France
statement (including a balance sheet, income statement, statement of cash flow,

etc.), an interim activities’ report, and an auditor’s opinion.166
Finally, forty-five days following each quarter, listed companies must publish
in the Balo information on their net sales for that quarter and, if applicable, for
each previous quarter of that year as well as total net sales since the start of the
current financial year (on a consolidated basis, if applicable) plus corresponding
net sales from the previous financial year.167
The entry into force on 20 January 2007 of the Transparency Directive168
imposes new information obligations on listed companies in France, such as an
annual financial report including a management report, semi-annual financial
report and quarterly reports169 (for the first and third quarters).170
Depending on the size of the company, additional information may be
required.171
2 Consolidated accounts
59. Each year, the board of directors or the management board shall draw up
and publish consolidated accounts and a group management report for any
companies they control, either jointly or severally, or over which they exert
significant influence.172 Consolidated accounts must be drawn up in accordance
with IFRS standards.
Special rules apply to banks and insurance companies. Article 62 of the Regu-
lation states that these rules shall also apply to SEs.
3 Auditors
60. An SE must appoint one auditor and a substitute or two auditors if it publishes
consolidated accounts.173 The auditors must be independent both from one
another and from the SE.
The auditors are appointed by the general meeting of shareholders (or in the
articles of association of newly formed private SEs) for a renewable six-year
term174 , 175 and can be removed from office for just cause.176
166
Ibid. Art. L.232-7; Art. R.232-13.
167 Ibid., Art. R.232-12. 168 Council Directive 2004/109 of 15 December 2004.
169
This requirement does not entail quarterly accounts, only a general description of the issuer’s
financial situation and income for the period under consideration and turnover by area of
activity.
170
Cf. AMF communication of 30 November 2006.
171 Art. L.232-2 Commercial Code. 172 Ibid., Art. L.233-16. 173 Ibid., Art. L.823-2.
174
Ibid., Art. L.823-3.
175
Article L.822-14 of the Commercial Code provides that the auditors of a public company
cannot be reappointed.
176
Ibid., Art. L.823-7.
145
The auditors audit the company’s annual accounts, issue a report in that respect,
and certify or make reservations and qualifications regarding the company’s
accounts. Their role entails more than mere review of the accounts; they must
ensure equal treatment of shareholders and alert management and the competent
commercial court if there is an ongoing concern about the company.
The auditors also issue various other reports, such as a report on the authorised
agreements177 mentioned in Section IV.3.A above, a report on the issuance of
shares without pre-emptive rights or of securities with rights to shares, as well as
a report if there is a delegation of authority by the general meeting to the board
of directors or management board to increase, by any means, the company’s
share capital.
The auditors must alert the shareholders of any failure by management to comply
with its numerous information obligations under French law178 or of specific
facts, such as a change in control179 or statutory violation by any member of the
management or supervisory board.180
The rules on the liability of an SA’s auditors shall apply to SEs. French law
provides for specific criminal sanctions if the auditors’ report to the general
meeting on an increase in the company’s share capital with a waiver of pre-
emptive rights conveys or confirms incorrect information.181

61. Several national authorities are competent to supervise application of the
Regulation in France. Pursuant to Article 68(2) of the Regulation, the competent
national authorities in France are the following:
• The clerk of the competent commercial court conclusively attests to com-

pletion of the pre-merger procedure, for the purposes of Article 25(2) of
the Regulation, and issues a certificate in this respect;
• A French notary must attest to completion of the requisite formalities to
be accomplished prior to the transfer of an SE’s registered office and issue
a certificate to this end, for the purposes of Articles 8(8) of the Regulation;
a notary must also attest to completion of a merger and the subsequent
procedure and issue a certificate to this end, for the purposes of Article
26(1) of the Regulation;
• The public prosecutor is competent to object to the transfer of an SE’s
registered office or to the promotion or formation of an SE by merger
by a French company, for the purposes of Articles 8(14) and 19 of

179
Article L.247-1 of the Commercial Code provides for criminal sanctions if such information
is not provided.
146
France
the Regulation; this power is also granted to the Credit Institutions

and Investment Firms Committee (Comité d’établissement de crédit et
des entreprises d’investissement)182 when a French credit institution or
authorised investment company is involved, to the AMF when a French
portfolio management company (société de gestion de portefeuille) is
involved, and to the Insurance Supervisory Committee (Comité des enter-
prises d’assurances)183 when an insurance company is involved. Unfor-
tunately, the grounds for opposition are unclear184 and could include
those mentioned under Article L.151-3 of the French Monetary and
Financial Code, which refers to areas supervised by the public author-
ities185 (e.g. activities liable to violate public policy or go against pub-
lic safety or national defence; research in, and production or marketing
of, arms, munitions and explosives, etc.). However, as investments in
such areas are, under certain circumstances, subject to the prior approval
of the finance minister, it would behove French law to reconcile these
procedures.
• If an SE transfers its registered office from France to another Member
State in violation of Article 7 of the Regulation, the public prosecutor
shall be informed for the purposes of Article 64(4) of the Regulation.
VIII Dissolution
According to Article 63 of the Regulation, winding up, liquidation, insolvency,
cessation of payments and similar procedures involving an SE are governed by
the statutory provisions applicable to SAs.
1 Winding up
62. The dissolution of a company can be either voluntary, in which case the
extraordinary general meeting approves the dissolution, or involuntary if, as a
result of losses duly recorded in the accounts, the value of a company’s equity
falls below half its share capital and the situation is not regularised.186
If a company foresees or sustains an economic, legal or financial set-back,
French law contains provisions aimed at facilitating its recovery. If a company
has ceased payments, the competent commercial court can declare the company
bankrupt or order its liquidation.
182
Arts. L.511-13-1, L.532-3-2 and L.532-9-2 Financial and Monetary Code.
183
Arts. L.322-28 and L.322-29 Insurance Code.
184
These decisions can be appealed to the Council of State (Conseil d’État). Although not
specifically mentioned in French law, a decision of the public prosecutor to oppose an operation
pursuant to Article L.229-4 of the Commercial Code can be appealed, and Article 8(14) of the
Regulation expressly provides for this possibility.
185 In accordance with Article 296 of the EC Treaty. 186 Art. L.225-248 Commercial Code.
147
Pursuant to Article 30(1) of the Regulation, once an SE formed by merger has

been registered, the merger may not be declared null and void.
However, an SE formed by merger can be wound up on two grounds if an
interested party so requests within six months from the last filing with the trade
register required by the merger procedure:187 (i) the absence of scrutiny of the
legality of the merger or (ii) invalidity188 of the general meeting’s decision on
the merger.189
The competent commercial court can grant the SE a deadline by which to
regularise its situation or liquidation shall occur in accordance with its articles
and Articles L.237-1 to L.237-31 of the Commercial Code.190
2 Liquidation
63. The rules on the liquidation of an SA shall apply to SEs (Art. 63 Reg.). In
addition, an SE with its registered office in France may be ordered to liquidate
if it transfers its head office abroad (see Section III.ii: Transfer).
In this case, the competent court shall grant the SE a deadline by which to
regularise its situation, failing which it shall order the company to liquidate.
IX Applicable law
64. SEs registered in France shall be governed by French law. However, the
laws of another Member State may apply in certain cases, such as when an
SNB is established or for tax purposes.
X Tax treatment
1 Income tax
65. Unlike in most other European countries, French corporate tax is based
on the territoriality principle, pursuant to Article 209 of the French Tax Code
(FTC). According to this principle, and subject to the applicable tax treaties, a
French resident company is subject to corporate income tax at a standard global
rate of 34.43%191 on business income generated by enterprises operating in
France. Accordingly, business income realised by enterprises operating outside
187
According to the rules applicable to the SA.
188 According to the rules applicable to the SA. 189 Art. L.229-3 Commercial Code.
190
According to Article R.229-4 of the Commercial Code, this decision shall be published in the
BODACC by the clerk of the competent commercial court and in an official newspaper entitled
to publish legal notices in the département where the SE’s registered office is located. If the
SE is public company, the notice must also be published in the Balo.
191
This rate is based on the standard corporate tax rate of 33.33% increased by a social contribution
tax of 3.3% (applied to the 33.33% standard rate) after deduction of a €763,000 rebate.
148
France
France is not taken into account for French corporate tax purposes, nor are
losses generated by such enterprises.
French tax law does not contain any particular provisions with respect to SEs.
Therefore, an SE incorporated in France shall be afforded the same tax treatment
as an SA, subject to the territoriality principle.
Exceptions to the territoriality principle exist. For example, authorised French
companies can apply the rules on worldwide income or consolidated income
(bénéfice mondial or bénéfice consolidé) to consolidate their total profits and
losses realised both within and outside France. These rules are of particular
interest for activities that generate losses abroad and profits in France; in this
case, consolidation allows foreign-source losses to be set off against French-
source income for French corporate tax purposes.
The provisions of the Merger Directive (90/434) of 23 July 1990 have been
extended to SEs by the Directive 2005/19 of 15 February 2005. The tax-neutral
merger rules may therefore also apply to French SEs.
The transfer of a French SE’s registered office to another Member State will not
give rise to taxation in France, as it is not considered as a taxable event, unlike
the winding up of a business,192 provided the SE’s assets remain in France. In
practice, the assets should be attributed to a permanent establishment in France
whose profits (income and capital gains) remain subject to French corporate
tax in accordance with the standard rules.
An SE may be set up in France in order to act as a holding company. Withholding
tax, generally arising in the distributing company’s country of residence, may
be limited either by the applicable tax treaties or the Parent-Subsidiary Direc-
tive.193 Furthermore, dividends received by a French SE may be exempt from
corporate income tax in France, provided the SE has opted for the participation
exemption, subject to certain conditions.194 Under these rules, 95% of divi-
dends received are exempt from corporate tax; the remaining 5% (or actual
expenses, if lower) is deemed to correspond to expenses incurred with respect
to the shareholding or participation and is taxed at the standard rate. Capital
gains realised by a French SE upon the disposal of a qualifying equity inter-
est (titres de participation)195 are exempt from tax in France as of 1 January
192
Article 221(2) FTC, as amended by Article 34 of the 2005 Finance Bill.
193
Directive 2003/123 of 22 December 2003, amending Directive 90/435 of 23 July 1990.
194
The requirements are: (i) the parent company must be subject to corporate tax at the standard
rate on all or part of its activities; (ii) the shareholding or participation must be at least 5% of the
subsidiary’s share capital (with respect to both the right to receive dividends and voting rights);
(iii) the shares must be registered or have been deposited with an approved intermediary; and
(iv) the parent company must have held the shares for at least two years.
195
Pursuant to Article 219 Ia quinquies FTC, titres de participation are: (i) shares that qualify as
such for accounting purposes; (ii) shares acquired within the course of a public takeover bid
149
2007, with the exception of a 5% share which remains taxable at the standard
rate.
2 Value added tax

66. An SE is subject to VAT under the standard rules applicable to French
resident companies.
3 Other taxes
67. An increase in a French SE’s capital through a contribution of any of the
following triggers a registration duty of either €375, if the SE has share capital
of less than €225,000, or €500 in all other cases:
• cash;
• assets other than real property, real property rights, going concerns and
leasehold rights;
• real property, real property rights, going concerns and leasehold rights
realised by a company subject to corporate tax.
Contributions to an SE of real property, real property rights, going concerns and
leasehold rights by a company that is not subject to corporate tax are subject
to a 5% registration duty (with respect to going concerns, only on the value in
excess of €23,000). However, such contributions may be subject to the €375 or
€500 registration duty if the contributor undertakes to hold the shares received
in exchange for at least three years.
If the contributor receives cash (rather than shares) in return for its contribution,
the registration duty applicable to a sale shall apply (for example, 5% for real
property or a going concern). The same holds true if the contributor transfers
liabilities to a newly formed subsidiary, up to the amount of such liabilities.
A capital increase resulting from an incorporation of reserves is subject to a reg-
istration duty of €375, if the company has share capital of less than €225,000,
or €500 in all other cases.
XI Conclusion
68. The introduction of the SE in France did not lead to a revolution in French
corporate and labour law, since most of the provisions of the Regulation and
the Directive reflect pre-existing provisions of French law applicable to the SA.
(a takeover bid or share exchange offer); and (iii) shares qualifying for the parent-subsidiary
regime, provided they appear on the balance sheet in the appropriate account or any other
account that suits their characterisation for accounting purposes, with the exception of shares
in real estate companies.
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France
For instance, both a one-tier and a two-tier management system already existed
under French law. Likewise, the provisions on the protection of creditors and
minority shareholders when an SE is formed by merger or as a holding company
or subsidiary are based on the protection afforded creditors and shareholders of
an SA in the event of a merger.
The major changes in French corporate law relate to the transfer of an SE’s
registered office, whereby minority shareholders may force the company to
redeem their shares.
The procedure within the SNB to reach an agreement on employee involvement
could outweigh the advantages of the SE and be considered very cumbersome,
even if the rights the employees eventually obtain are not very different from
those granted in the jurisdiction where the SE operates.
From a forum-shopping perspective, the statutory freedom to restrict the trans-
ferability of shares and to organise relations between shareholders afforded to
private SEs registered in France could attract investor interest.
151
5
Greece
stefanos charaktiniotis
Zepos&Yannopoulos
I Introduction 152
III Formation 153
B Name 153
E Capital 155
A Two-tier system/one-tier system 164
D Liability 166
3 Protection of employee representatives 168
2 Auditors 168
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1 Winding up 169
2 Liquidation 170
3 Insolvency 170
X Tax treatment 171
1 Income tax 171
3 Other taxes 172
XI Conclusion 172
I Introduction
1. Greece has implemented the Regulation, albeit with a significant delay, by
Law 3412/20051 establishing a framework for the formation and operation of
SEs (hereinafter ‘the SE Act’).
The SE Act entered into force on 4 May 2006, following the issuance of
presidential decree 91/20062 on the involvement of employees in the Euro-
pean company (hereinafter the ‘presidential decree’), intended to harmonise
Greek law with the provisions of Council Directive 2001/86/EC3 supplement-
ing the Statute for a European company with regard to the involvement of
employees.

2. The SE has a number of advantages over national corporate forms, the first
being enhanced mobility, as SEs can move across borders without having to
dissolve and wind up. It has also been acknowledged that the creation of an SE
may offer participating companies the opportunity to simplify their organisation
and reduce their administrative costs, as they will be able to use the same form
of legal entity in each country in which they conduct business. This enhanced
freedom of movement is expected to maximise companies’ ability to take full
advantage of trading possibilities within the internal market and increase their
competitiveness within a large-scale market economy. The SE may also provide
an alternative vehicle for cross-border joint ventures and mergers.
In addition, the SE offers, as stated in the explanatory memorandum to the SE
Act, a well-defined legal framework for cross-border businesses, which could
lead to heightened protection for minority shareholders and creditors. Last but
certainly not least, the SE can be an important marketing tool as it allows
companies to trade their national identity for a pan-European one.
1 Government gazette 276 A/04.11.2005. 2 Ibid., 92 A/04.05.2006.

3
Council Directive 2001/86 of 8 October 2001 supplementing the Statute for a European company
with regard to the involvement of employees, Official Journal 294, 10/11/2001. P. 0022-0032.
153
3. Notwithstanding the above, it remains to be seen whether the new European

company will be successful. As a new corporate form – and one very recently
introduced in Greece – it remains subject to a certain amount of criticism. For
instance, the SE is only considered suitable for larger enterprises. As many
Greek businesses are small or medium sized, it is thought that the costs and
other complex issues related to the formation of an SE will discourage the
adoption of this corporate form. The provisions of the Regulation have also
been criticized as being out of date and inflexible.
In view of the above, it seems that the success of the SE will be judged on
case-by-case basis. The SE may turn out to be a handy tool for enterprises that
wish to make use of certain provisions of national law. For instance, Greek
companies interested in appointing a single manager could opt to incorporate
as an SE, as this would allow them to use the two-tier management structure
introduced by the SE Act which did not previously exist under Greek law. On
the other hand, foreign companies could opt to take the form of a Greek SE in
order to be able to directly appoint managers to the board, pursuant to Article
18(3) of Law 2190/1920 (the Limited-Liability Companies Act).
III Formation
1 General remarks
A Founding parties
4. Pursuant to the Regulation (Annexes I and II), the Greek corporate forms that
can take part in the establishment of an SE are the company limited by shares
(anonymos etairia or AE) and the limited-liability company (eteria perioris-
menis efthinis or EPE).
Pursuant to the SE Act (Art. 3), a company whose head office is not located in
the EU can participate in the formation of an SE provided it is established
in and operates under the laws of an EU Member State, has its registered office
in that Member State, and has a real and continuous link with the economy of
a Member State.
B Name
5. An SE is referred to as a ‘Evropaiki etairia’. The company’s registered name

must include the abbreviation ‘SE’. Only SEs can include this abbreviation in
their names (Art. 11 Reg.). However, the SE Act expressly provides (Art. 29) that
if a company already had the abbreviation ‘SE’ in its name when the law entered
into force, it is not required to change it. In general, all matters related to an SE’s
name are governed by Article 5 of Law 2190/1920 on public limited-liability
companies. Under this law, the name of a company must indicate its purpose.
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Greece

6. Greece applies the incorporation doctrine to determine whether a company is
governed by Greek law (Art. 10 Greek Civil Code). This means that a company
established abroad but with its head office in Greece shall not be deemed duly
incorporated in Greece. Pursuant to the relevant case law, such companies can
only be considered general or de facto partnerships.
Article 7 of the Regulation provides that the registered office and head office of
an SE must be located in the same Member State. Greece has adopted the stricter
option provided for in the Regulation, according to which an SE’s registered
office and head office must be at the same place (Art. 6 SE Act). However,
Greek law does not refer to the potential sanctions that can be imposed if this
requirement is not met. If an SE fails to comply with this requirement (i) it will
not be able to enforce its real registered office against third parties and (ii) it
may be liable in tort pursuant to Article 914 of the Greek Civil Code.
If an SE does not have both its registered office and its head office in Greece, the
competent Greek supervisory authority will ask the SE to either (i) re-establish,
or establish its head office in Greece or (ii) transfer its registered office to the
Member State in which its head office is located. The SE must comply with
this request within a certain period of time. If it does not do so, its licence shall
be revoked and, pursuant to a decision of the supervisory authority, it shall be
ordered to liquidate. Any interested party can, however, petition the courts to
set aside the supervisory authority’s decision to revoke an SE’s licence. Such a
petition suspends application of the decision.

7. Article 8 of the Regulation provides that an SE’s registered office may be
transferred to another Member State without first having to wind up the com-
pany or create a new legal person. In this context, a transfer proposal must be
drawn up and published by the company’s management or administrative organ.
Furthermore, in order to ensure compliance with the conditions set forth in the
Regulation, a certificate attesting to completion of the requisite pre-transfer acts
and formalities must be issued.
Pursuant to the SE Act, the competent authority for issuance of the abovemen-
tioned certificate is the Ministry of Development or the prefecture in the area
where the SE’s registered office is located (Art. 6 SE Act). In order to acquire
this certificate, an SE transferring its registered office must prove, with respect
to any liabilities that arise up to the date of the transfer, that the interests of
creditors and the holders of other rights (including public bodies) have been
adequately protected. Creditors with claims that arose prior to the transfer but
which are not yet due at the time of the transfer are entitled, within one month
from the transfer, to request sufficient guarantees if the SE’s financial condition
155
renders such protection necessary and provided the creditor has not already
been granted sufficient security (Art. 70 Law 2190/1920).
In order to obtain the abovementioned certificate, an SE transferring its regis-
tered office must also submit a certificate stating that it has fulfilled its obli-
gations relating to the payment of social security contributions and taxes (Art.
6(5) SE Act).
8. A special scheme is also foreseen for the protection of minority shareholders
who object to the transfer of an SE’s registered office. According to Article
6(3) of the SE Act (which refers to Article 84(2) of Law 2190/1920), minority
shareholders of an SE registered in Greece are entitled to request, even by way
of interim relief, that the company redeem their shares, provided a good reason
for doing so exists. In this case, minority shareholders are entitled to an amount
proportionate to the value of their shares. In the event of disagreement as to this
amount, the competent court of first instance will decide the matter, pursuant
to the rules of voluntary jurisdiction.
9. It should be noted that although the Regulation provides that the Member
States can object to the transfer of an SE’s registered office on grounds of public
interest, the SE Act does not contain provisions to this effect. It is therefore
impossible for the Greek authorities to prevent the transfer of an SE’s registered
office from Greece on grounds of public interest.
D Corporate purpose
Pursuant to Article 5 of Law 2190/1920, the articles of association of an SE

established in Greece must mention its object, i.e. the framework within which
its business is conducted. An SE may conduct more than one type of activity, all
of which must be described in a detailed manner in its articles of association. A
vague or very general description is thus prohibited. The company’s purpose,
on the other hand, is a broader concept which refers to whether its goal is to
turn a profit. A company’s corporate purpose must comply with the law and
may not be contrary to public policy or morality.
E Capital
10. With the exception of the Regulation’s minimum capital requirement,

all other issues concerning the share capital of an SE are regulated by Law
2190/1920. An SE’s share capital must be at least EUR 120,000, fully paid-up
within two months from the effective date of its incorporation. To register an SE
whose share capital exceeds EUR 300,000 a prior administrative assessment
of its articles of association with a view to ensuring compliance with the law
is required. The minister of development exercises authority through ‘locally
competent’ prefectures. However, certain types of companies, such as banks,
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insurance companies and investment companies, as well as listed companies,

are subject to stricter centralized control.

(i) Types of companies that can be involved in the formation of an

SE by merger
11. The only Greek corporate form that can participate in the formation of an SE
by merger is the public limited-liability company (anonymos etairia or AE) (see
Annex I to the Regulation). During the first phase of the merger process, Greek
company law (Law 2190/1920) applies to issues not covered by the Regulation
as well as to issues related to the protection of creditors, bondholders, and the
holders of securities other than shares which carry special rights in the merger
and to determine the legality of the merger. On the other hand, the provisions
of the Regulation govern matters that arise in the second stage of the merger,
including conclusion of the merger agreement and recordation in the relevant
company register.
According to Article 9 of the SE Act, the board of directors of each Greek
participating company must draw up a draft merger agreement including the
items listed under (a) to (e) of Article 21 of the Regulation. The draft agree-
ment is subject to the publication requirements mentioned in Article 7b of
Law 2190/1920 for each merging company at least two months prior to
the date of the general meeting called to vote on the draft agreement (Art.
69(3)).
The merger agreement must take the form of a notarial instrument to which
the solemn statement mentioned in Article 8 of Law 1599/1986 is appended
(i.e., a statement to the effect that no objections have been raised by creditors or
that any objections raised have been settled). The prefecture in the area where
the company’s registered office is located is competent to issue the certificate
attesting to completion of the requisite pre-merger acts and formalities.
12. Under Greek law, the supervisory authority competent to scrutinize the
legality of a merger is the prefecture in the area where the company’s registered
office is located. The merger will be approved once it has been ascertained
that the merging companies have validly completed all steps required by Law
2190/1920.
13. In order for a merger to be effective against third parties, the following
formalities must be fulfilled: (i) the supervisory authority’s approval of the
merger must be recorded in the register of companies limited by shares kept by
the prefecture in the area where the company’s registered office is located and (ii)
an announcement of the formation of a company by merger must be published
157
in the issue of the government gazette dealing with companies limited by shares
and limited-liability companies.
(ii) Right to object to a company participating in a merger

14. Greek law allows the tax authorities and other competent authorities, such
as the prefectures, to object to the participation of a company in the formation
of an SE by merger on grounds of public interest.
(iii) Minority shareholders

15. As regards the protection of minority shareholders who oppose the formation
of an SE by merger, Article 12 of the SE Act and Article 84(2) of Law 2190/1920
apply. Pursuant to these provisions, minority shareholders who have objected to
a merger are entitled to request that the company, even by way of interim relief,
buy back their shares, upon a showing of good cause, in particular in the event
of a share exchange that is extremely unfavorable to their interests. In this case,
they are entitled to an amount proportionate to the value of their shares. In the
event of disagreement as to this amount, the competent court of first instance
shall decide the matter, pursuant to the rules on voluntary jurisdiction.
(iv) Rights of creditors

16. With respect to the protection of creditors, Article 70(2) and (3) of Law
2190/1920 applies. According to this provision, within one month following
publication of the draft merger agreement, creditors whose claims arose prior
to, but which are not yet due as of, the publication date of the merger proposal
are entitled to request sufficient guarantees if the merging companies’ financial
position renders such protection necessary and provided they have not already
been granted adequate security. Creditors have the right to raise their objections
to the merger in writing to the merging companies within one month. In any
event, the court of first instance of the district where the company’s registered
office is located can allow the merger to go through, further to an application
by the Greek merging company despite objections by creditors, if it finds that
the objections are not substantiated based on the merging companies’ financial
position or guarantees previously received by or offered to creditors.
(v) Acquisition by a company holding 90% or more of the shares in

another company
17. A simplified merger procedure is foreseen in cases where a company holds
90% or more of the shares in another company (Art. 16(1) SE Act). If a company
holds 100% of another company’s shares, the merger (by absorption) is divided
into a preliminary phase, which includes drafting a merger agreement and mak-
ing arrangements for the protection of creditors of the absorbed companies, and
a final phase, which covers the main substantial and formal requirements, deter-
mination of the liability of directors of the absorbed companies, and avoidance
of the merger.
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18. If a company holds 90% or more, but not all, the shares or other voting
securities in another company, Greek company law governs the independent
experts’ reports, the reports by the management and administrative bodies,
and all other necessary documents (Art. 16(2) SE Act). Thus, in order to con-
clude the merger, and to the extent the absorbed or absorbing company is
governed by Greek law, the following are required: a valuation report drawn
up by a committee of experts on the assets and liabilities of the merging
companies (Art. 9 Law 2190/1920) and a resolution of the general meeting
approving the draft merger agreement and the necessary amendments to the
company’s articles of association. The merger is effected by a notarial instru-
ment. The resolutions passed by the general meetings of the merging com-
panies, the merger agreement and the relevant administrative authorisations
shall be published in accordance with the provisions of Article 7b of Law
2190/1920.
(vi) Avoidance of a merger

19. A merger can be declared void under Greek law (Art. 15 SE Act) if the
supervisory authority has not scrutinised the legality of the merger. In particular,
any person with a lawful interest may petition the court of first instance of the
place where the SE’s registered office is located to dissolve the company. The
petition must be filed within two months following registration of the SE in the
register of companies limited by shares kept by the competent prefecture. The
court shall rule on the matter pursuant to the voluntary jurisdiction rules, and
its decision shall be recorded in the abovementioned register.
20. According to the provisions of the SE Act, the corporate forms that can
take part in the formation of a holding SE are the private limited-liability com-
pany (eteria periorismenis efthinis) and the public limited-liability company
(anonymos eteria) (see Annex II Reg.).
The management or administrative bodies of the companies promoting the
formation of a holding SE must draw up draft terms of formation, including a
report explaining and justifying the legal and economic aspects of the formation
and indicating the implications for shareholders and employees. Pursuant to the
SE Act (Art. 17), when the formation of a holding SE is promoted by a Greek
public limited-liability company, the draft terms are subject to the publication
requirements set forth in Article 7b of Law 2190/1920, at least one month prior
to the general meeting scheduled to vote on the matter.
The SE Act does not contain any other special rules on the formation of a
holding SE. The provisions of the Regulation shall thus apply.
159

21. As with the formation of an SE by merger, the SE Act includes special
provisions for the protection of shareholders when a holding SE is formed. The
procedure is the same as that described above (see no. 16 of this report).
22. Under the SE Act, the corporate forms that can participate in the formation of
a subsidiary SE are the private limited-liability company (eteria periorismenis
efthinis) and the public limited-liability company (anonymos eteria) (see Annex
II Reg.). No other special provisions apply.
23. The only corporate form that can be converted into an SE is the public
limited-liability company (Art. 19 SE Act).
The content of the draft terms of conversion is not specified in the SE Act.
However, based on the provisions governing the formation of an SE by merger
and of a holding SE, the draft terms must indicate and explain the legal and
economic consequences of the conversion. Furthermore, the draft terms must
be published pursuant to the provisions of Article 7b of Law 2190/1920 at least
one month prior to the general meeting scheduled to vote on the conversion.
The general meeting’s resolution approving the draft terms must be passed in
accordance with the applicable provisions of national law, thus by the increased
quorum and majority set forth in Article 72 of Law 2190/1920. In particular,
at the general meeting scheduled to vote on the conversion of an SA into an
SE and on the relevant amendments to the company’s articles of association,
shareholders representing at least two-thirds of the paid-up share capital must
be either present or represented. If this quorum is not met, the general meeting
will adjourn, and another meeting will be called at which at least half the paid-
up share capital must be present or represented. If, once again, this quorum is
not met, the general meeting will adjourn and another meeting will be called
at which at least one-third of the paid-up share capital must be present or
represented. The resolution must be adopted by two-thirds of the votes cast at
this meeting.

24. Article 2(2) of the SE Act provides that natural persons or legal entities that
have acted and expressly signed in the name of an SE prior to its incorporation
and registration shall be jointly and severally liable for these acts, unless the SE
assumes the relevant obligations within two months following its registration.
Thus, Greek law imposes additional conditions to those set forth in Article
16(2) of the Regulation with respect to the liability of natural persons and
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Greece
legal entities who commit acts on behalf of an SE in formation, as in order to

be held liable under Greek law, these persons must have signed on the SE’s
behalf.

25. Pursuant to the provisions of Law 2190/1920, the formation of an SE
involves four stages: (i) adoption of the articles of association; (ii) subscription
of the share capital; (iii) authorisation by the competent authority; and (iv) pub-
lication. The articles of association must be executed before a notary public in
Greece. The physical presence of the founders is not necessary, as duly autho-
rised representatives may execute the articles on their behalf. The articles are
submitted to the competent authority for approval and registration in the com-
panies register, while a summary thereof is published in the government gazette
(in the issue on companies limited by shares and limited-liability companies,
‘tefchos AE and EPE’). Capital contributions may be made either in cash or in
kind, including intangibles. In the latter case, however, a valuation report by a
committee of experts appointed by the supervisory authority is required
Notwithstanding the foregoing, an SE whose share capital does not exceed EUR
300,000 is eligible for ‘fast track’ registration, or same-day registration without
prior authorisation. The requirements are:
(i) prior approval of the company’s trade name and distinctive title by the
competent chamber of commerce;
(ii) adoption of the company’s articles of association by notarial instrument;
(iii) subscription of the share capital; and
(iv) publication.
26. Administrative authorisation is not required. Exceptionally, the ‘fast track’
procedure is not available for companies whose share capital has not been
fully paid in, athletic companies, and public limited companies formed by
conversion. To register an SE whose share capital exceeds EUR300,000, a
prior administrative assessment of its articles of association with a view to
ensuring their compliance with the law is required. In this respect, the minister
of development exercises authority through the local prefectures. However,
some companies such as banks, insurance companies, investment companies
and listed companies, are subject to stricter, centralised control.
27. Pursuant to Article 7(1) of the SE Act, the supervisory authority’s decision
(if applicable) and the SE’s articles must be recorded in a special SE register
(separate from the register of companies limited by shares) kept by the com-
petent supervisory authority. The SE will then be granted a special registration
number (‘ARMAE’). This constitutes the first stage in the twofold publica-
tion system introduced to ensure compulsory disclosure of important docu-
ments and company particulars. In the second stage, a notice of recordation of
161
the instrument of incorporation must be published in the official government

gazette (in the issue on companies limited by shares and limited-liability com-
panies, ‘tefchos AE and EPE’) at the initiative of the appropriate authority and
at the company’s expense. The company must submit proof of such publication
to the supervisory authority within one month’s time or risk having its entry
deleted.

28. An SE acquires legal personality only after having obtained administrative
approval (if required) and once its articles of incorporation have been recorded in
the SE register kept by the competent supervisory authority which, as mentioned
above, is separate from the register of companies limited by shares (Art. 2(2)
SE Act).

1 General remarks
29. Greek law has traditionally recognised a one-tier system of organisation
and management in which the board of directors is authorised to manage and
represent the company. The general meeting of shareholders, on the other hand,
wields all other powers (with the exception of management and representation)
and adopts resolutions in accordance with the company’s articles of association
and the law.
2 General meeting
30. Under Greek law, the general meeting of shareholders is the company’s
‘supreme organ’ (Art. 33 Law 2190/1920). Pursuant to Article 52 of the Regu-
lation, the general meeting has authority to take decisions on matters for which
it is given sole responsibility by the Regulation and national law in the Member
State where the SE’s registered office is located. Pursuant to Law 2190/1920,
the general meeting is competent to take decisions on: (i) amendments to the
company’s articles of association, including changes to the company’s capi-
tal; (ii) the appointment of members of the board of directors and auditors;
(iii) approval of the company’s annual accounts; (iv) the distribution of annual
profits; (v) the issuance of debentures, including convertible bonds; (vi) the
merger, division, conversion, revival, extension of duration or dissolution of
the company; and (vii) the appointment of liquidators. In general, the provi-
sions of Law 2190/1920 on the calling, holding and organisation of general
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meetings of shareholders contain strict procedural rules designed to protect

shareholders.
The general meeting must meet at least once each calendar year, within six
months following the close of the financial year. In addition, a general meeting
can be called at any time by the management organ, the supervisory organ or
the competent authority, even though no reference is made to the latter in the
SE Act.
Notices of a general meeting must comply with the provisions of Article 26
of Law 2190/1920. Pursuant to this provision, the notice should state at least
the date and time of the meeting as well as the items on the agenda, which
must be posted at a prominent location at the company’s offices and published
in the government gazette (in the issue on companies limited by shares and
limited-liability companies), one widely circulated Athenian daily newspaper,
one financial newspaper published at least six times per week and which has
been in continuous circulation for at least three years with a daily publication
rate of at least 5000 issues, and one daily or weekly newspaper issued in the
area where the company’s registered office is located or, if there is no such
newspaper, in at least one daily or weekly paper published in the capital city
of the prefecture of the area where the SE’s registered office is located. The
items on the agenda are defined by the party calling the meeting. Article 24
of the SE Act provides that shareholders representing 5% of the paid-in share
capital can request that one or more items be added to the agenda of a general
meeting and can also request that a general meeting be called and draw up an
agenda for the same. The Regulation provides that if, following a request by
shareholders holding 5% of the share capital, a general meeting is not held
in due time and, in any event, within two months, the competent judicial or
administrative authority of the Member State where the SE’s registered office
is located can order that a general meeting be held within a given period of
time or authorise the shareholders in question or their representatives to call a
general meeting. No mention is made of this provision in the SE Act.
In order to attend a general meeting, shareholders must deposit their share
certificates and proxies with defined banks at least five days before the date
scheduled for the meeting. Shareholders that are legal entities can participate
in a general meeting by appointing up to three natural persons as their rep-
resentatives. A shareholder who has failed to comply with this requirement
may attend the general meeting only with the latter’s permission. The meeting
is presided over by a chair (normally the chair of the board of directors or a
person designated in the articles of association); a secretary is also appointed.
31. Law 2190/1920 applies to determine the quorum required for a general
meeting. Article 29 of this law provides that a meeting can be validly held
when shareholders representing at least one-fifth of the paid-in share capital
163
are present or represented by proxy. In the absence of such a quorum, the

meeting shall be adjourned and convened again within twenty days’ time with
at least ten full days’ notice. On second call, the meeting can validly take
decisions on items on the agenda of the initial meeting regardless of the share
capital represented. Special quorums are required for statutory general meetings
called to adopt resolutions on important matters. Thus, the general meeting
can validly pass resolutions concerning, for example, the transfer abroad of a
company’s registered office, a change in its objects, an increase in its shareholder
obligations or share capital, or a reduction in its share capital, if shareholders
representing two-thirds of the paid-in share capital are present or represented.
Once again, if this quorum is not met on first call, a second meeting shall be
held under the conditions described above, for which the required quorum is
one-third of the paid-in share capital.
The majority required to adopt resolutions is determined by the Regulation,
which provides that, with the exception of those matters for which a greater
majority is required by its provisions or national law, resolutions shall be
adopted by a simple majority of votes validly cast. The Regulation requires
a greater majority for resolutions to amend an SE’s articles of association.
The provisions of Law 2190/1920 apply to other matters pertaining to the
holding and organisation of general meetings, the casting of votes, and void
and voidable resolutions.

32. The rights of shareholders are defined by Law 2190/1920 and in the SE’s
articles of association. In general, shareholders wield the management rights
attached to their shares. In addition, they have the right to attend general meet-
ings and to vote, to inspect the accounts and to request information. Under
Greek law, voting rights cannot be restricted in an SE’s articles of association.
Shareholders can vote by proxy. Voting trusts are allowed, but breaches thereof
do not affect the SE.
A share also bestows on its holder certain property rights, namely the right
to participate in profits and liquidation proceeds. The right to participate in
profits gives rise to an entitlement only when the general meeting has decided
to distribute a dividend. In the absence of such a decision, shareholders have
no claim to the company’s profits. An entitlement to a dividend can take the
form of a negotiable instrument, a dividend coupon, which can be transferred
like any other such instrument.
Due to the SE’s nature as a company limited by shares, Greek company law
does not provide for obligations other than the payment of a capital contribution
upon incorporation.
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Greece

A Two-tier system/one-tier system
(i) General remarks

33. The SE Act provides for both a one-tier and a two-tier system of manage-
ment. If the shareholders of an SE select the one-tier system, the SE shall have
two corporate bodies, a management board and a general meeting of share-
holders, so that its structure shall reflect for the most part that of a traditional
Greek public limited company. If, on the other hand, the shareholders opt for a
two-tier system, the SE shall have three corporate bodies, namely the general
meeting of shareholders, a management board and a supervisory board. The
supervisory board is a relatively new concept in Greek company law.

34. Pursuant to Article 22 of the SE Act, the articles of an SE may provide for
the one-tier system of management traditionally used in Greek public limited
companies. If the company’s shareholders opt for this system, the provisions of
Law 2190/1920 shall apply with regard to formation of the management organ.
According to the SE Act, the management organ must have three members (Art.
22). The Regulation does not distinguish between executive and non-executive
members. The SE Act, however, with reference to Articles 18(2) and 22(3) of
Law 2190/1920, allows specific powers to be attributed to one or more members
of the management organ, in accordance with Article 43 of the Regulation.
Under Greek law, members of the management organ are authorised to repre-
sent the SE and to take decisions on all matters related to its management, the
administration of its property and the implementation of its objects in general.
Members of the management organ have fiduciary duties and a duty of loyalty
to the SE. Thus, they must protect the interests of the SE and implement its
objectives acting with the honesty, due care, impartiality, good faith and dili-
gence expected from a fiduciary. Furthermore, the management organ has a
duty to ensure the accuracy of the SE’s balance sheet and other public financial
statements.
35. Members of the management organ may or may not be entitled to remu-
neration. Traditionally, they are not compensated, it being assumed that their
financial stake in the company encourages them to serve in this capacity. Nev-
ertheless, remuneration paid out of the company’s profits must be taken out of
the balance of net profits, after deduction of amounts contributed to ordinary
reserves and any dividends paid. Any other remuneration is chargeable to the
company, if approved by a specific resolution of the ordinary general meeting
of shareholders. Excessive remuneration may be reduced by the courts (Art. 24
Law 2190/1920).
165

36. Pursuant to Articles 20 and 21 of the SE Act, the articles of an SE may
provide for a two-tier management structure.
Under Greek law, the management board of an SE must have at least one
member and no more than five. Exceptionally, if an SE’s share capital exceeds
EUR3,000,000 at the time of appointment of its management board, the board
must have at least three members, unless the articles of association provide
otherwise. In the event of a vacancy, a member of the supervisory board may
sit on the management board until the vacancy is filled. An appointment must
be made no later than the next general meeting of shareholders.
With respect to the supervisory board, the SE Act stipulates only the minimum
number. Thus, the number of members of the supervisory board, as set forth in
the SE’s articles of association, may not be less than three.
The SE Act does not go into detail concerning the rights and obligations of
members of the management and supervisory boards. Therefore, the applicable
provisions of the Regulation shall apply.

37. In principle, members of the management organ are elected by the general
meeting of shareholders, which has exclusive authority in this regard. By way
of exception, the SE’s articles may give a specified shareholder or shareholders
the right to appoint members of the management board, which number is not to
exceed one-third of the total number of directors, according to the provisions
of Article 18(3) through (5) of Law 2190/1920.
Members may be freely removed from office at any time by a decision of the
general meeting of shareholders, while members appointed by other means can
be removed and replaced at any time by the shareholders who appointed them.
Furthermore, shareholders representing at least one-tenth of the paid-in share
capital can petition the president of the competent court of first instance to
remove directors for just cause.
Members of the supervisory board are, in principle, also appointed by the
general meeting of shareholders, although the first board members may be
appointed in the articles of association. Pursuant to Article 20(1) of the SE Act,
in conjunction with Article 18 of Law 2190/1920, an SE’s articles can give
a specified shareholder or shareholders the right to appoint members of the
supervisory board, which number is not to exceed one-third of the total number
of members, and determine simultaneously the conditions for exercise of this
right, especially with regard to the participation in share capital and the disal-
lowance of certain shares, i.e. whose transfer requires the prior authorisation of
the board of directors.
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Greece
C Representation
38. In the one-tier system, an SE is represented by its board of directors. By

application of Law 2190/1920, the management board represents the SE in and
out of court, acting jointly as a body (Art. 18(1) Law 2910/1920). This power is
unlimited and cannot be restricted. ‘Joint action’ does not imply action on the
part of all members but rather action taken in accordance with the rules to pass a
valid resolution. In place of collective representation, the law allows individual
representation for specific matters. In particular, the articles of association can
authorise the assignment of the management board’s powers, in whole or in
part, to one or more of its members (Art. 22(3) Law 2190/1920) or to third
parties (Art. 18(2) Law 2190/1920). It should be noted, however, that only the
management board has authority to specify those persons who, in accordance
with the SE’s articles, are authorised to represent and bind the company and
their powers.
39. In the two-tier system, a single member of the management board or its
chair is entitled to represent the SE before third parties. This means that the
management board is de facto required to appoint a chair. Furthermore, the
SE Act provides for the possibility of granting representation powers to other
members of the board by referring to Articles 18(2) and 22(3) of Law 2190/1920
(Art. 20(4) SE Act).
D Liability
40. The liability of members of the management organ is governed by the
rules applicable to Greek public limited companies. In particular, members
of the management board are liable to the company for any fault committed
by them in managing the company or arising from breach of duties imposed
on them by the company’s articles of association or by a resolution of the
general meeting of shareholders. Members of the management board may be
held liable to the company but not to individual shareholders. Board members
are liable for any wrongdoing on their part (fraud or negligence), unless they
can prove that they managed the company’s affairs with the diligence expected
of a conscientious manager or can show that their acts or omissions were based
on lawful resolutions passed by the general meeting of shareholders.
In this context, the company can file suit against members of its management
organ in the following ways. First, the general meeting can pass a resolution
authorizing the board to bring proceedings or empowering a special representa-
tive(s) to do so, if one-fifth of the paid-up share capital is present or represented
and the resolution receives an absolute majority of the votes validly cast. In
the alternative, shareholders representing one-third of the paid-up share capital
can request that the board bring proceedings or petition the competent court
of first instance to appoint a special representative(s) to do so. The same body,
i.e. the general meeting of shareholders, has authority to abandon or settle a
167
suit against a director, while the defendant director is not entitled to vote on a
resolution to bring proceedings against him or her.
41. Members of the supervisory board are liable to the company for any wrong-
doing (fraud or negligence), unless they can prove that they acted with the
diligence expected of a conscientious manager.
42. Directive 2001/86 has been transposed into Greek law, with a considerable
delay, by presidential decree 91/2005 (government gazette A92/04.05.2006)
(the ‘presidential decree’), which adopts most provisions of the Directive.
The issuance of presidential decree 91/2005 signalled the conclusion of the
Greek legislative process to allow the establishment and operation of SEs in
Greece. Thus, as of 4 May 2006, it has been possible to establish and operate
an SE in Greece.

43. Article 3(2) of the presidential decree provides for the establishment of
a special negotiating body (‘SNB’). SNB members are, in principle, elected
by the relevant trade unions. If no such trade unions exist, the SNB members
are elected by the work councils in the relevant companies, pursuant to the
provisions of Law 1767/1987. Finally, the employees themselves can elect the
members of the SNB pursuant to the provisions of Article 12 of Law 1264/1982
and Article 4 of Law 1767/1988, if neither a trade union nor a work council
exists.
Each company is entitled to elect the following number of representatives: (i)
three, if it has up to 300 employees; (ii) five, if it has between 300 and 1000
employees; and (iii) seven, if it has more than 1000 employees. Representatives
elect by secret ballot a number of SNB members corresponding to the number
of employees of the participating companies in Greece.
All necessary expenses relating to operation of the SNB shall be borne by the
participating companies. By way of example, these expenses can pertain to: (i)
the election of SNB members; (ii) the organisation of SNB meetings, including
translation, travel and housing costs, etc.; and (iii) fees for an expert appointed
by the SNB to assist it in its tasks.
44. The provisions of the presidential decree regarding employee participation
reflect those of the Directive. The decree thus provides for a formal negotiation
procedure between the SNB and the participating companies’ organs which
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Greece
aims to conclude a written agreement governing employee involvement in the

SE. If formal negotiations fail, the standard rules shall apply. Greece has enacted
the option contained in Article 7(3) of the Directive.
3 Protection of employee representatives

45. Pursuant to Article 10(1) of the presidential decree, members of the SNB
are granted the same protection as members of work councils and trade unions.
Members of the SNB are thus protected against abusive acts or omissions by
their employers, or third parties acting on their behalf, aimed at impeding in any
way the exercise of their rights. In addition, members of the SNB are protected
against abusive dismissal and unfavourable treatment and are entitled to paid
time off to perform their duties (meetings) and participate in conferences.
Employers that fail to comply with the above requirements shall be subject to
sanctions (monetary fines or temporary closure of their business), pursuant to
the provisions of Article 16 of Law 2639/1998.

46. Pursuant to Article 61 of the Regulation, SEs are governed by the rules
applicable to public limited-liability companies in the Member State in which
their registered office is located as regards the preparation of their annual and,
where appropriate, consolidated accounts, including the accompanying annual
report and the auditing and publication of these accounts.
In this regard, it should be noted that Greece has implemented, by presiden-
tial decrees 409/1986 and 498/1987, Fourth Council Directive 78/660 on the
annual accounts of certain types of companies, as amended by Seventh Council
Directive 83/349 on consolidated accounts. Thus, Law 2190/1920, as amended
by presidential decree 409/1986, implementing the abovementioned directives,
includes provisions on fiscal years (Art. 42), annual accounts in general (Art.
42a), the structure of the balance sheet and the income statement (Arts. 42b,
42c, 42d, 42e), valuation rules (Art. 43), the content of notes to the accounts
and the management report (Art. 43a), and the publication of annual accounts
(Art. 43b).
2 Auditors
47. Pursuant to Law 2190/1920, an SE must appoint at least two auditors.
The provisions of Law 2190/1920 (Art. 36) governing the rights and duties
of auditors are of mandatory application. The auditors are appointed by the
ordinary general meeting. The auditors’ fees are paid by the company and fixed
by the general meeting.
169
48. With regard to the powers and duties of auditors, the following should
be noted. During the accounting period, the auditors supervise the company’s
accounting and managerial practices. To this end, they must be granted access
to all books, records and documents of the company and to the minutes of the
general meetings and meetings of the board of directors. In discharging their
duties, the auditors are required to suggest necessary actions to the board of
directors and to inform the supervisory authority of any violation of the law or
the company’s articles of association. After close of the fiscal year, the auditors
examine the company’s balance sheet and income statement and draft a report
for the ordinary general meeting. This report should state that the company’s
bookkeeping is lawful and proper, that the balance sheet presents the company’s
actual financial position, and that the income statement presents the company’s
true results. In addition, auditors are required to attend the ordinary general
meeting and to provide any explanations requested about their audit.
Finally, in discharging their duties, the auditors are liable for any damage caused
to the company. Pursuant to the provisions of Article 37 of Law 2190/1920,
their liability cannot be excluded, amended or limited by contract. Claims by a
company against its auditors for damages are time-barred after two years.

49. The national authority competent to supervise application of the Regulation
depends on the provision in question. Pursuant to Article 68(2) of the Regula-
tion, the competent authority for ensuring effective application of the Regulation
is the Ministry of Development through the locally competent prefectures, i.e.
the prefecture where the SE’s registered office is located.
VIII Dissolution
1 Winding up
50. By way of application of Law 2190/1920 (pursuant to Article 63 of the
Regulation), an SE can be dissolved: (i) upon expiry of its term of existence, as
set forth in its articles of association; (ii) by a resolution of the general meeting
adopted by a qualified quorum and majority of two-thirds; or (iii) if the company
declares bankruptcy or is declared bankrupt.
The company may also be ordered to dissolve if the value of its assets falls below
one-half of its share capital. In this case, the board of directors is obliged to
convene a general meeting within six months following the close of the financial
year in order to vote on dissolution or adopt other restructuring measures.
51. Another cause of dissolution is revocation of the company’s licence by
the relevant prefecture. Revocation is only allowed in those cases specifically
provided for by law, such as: (i) failure to pay a capital contribution or contribute
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Greece
to a capital increase; (ii) failure by the company to remove a member of the

board of directors or a manager convicted of a crime committed and associated
with management of the company’s interests; (iii) the value of the company’s
assets falls below one-tenth of its share capital; and (iv) failure to submit to
the supervisory authority, as required by law, balance sheets approved by the
general meeting, for at least three financial periods. The first three cases shall
result in mandatory revocation of the authorisation, while, in the latter case, the
authorities have discretion.
2 Liquidation
52. Dissolution is followed by liquidation. Liquidation is mandatory for a dis-
solved public limited company and therefore for SEs. In should be noted that,
in the event of dissolution due to bankruptcy, the bankruptcy rules replace the
liquidation process, and a trustee in bankruptcy is appointed to manage the
company’s property.
Liquidators are usually named in the articles of association. If this is not the
case, they are appointed by the general meeting. If the company is dissolved
due to expiry of its term of existence, the board of directors acts temporar-
ily as a liquidation committee until liquidators are appointed by the general
meeting.
The appointment of liquidators, as well as the results of liquidation, must be
published. The liquidators are required to terminate all pending business, pay
off the company’s debts, collect money and receivables owed to the company,
and distribute any remaining proceeds to shareholders.
Finally, it should be noted that the duration of the liquidation process varies
depending on the extent of the company’s debts, the assets to be distributed to
shareholders, etc. Nevertheless, under normal circumstances, liquidation usu-
ally lasts five years and under no circumstances may it exceed ten.
3 Insolvency
53. Bankruptcy proceedings may be initiated either by creditors or by the com-
pany itself (Art. 528 Commercial Code). The law also allows the courts to
commence proceedings ex officio, but this is rare in practice. Once a company
has been declared bankrupt by a competent court, it is ipso jure dissolved. The
bankruptcy of a company has no adverse financial effects on the members of
its board of directors or its individual shareholders.
IX Applicable law
54. As a general rule, an SE with its registered office in Greece shall be governed
by Greek law with respect to matters not addressed by the Regulation.
171
X Tax treatment
1 Income tax
55. A Greek SE is, in principle, subject to corporate tax at a rate of 25% on
its worldwide income. A non-resident SE with a permanent establishment in
Greece is also subject to corporate tax at a rate of 25%, but only on profits
attributable to its permanent establishment.
Greece has not enacted any specific direct or indirect tax measures with respect
to SEs. The direct and indirect tax treatment of an SE does not differ from that
of any other public limited company. Consequently, there is no specific risk
of discrimination against the SE compared to national or foreign legal entities
established under domestic or foreign law.
With respect to the offsetting of losses, Greek tax law does not provide for
consolidation within a group, or for cross-border consolidation at the head-
office level. Losses incurred outside Greece can only be offset against taxable
profit generated outside Greece. Under Greek tax law, tax losses from business
activities conducted in Greece can be carried forward five years. Finally, any
tax losses carried forward by a transferring company located in Greece may, in
principle, be taken over by its Greek permanent establishment under the same
conditions applicable in purely national restructurings (e.g. mergers, divisions,
etc).
The creation of an SE by means of a cross-border merger shall not give rise
to taxation on capital gains or hidden reserves, provided the newly formed
company (the SE) retains the book values and depreciation methods used by
the transferring company, and the transferred assets and liabilities constitute a
permanent establishment of the new SE in Greece. Nevertheless, the possibility
of a cross-border merger is not regulated under Greek corporate law, even though
Directive 90/434 EEC, as amended by Directive 2005/19 EEC, has been fully
transposed into Greek law.
Under Greek tax law, the formation of a holding SE by means of a share
exchange in a cross-border transaction is not considered a taxable event, pro-
vided the shareholders of the target company assign the same book value to
their new shares in the SE.
The formation of a subsidiary SE by means of a transfer of assets by a Greek
company shall be treated, from a tax perspective, as the formation of a Greek
public limited company. Nevertheless, the creation of a subsidiary SE by means
of a cross-border transfer of assets shall be tax neutral, provided the transferred
assets and liabilities constitute a branch of activity. If assets situated in Greece
are contributed to a foreign SE, the assets should remain in Greece in the form
of a Greek permanent establishment at their previous book value in order to
benefit from tax deferral.
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Greece
Pursuant to Greek tax law, the transfer of an SE’s registered office does not
give rise to taxation of capital gains provided the assets and liabilities of the
SE remain effectively connected with a permanent establishment in Greece.
The permanent establishment must maintain the tax value of the assets for the
purposes of calculating depreciation.
2 Value added tax

56. An SE will be subject to Greek VAT at a rate of 19% at the same terms
and conditions as other Greek companies, in accordance with the Sixth VAT
Directive.
3 Other taxes
57. Contributions to the capital of a Greek SE are subject to a 1% capital
contribution tax.
XI Conclusion
58. The recently introduced SE presents two main advantages over national
corporate forms, namely a simplified procedure to transfer its registered office
and the possibility to engage in tax-neutral cross-border mergers. Hence, the
SE will facilitate the restructuring of companies across Europe.
Nevertheless, the SE is still viewed with scepticism in Greece, where most
enterprises are small or medium sized and are thus unwilling to bear the bur-
densome costs and tackle the complex issues related to the formation of an SE.
Furthermore, under Greek tax law, a cross-border merger is not eligible for tax
deferral, which renders moot in practice one of the main incentives to form an
SE. Under these circumstances, it remains to be seen whether the SE will be
successful in Greece.
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6
Ireland
m i c h a e l g r e e n e a n d k e av y r ya n
A&L Goodbody
I Introduction 175
II Formation 176
B Name 177
E Capital 181
2 Shareholders 187
A General meeting 187
B Types of resolutions 188
C Rights and obligations of shareholders 188
A One-tier system/two-tier system 189
C Liability 191
IV Employee involvment 191
3 Protection of employee representatives40 193
4 Complaints procedure 194
5 Information and confidentiality42 194
6 Existing employee involvement rights 195
V Annual accounts and consolidated accounts 195
B Annual accounts 195
174
Ireland
C Consolidated accounts 196

2 Auditors 196
VII Dissolution 197
2 Liquidation 197
A Members’ voluntary liquidation45 197
B Creditors’ voluntary liquidation 197
C Compulsory liquidation46 198
3 Receivership 198
4 Examinership 198
5 Schemes of arrangement 199
VIII Tax treatment 199
1 Introduction 199
2 Income tax 200
4 Other taxes 201
IX Conclusion 201
I Introduction
1. The Regulation has been implemented in Ireland partly by means of two new
statutory instruments, the European Communities (European Public Limited-
Liability Company) Regulations 2007 (the ‘ECR1’) and the European Com-
munities (European Public Limited-Liability Company) (Forms) Regulations
2007 (the ‘ECR2’) together (the ‘ECRs’). This legislation was issued on 31
January 2007. ECR1 and ECR2 deal with the company law aspects of SEs. The
ECRs are supplemented by the legal provisions applicable to public limited
companies, found mainly in the Companies Acts 1963–2006 (the ‘CA’) and
the common law.
The Directive has also been implemented in Ireland by means of a statutory
instrument, the European Communities (European Public Limited-Liability
Company) (Employee Involvement) Regulations 2006 (the ‘EEIR’).
In drawing up the ECRs, the legislature adopted a minimalist approach and
drafted the legislation in such a manner so as to avoid significant conflicts with
existing domestic company law.
This report focuses on implementation of the Regulation and transposition of the
Directive in Ireland, and in particular on the options provided in the Regulation
which Ireland has chosen to adopt. Any reference in this chapter to ‘Ireland’ or
the ‘State’ refers to the Republic of Ireland.
175
II Formation
1 General remarks
A Founding parties
2. Article 2(1) to (4) of the Regulation lists the legal entities that can participate
in the formation of an SE. In Ireland, the following types of entities qualify:
(i) Formation by merger

• Public companies limited by shares.
• Public companies limited by guarantee having a share capital.
(ii) Formation of a holding SE or a subsidiary SE

• Private companies limited by shares.
• Private companies limited by guarantee having a share capital.
(iii) Conversion of an existing public limited company into an SE

3. Ireland has chosen to allow a company whose head office is not in a Member
State to participate in the formation of an SE if that company’s registered office
is located in a Member State and the company has a real and continuous link
with the economy of a Member State (Art. 2(5) Reg.).1 Under clause 6(2) of
the Irish Regulations, the Registrar of Companies (the ‘Registrar’) shall not
be satisfied that a company has such a link with the State unless that company
furnishes a statement in writing:
(a) that has been given to it by the Irish Revenue Commissioners within two
months, ending on the date on which the statement is furnished; and
(b) that the Irish Revenue Commissioners have reasonable grounds to believe
that the company has a real and continuous link with the State’s economy.
The Revenue Commissioners have advised that, in order for a company to
be considered to have a real and continuous link with an economic activity
carried on in the State, it must actively participate in generating income
in the State. If a company is trading and has an activity and employees in
the State and/or income from a business in the State, it will be considered
to have an economic link with the State.
4. By virtue of Article 15 of the Regulation, the existing rules for the formation
and registration of a public limited company in Ireland will apply. A PLC must
1
Reg. 6(1) ECR1.
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Ireland
have at least seven members and comply with certain registration requirements.
section 6(1) of CA 1983 provides that a company initially registered as a PLC
shall not do business or exercise any borrowing powers unless the Registrar has
provided it with a certificate under that section. The reason for this restriction is
to ensure compliance with the minimum authorised share-capital requirements
applicable to PLCs.
The form which must be filed with the Registrar is Form 70, which sets out the
following matters enumerated in section 6(3) of CA 1983:
• that the nominal value of the Company’s allotted share capital is not less
than the authorised minimum;
• the amount paid up, at the time of the application, on the company’s
allotted share capital;
• the amount, or an estimate, of the company’s preliminary expenses and
the persons that have paid or owe any of these expenses; and
• any amount or benefit paid or given, or intended to be paid or given, to
any promoter of the company and the consideration received in return.
Where a statutory declaration is made in accordance with CA 1983, section 6(2),

it shall be deemed sufficient evidence of the matters stated therein. Where the
Registrar issues a certificate under this section, this shall be conclusive evidence
that the Company is entitled to do business and exercise any borrowing powers.2
Where a PLC registered as such does not obtain such a certificate within one
year from its original incorporation, the Registrar can strike it off the Register
of Companies (the ‘Register’) in accordance with section 311(5) of CA 1963.
B Name
5. Under the Regulation, the name of an SE must be preceded or followed

by the abbreviation ‘SE’, and only SEs may include this abbreviation in their
names (Art.11 Reg.). Under ECR1, if an SE or any of its officers fails to comply
with this provision, the SE and every officer in default shall be found guilty of
an offence and be held liable on summary conviction for a fine not exceeding
€3,000.3
An SE with its registered office in Ireland must be registered with the Companies
Registration Office (CRO) and should contact the CRO before selecting a name
to ensure that the CRO has no objection to the chosen name.
The CA contains detailed provisions prohibiting the registration of certain
names, and the Registrar can object to a name that is already in the Regis-
ter which is confusingly similar to an existing registered name or where a name
is deemed to be offensive, misleading or otherwise objectionable.
2 S. 6(6) CA 1983. 3 Reg. 34(1) ECR1.
177

6. For any SE to be established in Ireland, whether by way of merger, conversion
from a PLC, or as a subsidiary or holding company, the relevant forms to be filed
with the Registrar must state that its registered office is to be situated in Ireland.
A full street address to which mail and other documents can be readily delivered
must be given; a PO box will not suffice. Under the CA,4 every company must
have a registered office within the State. There is currently no obligation in
Ireland for companies to have their head office and registered office in the same
place and, therefore, the option contained in Article 7 of the Regulation has not
been adopted in Ireland.
(ii) Transfer of registered office to Ireland

7. Where it is proposed to transfer the registered office of an SE to Ireland from
another Member State, a transfer proposal must be drawn up by the management
or administrative organ in accordance with Article 8 of the Regulation. This
proposal must be filed at the CRO using a Form SE6.
A copy of the SE’s articles and a certificate by the former registration authority,
attesting to completion of the acts and formalities which must be completed
before the transfer, must be filed with the Form SE6. This form also includes
a statutory declaration which must be sworn by either a lawyer involved in
registering the SE (who must be entitled to pursue his or her professional
activities under one of the denominations laid down in Council Directive
77/249/EEC or Council Directive 98/5/EC) or a director or the company secre-
tary in the presence of either a commissioner of oaths, notary public, solicitor
or peace commissioner, confirming that all registration requirements have been
completed.
The Form SE6 must also detail the SE’s balance sheet and the proposed end
of its financial year. The Registrar will assign to the SE an annual return date.5
The Form SE6 must also include details of the SE’s subscribers, director(s) and
secretary.
Publication of the transfer proposal is effected by filing it at the CRO and
publication in the CRO Gazette.
(iii) Transfer of registered office out of Ireland

8. An application to transfer the registered office of an SE from Ireland to
another Member State must be filed with the Registrar in accordance with the
details set out in Form SE7. The application must mention the Member State to
4
S 113 CA 1963, as amended by s 4(1) of Companies Amendment Act 1982.
5
Reg. 33 ECR1.
178
Ireland
which the SE is to transfer its registered office and the proposed address. The
following documents must be submitted with the Form SE7:
(a) a copy of the general meeting’s resolution approving the transfer;
(b) a Form SE8 (statement of solvency); and
(c) a copy of the company’s individual accounts,6 together with a copy of the
auditors’ report, which should be unqualified, and the directors’ report
on each set of accounts. The individual accounts must be prepared as
of a date no earlier than two months from the date of the application to
transfer the SE’s registered office.
9. The Form SE7 must contain a declaration by either a secretary or director of
the SE confirming that:
(a) a transfer proposal was drawn up and publicised pursuant to Article 13
of the Regulation;
(b) a report explaining and justifying the legal and economic aspects of the
transfer and explaining the implications of the transfer for shareholders,
creditors and employees has been drawn up;
(c) shareholders and creditors of the SE have been notified in accordance
with Article 11(1) of the Regulations of their rights to examine and obtain
copies of the transfer proposal and report;
(d) at least one month before the general meeting called to decide on the
transfer, shareholders and creditors of the SE could examine and obtain
copies of the transfer proposal and the abovementioned report;
(e) the SE’s invoices, orders for goods and business letters complied with the
requirements of Regulation 11(2) of the Regulations;
(f) the SE’s general meeting has approved the transfer;
(g) the individual accounts and the auditors’ report and directors’ report on
the accounts attached to the form are true copies of each such document;
(h) no proceedings have been commenced for winding up, liquidation, insol-
vency, or suspension of payments or any other similar proceedings;
(i) the Form SE7 also includes a statutory declaration to be sworn by a
lawyer involved in transferring the SE’s registered office out of Ireland,
confirming that all of the acts, formalities and conditions required by
Article 8 of the Regulation, have been completed.
10. The transfer of an SE’s registered office will necessitate an amendment to
its articles (Art. 59(1) Reg.). An SE that proposes transferring its registered
office from Ireland will be governed by Irish law as far as the amendment of
its articles is concerned and, therefore, the transfer must be approved by 75%
of the SE’s shareholders. A Form SE14 must be filed with the CRO along with
the amended articles, within 14 days of adoption of the amendments.7
6
Drawn up in accordance with either ss 3, 4 and 5 of CA 1986 or s 149 of CA 1963.
7
Reg. 32 ECR1.
179
11. In Ireland, the SE must furnish with Form SE7 a statement of solvency on
a Form SE8. If the company has a one-tier management system, this statement
must be made by all directors of the administrative organ. If the SE has a two-
tier system, the statement must be made by all directors of the management
organ authorised by the supervisory organ. The statement must provide that all
members of the relevant organ are of the opinion that:
• As regards the SE’s financial situation immediately after the transfer, there
will be no grounds on the basis of which the SE will be unable to pay its
debts; and
• As regards the SE’s prospects for the year following the transfer date, the
company will be able to conduct business as a going concern (and thus
able to pay its debts as they fall due throughout the year), having regard
to the management of the SE’s business during that year and the amount
and type of financial resources which will be available, in the directors’
view, to the SE during that year.
• In forming their opinion, the directors must take into account the same
liabilities (including prospective and contingent liabilities) relevant under
CA section 214 (winding up by court order) in determining whether the
company is able to pay its debts.
The option to extend the definition of liabilities to include those arising subse-
quent to publication of the transfer proposal but prior to the transfer itself (Art.
8(7) Reg.) has been enacted in Ireland.8
12. The right of the Member States to oppose transfer applications (Art. 8(14)
Reg.) is prescribed under ECR1 in order to protect the public interest.9 The
competent authority for this purpose is the Registrar. A decision of the Registrar
to oppose the transfer of an SE can be appealed to the High Court within 21
days from being informed of the Registrar’s decision to oppose the transfer.
(iv) Rights of minority shareholders and creditors

13. Under the Irish implementing legislation, in the event the registered office of
an SE is transferred from Ireland to another Member State, additional protection
is afforded creditors and shareholders in the following manner:
(a) The SE must notify in writing its shareholders and every creditor of whose
claim and address it is aware of their right to examine the transfer proposal
and the report drawn up pursuant to Article 8(3) at its registered office and
obtain copies of these documents upon request free of charge no later than
one month before the general meeting called to decide on the transfer;
(b) Every invoice, order for goods or business letter which, at any time
between the date on which the transfer proposal and the report are made
8 Reg. 13 ECR 2. 9 Reg. 14 ECR1.
180
Ireland
available for inspection at the SE’s registered office and the date of dele-
tion of the SE’s registration and transfer, is issued by or on behalf of
the SE must contain a statement that the SE is proposing to transfer its
registered office to another Member State and identify that Member State;
(c) Where it is proposed to transfer the registered office of an SE out of
Ireland, any member(s) holding at least 10% of the nominal value of the
SE’s issued share capital and who did not consent to or vote in favour of
the transfer resolution may apply to the court to either have the decision
set aside or require the SE to acquire their securities for cash or order any
other remedy it considers just.10
D Corporate purpose
14. Since the Regulation and the ECRs are silent on this matter, SEs shall be
subject to the provisions applicable to PLCs. The corporate purpose (or objects)
of an SE registered in Ireland must be clearly defined, as a company may only do
what is within the parameters of its permitted corporate activity.11 A company
may declare void a transaction concluded in its name if the transaction went
beyond the scope of its corporate purpose. Typically companies are incorporated
with a multitude of express objects and powers which are ancillary to their main
objects to ensure greater flexibility in trading.
E Capital
15. According to Article 4(2) of the Regulation, the subscribed capital of an SE

may not be less than €120,000 which is considerably higher than the minimum
requirement for PLCs in Ireland (€38,092.14). It should be noted, however, that
not all the minimum issued share capital (€38,092.14) must be fully paid-up,
and it is sufficient if only a quarter of the nominal value of the SE’s shares is
paid up.12

16. Public limited companies established in at least two Member States can form
an SE by merger. A merger may result from the acquisition by one company
of another or through the formation of a new company. Irish companies that
qualify as public limited companies for this purpose are: (i) the public company
limited by shares; and (ii) the public company limited by guarantee with share
capital.
10 Art. 11 ECR. 11 Sect. 6(1)(b) CA 1963. 12 See S28(1) and S6(3)(b) C(A) 1983.
181

17. Pursuant to the Regulation, the management or administrative organs of
the merging companies must draw up draft terms of merger. In Ireland, the
terms of the Third Company Law Directive involving public limited-liability
companies has been implemented pursuant to the EC (Mergers and Divisions
of Companies) Regulations 1987 (the ‘Merger Regulations’).
In addition to the items which must be included pursuant to the Regulations,
the draft terms should also include the following information with respect to
Irish companies participating in the merger:
(a) confirmation as to whether the companies involved are public companies
limited by shares or public companies limited by guarantee; and
(b) details of any payment or benefit in cash or otherwise paid or intended to
be paid to the independent person who is providing a report in respect of
the merger and to any director of the merging companies.
The directors of each merging company must also prepare a separate written
report detailing the draft terms of merger, the legal and economic grounds for and
the implications of the merger with particular reference to the share-exchange
ratio, organisation and management structures, recent and future commercial
activities and the financial interests of the holders of shares and other securities
in the company, the methods used to arrive at the proposed share-exchange ratio
and the reason for the use of these methods and any valuation difficulties which
have arisen.
An expert’s report must be prepared which should contain the information as
set out in the Regulation. No additional information need be included in the
expert’s report pursuant to the Merger Regulations.
Each merging company must submit the draft terms of merger to the Registrar
and publish the same in the CRO’s Gazette and at least two daily papers with
a circulation in the district where the company’s registered office is situated at
least one month before the date of the general meeting scheduled to approve
the draft terms of merger.
Within this one-month period, each merging company must make available free
of charge the documents listed below for all members to inspect at its registered
office for at least two hours each day:
(a) the draft terms of merger;
(b) audited annual accounts for the preceding three financial years of the Irish
company or, where the Irish company has traded for less than three years,
annual accounts for the years in which it was traded;
(c) an independent expert’s report;
(d) the directors’ report; and
182
Ireland
(e) any accounting statement in relation to the merging companies where the
last annual accounts ended more than six months before the date of the
draft terms of merger.
The draft terms of merger must be approved by the general meeting of each
merging company (Art 23(1) Reg.). As explained above, the relevant majority
for any participating Irish company is 75% of those shareholders present and
voting.
18. The Irish High Court must issue a certificate attesting to completion of the
pre-merger acts and formalities (Art. 25(2) Reg.).
19. When an SE formed by merger is to be registered in Ireland (pursuant to
Regulation 6) a Form SE1 must be filed with the CRO. This form should contain
details of the SE’s name and registered office and the proposed closing date of
its financial year. Pursuant to Regulation 33, the Registrar will assign to the SE
an annual return date and will have regard, in this context, to the close of its
financial year. The following documents must be attached to the Form SE1:
(a) Articles of the SE;
(b) Office copy of the High Court Order conclusively attesting to completion
of the pre-merger acts and formalities in respect of any merging Irish
registered company; and
(c) A certified copy of the decision of the court, notary or other competent
authority attesting to completion of the pre-merger acts and formalities
in respect of any Irish registered company.
20. The Form SE1 must also give details of the proposed directors and secretary.
Every SE with its registered office in Ireland must have at least two directors,
one of whom must be an Irish resident or a bond will have to be filed with the
CRO.13 Where a person who has consented to be appointed director of an SE is
disqualified under the laws of another Member State from being appointed or
acting as a director or secretary of a body corporate or undertaking, that person
must complete a Form B74, to be submitted to the CRO with the Form SE1,
failing which he or she shall be deemed to be disqualified from acting as director
of an Irish SE for the remainder of the period of his or her disqualification.
The Form SE1 must also contain details of the subscribers to the articles and of
the merger, i.e. confirmation as to whether the merger is by way of acquisition
or by the formation of a new SE.
Finally, the Form SE1 contains a statutory declaration of compliance with all
legal requirements relating to formation by merger. It must be signed by either
a lawyer who is forming the SE, a director or the secretary in the presence
13
Pursuant to s 43(3) CA(2) 1999.
183
of either a commissioner of oaths, notary public or peace commissioner. The

declaration must contain information regarding the general nature of the SE’s
activity, the place in Ireland where it proposes to carry out business or where
the SE’s central administration will normally be located.
(ii) Opposition to a merger

21. The option contained in the Regulation to allow the Member States to oppose
the formation of an SE by merger in order to protect the public interest (Art.
19 Reg.) has been adopted in Ireland.14 The competent authority in Ireland for
this purpose is the Registrar.
Within 21 days from being informed of the Registrar’s decision to oppose its
taking part in the formation of an SE by merger, the SE or public limited
company, as appropriate, may appeal the Registrar’s decision to the High Court
by way of judicial review.
(iii) Rights of minority shareholders and creditors

22. Any member or members holding, in the aggregate, at least 10% in nominal
value of the issued share capital of an SE who did not consent to, or vote in
favour of, the merger resolution may apply to the High Court within 28 days
of when the merger resolution is passed in order to either have the decision to
merge reversed or to require the SE to acquire their securities for cash or to
request any other such remedy as the High Court considers just.
23. Irish legislation has not introduced any additional protection for creditors
of an SE in respect of a merger.
24. In Ireland, public and private limited companies may participate in the
creation of a holding SE. The management or administrative organ of each
participating company must prepare draft terms of formation (Art. 32(2) Reg.).
25. An expert’s report, similar to that described above for the formation of
an SE by merger, must be provided by an independent expert. This report,
along with the draft terms of formation approved by the general meeting of
each company involved, the SE’s articles and copies of the resolutions of the
promoting companies approving the draft terms of formation, should be filed
at the CRO on a Form SE2. If all conditions for the formation of a holding SE
have been fulfilled, a Form SE11 must also be filed at the CRO within fourteen
days, and the Registrar must ensure publication of this information in the CRO
Gazette (Art. 33(3) Reg.). The Form SE 11 must be signed by a director or the
secretary of the Irish promoting company. If an SE or any of its officers fails
to comply with these requirements, the SE and every officer who is in default
14
Reg. 16 ECR1.
184
Ireland
shall be found guilty of an offence and liable on summary conviction to a fine

not exceeding €3,000.
26. Ireland has not enacted any provisions pursuant to Article 34 of the Regula-
tion, beyond those already applicable under existing company law, to protect the
rights of either creditors and employees or minority shareholders who oppose
the formation of a holding SE.
27. Where it is proposed to register a subsidiary SE in accordance with Article
2(3) of the Regulation, a Form SE3 must be filed with the Registrar, to which
the articles of the proposed subsidiary should be attached. This form must be
signed by the subscribers to the SE, who should correspond with the subscribers
to the accompanying articles. Details of the proposed directors and secretary
should be included. The Form SE3 contains a statutory declaration which must
be sworn by either a lawyer who is forming the subsidiary SE or the company’s
director or secretary in the presence of either a commissioner for oaths, notary
public, solicitor or peace commissioner confirming that all other registration
requirements have been completed.
Where it is proposed to register an SE formed as the subsidiary of another SE in
accordance with Article 3(2) of the Regulation, a Form SE5 must be filed with
the Registrar, containing the same information as the Form SE3. Reference to
an SE whose subsidiary is to be registered in accordance with this paragraph
includes an SE with its registered office in another Member State.
28. In order for an Irish plc to convert into an SE, draft terms of conversion
(in line with those required for the formation of a holding SE or an SE formed
by merger) must be drawn up (Art. 37(2) Reg.) and an independent expert’s
report prepared. The expert must certify that the company has net assets at least
equivalent to its capital plus those reserves which cannot be distributed by law
or pursuant to the company’s articles. The draft terms of conversion must be
approved by the general meeting of shareholders. The option afforded to the
Member States to require that the conversion of a public limited company into
an SE be subject to a favourable vote of a qualified majority or unanimity in the
organ of the company within which employee participation is organised (Art.
37(8) Reg.) has not been adopted in Ireland.
29. A Form SE4 must be filed with the Registrar, together with the SE’s articles,
the resolution approving the draft terms, the independent expert’s report and the
report explaining and justifying the legal and economic aspects of the conversion
pursuant to Article 37(4) of the Regulation. The Form SE4 must also be signed
by the subscribers to the SE, who should correspond with the subscribers to
185
the accompanying articles. The Form SE4 also contains a statutory declaration
confirming that all other registration requirements have been completed.

30. An SE formed in or transferred to Ireland must be registered at the CRO
which involves filing the relevant documentation referred to above.

31. An SE acquires legal personality on the date on which it is registered by
the Registrar. A company is deemed a legal entity distinct from its members,
capable of enjoying rights and incurring obligations which are not the same as
those enjoyed or borne by its members. This principle has been recognised and
applied in many Irish court decisions.

1 General remarks
32. Ireland has traditionally only recognised a one-tier management system,
and the two-tier system of management described in the Regulation is not used
within Irish companies. However, Ireland has taken a flexible approach to these
provisions of the Regulation so as to ensure that both forms can be accommo-
dated. In Ireland, as regards the rules governing the internal management of an
SE, unless specifically stated in the company’s articles, the articles of associa-
tion prescribed by the CA (Table A) will serve as a default model. Table A is a
set of ‘model’ articles of association contained in the First Schedule to CA 1963.
These articles are by no means binding but are applicable unless excluded or
varied.
33. In respect of Article 3 of the Regulation and the number of members of an
administrative organ, Ireland did not stray from its existing provision which
requires a minimum of two directors, even for single-member companies, and
imposes no upper limit.15 Model Article 97 in Table A allows a company to
vary the number of its directors by an ordinary resolution. There is, however,
a requirement that one of the directors be a resident of the State.16 By law, no
individual may hold more than 25 directorships. The obligation of every Irish
company to appoint a secretary17 is also reflected in the Irish implementing
legislation.
15
S 174 CA 1963, which stipulates the requirement of two directors.
16
Section 43 of CA(2) 1999 imposes such a restriction, although permitting a bond to be entered
into in the amount of €25,394.76 in the event no director is resident in the State.
17
S 175 CA 1963.
186
Ireland
2 Shareholders
A General meeting
(i) Decision-making process

34. Subject to the rules on general meetings set out in the Regulation, the rules
applicable to the convening and conduct of general meetings of an SE are
prescribed by the CA. Under Irish law, the board of directors has authority to
call a general meeting. Under the ECRs, the first general meeting may be held at
any time during the first eighteen months following the formation of an SE (Art.
54(1) Reg.).18 An annual general meeting (AGM) must be held every calendar
year, with no more than 15 months between one AGM and the next. With the
exception of the statutory AGM, member meetings may be held largely at the
company’s discretion.19
35. Shareholders representing 10% of the issued share capital may request
that the SE convene a general meeting (Art. 55(1) Reg.). Ireland has not
adopted the provisions to allow a lower percentage of shareholders to call an
AGM.
36. As with all companies, at least 21 days’ notice of an AGM must be given
in writing.20 For an extraordinary general meeting (EGM) of a PLC, at least 14
days’ notice is required. Any provision in a company’s articles of association
that provides for a shorter notice period shall be void. However, Section 133(3)
CA 1963 provides that a meeting may be held at shorter notice if the consent
of all members and the auditors is obtained in advance.
37. The business transacted at an AGM must include a presentation of the
audited accounts, the re-appointment of the company’s auditors and the granting
of authorisation to the directors to fix the auditors’ remuneration. Depending
on the SE’s articles of association, the AGM must also reappoint by rotation
directors who retired during the year, declare a final dividend and pass ordinary
or special resolutions.
38. At least three (for a public limited company) or two (for a private company
other than a single-member private limited company) shareholders of a company
must be present to pass a resolution.
39. With a few notable exceptions,21 most resolutions can be passed with-
out holding a members’ meeting by using the written procedure facilitated by
section 141(8) CA 1963.
18
Reg. 20 ECR1.
19
An exception is the requirement for directors to convene an EGM if the company has suffered
a capital loss, s 40 CA 1983.
20
S 133 CA 1963.
21
Resolutions to appoint or remove auditors or remove directors cannot be passed in writing.
187
B Types of resolutions
(i) Special resolution

40. A special resolution must be approved by 75% of the members entitled to
vote. A special resolution is required to allow an SE to do any of the following:
(a) change its name;
(b) permit the grant of financial assistance for the purchase of shares;
(c) reduce its share capital;
(d) amend the memorandum and/or articles of association; or
(e) wind up.
A copy of every special resolution passed must be filed with the CRO on a Form
G116.
(ii) Ordinary resolution

41. An ordinary resolution must be approved by a simple majority (50%) of
the members entitled to vote. An example of where an ordinary resolution is
required is where there is an increase in the company’s authorised share capital.
Certain ordinary resolutions must be filed with the CRO relate to attaching,
restricting or varying rights on shares.
42. Ireland has chosen not to adopt the option contained in the Regulation
allowing the Member States to provide that where at least half of an SE’s
subscribed capital is represented at a meeting, a simple majority is sufficient to
pass ordinary resolutions (Art. 59(2) Reg.).
43. Ireland has adopted the option contained in Article 12(4) of the Regula-
tion, allowing the Member States to provide that if the articles of an SE require
amendment due to a conflict with the new arrangements for employee involve-
ment required by the Directive, the SE’s management or administrative organ
is entitled to do so without the approval of the general meeting.22
C Rights and obligations of shareholders

44. The specific rights and obligations of shareholders are set out in an SE’s
articles of association and under domestic law.
Primarily, shareholders have a right to speak and vote at general meetings, to
inspect the company’s annual accounts and to receive dividends and a share
in liquidation proceeds. In addition, certain decisions may only be taken by
shareholders. The CA grants shareholders specific rights, such as the right to
remove directors by a simple majority of votes cast.
Shareholders also have certain statutory obligations under domestic law. For
example, Chapter 1 of Part IV of CA 1990 imposes obligations on directors,
22
Reg. 15 ECR1.
188
Ireland
secretaries and their families to disclose their shareholdings in a PLC. Chapter

2 of that part imposes similar obligations on groups and individuals that acquire
more than 5% of the issued share capital of a PLC. In addition, Section 53 of
CA 1990 requires directors and secretaries to notify the company of any interest
they might have in the company’s shares. The concept of an ‘interest’ in shares
is defined broadly and includes a contract to purchase or a call option (even
if conditional) and, in many circumstances, being a beneficiary of a trust that
owns the shares, but not holdings through unit trusts or UCITS or shares held
as security in the ordinary course of a lending institution’s or stockbroker’s
business
Interests are aggregated between spouses, their minor children, companies that
they control and parties acting in concert (for which there is an extensive defi-
nition).
If a person fails to make a required notification within the appropriate number
of days or gives false or reckless information, that person shall be guilty of an
offence and, amongst other things, may lose any right to enforce his or her rights
in the shares in question. (This does not apply for a failure to notify a disposal.)

A One-tier system/two-tier system
45. An SE may choose either a one-tier or a two-tier system of management. In
an SE with a one-tier system, management is entrusted to a board of directors
(the ‘administrative organ’). In the two-tier system, management is undertaken
by a management board (the ‘management organ’), which is overseen by a
supervisory board (the ‘supervisory organ’). Article 47(1) of the Regulation
(which allows companies and other legal entities to sit on an SE’s management
organ provided the law applicable to public limited companies in the Member
State concerned so allows) is not applicable in Ireland. ‘Corporate’ directors
are not permitted under Irish law.23
In Ireland, the members of the administrative organ, the management organ
and the supervisory organ are treated like directors of an Irish PLC and must
discharge the responsibilities of such directors accordingly.24
46. Articles 39(1) and 43(1) of the Regulation (regarding the two-tier and one-
tier system, respectively) state that the Member States may provide that one or
more managing directors shall be responsible for the day-to-day management
of an SE under the same conditions applicable to public limited companies
registered within that state. However, there is no provision under Irish law
requiring Irish public limited companies to have a certain number of managing
directors and, as such, there is no obligation for SEs registered in Ireland to
23 S 176(1) CA 1963. 24 Reg. 28(1) ECR1.
189
have managing directors, though they may appoint some if they so wish. Article
50 of the Regulation sets out the internal rules on quorums and decision-taking
in SE organs. As employee participation is not recognised under Irish law, the
derogation permitted by Article 50(3) is not relevant in Ireland.
47. Ireland has opted to extend the scope of the supervisory organ’s powers
(pursuant to Art. 41(3) Reg.) so as to allow each member to request from the
management organ any information necessary to perform his or her duties.25
48. Ireland has not enacted the options contained in Article 48(1) and (2) of
the Regulation, pursuant to which a Member State may provide that: (i) the
supervisory organ in an SE with a two-tier system can make certain categories
of decisions subject to its approval; and (ii) certain categories of transactions
must be indicated in the articles of SEs registered within the territory of that
Member State.

49. Under Irish law, directors are appointed by a company’s general meeting
of shareholders, and additional directors may be co-opted onto the board. The
articles of an SE registered in Ireland may permit the members of the manage-
ment organ to be appointed and removed by the general meeting in accordance
with Article 39(2),26 without prejudice to shareholders’ right under domestic
law to remove a director by way of an ordinary resolution.
50. The Irish implementing legislation has introduced a provision whereby a
secretary with the same duties and obligations as the secretary of a PLC must
be appointed for every SE registered in Ireland (by the administrative organ for
an SE with a one-tier system and by the supervisory and management organs
for an SE with a two-tier system).27
The secretary’s functions include administration, such as bookkeeping, making
the annual return to the Registrar, keeping the minutes of general meetings of
the board of directors, notifying the Registrar of any amendments to the memo-
randum and articles of association, sending notice of meetings to members and
handling all required filings with the CRO.
It should be noted that the prohibition in Ireland on companies having a body cor-
porate as a director has no parallel in the case of secretaries, and thus many com-
panies appoint corporate secretarial service providers as their named secretary.
51. For the purposes of application to an SE of the provisions of the CA
that require a document prepared by a PLC to be signed or certified by the
company’s secretary, acting alone or jointly with a director (e.g. documents
that must be signed under seal) or, as the case may be, by a specified number
25 Ibid., Reg. 18. 26 Ibid., Reg. 17. 27 Ibid., Reg. 28(2).
190
Ireland
of directors, this requirement shall be deemed satisfied, in the case of an SE,

if the document is signed or certified by the SE’s secretary acting alone or, as
appropriate, jointly with the requisite number of members of the administrative
organ, the supervisory organ or the management organ, as the case may be.28
52. Every member of the supervisory organ is entitled to require the man-
agement organ to provide information of any kind necessary to exercise
supervision in accordance with Article 40(1).29
53. Ireland has not chosen to stipulate a maximum period of time during which
a member of the supervisory board can fill a vacancy on the management
board (Art. 39(3) Reg.).
C Liability
54. The liability of directors is governed by the provisions of the CA applicable

to directors of Irish companies. These provisions also apply to SEs.
The following are examples of situations in which directors may be held liable
for breach of the Companies Acts:
(a) A director who carries on a business with the intent to defraud creditors
or for any fraudulent purpose can be held personally liable for some or all
of the company’s debts. This also applies where a director is found guilty
of reckless trading or if the company has not maintained proper books of
account.30
(b) Any director who misapplies or retains any money or property of the
company or is found guilty of any breach of duty or trust in relation to the
company may be compelled to repay the money or restore the property
or compensate the company.31
(c) It is both a criminal and a civil offence for a person connected with a
company, including directors, to deal in the company’s shares on the
basis of inside information in relation to the value of these shares. The
criminal offence carries a penalty of up to ten years’ imprisonment and
fines of up to €253,950. The civil liability extends to compensating any
other party to the transaction who was not in possession of the relevant
information and accounting to the company for any profit made on the
transaction.32
IV Employee involvment
55. The Directive has been transposed into Irish law through the EEIR.
28 Ibid., Reg. 28(3). 29 Ibid., Reg. 18. 30 S 297 CA 1963.

31 Ibid., s 298. 32 Part 5 CA 1990.
191

56. An SNB must be elected to agree a level of employee involvement in the SE.
The allocation of SNB members is by Member State. The competent organs of
the participating companies, concerned subsidiaries and establishments shall
arrange for these elections.
Where the number of seats on the SNB allocated to the State is equal to the
number of participating companies with employees in the State, there shall be
at least one seat for each participating company, and each member elected to fill
such a seat shall be considered as representing the employees of the participating
company that elected or appointed him or her.33
Where the number of the seats on the SNB allocated to the State is greater
than the number of participating companies with employees in the State, there
shall be one seat for each participating company, and additional seats shall
be allocated to participating companies by decreasing order of the number of
employees they employ in each Member State. The representatives elected or
appointed to fill a seat shall be considered to represent the employees of the
companies that elected them.34
Where the number of seats on the SNB allocated to the State is less than the
number of participating companies, a number of members equal to the number
of available seats shall be elected or appointed according to the greatest number
of votes, and the representatives so elected or appointed shall between them
represent the employees of the participating companies in the State.35
The SNB and the competent organs of the participating companies must nego-
tiate and determine by written agreement arrangements for employee involve-
ment in the SE. With a view to concluding such an agreement, the competent
organs of the participating companies shall:
(a) convene a meeting with the SNB and inform local management accord-
ingly; and
(b) inform the SNB of the plan, expected timetable and actual process of
establishing the SE up to its registration.36
The agreement referred to above shall be binding on all companies within the
SE’s group, irrespective of the Member State in which it is signed and the
location of these companies.
The SNB shall take decisions by an absolute majority of its members, with each
member having one vote, provided such a majority also represents an absolute
majority of the employees.
33 Reg. 6(3) EEIR. 34 Ibid., Reg. 6(4). 35 Ibid., Reg. 6(5). 36 Ibid., Reg. 9(2).
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Ireland
If negotiations would lead to a reduction in participation rights, the majority

required to approve entering into the agreement for employee involvement in the
SE shall be two-thirds of the votes cast by SNB members representing at least
two-thirds of the total number of employees, including the votes of members
representing employees employed in at least two Members States:
(a) in the case of an SE to be formed by merger, if participation covers at least
25% of the total number of employees of the participating companies;
and
(b) in a holding or subsidiary SE, if participation covers at least 50% of the
total number of employees of the participating companies.37
The SNB shall bring any decision to the employees’ attention as soon as rea-
sonably practicable and, in any event, no later than 14 days after the decision
has been taken.38
57. Irish law does not currently recognise the right of employees to participate
in the corporate decision-making process or to sit on the board (although they
are not prevented from serving as directors). Thus, if formal negotiations for
arrangements on employee involvement via the SNB (as set forth in the Direc-
tive) fail, then under the standard rules contained in the EEIR,39 an SE formed
by an Irish company need only guarantee employee participation to the extent
such participation already exists in the other companies forming the SE. Where
the standard rules on employee participation apply and if more than one form
of participation exists in the participating companies, the SNB shall determine
which form should be continued in the SE.
Ireland has not made further provision for amending the rules applicable in
the absence of any decision on the matter, as permitted by Article 7(2) of the
Directive.
Ireland has not opted to lay down budgetary rules for the operation of the SNB,
as permitted by Article 3(7) of the Directive; nor has it opted to take advantage
of the derogation provided in Article 7(3) of the Directive.
3 Protection of employee representatives40

58. SNB members and employee representatives cannot be penalised for the
performance of their functions under the EEIR. They are entitled to be paid their
wages for any period of absence required to perform their functions as SNB
members or employee representatives and should be granted the necessary
time-off to do so. In addition, they are protected against unfair dismissal, any
37 Ibid., Reg. 9(3). 38 Ibid., Reg. 9(5). 39 Schedule 1. 40 Reg. 19 EEIR.
193
unfavourable changes to their conditions of employment and unfair treatment

(including selection for redundancy) by an employer when acting as employee
representatives. Employee representatives are further entitled to any relief avail-
able under the Unfair Dismissals Acts, 1977–2005.
4 Complaints procedure
59. Any disputes or complaints that arise in connection with the formation
of an SNB may be resolved pursuant to the Dispute Resolution Procedure.41
However, such disputes should first be referred to the SE’s internal dispute res-
olution procedure (if any) and subsequently forwarded to the Labour Relations
Commission if resolution is not possible. The Labour Relations Commission
may furnish a certificate to the competent labour court stating that it is satisfied
that no further efforts on its part will advance resolution of the dispute. Having
investigated such a dispute, the labour court may then make a recommendation
in writing giving its opinion on the matter. Each of the parties will be given an
opportunity to be heard by the labour court and to present any evidence relevant
to the dispute, and the court may make a recommendation or a determination
in writing in relation to the dispute and communicate this to the parties. Such
a determination is binding and may be enforced by the circuit courts.
5 Information and confidentiality42

60. An individual who is, or at any time was, an employee, a member of the
SNB or representative body, an employee representative or an expert providing
assistance shall not reveal any information concerning the SE which has been
expressly provided in confidence.
This duty of confidentiality shall continue to apply after cessation of the employ-
ment of the individual concerned or the expiry of his or her term of office.
A relevant undertaking and the SE may refuse to communicate information
to the SNB, a representative body or employees or their representatives in an
information and consultation procedure where the nature of that information is
such that, by reference to objective criteria, it would:
(a) seriously harm the functioning of one or more relevant undertakings of
the SE, or;
(b) be prejudicial to one or more relevant undertakings of the SE.
Ireland has not opted to make this dispensation subject to prior administrative
or judicial authorisation (Art. 8 Dir.) and has not laid down provisions that aim
to provide ideological guidance with respect to information and the expression
of opinions pursuant to Article 8(3) of the Directive.
41 Ibid., Reg. 20. 42 Ibid., Reg. 18.
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Ireland
6 Existing employee involvement rights

61. The EEIR and the regulations contained therein are without prejudice to (a)
the existing rights to employee involvement enjoyed by employees of the SE and
its subsidiaries and establishments, other than participation in the SE’s bodies,
and (b) the rights to participation conferred on employees by any enactment or
instrument hereunder applicable to the subsidiaries of the SE. In this respect,
the provisions of the Employees (Provision of Information and Consultation)
Act 2006 may apply.
V Annual accounts and consolidated accounts

A General remarks
62. The rules governing public limited companies in Ireland also apply to SEs
registered in Ireland as regards the preparation, auditing and publication of their
annual (and, where applicable, consolidated) accounts (Art. 61 Reg.).
B Annual accounts
63. SEs are required to keep proper books of account which give a true and fair
view of their financial affairs. SEs are also required to disclose details of their
accounts at their AGM and to attach a copy of these accounts to the annual return
filed with the CRO. In addition, they are required to observe certain standards in
the preparation of accounts, following specimen formats and disclosing certain
information by way of notes to the accounts.
Directors of an SE are required to present the following accounts and reports
to the company’s members at the AGM:
• a profit and loss account (or an income and expenditure account if the
company is not trading for profit);
• a balance sheet;
• a directors’ report;
• an auditor’s report.
The above documents must be annexed to the annual return of a limited company
on delivery to the CRO. In addition, there must be a certificate, signed by both
a director and the secretary, certifying that the accounts and reports are true
copies of those presented or to be presented to the SE’s AGM.
If an SE fails to comply with these requirements, the CRO will reject its annual
return. In addition, the company and every officer who is in default will be
liable for a fine not exceeding €1,905.
195
No accounts are required to be annexed to an SE’s first annual return following

incorporation. This return must be prepared up to the date six months after the
date of the company’s incorporation. Accounts are required to be attached to
all subsequent annual returns filed by the SE, however.
C Consolidated accounts
64. Subject to certain exceptions, consolidated accounts must be prepared if the
company in question is the parent company of a group of companies (so SEs
formed as subsidiaries will not need to do so). Consolidated accounts are com-
prised of a consolidated balance sheet detailing the state of affairs for the whole
group; a consolidated profit and loss account dealing with the profit and loss of
the group as a whole; and notes to the accounts giving additional information.
The consolidated accounts must combine in full the information contained in
the separate accounts of each undertakings in the group, subject to any adjust-
ments required or committed by the European Community (Companies: Group
Accounts) Regulations 1992.
Special rules apply to banks and insurance companies. Article 62 of the Regu-
lation states that these rules shall also apply to these types of SEs.
2 Auditors
65. Every SE is required to appoint an auditor(s) at its AGM. The auditor’s
or auditors’ term starts at the conclusion of the AGM and runs until the con-
clusion of the next AGM.43 The appointment of an auditor or auditors is prin-
cipally a matter for the shareholders in general meeting. Casual vacancies in
the office of auditor may be filled by the directors or the company in general
meeting.
Auditors of an Irish SE must be members of one of the following institutes:
• The Institute of Chartered Accountants in Ireland

• The Institute of Chartered Accountants in England and Wales
• The Institute of Chartered Accountants in Scotland
• The Institute of Certified Public Accountants in Ireland
• The Chartered Association of Certified Accountants
Officers, servants and employees of the SE may not be appointed auditors.

66. The competent authorities in Ireland for the purposes of Article 68(2) of
the Regulation are:44
43 S 160(1) CA 1963. 44 Reg. 29 ECR1.
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Ireland
(a) The Registrar of Companies, in respect of Articles 8(7) and 8(8);

(b) The Director of Corporate Enforcement, in respect of Articles 8(14), (19),
(54), (55) and (64); and
(c) The High Court, in respect of Articles 25 and 26.
VII Dissolution
1 General remarks
67. The insolvency and dissolution procedures available to companies in Ireland
are:
(a) members’ voluntary liquidation;
(b) creditors’ voluntary liquidation;
(c) compulsory liquidation;
(d) receivership;
(e) examinership;
(f) schemes of arrangement.
The application of these procedures is governed by the CA, the Rules of the
Superior Courts and the case law.
2 Liquidation
A Members’ voluntary liquidation45
68. In order to initiate a members’ voluntary winding up, the company must
be solvent, meaning it must be able to pay its debts in full within one year of
commencement of the winding up. The process entails: (i) preparation by a
majority of the board of directors of a declaration of solvency; (ii) convening
of a shareholders’ meeting; and (iii) the passing of special resolutions to wind
up the company and appoint a liquidator. This is the most common means of
winding up a company in Ireland.
B Creditors’ voluntary liquidation

69. This occurs when a company is unable to pay its debts and the directors
initiate the winding-up process. To this end, the board of directors convenes a
shareholders meeting at which ordinary resolutions are passed to wind up the
company, by reason of its inability to pay its debts, and to appoint a liquidator.
The shareholders’ meeting is normally immediately followed by a creditors’
meeting, usually chaired by a director of the company who is expected to account
to the creditors as to the cause of the company’s insolvency. The creditors may
appoint an alternative liquidator as a substitute for the company’s appointment
and a committee of inspection.
45 Governed by ss 256–264 CA 1963.
197
C Compulsory liquidation46
70. Compulsory or court-ordered winding up is again quite common. Usually
this occurs where the company is insolvent or if there is a shareholder dispute
which cannot be resolved. Compulsory liquidation will also arise where the
High Court is petitioned by a creditor, contributor or the company itself to
have the company involuntarily wound up. Where the court is of the view
that the company should be wound up, it will issue an order to this end and
appoint a liquidator for the purposes of effecting the winding-up and realising
the company’s assets. The liquidator’s powers are subject to judicial review.
3 Receivership
71. The most common type of receivership occurs where a secured creditor
(usually a lending institution) appoints a receiver pursuant to contractual powers
granted by the company in the debenture or charge under which a loan was given
if a company has defaulted on repayments. Where there is no such contractual
power in the debenture, the creditor can petition the court to have the company
wound up. The appointment of a receiver does not change the status of the
company. Although the directors cease to control the assets over which the
receiver has been appointed, their normal powers and duties continue in respect
of the company’s other assets and liabilities.
In practice, most receiverships result in the dissolution of the company. A
receiver and liquidator may act concurrently in respect of the same company,
but a liquidator is unable to deal with assets under a receiver’s control.
4 Examinership
72. Where a company is, or is likely to be, unable to pay its debts and has not
been wound up, a petition may be presented to the High Court seeking protection
and the appointment of an examiner.47 Such a petition may be presented by the
company itself, its directors, any creditor or shareholders representing 10% or
more of the company’s paid-up capital.
When appointing an examiner, the court must be satisfied that there is a rea-
sonable prospect for the company’s survival in the whole or any part of its
undertaking as a going concern.
For a period of seventy days from the date of the petition, the company is
protected from any action which might be taken by creditors. Accordingly,
winding-up proceedings or the appointment of a receiver are not allowed. The
examiner’s principal duty is to prepare a report for the court on the viability
of the company. The proposals are then put to the shareholders and to the
46 Ibid., s 213. 47 CA(A)(No. 2)A 1999.
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Ireland
various classes of creditors and shall be deemed to have been accepted by a

class of creditors or of members when approved by a majority in number and
three-quarters in value of the claims present.
Once the members and creditors have voted on the examiner’s proposals, the
examiner must report back to the court on the outcome of those meetings. If the
court decides to confirm the proposals, it can fix a date for their implementation.
If the court does not confirm the proposals, it can issue such an order as it deems
fit, which is likely to be an order to wind up the company.
5 Schemes of arrangement
73. Section 201 CA 1963 provides inter alia that where a compromise or
arrangement is proposed between a company and its creditors, the court may,
on the application of the company or of any creditor or member, order a meeting
of creditors or members, as the case may be, to be summoned in such a manner
as the court directs.
If the majority of creditors or members representing at least three-quarters of
the value of that class votes in favour of the resolution agreeing to a compromise
arrangement, the compromise shall, if sanctioned by the court, be binding on
all creditors. This procedure is mentioned for the sake of completeness only,
as it is very rarely used and has effectively been superseded by the process of
examinership.
74. Irish law does not provide for procedures applicable in the event of insol-
vency or cessation of payments, other than those mentioned above.
75. In the event any winding up, liquidation or insolvency procedure is initiated
or terminated, the SE is obliged to publicise the date on which this event occurred
and file a Form SE 15 with the CRO.
VIII Tax treatment

1 Introduction
76. Broadly speaking, an SE is treated for tax purposes like any other Irish
company, subject to a number of provisions necessary to recognise and cater
for transactions that an SE can be involved in which a regular Irish company
cannot, such as cross-border mergers.
An SE registered in Ireland is treated as a resident of Ireland for tax purposes.
Irish tax law has recently been amended (by the Finance Act 2006) to accom-
modate certain tax aspects relating to SEs.
In particular, changes were introduced to address the formation of an SE by
merger. The merger aspects of Directive 90/434/EEC (commonly referred to as
199
the ‘Merger Directive’) were not specifically transposed into Irish law because
it is not possible for an Irish company to carry out a cross-border merger. As
it is possible under the SE regulations to carry out a merger in the context of
forming a SE, provisions were introduced to deal with the tax aspects of such
a transaction.
In particular, a new section (section 633A) was inserted into the Taxes Consoli-
dation Act 1997, setting out rules covering the situation where an SE is formed
by merger and, following its formation, assets remain in Ireland. This section
provides for tax neutrality where the assets transferred to an SE in the course
of a merger to form an SE remain chargeable to tax in Ireland afterwards.
2 Income tax
77. Under Irish taxation rules, corporation tax is charged on the profits of a
company resident in Ireland for tax purposes. Profits are defined as a company’s
income and chargeable gains. In certain situations, a company may be subject
to income tax or to capital gains tax rather than corporation tax. In order to
calculate a company’s taxable income, its trading profit from its profit and loss
account is adjusted for tax purposes. This will involve adding back disallowed
debited expenditures and deducting expenditures which are allowed for tax
purposes but not debited in the profit and loss account. Irish tax law disallows
the deduction of certain specific types of expenditures in computing a company’s
taxable trading income. For an expenditure to be deductible it must be incurred
wholly and exclusively for the purposes of the company’s trade and not be of a
capital nature.
78. Corporation tax is charged at a rate of 12.5% on all corporate trading profits,
with the exception of mining and petroleum activities and dealings in land. The
latter income and all other corporate income is taxed at a rate of 25%. The
effective tax rate on chargeable gains is 20%.
An SE whose registered office is in Ireland is deemed, for the purposes of
the Tax Acts, to be a tax resident of Ireland48 (subject to the same exceptions
applicable to other Irish companies). An SE that transfers its registered office
out of Ireland in accordance with Article 8 of the Regulation does not cease
to be tax resident of Ireland solely by reason of the transfer.49 Like any other
company, an SE that is centrally managed and controlled in Ireland will be an
Irish resident for tax purposes regardless of its place of registration.
3 Value added tax

79. Value added tax (VAT) is payable on goods and services supplied in Ireland
by taxable persons in the course of business. VAT is also payable on goods
48 S 23B(1) Taxes Consolidation Act 1997 (TCA). 49 Ibid., s 23B(2).
200
Ireland
imported into Ireland from outside the EU. The VAT rates range from 0%
to 21%. Generally, businesses registered for VAT are entitled to recover VAT
paid on their purchases and expenses, including capital expenditures. An SE is
treated no differently than any other Irish company for VAT purposes.
4 Other taxes
80. Stamp duty is a once-off tax on documents implementing certain transac-
tions. The principal act governing stamp duty is the Stamp Duties Consolidation
Act 1999 (SDCA). Any instrument specified in Schedule 1 to the SDCA which
is executed in Ireland or, wherever executed relates to property situated in Ire-
land or any matter or thing done or to be done in Ireland, is subject to Irish stamp
duty. The actual amount of the duty depends on the nature of the instrument
created.
An instrument evidencing the sale of shares in an Irish registered company,
including for this purpose an SE registered in Ireland, for cash consideration will
be subject to stamp duty under the ‘conveyance or transfer on sale of any stocks
or marketable securities’ head of charge and liable for stamp duty at a rate of 1%
of the value of the consideration or, where the transfer constitutes a voluntary
disposition, the market value of the shares. Various forms of relief from the
charge to stamp duty exist for company restructurings and amalgamations and
for transfers of assets between associated companies.
IX Conclusion
81. The SE has a number of notable advantages:
• As an Irish company cannot transfer its registered office to another Mem-

ber State without first having to wind up its operations in Ireland, the fact
that an SE can move its registered office to another Member State without
having to wind up its operations and re-register in the second Member
State should result in greater financial and administrative efficiency.
• There are no special tax provisions applicable to the SE (at the moment).
Its tax treatment will thus be determined by the provisions of corporate
tax law of each Member State. However, tax considerations could be a
driver towards use of the SE, provided the company is established in a
Member State that taxes companies on their worldwide income. In this
case, it will be considerably easier to offset losses from operations in one
country against profits from operations in another.
• It was not previously possible for an Irish company to have a two-tier
board. The new legislation will allow SEs formed in Ireland to opt for
separate management and supervisory boards, if they wish.
201
82. Despite the advantages, however, there are certain negative aspects to the
SE:
• In practice, it may take some time and expense to establish an SE. The
procedure for transferring an SE’s registered office is quite complex and
subject to extensive safeguards to protect the interests of creditors.
• As in the UK, Irish law does not currently provide for high levels of
employee involvement on company boards, and Irish boards may not
wish to go through the long consultation process with their employees
as required by the Directive. This may result in SEs only being used as
SPVs where the founding parties do not have any employees. Ireland
has no institutionalised system of employee representation, other than for
state enterprises. Less than 10% of the Irish work force is employed by
a state enterprise, and the related scope for employee involvement at this
level has been diminishing with the continued privatisation of this sector.
83. To date, interest in the SE has been limited, but this is, of course, partly to
do with the fact that until the Regulation was actually implemented, it was not
possible to establish an SE in Ireland. It is therefore hoped that interest in the
SE will grow now that the Regulation has been implemented.
202
7
Italy
francesco gianni
Gianni, Origoni, Grippo & Partners
I Introduction 204
III Formation 205
B Name 206
E Capital 209
D Formation by conversion 215
4 Registration and acquisition of legal personality 216
3 Management 218
C Liability 221
V Group companies 222
VI Employee involvement 223
3 Protection of employee representatives and duty of
confidentiality 224
VII Annual and consolidated accounts 224
1 Annual and consolidated accounts 224
2 Auditors 226
VIII Termination 226
1 Winding up 226
2 Liquidation 227
3 Insolvency (Bankruptcy) 227
203
4 Composition with creditors 228

IX Tax treatment 229
X Conclusion 230
I Introduction
1. Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute
for a European company with regard to the involvement of employees (the
‘Directive’) has been transposed into Italian law by means of Legislative Decree
N◦ 188 of 19 August 2005 (effective 6 October 2005, the ‘Legislative Decree’).
As far as Council Regulation (EC) No 2157/2001 of 8 October 2001 on the
Statute for a European company (SE) (the ‘Regulation’) is concerned, no imple-
menting legislation has been adopted in Italy so far. In this respect, though a
Council regulation is, in principle, immediately applicable within all Member
States, regardless of whether implementing rules have been enacted, in some
instances the Regulation seems to refer to national laws to be enacted by each
Member States in relation to the SE.
Due to the abovementioned lack of implementation of the Regulation, there
has been a lengthy debate amongst scholars and notaries in Italy regarding the
possibility to form an SE with its registered office in Italy. Although the issue
has been somewhat controversial, the prevailing opinion seems to be that an SE
can be set up with its registered office in Italy. This interpretation has been, in
particular, upheld by the authoritative National Council of Notaries (‘NCN’) in
an opinion rendered in March 2006.1
The NCN’s interpretation has – to a certain extent – filled in gaps left by the
Italian legislature, in particular with respect to identification of the national
authorities in charge of certain formalities in connection with the incorporation
of an SE.2
The lack of specific implementing rules and of precise indicators by the Italian
legislature renders, to a certain degree, the legal framework in which the SE will
operate within Italy uncertain. This uncertainty may, tentatively, be overridden
by a combined reading and interpretation of the Regulation with the provisions
of Italian law applicable to joint stock companies, relying for support on the
NCN’s authoritative opinion, where necessary.
1
It should be noted that the NCN’s opinion does not have the effect of law and represents only
an authoritative interpretation of the applicable law.
2
Article 68(2) of the Regulation provides that ‘[e]ach Member State shall designate the competent
authority within the meaning of Articles 8, 25, 26, 54, 55 and 64. It shall inform the Commission
and the other Member States accordingly’. There is no evidence, however, that Italy has fulfilled
this obligation to inform.
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Italy

2. The SE certainly presents certain advantages compared to national corporate
forms under Italian law. Indeed, the SE is able to operate on a European-wide
basis as a corporate vehicle governed, to a certain extent, by a single set of rules
adopted at the Community level, directly applicable in all Members States.
Indeed, as a result of the introduction of the SE, companies in the EU now
have the option to form a European company, operating throughout the EU
on the basis of a single set of rules, with a unified management and reporting
system, without having to face the obstacles that arise due to differences in,
and limited territorial application of, national company law. In practice, this
implies that there will be significant reductions in terms of administrative and
legal costs as it will no longer be necessary to set up a financially costly and
administratively time-consuming complex network of subsidiaries governed by
different national laws.
In this respect, the Regulation also aims to overcome the difficulties inherent in
restructuring operations and transactions involving companies from different
Member States due to different national laws, thus permitting and regulating
cross-border mergers3 and transfers of registered offices.
The possibility to transfer an SE’s registered office to another Member State
without affecting legal personality and, following the implementation in all
Member States (including Italy) of Council Directive 2005/19/EC of 17 Febru-
ary 2005, without adverse tax consequences, appears particularly advantageous.
In the latter respect, SEs with commercial interests in more than one Member
State will be able to move across borders at will in response to the changing
needs of their business, by transferring their registered office from one Mem-
ber State to another, without the need to liquidate and form a new company.4
Such a transfer could also be motivated by a change in the law that renders the
legislation in other Member States more attractive.
III Formation
1 General remarks
A Founding parties
3. The provisions of the Regulation with respect to the requirements that the
founders of an SE must meet appear to apply in Italy.
3
International mergers are now governed by Directive 2005/56/EC on cross-border mergers of
limited liability companies.
4
Currently, the transfer of an Italian company’s registered office (and head office) will trigger, in
many cases, its winding up.
205
B Name
4. The name of an SE must be preceded or followed by the abbreviation SE.

Only SEs may include this abbreviation in their names, except for companies,
firms and other legal entities whose names included this abbreviation before
the entry into force of the Regulation (Art. 11 Reg.). Furthermore, if the name
of a newly formed SE is identical or similar to the name of another legal entity
and such similarity is liable to create confusion in light of the SE’s area of
activity or the territory in which its activity is exercised, the SE should modify
its name in order to sufficiently differentiate it from that of the other legal entity
(Arts. 2564 and 2567 Italian Civil Code, hereinafter ‘ICC’).

5. Pursuant to the first paragraph of Article 25 of Law 218/1995, Italy applies
the incorporation theory to determine the national law applicable to a legal
entity. In any event, Italian law will apply if the company’s head office (i.e., its
central management and administration) is located in Italy or if its main activity
is carried out in Italy. Moreover, pursuant to the third paragraph of Article 25
of Law 218/1995, the transfer of a company’s registered office from Italy to
another Member State is allowed to the extent it is carried out in compliance
with the laws of the states involved. In many instances, however, the transfer of
an Italian company’s registered office (and head office) from Italy will trigger
its winding up if the new state does not recognise the transfer and requires that
the company first be wound up.5
An SE is, on the other hand, regulated by the laws of the Member State where
its registered office is located (rather than by the laws of the state where it is
incorporated), subject of course to the provisions of the Regulation.
Pursuant to Article 7 of the Regulation, an SE’s registered office shall be located
in the same Member State as its head office. Article 6 of the Legislative Decree
adds that the registered office of an Italian SE should be located at the same
place as its head office.6
The Regulation refers to the national law of the Member State in which the
SE has its registered office with respect to the establishment of a judicial rem-
edy to ensure liquidation of an SE whose head office is located outside the
territory of such Member State, in violation of Article 7 of the Regulation.
Absent any implementing rules in Italy, the NCN has indicated that, under
5
This will generally occur where the state of destination recognises the head office theory (as
opposed to the incorporation theory). Generally speaking, such a transfer will not trigger winding
up if the state of destination follows the incorporation theory.
6
The Regulation gives each Member State discretion to require SEs registered on its territory to
have their head office and registered office at the same place (Art. 7 Reg.).
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Italy
these circumstances, the competent Italian court can: (i) issue an order call-
ing for the dissolution of an SE with its registered office in Italy and its head
office outside the Italian territory, to the extent the violation of Article 7 of the
Regulation has not been remedied in the meantime; and (ii) convene a general
meeting of shareholders to appoint liquidators, or failing such an appointment,
directly appoint liquidators pursuant to Article 2487 of the Italian Civil Code.
The NCN does not indicate the authority in Italy that shall inform, pursuant to
Article 64 of the Regulation, the authorities of the Member State where an SE’s
registered office is located should it be ascertained that the SE’s head office is
in Italy.

6. The rules relating to the transfer of an SE’s registered office to another
Member State are set out in Article 8 of the Regulation. Such a transfer will not
result in the winding up of the SE or in the creation of a new legal person.
As to the procedure, the SE’s management or administrative body must prepare a
transfer proposal to be filed with and published in the Companies Register of the
place where the SE has its registered office. In addition, this body must prepare
a report in which it explains and justifies the legal and economic aspects of the
transfer as well as the implications of the transfer for shareholders, creditors
and employees. The transfer proposal and this report must be made available
at the SE’s registered office to shareholders and creditors at least one month
before the general meeting scheduled to vote on the transfer.
7. The general meeting of shareholders can vote on the proposed transfer no
earlier than two months after the date of publication of the transfer proposal
by the competent Companies Register. Since the transfer of an SE’s registered
office abroad necessitates an amendment to its articles of association, the general
meeting should approve (on first call) the transfer by the greater of: (i) 75% of
the votes cast at the meeting;7 or (ii) more than half the SE’s share capital or
any higher majority provided for in the company’s by-laws.8 Such a resolution
should be adopted before a notary public, who shall then file the text of the
resolution with the competent Companies Register within thirty days.
Article 8(7) of the Regulation provides that, prior to completion of the transfer,
it should be ensured that the interests of creditors and the holders of other
rights vis-à-vis the SE, with respect to any claims arising prior to publication
7
Article 59 of the Regulation provides that ‘[a]mendments of the SE’s statutes shall require a
decision by the general meeting taken by a majority which may not be less than two-thirds of the
votes cast, unless the law applicable to public limited-liability companies in the Members State
in which an SE’s registered office is situated requires or permits a larger majority.’
8
Specific quorum and majority requirements apply on second call under Italian law. It is not
clear, however, whether the majority mentioned in Article 59 of the Regulation (see N◦ 7 of this
report) should also apply on second call.
207
of the transfer proposal, have been adequately protected in accordance with

the requirements of the Member State where the SE has its registered office.
Absent any Italian implementing rules regarding the protection of creditors,
certain commentators have taken the view that an SE with its registered office
in Italy cannot transfer this office abroad.9 Such a conclusion would de facto
frustrate one of the most obvious advantages of the SE, i.e. the ability to freely
transfer its registered office within the Community.
Therefore, in order to fill in the legislative gap, the NCN proposes applying
by analogy Article 2503 of the Italian Civil Code (relating to the merger pro-
cedure), as a result of which creditors and/or bondholders with claims against
the SE that exist on the publication date of the transfer proposal in the Com-
panies Register may object to the transfer within a sixty-day period. Although
the NCN does not indicate clearly when this sixty-day term should start to
run, it is reasonable to assume that it starts upon registration with the Compa-
nies Register of the shareholder resolution approving the transfer proposal.
Despite creditors’ objections, the competent court may, however, authorise
completion of the transfer if it is ascertained that: (i) there is no risk of harm
to the objecting creditors and bondholders; or (ii) the SE has provided ade-
quate guaranties. Furthermore, this sixty-day term can be waived in certain
cases provided for under Article 2503 of the Italian Civil Code, including
but not limited to where the creditors and bondholders consent to the trans-
fer or an amount sufficient to pay the claims of all creditors and bondholders is
deposited.
8. As soon as the above formalities are completed, the court, notary or other
designated authority in the Member State where the SE has its registered office
shall issue a certificate attesting to the completion of all requisite acts and
formalities (Art. 8(8) Reg.). Italy has not designated the authority responsible
for issuing such a certificate. The NCN is of the opinion that it should be issued
by the notary public who notarises the shareholder resolution approving the
transfer, to the extent all formalities (including those relating to the protection
of creditors’ rights) have been completed.
After the issuance of this certificate, the transfer of the SE’s registered office
shall be recorded in the companies registry of the new Member State.10 This
registry shall notify the Member State where the SE’s registered office was
previously located of the new registration. Upon receipt of such notice, the
latter will delete the old registration. The transfer of the SE’s registered office
will take effect on the date on which the new registration is made.
9
See G.A. Rescio, in La Società Europea tra diritto comunitario e diritto nazionale, in Rivista
delle Società, 2003, p. 984.
10
The SE should also provide the competent authority of the new Member State with proof that
all other formalities required to be registered in this state have been completed.
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Italy
9. The Regulation also provides that the Member States may adopt appropriate
legislation in order to protect the rights of minority shareholders who oppose the
transfer abroad of an SE’s registered office. On the basis of this provision, Article
2437 of the Italian Civil Code may apply. This article grants any shareholder who
opposes the transfer abroad of an Italian joint stock company (SpA) the right
to exit the company,11 as a result of which minority shareholders who oppose
the transfer of an SE’s registered office may be able to force the company to
redeem their shares.
The procedure described above does not apply to the transfer of an SE’s reg-
istered office within the same Member State (i.e., Italy). The rules applicable
to such a transfer are determined by national law (see vol. 1, chap. 2, N◦ 81).
As a result, the transfer of an SE’s registered office within Italy is a matter for
the (extraordinary) general meeting, unless the SE’s by-laws have vested the
management or administrative body with the power to decide on such a transfer
(Art. 2365(2) ICC).
D Corporate purpose
10. The Italian rules on corporate purpose should apply to SEs registered in
Italy. This means that an SE’s corporate purpose must be clearly defined in its
by-laws and that an SE can only engage in acts that fall within or are incidental
to its corporate purpose. Any ultra vires acts carried out by members of an
SE’s administrative or management body shall be binding on the company
unless it can be established that the third party in question acted with intent
to harm the SE (publication of the SE’s corporate purpose in the Companies
Register does not constitute sufficient proof of knowledge and intent in this
regard).
E Capital
11. The capital of an SE is represented by shares and should be at least equal to

€120,000. The subscription and payment of shares are governed by the rules of
national law applicable to public limited-liability companies of the place where
the SE has its registered office (see vol. 1, chap. 2, N◦ 16).
Upon subscription of the share capital, shareholders must pay in at least 25%
of any contribution in cash (Art. 2342 ICC); shares subscribed by way of a
contribution in kind must be fully paid-in upon subscription.
As to the procedure to make a contribution in kind, a shareholder who intends
to make such a contribution (upon either incorporation or a capital increase)
must obtain a valuation from a court-appointed expert stating inter alia that the
11
Article 2437 of the Italian Civil Code grants such a right to shareholders who do not participate
in the resolution approving the transfer abroad.
209
value of the assets to be contributed is at least equal to their value for purposes
of determining the share capital plus any share premium. The expert shall be
appointed by the competent court of the place where the receiving company’s
registered office is located, at the request of the contributing shareholder.
The SE’s directors shall then verify the values indicated in the expert’s report
(Art. 2342 ICC) within 180 days from the filing date with the Companies
Register of the instrument of incorporation or from the contribution, in the
event of a capital increase.

(i) Registration and publication
12. Public limited-liability companies from at least two different Member States
can form an SE by merger. In order to take part in the merger, each company
must have its registered office and head office within the Community.
Among the Italian corporate forms, only a società per azioni (SpA) can partic-
ipate in a merger to form an SE. The società in accomandita per azioni (Sapa)
and the società a responsabilità limitata (Srl) are, indeed, not listed in Annex
I to the Regulation and, therefore, cannot participate in the formation of an SE
by merger. They must first be converted in an SpA.
Each participating company must contribute to the preparation of draft terms
of merger, which shall contain the information set forth in the Regulation (the
‘merger plan’). The management or administrative body is solely competent to
prepare this draft.
The management or administrative body of each participating company shall
prepare a report (the ‘directors’ report’) explaining and justifying the merger
plan and its legal and economic grounds. In particular, the directors’ report
shall explain the share-exchange ratio and describe the valuation methods used
to determine this ratio and highlight any difficulties encountered during the
valuation process (see vol. 1, chap. 2, N◦ 26).
The merger plan must be examined by one or more experts on behalf of each
participating company (the ‘independent expert’), appointed by a judicial or
administrative authority in each Member State (see vol. 1, chap. 2, N◦ 27).
According to the NCN, the independent expert for an SpA participating in the
formation of an SE by merger shall be appointed by the court of the district where
the SpA has its registered office.12 This court will also be competent in Italy
when the participating companies decide to jointly request the appointment
12
Or, if the authors have correctly interpreted the NCN’s opinion, where the new SE will have its
registered office in Italy.
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Italy
of a single independent expert (rather than one expert for each participating
company), as permitted by Article 22 of the Regulation.
The independent expert shall draft a report stating whether the share-exchange
ratio is fair and describing the criteria followed to determine this ratio as well
as any special valuation difficulties (see vol. 1, chap. 2, N◦ 27; Art. 2501sex-
ies ICC). To this extent, the expert can request from each merging company
any information considered necessary to carry out its duties (Art. 22 Reg. and
Art. 2501sexies para. 5 ICC).
An independent expert’s report shall not be required, however, in the event of a
merger by absorption where the acquiring company wholly owns the acquired
company (Art. 31(1) Reg.; Art. 2505 para.1 ICC).
13. The Merger Plan shall be filed with the Companies Register of the district
where the participating SpA has its registered office. The general meeting can
vote on the merger plan no earlier than thirty days after its publication date with
the competent Companies Register (Art. 2501ter ICC; vol. 1, chap. 2, N◦ 25).
The information mentioned in Article 21 of the Regulation (such as the legal
form, name and registered office of each participating company as well as the
proposed SE’s name and registered office) shall then be published in the Italian
official gazzette (Gazzetta Ufficiale).13
Shareholders of the merging companies should be able to consult the following
documents at least 30 days before the general meeting scheduled to vote on
the merger: (i) the draft terms of merger; (ii) the management report and the
independent expert’s report, if required; (iii) the merging companies’ annual
accounts and annual management reports for the last three financial years; and
(iv) if the latest annual accounts relate to a financial year that ended more than
six months before the date on which the merger plan is made available at the
participating company’s registered office, a financial statement dated within
180 days preceding this date (Art. 2501septies ICC; vol. 1, chap. 2, N◦ 28)
(Art. 2501quinquies ICC). Each shareholder is entitled to receive a copy free of
charge of any document made available in accordance with the above provisions.
The merger plan must be approved by the general meeting of each merging
company by the majority required under national law. As far as Italian law is
concerned, a merger14 is approved by the (extraordinary) general meeting, on
13
According to certain scholars, the information referred to under Article 21 should be published
in the competent Companies Register (rather than in the Gazzetta Ufficiale), considering the
repeal of such a formality in the internal merger procedure; see E. Bergamo and P. Tiburzi in
Le nuove trasformazioni, fusioni, scissioni 2005, p. 122.
14
On second call, Article 2369 of the Italian Civil Code requires in any case that shareholders
representing at least one-third of the company’s share capital approve a resolution to change
the corporate form of a SpA. Therefore, this provision could well apply. Specific quorum and
majority requirements are provided with respect to companies whose securities are traded on
the financial markets, including publicly listed companies.
211
first call, by shareholders representing more than 50% of the share capital, unless
the company’s by-laws require a higher majority. If the minimum quorum is not
reached on first call, the extraordinary general meeting may approve the merger
on second call by a two-thirds majority vote of the share capital in attendance,
provided at least one-third of the share capital is present or represented.15
14. The minutes of the extraordinary general meeting of an Italian participating
company must be notarised by a notary public, who shall control and verify
the legality of the merger procedure as far as the Italian company is concerned.
The minutes so notarised shall be filed for registration with the competent
Companies Register by the notary public within 30 days following the date of
the general meeting approving the merger plan (Art. 2502bis ICC).
According to the NCN, provisions aimed at protecting creditors of a merging
company under Italian law should also apply to the formation of an SE by
merger. In its opinion, creditors and/or bondholders with claims against an
SpA participating in the formation of an SE by merger that existed on the
publication date of the merger plan in the Companies Register may object
to the merger within 60 days’ time, starting from the registration date of the
shareholder resolution with the Companies Register.16
Despite creditors’ objections, the competent court may nonetheless authorise
completion of the merger if it is ascertained that: (i) there is no imminent
risk of harm to the objecting creditors and bondholders; or (ii) the SpA
participating in the merger has provided adequate guaranties. Furthermore, the
abovementioned sixty-day period can be waived in the cases provided for by
Article 2503 of the Italian Civil Code, including but not limited to where the
creditors and bondholders consent to the merger or an amount sufficient to pay
the claims of said creditors and bondholders is deposited with a bank.
As soon as the above formalities are completed, a court, notary or other desig-
nated authority in the Member State of each participating company shall issue
a certificate conclusively attesting to the completion of the requisite pre-merger
acts and formalities. (Art. 25(2) Reg.). Italy has not designated the authority
responsible for issuing this certificate. However, the NCN deems that it should
be issued by the notary public who notarised the shareholder resolution approv-
ing the merger plan. Before issuing the certificate, the notary public shall verify
15
See F. Ambrosiani in Le Società, 2002, p. 1499 et seq., who confirms that a SpA shall
approve the merger with the quorum and by the majority required for an extraordinary general
meeting.
16
More specifically, Article 2503 of the Italian Civil Code provides that this sixty-day term starts to
run on the latest registration date of the two shareholder resolutions (each company participating
in the merger must pass a resolution in this regard). Given that one of the participating companies
will be from a Member State other than Italy, the question could arise as to whether this sixty-day
term starts to run on the registration date of the Italian company’s shareholder resolution or on
the later of the two registration dates.
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Italy
that all formalities (including those relating to the protection of creditors) have
been completed and, in particular, that no objections by creditors have been
raised within the aforementioned sixty-day term and that there is the basis for
an anticipated merger or, in the alternative, creditors’ objections have been over-
ridden pursuant to the last paragraph of Article 2445 of the Italian Civil Code.
15. Each participating company shall submit to the competent authority in the
Member State of the acquiring company (which will eventually become an SE)
or the new company (an SE that results from a merger by incorporation) the
abovementioned certificate attesting to completion of the requisite pre-merger
acts and formalities, within six months from its issuance together with a copy
of the approved merger plan.
This competent authority (in the Member State where the SE’s proposed
registered office will be located) shall then scrutinise the legality of the merger,
as regards the completion procedure and formation of the SE. According to the
NCN’s interpretation, this authority in Italy shall be held by the notary public
who shall (i) scrutinise the legality of the merger as well as formation of the
SE17 and, afterwards, (ii) proceed to notarise the merger instrument.18 Within
thirty days from execution of the merger instrument, the notary public shall
file it for registration with the Companies Register in the district where the
SE’s registered office will be located.
The merger and simultaneous formation of the SE will take effect on the date
on which the SE’s merger instrument is recorded with the Companies Register
(Art. 27 Reg. and Art. 2504bis para. 2 ICC).
For the participating SpA, completion of the merger shall then be publicised
through registration with the Companies Register of the district where its
registered office is located.

16. The Member Sates are free to adopt appropriate provisions designed to
protect minority shareholders who oppose the formation of an SE by merger.
In light of the foregoing, Article 2437 may apply and, as a result, minority
shareholders of an SpA who voted against the formation of an SE by merger
could exercise their right to exit the company pursuant to this article, assuming
the proposed merger entails the conversion of the SpA into an SE.19
17
In particular, the notary public should ensure that the merging companies have approved the
draft terms of merger on the same terms and that arrangements for employee involvement have
been determined pursuant to the Directive.
18
The content of the merger instrument is prescribed by Italian law.
19
Article 2437 of the Italian Civil Code provides that shareholders who did not approve the
resolution concerning inter alia conversion of the SpA, the transfer abroad of the company’s
registered office, etc. have a right to request redemption of their shares.
213
(iii) Acquisition by a company holding 90% or more of the shares in

another company
17. Article 31(2) of the Regulation provides that in the event of a merger by
absorption by a parent company holding at least 90% of the share capital of
a subsidiary, a report by management and/or an independent expert shall be
required only to the extent the national law governing either the acquiring
company or the acquired company so requires. According to the provisions
of Italian law applicable to SpAs, under these circumstances, an independent
expert’s report is not required if the subsidiary’s minority shareholders are
granted a put option with respect to their shares at a price determined according
to the criteria applicable with respect to the redemption right.
(iv) Avoidance of a merger

18. The merger cannot be declared void after registration of the SE’s merger
instrument with the competent Companies Register. However, under Italian law,
shareholders and third parties are entitled to be compensated for any damage
arising from a merger (Art. 2504quarter ICC). This provision should probably
also apply to Italian companies participating in the formation of an SE by
merger.
19. In Italy, a società per azioni (SpA), i.e. a public limited-liability company,
and a società a responsabilità limitata (Srl), i.e. a private limited-liability com-
pany, are in principle entitled to participate in the creation of a holding SE (vol.
1, chap. 2, N◦ 36).
However, according to the NCN, it appears that the incorporation of a holding SE
is currently not possible in Italy. Unlike with the other forms, the Regulation’s
provisions on the holding SE entail the introduction of a new and original set
of rules into Italian law, which does not currently contain principles of law that
may be relied on for, or extended to allow the incorporation of a holding SE in
Italy. In this area, therefore, the intervention of the Italian legislature appears
necessary.
20. The rules on the formation of an Italian società per azioni apply to the
formation of a subsidiary SE with its registered office in Italy. If an Italian
company participates in the incorporation of an SE (regardless of where the
SE will be located), it shall be subject to the rules of Italian law regulating its
participation in the incorporation of an SpA.
An SE can itself incorporate one or more subsidiaries that take the form of
an SE.
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Italy
D Formation by conversion
21. In Italy, only a società per azioni can be converted into an SE (Art. 2(4)
Reg.). Such conversion will not result in the winding up of the società per azioni
or in the creation of a new legal person.
The management or administrative body of an SpA shall draw up draft terms
of conversion and a report explaining and justifying the legal and economic
aspects of the conversion and indicating the implications for shareholders and
employees (Art. 37(4) Reg.). The draft terms of the conversion shall be filed for
registration with the Companies Register of the district where the SpA’s regis-
tered office is located at least one month before the general meeting scheduled
to vote on the conversion.
Moreover, one or more independent experts shall be appointed to draw up a
report on the conversion, certifying that the company has net assets at least
equivalent to its capital plus those reserve that may not be distributed by law or
pursuant to the company’s articles. According to the NCN, the expert shall be
appointed by the court in the district where the SpA’s registered office is located.
22. At the extraordinary general meeting on first call, the draft terms of
conversion and the SE’s new articles of association must be approved by
shareholders representing more than 50% of the share capital, unless the
by-laws require a higher majority. If the required quorum is not reached on first
call, the conversion shall be approved by the extraordinary general meeting on
second call by a two-thirds majority vote of the share capital in attendance,
provided at least one third of the share capital is present or represented.20
The minutes of the SpA’s extraordinary general meeting should be notarised
by a notary public. The minutes so notarised shall then be filed for registration
with the competent Companies Register by the notary public within thirty days
following the date of the general meeting approving the conversion.
Subsequently, the conversion shall be registered with the Companies Register
of the district where the SE has its registered office. Only after such registration
shall the SE be deemed to exist and the resolution of the extraordinary general
meeting fully effective.21
Minority shareholders of a SpA who voted against the formation of an SE by
conversion could seek to exercise their redemption right pursuant to Article
2437 of the Italian Civil Code, assuming the SpA will be converted into an SE.
20
Please note that, on second call, Article 2369 of the Italian Civil Code requires in any case that
shareholders representing at least one-third of the share capital approve any change in corporate
form of an SpA. This provision could be deemed applicable in the case at hand, assuming the
conversion entails a change in corporate form (an SpA to an SE).
21
See A. Zanardo, ‘La trasformazione di SpA in società europea alla luce del Regolamento
comunitario 2157/2001’, Contratto e Impresa, 2003 p. 372.
215

23. If acts are performed in an SE’s name prior to its registration, the natu-
ral persons or legal entities that committed the acts shall be held jointly and
severally liable if the SE does not assume the obligations arising there from.
Upon ratification, the acts shall be considered by operation of law to have been
entered into by the SE. Therefore, Article 2331 of the Italian Civil Code does
not apply.
4 Registration and acquisition of legal personality

24. An SE shall be registered in the Member State in which its first registered
office is located. In Italy, the articles of incorporation of an SE should be filed
with the Companies Register of the district where the SE’s registered office
is located. Filing is only possible if the rules on employee involvement have
been fulfilled. Notice of an SE’s registration (or of a change in its registered
office) must be published in the Official Journal of the European Communities
(Art. 14(1) Reg.).
An SE shall acquire legal personality on the date on which it is registered
with the Companies Register (Art. 2(4) Reg.). Similarly, public limited-liability
companies in Italy enjoy legal personality on the date on which their registration
is effected.

1 General remarks
25. The organisation of the SE complies, in part, with the existing Italian rules
applicable to società per azioni. Until very recently, Italy recognised only a
traditional corporate governance model (the so-called modello tradizionale or
‘traditional model’) composed of: (a) a board of directors or a sole director
responsible for managing the company; and (b) a board of statutory auditors
entrusted inter alia with certain surveillance duties regarding compliance of the
company’s activities with its by-laws and applicable law. However, since the
entry into force of the Corporate Law Reform (i.e. January 1, 2004), a società
per azioni can, in addition to the traditional model, opt for either a one-tier or
a two-tier management structure.
An SE may adopt either a one-tier or a two-tier system. Pursuant to the provi-
sions of the Regulation, there is no modello tradizionale available to the SE.

26. Subject to the provisions of the Regulation, the convocation and organ-
isation of the general meeting of an SE with its registered office in Italy
216
Italy
are governed by the provisions applicable to società per azioni under Italian
law.22
The general meeting of an SE shall take decisions according to the so-called col-
lective method (metodo collegiale), which requires that the calling of meetings,
discussion at meetings and the adoption of any resolutions during meetings be
reported in minutes.
The general meeting can be convened by either the board of directors (in the one-
tier system) or the management or supervisory board (in the two-tier system).
In addition, one or more shareholders holding at least 10% of the subscribed
capital, or a lower percentage if the company’s by-laws so provide (Art. 2367
ICC), are entitled to request that a general meeting be called with an agenda
they propose. If the board of directors or the management or supervisory board
or the controlling committee (comitato per il controllo sulla gestione) does not
convene a general meeting in due time, and in any event within two months
following the submission of such a request, the competent court may order that
a meeting be called and designate the chair of the meeting.23
27. The Regulation reserves the following powers to the general meeting of
an SE: transfer of the SE’s registered (and head) office to another Member
State; amendments to the SE’s articles of association; and the appointment and
removal of members of the supervisory board, in the two-tier system, and of
the administrative body, in the one-tier system. Other powers are reserved to
the general meeting of an SE by the provisions of national law of each Member
State applicable to public limited-liability companies (in Italy, the SpA).
According to the provisions of Italian law applicable to the SpA, the general
meeting in the one-tier system votes to approve the SE’s annual accounts and
on any liability actions brought against members of its board of directors. In
the two-tier system, Italian law provides that the supervisory body approves the
annual accounts24 (rather than the general meeting). However, the SE’s by-laws
22
Based on this principle, it may be inferred that, as is the case with a SpA, the general meeting
of an SE with its registered office in Italy may be either ordinary or extraordinary, depending
on the subject matter of the meeting. An extraordinary general meeting is subject to different
quorum and majority requirements.
23
Article 2367 of the Italian Civil Code provides that the court shall issue such an order after
hearing the management and controlling corporate organs, to the extent the decision not to
call a meeting appears unjustified. In addition, the last paragraph of this article specifies that
shareholders may not request that a general meeting be called to vote on items placed on the
agenda further to a proposal of the company’s directors or on the basis of a report or draft
prepared by the latter in accordance with the law. The application of such rules to the calling of
an SE’s general meeting appears controversial.
24
Pursuant to Article 54 of the Regulation, the general meeting must meet at least once each
calendar year within six months from the close of the company’s financial year. Based on this
article, it could be inferred that this general meeting must approve the SE’s annual accounts for
the preceding financial year (see vol. 1, chap. 2, N◦ 62). However, such an interpretation must
217
may provide that if the annual accounts are not approved, or if one-third of the
members of the management or supervisory body so request, the authority to
approve the annual accounts can be granted to the general meeting.
In the two-tier system, the general meeting is competent for decisions on any
liability actions brought against members of the supervisory body. Furthermore,
in both the one-tier and two-tier systems, the general meeting shall decide on
the distribution of profits.
28. Based on the provisions of Italian law applicable to the SpA, the (ordinary)
general meeting of an SE takes decisions on the matters reserved to it (such as
approval of the annual accounts, appointment of members of the board of direc-
tors or supervisory board, the distribution of profit, etc.) by a simple majority
of votes cast or any higher majority specified in the by-laws, provided at least
50% of the share capital is in attendance. No minimum quorum is required,
however, on second call.
An extraordinary general meeting, on the other hand, is required to approve
amendments to an SE’s by-laws. Based on the provisions of Italian law read in
conjunction with the Regulation, it may be inferred that, on first call, amend-
ments to the by-laws of an SE must be approved by the higher of: (i) two-thirds
of the votes cast at the meeting; or (ii) more than half the share capital or
any higher majority provided for in the by-laws. On second call, the extraor-
dinary general meeting can validly take decisions by a two-thirds majority of
the share capital represented if more than one third of the share capital is in
attendance.25
3 Management
(i) General remarks
29. The founders of an SE must opt for either a one-tier or a two-tier management
system. In the one-tier system, management is entrusted to a board of directors
(consiglio di amministrazione). In the two-tier system, management is entrusted
to a management body (consiglio di gestione), overseen by a supervisory board
(consiglio di sorveglianza).
be in keeping with the provisions of Italian law granting, in the two-tier system, authority to
approve the annual accounts to the supervisory board. Apparently, Article 54 of the Regulation
should prevail over the provisions of Italian law requiring that financial statements be approved
within a term not to exceed 120 days from the end of the financial year, with a possible extension
to 180 if the company is obliged to draft consolidated financial statements or in the event of
particular circumstances relating to the company’s structure and purpose.
25
In any event, shareholder resolutions concerning matters such as amendments to the company’s
corporate purpose and extension of its term of existence, etc. must be approved by shareholders
representing more than one-third of the share capital, even on second call.
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Italy
Likewise, the general meeting, the board of directors and the management
body take decisions in accordance with the so-called collective method (metodo
collegiale), which requires that the calling of meetings, discussions and the
adoption of resolutions during such meetings be recorded in minutes.
30. An SE is bound by acts committed by members of its management or admin-
istrative body, even if these members exceeded their representative powers or if
their actions fall outside the SE’s corporate purpose, unless it can be established
that the third party dealing with the SE acted with intent to harm the latter.
31. According to the Regulation, a company or other legal entity may serve as
a member of an administrative, management or supervisory body to the extent
national law does not prohibit its appointment. Please note that the possibility
to appoint a legal entity to the corporate organs of an Italian company is very
controversial, particularly given that until quite recently the traditional view of
both the Italian courts and commentators was that a legal entity could not sit on
a corporate body. This view is now being challenged following a recent ruling
of an Italian court allowing a legal entity to serve on the board of directors of a
limited-liability company.

32. In the one-tier system, the board of directors is entrusted with the over-
all management of the company. Although the Regulation does not expressly
provide for a supervisory body in this system, the provisions of Italian law appli-
cable to one-tier SpAs provide for a so-called controlling committee (comitato
per il controllo sulla gestione) whose function is to monitor the fitness of the
company’s organisational, administrative and accounting systems and, in gen-
eral, supervise the company’s operations. Members of the controlling committee
are appointed by the board of directors and must meet certain requirements in
terms of independence, professionalism and integrity. Though such a corporate
body is not provided for by the Regulation, it seems that a one-tier SE with its
registered office in Italy must establish a controlling committee.26
The management body is validly represented by at least two of its members
(forming a board of directors) and may not consist of a sole director.
33. In view of the principles applicable to the SpA, the board of directors
of an SE may delegate certain of its functions to one of its members (the
managing director) or to an executive committee, specifying the limits of any
powers so entrusted, it being understood, however, that certain activities (such
as preparation of the financial statements or merger plans) may not be delegated.
Delegated members shall ensure that the SE’s organisational, administrative and
accounting framework is suitable for its size and nature. Moreover, delegated
members have information duties towards the entire management body.
26
See Assonime Circular N◦ 4 [2005], p. 5.
219

34. The management body (consiglio di gestione) shall be composed of at
least two members (Art. 2409novies ICC). Management of the SE is entrusted
solely to the management body, which carries out all activities in furtherance
of the SE’s corporate purpose. The management body may delegate certain of
its functions to one of its members or to an executive committee in accordance
with the principles outlined above with reference to the one-tier system.
The supervisory board must have at least three members, unless the SE’s by-laws
require a higher number. Members of the management body and the supervisory
body may, but need not, be shareholders of the SE.
35. The supervisory board27 shall supervise the work performed by the man-
agement body. It may not itself exercise managerial authority. The SE’s articles
should list those categories of transactions, if any, that require the authorisa-
tion of the supervisory organ. Furthermore, in keeping with the provisions of
Article 2409terdecies of the Italian Civil Code, if the by-laws so provide, the
supervisory board can take decisions on strategic transactions and industrial or
financial plans prepared by the management body.
Members of the supervisory board may not serve on the management body
(Art. 39 Reg.). However, the supervisory board can appoint one of its members
to temporarily fill a vacancy on the management body. During this time, the
functions of that person on the supervisory board shall be suspended. Members
of the supervisory board are entitled to participate in meetings of the manage-
ment body and are obliged to attend the general meeting (Art. 2409terdecies,
last paragraph).
The supervisory board shall meet at least once every ninety days and may not
take decisions in writing.
36. Conflicts-of-interest rules for directors of a SpA should apply to members of
the management body of an SE. Thus, the latter shall notify the other members
of the management body and the supervisory body of any interest that member
has, on his or her own behalf or on behalf of a third party, in a given transaction to
be undertaken by the SE, clarifying the extent of this interest. If the transaction
falls within the authority of a delegated member with a similar interest on his or
27
An inconsistency between the provisions of Italian law as to the composition of the supervisory
body, on the one hand, and certain principles underlying the governance of SEs should be
noted. In particular, according to Article 2409duodecies of the Italian Civil Code, employees
or consultants of a SpA may not hold office as members of its supervisory body. In light of this
provision, it could be argued that employees of an SE with its registered office in Italy may
not be appointed to its supervisory body. However, this position appears to conflict with the
rationale of the Directive which could be interpreted as allowing the participation of employees
in any corporate body of an SE. The same could be said for members of the comitato per il
controllo sulla gestione in the one-tier system, who are subject to a similar restriction under
Italian law.
220
Italy
her own or a third party’s behalf, that member shall abstain from pursuing the
transaction and submit the matter to the management organ. In such cases, the
management organ’s resolution shall explain in detail the reasons justifying, and
the advantages of, the transaction at issue for the SE. Special rules to render void
resolutions are provided for breach of the above rules. Furthermore, members of
an SE’s management shall be held liable for any damage deriving from breach
of their disclosure duties.
37. As far as the two-tier system is concerned, members of the management

body are appointed and removed by the supervisory board (Art. 2409terdecies
ICC). Members of the supervisory body are, in turn, appointed by the general
meeting, which also has the power to remove such members from office, without
prejudice to the latter’s right to claim compensation if the removal is not justified
(Art. 2409duodecies, para. 5 ICC). As mentioned above, the supervisory board
can appoint one of its members to temporarily fill a vacancy on the management
body. During this time, the functions of that person on the supervisory board
shall be suspended.
In the one-tier system, members of the board of directors are appointed by
the general meeting. In addition, the general meeting also has the power to
remove directors from office, without prejudice to the latter’s right to claim
compensation if the removal is not justified (Art. 2383, par. 3 ICC). Members
of the controlling committee are, on the other hand, appointed by a resolution
of the board of directors, unless the company’s by-laws provide otherwise.
C Liability
38. The liability of members of the board of directors, management organ,
supervisory body and controlling committee of an SE is governed by the rules
applicable to members of the corresponding corporate organs of a SpA under
Italian law.
In light of the above rule, members of the board of directors or management
board of an SE can be held liable to: (i) the SE for damage sustained by the
same as a result of breach of their duties;28 (ii) creditors of the SE due to breach
of their obligations with respect to preservation of the ‘integrity of the com-
pany’s assets’; and (iii) individual shareholders or third parties, if the individual
shareholder and/or third party has suffered damage that results ‘directly’ from
negligence or a tortious act on the part of the board of directors or management
organ.
28
According to the last paragraph of Article 2392 of the Italian Civil Code, directors who have not
been negligent and who formally voice their disagreement in accordance with the formalities
set forth in this provision shall not be held liable to the company.
221
In the two-tier system, members of the supervisory board can be held jointly
liable, together with members of the management body, if they fail to properly
carry out their supervisory duties and the damage would not have occurred had
they done so (Art. 2409terdecies ICC).
V Group companies
39. The seventeenth recital to the Regulation states that ‘the rule applicable
when an SE is controlled by another undertaking should be specified, and for this
purpose reference should be made to the law governing public limited-liability
companies in the Member State in which the SE has its registered office’.
In addition, the sixteenth recital states that ‘the rules and general principles of
private international law should therefore be applied both where an SE exercises
control and where it is the controlled company’.
Based on these recitals, certain scholars29 have expressed the view that an SE
should be treated, as to the legal provisions applicable to corporate groups,
as a company (specifically a public limited-liability company) incorporated
according to the national law of each Member State. Therefore, the provisions
of Italian law on group companies should also apply to SEs.
40. In general, the provisions on ‘direction and coordination activity’ are sub-
stantially aimed at protecting minority shareholders and creditors of group
companies from actions of the controlling entity (the ‘parent company’) that
could have adverse effects on the business of the controlled companies (the
‘group companies’). Such provisions apply to the extent a company exercises
‘direction and coordination activity’ over another company, i.e. a dominant
influence is actually exerted by one company over another.30
These rules provide, amongst other things, for specific liability of the parent
company to minority shareholders and creditors of its group companies. In
particular, the parent company shall be held liable to shareholders and creditors
of a group company that takes the form of an SE with its registered office in Italy
if, in exercising its ‘direction and coordination activity’, the parent company:
(i) acted in its ‘own or in third parties’ business interests’; (ii) breached the
principles of fair corporate governance and entrepreneurial management of
the group company; and (iii) as a result, caused damage to the profitability and
29
M. Miola in Rivista delle Società, 2003, p. 371.
30
Determining whether ‘direction and coordination activity’ (i.e., dominant influence) exists thus
requires a case-by-case analysis in light of the actual relations amongst the group companies.
However, Italian law contains a presumption of ‘direction and coordination’ if certain circum-
stances are met. In particular, pursuant to Article 2497sexies of the Italian Civil Code, it is
presumed, in the absence of proof to the contrary (i.e., evidence that no dominant influence is
exercised), that direction and coordination are exercised by entities or companies over other
entities or companies: (i) which are obliged to consolidate their financial statements; or (ii)
which control other companies within the meaning of Article 2359 of the Italian Civil Code.
222
Italy
value of their shareholding or, as the case may be, impaired the group company’s
assets.
It should be noted that the provisions on ‘direction and coordination activity’
also set out certain cases in which shareholders of the group company have a
redemption right to allow them to exit the company when the risk connected
to their shareholding changes due to circumstances that are external to the
company and over which they have no control. For instance, shareholders of a
group company that takes the form of an SE with its registered office in Italy
may exercise their right of redemption under the following circumstances: (i)
there is a change in the parent company’s corporate form, if such a change
results in a change to its purpose, or a resolution is approved that substantially
changes the parent company’s corporate purpose; (ii) a court decision is issued
against the parent company and in favour of the shareholders of the SE group
company; or (iii) the ‘direction and coordination activity’ starts or terminates,
causing a change in the investment risk, provided the shares of the company
subject to direction and coordination are not traded on a regulated market and
no takeover bid has been launched for that company’s shares.
The provisions on direction and coordination activity also set forth special rules
with respect to intra-group financing and publicity and the requirements to be
fulfilled by group companies in this regard.
VI Employee involvement
41. With respect to the procedure to elect members of the special negotiat-
ing body (SNB), Article 3 of the Legislative Decree provides that the relevant
employee representatives shall be appointed by the internal trade union rep-
resentatives (RSU) and the national trade unions that executed the applicable
collective bargaining agreements. Trade union representatives may be elected to
the SNB, regardless of whether they are employees of a participating company.
Also, where a company participating in the formation of an SE does not have
any employee representatives, the national trade union that executed the appli-
cable collective bargaining agreement shall establish means for participation
by that company’s employees in the election of SNB members.
42. Italian law does not currently recognise a right for employees to sit on the
management bodies of a company or an employee participation right. Thus,
if formal negotiations fail, the standard rules on employee participation set
forth in the Directive and the Legislative Decree shall apply to the extent such
participation exists in the other companies forming the SE.
223
3 Protection of employee representatives and duty of confidentiality

43. Pursuant to Article 10 of the Legislative Decree, SNB members are protected
against dismissal in the same way as works council members under Italian law
and the applicable collective bargaining agreements. They are entitled to paid
time-off to perform their functions as well as to the reimbursement of travel
and accommodation expenses pursuant to the terms and conditions set forth in
the applicable collective bargaining agreement.
Article 8 of the Legislative Decree provides that SNB members, employee
representatives and the experts who assist them are not authorised to reveal
information disclosed to them in confidence. This duty of confidentiality con-
tinues in effect after expiry of their term of office. Violation of this duty can be
sanctioned by an administrative fine ranging from €1,033 to €6,198, as well as
by imposition of the disciplinary sanctions set forth in the applicable collective
bargaining agreement.
Furthermore, the supervisory body or management organ of an SE is not obliged
to reveal information whose disclosure could seriously harm the functioning of
the SE. A technical conciliation committee must be established by the parties to
evaluate questions of confidentiality and determine whether certain information
could harm the functioning of the company. The committee must be composed
of three members, appointed respectively by: (i) the employee representatives;
(ii) the supervisory or administrative bodies of the participating companies;
and (iii) the parties by mutual consent. The committee must conclude its activ-
ity within fifteen days from receipt of a complaint brought by the employee
representatives.
VII Annual and consolidated accounts

1 Annual and consolidated accounts
44. With respect to the preparation and approval of an SE’s annual and con-
solidated accounts, the rules governing the SpA will apply to SEs with their
registered office in Italy.
If the SE adopts a two-tier system, the supervisory board is authorised to approve
the annual and consolidated accounts, prepared by the management body. How-
ever, the company’s by-laws may provide that the financial statements must be
approved by the general meeting if the supervisory board fails to do so or if more
than one third of the members of the supervisory board and/or the management
board so request.
Approval of the SE’s annual accounts, in the one tier-system, falls within the
powers of the general meeting, while the board of directors is vested with the
authority to approve the consolidated annual accounts, if any. In any event, the
224
Italy
board of directors is entitled to submit the consolidated financial statements to

the general meeting for approval.
45. The financial statements must be prepared in accordance with the mini-
mum table of accounts set forth in the Italian Civil Code. In particular, the
financial statements must consist of a balance sheet, profit and loss state-
ment, supplementary note and any notes thereto (such as, in particular, a
report by the management body or board of directors, as the case may be,
prepared according to Article 2428 of the Italian Civil Code and relating to
the management of the company, and a report concerning the audited financial
statements prepared by the company’s external auditor). The draft financial
statements and any notes thereto shall be made available at the company’s
registered office at least fifteen days before the general/supervisory board
meeting scheduled to approve them. The financial statements must provide
a true and fair overview of the company’s financial situation and its economic
results at the end of the financial year. Articles 2423 and following of the
Italian Civil Code set forth the content of the balance sheet and profit and
loss statement as well as the information to be provided by the supplementary
note. Moreover, interpretative accounting and auditing guidelines are contained
in several recommendations drawn up and approved by the Italian Associa-
tion of Chartered Accountants (Consiglio Nazionale dei Ragionieri e Dottori
Commercialisti).
Banks, credit institutions and insurance companies as well as listed companies
are subject to specific accounting, reporting and auditing rules which fall outside
the scope of this report.
Within thirty days following their approval, the financial statements and any
notes thereto, as well as the minutes of the general/supervisory board meeting
approving them, must be filed with the relevant Companies Register.
46. A parent company is required to prepare consolidated financial statements
for itself and all companies it controls if certain thresholds relating to the
number of employees, turnover, and asset value are met pursuant to the pro-
visions of Legislative Decree N◦ 127 of 9 April 1991. The minimum con-
tent of consolidated financial statements is set forth in the Italian Civil Code
and Legislative Decree N◦ 127/91. Consolidated financial statements con-
sist of a balance sheet, profit and loss statement and supplementary note as
well as any notes thereto (such as, in particular, a report prepared by the
management body or board of directors in accordance with Article 40 of
Legislative Decree N◦ 127/91 and a report on the audited consolidated
financial statements prepared by the external auditor). Legislative Decree
N◦ 127/91 also contains specific rules regarding the audit and publication of
consolidated financial statements similar to those provided for the annual
financial statements.
225
2 Auditors
47. In the absence of specific provisions in the Regulation, the provisions of
Italian law on the auditing of a SpA should apply to the SE.31
In both the one-tier and the two-tier systems, accounting control shall be
entrusted to an external auditor (a single professional or an accounting firm)
appointed by the general meeting after consultation with the supervisory
board/controlling committee. The external auditor must be chosen from an
official list kept by the Ministry of Justice. The external auditor is appointed by
the general meeting for a term of three financial years, which shall expire on the
date of the general/supervisory board meeting called to approve the financial
statements for the last financial year of the three-year term. The general meeting
shall also determine the external auditor’s remuneration for the duration of its
term of office. The external auditor cannot be removed from office prior to term,
except for cause and upon consultation with the supervisory board/controlling
committee. Any shareholder resolution to this effect must be approved by the
competent court. The external auditor should be independent, and various rules
exist to guarantee such independence.
48. The external auditor’s duties include: verifying the company’s bookkeeping
and the correct indication in its accounts of the most important management
events; verifying the consistency of the company’s financial statements and
consolidated financial statements with its accounts; and drafting a report on the
audited financial statements, consolidated financial statements and the account-
ing review.
VIII Termination
1 Winding up
49. A company shall be dissolved under those circumstances provided for by
law and in its by-laws, if any. Dissolution may be also voluntary. If a com-
pany decides to dissolve, the directors shall file with the Companies Register
a statement indicating the reasons for the dissolution (Art. 2484 ICC). Simul-
taneously, unless the general meeting has already voted in this regard or the
by-laws provide otherwise, the management or administrative body shall call
a general meeting in order to approve, by the majority required to amend the
articles of association and by-laws, the appointment of one or more liquidators,
their powers and the rules pursuant to which liquidation shall be carried out.
If the management or administrative body neglects to arrange for dissolution
of the company, any shareholder, director or member of the supervisory board
or controlling committee can petition the court to order that the company be
31
See G. Rescio in Diritto delle Società, 2005, p. 266.
226
Italy
dissolved and its registration deleted from the Companies Register. Moreover,
if a general meeting to appoint liquidators and establish rules governing liqui-
dation is not called by the management or administrative body, any shareholder,
director or member of the supervisory board or controlling committee can peti-
tion the court to order that such a general meeting be called. If the general
meeting does not take decisions on these matters, the relevant decisions shall
be taken by the court.
2 Liquidation
50. In order for a company to be dissolved, it must have sufficient assets to
cover its liabilities. If all debts cannot be paid, the company will most likely be
declared bankrupt. The provisions governing the corporate liquidation process
are set forth in Articles 2487 et seq. of the Italian Civil Code. As stated above,
the general meeting is also entitled to vote on liquidation criteria according
to which the winding up shall be performed, with particular reference to the
transfer of the company’s business or part of a going-concern and certain assets,
rights or groups thereof as well as the actions required to protect the company’s
value, including temporary management, even of part of a going-concern.
3 Insolvency (Bankruptcy)
51. An insolvent company or commercial entrepreneur (with the exception of
small businesses with either a capital investment of less than €300,000 or gross
annual turnover for the past three years of less than €200,000) can be declared
bankrupt. Insolvency is defined as the inability to meet regularly and with
ordinary means payment obligations as they fall due. Only the bankruptcy court
can declare a debtor insolvent, and the relevant petition may be filed either by
the insolvent debtor itself, one or more creditors or the public prosecutor. Along
with the judgment of insolvency and the opening of bankruptcy proceedings,
the court will, amongst other things, appoint a bankruptcy judge and a trustee in
bankruptcy and set a deadline by which creditors must file proof of their claims
against the bankrupt’s estate.
As a result of the above judgment, (i) any individual enforcement or precau-
tionary actions against the insolvent entity shall be automatically stayed; (ii)
any existing claims against the insolvent entity shall become immediately due;
and (iii) interest on unsecured claims shall cease to accrue.
The trustee in bankruptcy is entrusted with managing the insolvent entity and
the latter’s corporate bodies (i.e. board of directors, supervisory board, etc.)
are divested of all authority. The trustee has the power to claw back or set
aside certain acts and transactions performed by the insolvent entity during a
given period prior to the adjudication in bankruptcy (the so called ‘relation
227
back period’). The trustee is also entitled to decide to continue or terminate any
contracts entered into by the insolvent entity.
Once all creditors’ claims have been ascertained, the trustee shall liquidate
all assets on the basis of a liquidation plan and pay off all debts on the basis
of the pari passu principle. The ranking of claims is as follows: preferred
claims/administrative expenses, secured claims, and unsecured claims.
52. In the alternative, one or more creditors, a third party or the insolvent
entity itself may file a proposal for a settlement with creditors (concordato
fallimentare) within the framework of bankruptcy proceedings. Such a proposal
may provide inter alia for: (i) restructuring of debts and the satisfaction of
creditors through any means; (ii) full transfer of the debtor’s assets to a third
party; (iii) the division of creditors into classes; and (iv) different recovery ratios
for creditors in different classes.
The proposal must be approved by the majority of creditors entitled to vote
(i.e. unsecured creditors as well as secured creditors that have received only
partial satisfaction for their claims or have waived collateral or any other kind
of security). Should the proposal provide for different classes of creditors, it
must be approved by a majority of creditors entitled to vote in each class.
However, the bankruptcy court may approve (‘cram down’) the proposal, even
against an opposing vote by one or more classes, if: (i) creditors representing
the majority of claims entitled to vote have approved the proposal; and (ii) the
majority of classes have approved the proposal (similar to a cram-down).
In the event of a favourable creditors’ vote, the bankruptcy court shall issue a
final judgment approving the settlement.
4 Composition with creditors

53. Companies or commercial entrepreneurs that are either insolvent or in a
state of crisis (i.e. facing temporary and reversible distress) may file with the
bankruptcy court a petition to open proceedings to reach a composition with
creditors (concordato preventivo).
The petition must be based on a plan which may provide inter alia for:
(i) restructuring of debts and the satisfaction of creditors by any means; (ii)
full transfer of the company’s assets to a third party; (iii) the division of cred-
itors into classes; and (iv) different recovery ratios for creditors in different
classes. The petition must be filed with the court along with an opinion drafted
by an independent expert on the feasibility of the plan and the accuracy of the
relevant data and information.
As from the filing date of the proposal, creditors are automatically prohibited
from starting or continuing individual actions against the debtor. The bankruptcy
court shall appoint a judge and a receiver, even though the debtor will continue
228
Italy
to manage its own business (i.e. through its corporate organs) with the authori-
sation of the court for certain acts.
The proposal for a composition with creditors must be approved by a majority
of creditors entitled to vote (i.e. unsecured creditors as well as secured creditors
that have waived collateral or any other kind of security). Fully secured creditors
are not entitled to vote, since they are expected to receive payment in full. Should
the proposal provide for different classes of creditors, it must be approved by
the majority of creditors entitled to vote in each class. However, the bankruptcy
court may approve (‘cram down’) the proposal, even against an opposing vote
of one or more classes if: (i) creditors representing the majority of claims
entitled to vote have approved the proposal; and (ii) the majority of classes have
approved the proposal (similar to a cram-down). In the event of a favourable
creditors’ vote, the bankruptcy court shall issue a final judgment approving the
composition with creditors.
IX Tax treatment
54. The SE is a tax-favourable vehicle for carrying out cross-border business
and investment transactions within the European Union.
However, the Regulation does not cover areas of law such as taxation.
It should be noted that no specific measures have been passed in connection
with the taxation of an SE registered in Italy.
As a general rule, companies and entities that are resident of Italy for tax pur-
poses are subject to corporate income tax (IRES). In particular, Italian resident
companies and entities include: (i) joint stock companies; (ii) limited liabil-
ity companies; (iii) partnership limited by shares; (iv) cooperative and mutual
insurance companies; and (v) public and private entities (other than compa-
nies), regardless of whether their sole or main purpose is to exercise business
activities. Currently, the SE is not on this list. Therefore, if Italy wishes to be
seen as a viable location to establish SEs, it would be highly desirable for the
legislature to enact ad hoc provisions, aimed at clarifying the fact that an Italian
SE is subject to the same tax treatment as an Italian resident company.
55. In principle, Italian companies are subject to IRES at a flat rate of 33%
as well as a 4.25% regional tax on production activities (limited increases are
allowed in each region). The same applies with respect to value added tax
(VAT) and other taxes which could apply to Italian SEs on the same conditions
applicable to Italian companies.
In considering Italy as a location to set up an SE, certain key tax features
should be taken into consideration. A recent tax reform introduced into Italian
tax law the following provisions, amongst others: (i) group taxation for IRES
purposes; (ii) a partial participation exemption for dividends and capital gains
229
on the disposal of certain shares; and (iii) new rules on the deductibility of
interest (including a thin capitalisation rule). However, there may be differences
between the treatment of an Italian SE and other Italian corporate forms if certain
possibilities (e.g. participation exemption or group taxation) are only allowed
between certain types of legal entities and not with reference to the SE (which,
as mentioned above, is not yet covered in Italian tax law).
All Community directives in the field of taxation, recently amended to include
the SE in their scope of application, apply to the SE.
In this respect, it should be noted that Italy has implemented (through pub-
lication in the Italian official gazette) Council Directive 2003/123/EC of 22
December 2003, amending Council Directive 90/435/EEC on the common sys-
tem of taxation applicable in the case of parent companies and subsidiaries of
different Member States.
Conversely, Italy has not yet implemented Council Directive 2005/19/EC of
17 February 2005, amending Directive 90/434/EEC on the common system of
taxation applicable to mergers, divisions, transfers of assets and exchanges
of shares concerning companies of different Member States (the ‘Merger
Directive’).
In light of the foregoing, as soon as the amended Merger Directive is imple-
mented in Italy, transactions covered by this directive that involve an Italian SE
will not trigger tax liability in Italy, subject to certain conditions.
X Conclusion
56. The SE has been greeted in Italy with moderate enthusiasm. The com-
plexity of the procedure to agree on rules for employee involvement, the lack
of implementing legislation for the Regulation and the uncertainties surround-
ing the SE’s tax treatment in Italy are the main concerns of Italian companies
examining the possibility of incorporating an SE.
The authors are not aware of any SE that has been incorporated in Italy thus
far. However, this should not discourage the establishment of SEs in Italy. Even
though the legal framework for incorporation may not be completely defined,
this should not prove an obstacle to setting up an SE, if handled correctly with
the assistance of competent legal advisors and active involvement by a notary
public.
In any case, the success of the SE in the European Union will certainly depend
on whether European companies and businesses see in it any advantages not
offered by national corporate forms.
230
8
Latvia
d a c e s i l ava - t o m s o n e , i v e ta m i k e l s o n e a n d
j u r g i ta s p i g u l e
Lejinś, Torgāns & Partners
I Introduction 232
III Formation 233
B Name 233
E Capital 235
4 Registration and publication requirements 240
3 Management 242
D Liability 244
2 The auditor’s role 246
231
VIII Termination 247

1 Winding up 247
2 Liquidation 248
3 Insolvency 248
X Tax treatment 249
1 Income tax 249
3 Other taxes 250
XI Conclusion 251
I Introduction
The Latvian European Company Act1 (‘SE Act’), implementing Regulation
2157/2001 of 8 October 2001 on the Statute for a European company (SE) (the
‘Regulation’) and Council Directive 2001/86/EC of 8 October 2001 supple-
menting the Statute for a European company with regard to the involvement
of employees (the ‘Directive’), was adopted on 10 March 2005 and entered
into force on 7 April 2005. In accordance with the SE Act, SEs in Latvia
are subject to the laws applicable to public limited-liability companies (akciju
sabiedrı̄ba) and to the legislation governing the Commercial Registry (komer-
creg‘istrs), insofar as these provisions do not conflict with the SE Act and/or
the Regulation. Thus, SEs registered in Latvia shall be subject to general provi-
sions of Latvian commercial, labour and tax law and other general and specific
legislation regulating companies incorporated and operating in Latvia.
In general, the incorporation and operation of various types of legal entities in
Latvia is regulated by a relatively recent law, the so-called Commercial Act
(Komerclikums).2 When adopting the Commercial Act, the legislature intended
to create an extensive regulatory framework applicable to most types of com-
mercial undertakings. However, even though the Commercial Act could have
been amended to accommodate the SE, the legislature decided not to do so and
instead enacted new legislation to regulate the SE.3

The reasons most often cited in the literature to opt for an SE include: (i) the
possibility to operate under a single set of management and reporting rules in
various jurisdictions; (ii) the ability to transfer the company’s registered office
to another jurisdiction (mobility); (iii) the possibility to carry out cross-border
mergers; and (iv) the likelihood that companies with a ‘European” identity will
be able to attract investors more easily.
1 Eiropas komercsabiedrı̄bu likums. 2 Komerclikums, effective 1 January 2002.

3
Like the SE, the European economic interest grouping is also regulated by separate legislation.
232
Latvia
Keeping in mind the SE’s relatively high capital requirement and multinational
nature, not to mention the fact that most Latvian businesses are, by and large,
still domestic in scope, it is unlikely that this new corporate form will attract
a great deal of interest in Latvia in the near future. Due to its favourable tax
rules and business climate, Latvia is more likely to host SEs established in other
Member States.
III Formation
1 General remarks
A Founding parties
The SE Act contains the same incorporation requirements as the Regulation.
An SE may be formed:
• by a merger of public limited-liability companies from different Member

States;
• as a holding company by public or private limited-liability companies
from different Member States;
• through the conversion of an existing Latvian public limited-liability com-
pany into an SE;
• through the creation of a subsidiary SE.
The founding parties, in any case, must be public or private limited-liability

companies from at least two different Member States with their registered and
head offices in the same Member State. Latvian law does not allow a com-
pany whose head office is outside Latvia to participation in the formation of
an SE.4
B Name
The Regulation sets forth certain requirements regarding use of the phrase
Societas Europaea and the abbreviation SE in an SE’s name. In Latvia, an SE is
referred to as a Eiropas komercsabiedrı̄ba. The abbreviation ‘SE’ must appear
at the beginning or end of a Latvian SE’s name.
In accordance with the general requirements applicable to undertakings
recorded with the Latvian Commercial Registry, a company’s name should
be unique and may not be the same as or similar to a pre-existing corporate
name. Nor may a company’s name violate general principles of morality or
contain misleading information with regard to the company’s activities. All
company names must be written in Latvian or Roman letters. In addition, there
4
Art 2(5) Reg.
233
are certain restrictions on the use in company names of the words ‘Latvia’,
‘state’, ‘municipal’ and the names of administrative territories or areas.5

Latvia applies the registered office theory to legal entities, meaning that in order
for Latvian law to apply, a company must be registered with the Commercial
Registry and have its registered office in Latvia.6 According to the Commer-
cial Act, the registered office of a company shall be in the place where its
headquarters are located.7
The above provisions are also applicable to SEs. Article 7 of the Regulation
requires that the registered office of an SE be located in the same Member State
as its head office and allows the Member States to require that an SE’s head
office and registered office be located at the same place. In keeping with the
Regulation, Latvia’s SE Act provides that an SE’s registered office must be
located at the same place as its head office.
The registered office of a company is particularly relevant for tax purposes.
According to the Taxes and Duties Act, companies established and registered
in Latvia (or which should have been established and registered in Latvia) are
considered residents of Latvia for tax purposes.

The general rules governing the transfer of an SE’s registered office from one
Member State to another are set forth in Article 8 of the Regulation. How-
ever, details regarding such a transfer are determined by the national laws of
the Member States. The SE Act provides that the Latvian State Revenue Ser-
vice and the Financial and Capital Markets Commission may both oppose the
transfer of an SE’s registered office from Latvia. As stated in Article 8(14) of
the Regulation, such opposition must be based on grounds of public inter-
est and may be challenged in accordance with the rules of administrative
procedure.
Minority shareholders who oppose the transfer of an SE’s registered office
are entitled, within one month following approval of the transfer by the general
meeting of shareholders, to request compensation from the SE which, according
to the SE Act, must be equal to that provided for by the relevant provisions of the
corporate reorganisation legislation.8 With respect to creditors, the provisions
5
Section IV of the Commercial Act (Company Names), Arts 28-29.
6
An exception to this general rule is the taxation of payments to non-resident companies. For
further information, see infra Section X (Tax Treatment).
7
Art 139 Commercial Act.
8
With respect to the amount of compensation, see infra Section 2.A.iii.
234
Latvia
of the Commercial Act on the protection of creditors in the event of a merger

shall apply (Art 345 Commercial Act).9
D Corporate purpose
A company registered in Latvia may freely choose to exercise any commercial
activity not prohibited by law. A Latvian company need not indicate its corporate
purpose or areas of activity in its articles of association (statūti). The same
applies to SEs.
Nevertheless, the founders of an SE may choose to define its corporate purpose,
in which case the SE’s commercial activity must be described in its articles and
a specific reference number must be given for each activity using the Latvian
classification schedule of economic activities (NACE).
E Capital
As provided in the Regulation (Art 4(2)), an SE must have minimum capital

of at least €120,000 (approximately LVL 79,000). By way of reference, the
minimum capital of a Latvian public limited-liability company is only LVL
25,000, while the minimum capital of a private limited-liability company is
LVL 2,000.
By the filing date of the application to register an SE with the Commercial
Registry, at least the minimum required capital (€120,000) and, in any case, no
less than 25% of the subscribed share capital, must be paid up. The remainder
must be paid up within one year from the signing date of the SE’s instrument of
incorporation. In general, share capital can be paid up in cash or in kind. How-
ever, capital contributions made prior to filing an application for registration
must take the form of cash.
The share capital of an SE registered in Latvia must be expressed in euros and
in Latvian lats. The annual and consolidated accounts must be denominated in
lats.

An SE may be formed through the merger of at least two public limited-liability
companies, provided (1) the participating companies have been incorporated in
accordance with the laws of a Member State; (2) the participating companies’
registered and head offices are located within the European Union; and (3) at
9
The provisions of the Commercial Act on the protection of creditors are discussed in more detail
under Section 2.A.iv (Creditors’ Rights).
235
least two of the participating companies are governed by the laws of different
Member States.
In accordance with the SE Act, the Commercial Registry shall scrutinise the
legality of a proposed merger before registering it. For this purpose, the Latvian
founding company must submit a certificate attesting to the completion of all
requisite pre-merger acts and formalities, as well as all documents required by
the Commercial Act for the merger of public limited-liability companies.

The procedure set forth in the SE Act to form an SE by merger is complex due to
the fact that various sets of requirements must be fulfilled simultaneously.10 In
addition to those contained in the Regulation, general requirements applicable
to company reorganisations, as well as specific provisions of the Commercial
Act to form a public limited-liability company, must be observed.
The founding company must submit to the Commercial Registry draft terms of
merger prepared in accordance with Article 20 of the Regulation. Furthermore,
the information required by Article 21 of the Regulation (i.e. details of the
merging companies and of the registers where documents are filed and available
in respect of each merging party, arrangements to protect creditors’ rights, etc.)
must also be filed with the Commercial Registry. The date of registration of the
merger, the Commercial Registry’s file number, and the information required by
Article 21 must be published in the official national gazette, Latvijas Véstnesis.
Each company involved in the formation of an SE or both acting jointly shall
prepare a reorganisation agreement and prospectus, which shall include draft
terms of merger, information on the legal and financial aspects of the merger, the
share-exchange ratio and the amount of compensation due, the methods, if any,
used to arrive at this ratio and compensation, and any difficulties encountered
in the calculation process.
The draft reorganisation agreement must be reviewed by an auditor selected by
the companies and approved by the Commercial Registry.
The draft reorganisation agreement shall be reviewed, and a decision on the
merger taken, by the general meeting of shareholders of each company. At
least one month before the general meeting in question, the draft reorganisation
agreement, together with the prospectus, the auditor’s report, the companies’
annual reports for the last three financial years and their financial statements
for the three months immediately preceding the filing date of the notice of
reorganisation with the Commercial Registry, shall be made available for review
by shareholders at the company’s registered office.
10
Art 4 SE Act.
236
Latvia
In accordance with the Commercial Act, an application to the Commercial

Registry concerning a potential reorganisation can be made no sooner than
three months after publication in the official gazette, Latvijas Véstnesis, of the
decision to reorganise.
(ii) Right to object to a company participating in a merger

According to the SE Act, the State Revenue Service and the Financial and
Capital Markets Commission can object to the participation of a Latvian public
limited-liability company in the formation of an SE. Such an objection may be
appealed to the Latvian administrative courts in accordance with the procedure
set forth in the applicable legislation.
(iii) Minority shareholders

Under the SE Act (Art 7), minority shareholders who oppose the formation
of an SE by merger have one month following approval of the merger by the
general meeting to lodge a request for compensation. Such compensation is
customary in the event of a reorganisation under Latvian law.
In accordance with the Commercial Act, the compensation due minority share-
holders in this case shall be equal to the proceeds the shareholder would have
received had the company been liquidated at the time the decision to reorganise
was taken. In addition, interest at the statutory rate is charged on this amount
from the effective date of the reorganisation (in this case, the formation of an
SE) until the date of payment.11
(iv) Rights of creditors

Under Latvian law, companies participating in the formation of an SE must abide
by the reorganisation process applicable to public limited-liability companies.
As a result, the provisions of the Commercial Act on the protection of creditors’
rights in the event of a reorganisation shall apply. Article 345 of the Commercial
Act requires the participating companies to take the following steps:
• within fifteen days from the date of the decision to form an SE by merger
and before implementing this decision, each participating company must
inform all known creditors to this effect in writing;
• each participating company must publish a notice in the official national
gazette, Latvijas Véstnesis, that a decision to form an SE has been taken,
as well as the place and time at which creditors may submit their claims;
such a period may not be less than one month from the publication date
of the notice;
• the company shall secure all claims submitted by the stipulated deadline;
11
237
• creditors of the acquiring company can request security only if they can
prove that the merger will jeopardise satisfaction of their claims;
• a secured creditor may request security only for the unsecured portion of
its claim.
(v) Acquisition by a company holding 90% or more of the shares in

another company
The Commercial Act provides that if the acquiring company holds 100% of the
shares in the target company, the draft terms of merger need not be reviewed
by an auditor and certain information can be omitted.
(vi) Avoidance of a merger

Under Latvian law, a court can declare the decision to form an SE by merger
null and void if: (i) it was taken in violation of the law or of a participating
company’s articles of association; and (ii) it is not possible to rectify the vio-
lation or rectification does not occur within the time period specified by the
court.12 Any shareholder or member of a participating company’s management
or supervisory board can bring an action to set aside the decision to form an
SE by merger within three months from publication of the notice in Latvia’s
official gazette, Latvijas Véstnesis.
A holding SE can be formed by at least two public or private limited-liability

companies that (1) have been incorporated in accordance with the laws of a
Member State; (2) have their registered and head offices within the European
Union; and (3) are governed by the laws of different Member States or, for at
least two years, have maintained a subsidiary or branch governed by the laws
of another Member State.

The management board of the Latvian founding company must submit to the
Commercial Registry draft terms of formation for the holding SE, as provided
by Article 32 of the Regulation. Furthermore, the date of registration and the
file number under which these draft terms may be consulted must be published
in Latvijas Véstnesis.
The founding companies must present proof of compliance with the provisions
of Article 33 of the Regulation. A notice to this effect should also be published
in Latvijas Véstnesis.
(ii) Minority shareholders and creditors

Although Article 34 of the Regulation allows the Member States to adopt pro-
visions designed to protect minority shareholders who oppose the formation of
12
Ibid., Art 346.
238
Latvia
an SE, the SE Act does not contain any special provisions to protect minority
shareholders, creditors or employees.
Since, in accordance with the Regulation, a company promoting the formation
of a holding SE continues to exist, it need not go through the reorganisation
procedure described above for the formation of an SE by merger. Thus, various
special provisions on the protection of minority shareholders and creditors shall
not apply.
A subsidiary SE can be formed by at least two companies or other legal entities

(1) governed by public or private law; (2) incorporated in accordance with the
laws of a Member State; (3) having their registered and head offices in a Member
State; and (4) which are subject to the laws of different Member States or have
maintained for at least two years a subsidiary or branch subject to the laws of
a different Member State.
With regard to the formation of a subsidiary SE, the SE Act does not stipulate
any other conditions in addition to those set forth under Articles 35 and 36 of
the Regulation. As a result, the general rules applicable to the formation of a
national public limited-liability company shall apply.13
A public limited-liability company which (1) has been incorporated in accor-
dance with the laws of a Member State; (2) has its registered office and head
office within the EU; and (3) for at least two years, has had a subsidiary subject
to the laws of a different Member State, may be converted into an SE.
In the event an existing public limited-liability company is converted into an
SE, the company’s management board must prepare and file draft terms of
conversion with the Commercial Registry. The date of registration of the draft
terms and the Commercial Registry’s file number must be published in Latvijas
Véstnesis, Latvia’s official gazette.
The SE Act does not provide any further details on the conversion of an existing
public limited-liability company into an SE.

The SE Act does not contain any specific provisions on acts committed on
behalf of an SE in formation. However, in accordance with general provisions
of Latvian corporate law,14 a founder acting on behalf of a company in formation
prior to its incorporation shall be held liable for any obligations incurred as a
13 Ibid., Arts 140–144. 14 Ibid., Art 163.
239
result. The company shall be deemed to assume liabilities incurred on its behalf
prior to incorporation if its management board or shareholders representing
at least 5% of the company’s share capital do not object within three months
from the date of the company’s registration with the Commercial Registry. If
objections have been raised, the issue shall be submitted to the general meeting
for a vote. However, the assumption of liability by the company shall not release
the founders from their liability.
4 Registration and publication requirements

In accordance with Article 12 of the Regulation, an SE shall be registered in
the Member State in which it has its registered office. Consequently, if an SE is
established in Latvia, the participating public limited-liability companies must
submit an application to register the SE with the Commercial Register. If an SE
is established in another Member State, the founding public limited-liability
company with its registered office in Latvia must petition the Commercial
Registry to delete its entry and present a certificate attesting to the registration
of the SE in another Member State.
In order to register an SE with the Commercial Registry, a standard application
form,15 which can be downloaded from the Commercial Registry’s website,16
must be submitted along with the following documents:
• draft terms signed by the founding companies’ representatives;

• the SE’s articles, signed by all founding parties;
• a bank statement confirming deposit of the share capital;
• documents confirming the value of any investments in kind;
• a statement of consent by the proposed members of the supervisory and
management boards to serve on these bodies;
• the auditor’s written consent to audit the SE’s accounts;
• sample signatures of all management board members;
• documents confirming the existence of related companies or branches in
other Member States;
• official confirmation from the commercial registries where the participat-
ing companies are registered that all formalities related to formation of
the SE have been fulfilled;
• the management board’s notification of its legal address;
• an agreement on arrangements for employee involvement;
• receipts for any duties and publication fees paid.
An entry in the Commercial Registry shall be made upon receipt of the

completed application form and all required documents. An application for
15 Regulation No. 344 as of 17 May 2005. 16 www.ur.gov.lv.
240
Latvia
registration is usually processed within four (4) business days. However, in

more complex cases, the Commercial Registry has the right to extend this
period by up to thirty (30) days.
As for all new recordations with the Commercial Registry, a notice of registra-
tion of the new SE shall be published in the official gazette, Latvijas Véstnesis.

According to the Commercial Act, a company acquires legal personality on the
date it is registered with the Commercial Registry.

1 General remarks
The management of an SE is not discussed in detail in the SE Act. Therefore,
provisions of Latvian law regarding the management of public limited-liability
companies shall apply to the organisation and management of an SE. However,
while a public limited-liability company incorporated under Latvian law can
have only a two-tier management structure, an SE can have either a one-tier or
a two-tier system.
2 General meeting
In accordance with the Article 53 of the Regulation, without prejudice to the
rules contained in the Regulation, the organisation and conduct of general meet-
ings shall be governed by the provisions of Latvian law applicable to public
limited-liability companies.
A general meeting can be either ordinary or extraordinary. An ordinary general
meeting must be called by the board of directors at least once a year in order
to approve the annual report, decide on the distribution of profits and elect
an auditor. If the management board fails to convene the general meeting, the
supervisory board (if there is one), the Commercial Registry or the liquidator (if
the company is in liquidation) can do so. An extraordinary general meeting can
be convened by the management board at its own initiative and must be convened
if the supervisory board, the company’s auditor or shareholders representing at
least 5% (1/20) of the company’s share capital (unless a lower percentage is
specified in the articles) so request.
According to the Commercial Act (Art 268), the powers of the general meeting
are limited, the most important being the power to appoint the supervisory
board, to take decisions with respect to the distribution of profits, to approve
capital increases and decreases, and to decide to wind up the company.
241
The general meeting is not allowed to take decisions that fall within the scope
of authority of the company’s supervisory or management board.
In general, the general meeting takes decisions by a majority of votes cast
by those shareholders present or represented. However, decisions regarding
amendments to the company’s articles; changes to its share capital; the issuance
of convertible bonds; reorganisation; entering into, amending or terminating a
‘group of companies’ agreement; and inclusion of the company in or consent
to inclusion in and termination or continuation of operations must be approved
by at least three-quarters of the votes cast.
If there are several categories of shares, a decision must be approved by a
majority of shareholders from each category affected present at the general
meeting.
Unless the SE’s articles provide otherwise, the general meeting is entitled to
take decisions irrespective of the share capital present or represented.

Each shareholder is entitled to participate in and vote at general meetings,
receive dividends and liquidation proceeds, if any, and request information
from the management board about the company’s financial situation.
Each par-value voting share carries one vote at the general meeting.
If the general meeting is scheduled to vote on issues related to winding-up,
reorganisation, a capital increase or decrease or amendments to the company’s
articles, the holders of preferred shares (who normally have preference in rela-
tion to dividends and liquidation proceeds but are not entitled to vote) shall also
be allowed to vote if their interests are liable to be affected.
3 Management
According to the Regulation, an SE can have either a two-tier or a one-tier system
of management. In the two-tier system, the SE is managed by a supervisory
board (padome) and a management board (valde). In the one-tier system, it
is managed by a management board alone. Under Latvian law, only natural
persons can serve as members of the supervisory board and the management
board. Overlapping membership on both boards is allowed.
Latvian law does not set forth any nationality or residency requirements for
members of the management and supervisory boards. However, the supervisory
board must have at least three members (five if the company is listed) and may
242
Latvia
have no more than twenty. The minimum and maximum number of members of
the management board is not specified, unless the company is listed, in which
case the board must have at least three members.

(i) Supervisory board
Members of the supervisory board are elected for a maximum term of three
years. Any shareholder or group of shareholders representing at least 5% of the
voting rights present or represented at a general meeting is entitled to nominate
candidates. All candidates shall be included on the election list.
Voting shall take place by ballot. Shareholders can vote for one or more can-
didates in any combination of whole numbers. Those candidates who receive
the most votes shall be elected to the supervisory board, taking into account the
maximum number of members specified in the articles.
Supervisory board members may be removed from office at any time by the
general meeting. Moreover, members of the supervisory board may resign from
office at any time by giving notice to this effect.
(ii) Management board

In an SE with a two-tier management structure, members of the management
board are appointed by the supervisory board for a maximum term of three
years, unless the company’s articles provide for a shorter term. The supervisory
board shall appoint the chair of the management board from amongst the latter’s
members. Members of the management board can be removed from office by
the supervisory board for just cause, including, for example, gross abuse of
authority, failure to perform or to appropriately perform their duties, inability
to manage the company and harming the company’s interests or pursuant to a
no-confidence vote by the general meeting. Members of the management board
may resign at any time.
In the one-tier system, members of the board of directors are appointed and
removed by the general meeting of shareholders.
C Representation
Under the Commercial Act, the general rule is that management board members
represent and manage the company jointly. Nevertheless, the company’s articles
may provide otherwise. For instance, each member of the management board
can be granted authority to represent the company individually (separately) or
the articles may state that the company shall be represented by any two directors
acting jointly.
In the event of joint representation, the management board may authorise one or
more of its members to conclude specific transactions or types of transactions.
243
D Liability
The Commercial Act requires members of the management and supervisory

boards to perform their duties as ‘honest, careful managers’.17 Members of an
SE’s management board and supervisory board shall be jointly and severally
liable for any losses they cause the company, unless they can prove that they
acted as honest, careful managers. Members of the management and supervi-
sory boards shall not be liable for losses incurred as a result of actions taken
pursuant to a lawful decision of the general meeting. However, the fact that the
supervisory board has approved the actions of the management board shall not
release the members of the management board from liability.
Approval of the company’s annual report at its annual general meeting shall not
be interpreted as a release of the members of the management and supervisory
boards from liability for activities undertaken during the past year. The general
meeting may release members of the management or supervisory board from
liability, or decide to enter into a settlement, only with respect to specific actions
disclosed to the general meeting and as a result of which the company sustained
a loss.
The Directive has been transposed into Latvian law by the SE Act, which
contains provisions on employee involvement in Section IV.

The SE Act includes provisions on a special negotiating body (SNB) formed to
represent the employees of all participating companies.
When nominating representatives to the SNB, the employees of Latvian partic-
ipating companies may decide that their interests would be best represented by
their incumbent representatives elected under the general employee representa-
tion rules or they may decide to elect new representatives. As long as the general
‘10% – one member’ rule is not violated, each Latvian participating company
is entitled to appoint one representative to the SNB. However, if the number of
Latvian participating companies is greater than the number of seats allocated to
Latvian representatives on the SNB, the employees of the Latvian companies
shall agree on a common representative(s) to represent their interests or (if no
agreement can be reached) the representatives of the companies with the most
employees shall be nominated.
The SNB shall take decisions by a simple majority of votes cast. Each member
has one vote.
17
244
Latvia
The purpose of the SNB is to reach an agreement with the representatives of

the participating companies’ management organs on employee information,
consultation and participation in the SE. The agreement must be in writing.
Under Latvian law, employees do not have a right to participate in management.
According to the Directive and the SE Act, if none of the participating companies
were subject to employee participation rules prior to registration of the SE, they
will not be required to establish provisions for employee participation. Thus,
employee participation will only be an issue if companies from other Member
States in which employee participation rules apply are involved in the formation
of an SE.

Members of the SNB and other employee representatives within an SE shall
be afforded protection and guarantees at least equivalent to those provided to
employee representatives under Latvian law.
Under Latvian law, the fact that an employee is an employee representative
cannot serve as a basis for refusing to enter into or terminating an employment
contract with, or otherwise discriminating against, that employee. The SE Act
provides that members of the SNB and of the employee representative body, as
well as other employee representatives, shall be granted paid time-off to fulfill
their information and consultation duties. In addition, members of the employee
representative body are entitled to paid vacation for training purposes in order
to gain the knowledge necessary to perform their duties.

Article 61 of the Regulation provides that the preparation, auditing and pub-
lication of an SE’s annual accounts and, where appropriate, its consolidated
accounts shall be governed by the national laws of the Member States applicable
to the public limited-liability companies. In Latvia, the main requirements for
financial reporting are set out in the Annual Reports of Undertakings Act,18 the
Consolidated Accounts Act,19 the Accountancy Act,20 the Commercial Act and
a number of regulations passed by the cabinet.
Pursuant to the Commercial Act, a company must prepare annual accounts at
the end of each financial year and submit them to its auditor for review as well
18
Annual Reports of Undertakings Act (Par uzn,ēmumu gada pārskatiem), effective 1 January
1993.
19
Consolidated Accounts Act (Par konsolidētajiem gada pārskatiem), effective 1 January 2000.
20
Accountancy Act (Par grāmatvedı̄bu), effective 1 January 1993.
245
as to its supervisory board (if there is one). The annual report covers a twelve-
month period which usually coincides with the calendar year, but an SE may
specify in its articles a financial year corresponding to another twelve-month
period. The financial year may be changed upon the presentation of reasonable
grounds for doing so. The annual accounts are approved at the general meeting
of shareholders called by the management board after receipt of the auditor’s
opinion and (if the SE has a two-tier system) the supervisory board’s report.
Once approved, the annual accounts are submitted to the Commercial Registry.
Within 30 days after the general meeting, the company must file its annual tax
return. Under the SE Act, an SE’s annual and consolidated accounts must be
denominated in Latvia’s national currency, the lat (LVL).21
Unless otherwise provided in the legislation governing the annual accounts
of financial and credit institutions, parent companies registered in Latvia are
usually required to prepare a consolidated annual report including the financial
reports of all related undertakings, drafted in accordance with the procedure set
forth in the Consolidated Annual Accounts Act. Even though parent companies
registered in Latvia are obliged to include in their consolidated financial reports
subsidiaries registered abroad, losses of such subsidiaries not be offset against
profits earned by the parent company in Latvia.
The Accountancy Act provides that any entity engaged in economic activity
in Latvia must keep accounts in such a way that a qualified third party can
obtain a clear and truthful view of the company’s financial situation. The infor-
mation should be truthful, comparable, timely, significant, understandable and
complete.
Accounts must be drafted in Latvia’s official language and, together with sup-
porting documents, kept on the Latvian territory. If a foreign legal entity par-
ticipates in the company’s economic activities in Latvia, a second language
may also be used in the accounts. All accounting entries must be supported by
adequate documentation.
All accounting registers, supporting documents, inventory lists, annual reports
and other documents must be archived after the close of the financial year.
Documents must be kept for 10 years, with the exception of personnel files,
which must be kept for 75 years.
2 The auditor’s role
An SE, like any other public limited-liability company, must name an auditor
upon its establishment. The auditor is appointed or re-appointed at the SE’s
annual general meeting.
21
Art 15 SE Act.
246
Latvia
The auditor renders an opinion on the SE’s annual report and is liable for any
damage sustained by the company due to negligence on its part. The auditor
shall not be liable for any losses caused as a result of violations committed by
the company’s management or administrative bodies, unless it knew or should
have known of such violations and failed to indicate them in its opinion. In
the latter case, the auditor shall be held jointly and severally liable with the
members of the relevant management or administrative body.22

The formation and activities of an SE are supervised by various national author-
ities in Latvia. The main supervisory institutions are the Commercial Registry
of the Company Register, the State Revenue Service and the Financial and
Capital Markets Commission. The Commercial Registry not only records all
relevant information related to the incorporation and functioning of an SE, but
also reviews the legality of actions taken by an SE’s supervisory and manage-
ment bodies. The State Revenue Service administers the tax laws and supervises
the financial aspects of an SE’s activities in Latvia. Moreover, the State Rev-
enue Service and the Financial and Capital Markets Commission, pursuant to
Section 8 of SE Act, which is based on Article 19 of the Regulation, can object
to the participation of a Latvian public limited-liability company in the forma-
tion of an SE and to the transfer of an SE’s registered office to another Member
State. These decisions can be appealed to the Administrative Court, however.
VIII Termination
According to the Article 63 of the Regulation, as regards winding-up, liquida-
tion, insolvency, cessation of payments and similar procedures, an SE shall be
governed by the provisions of national law applicable to public limited-liability
companies formed in accordance with the laws of the Member State in which
its registered office is located.
1 Winding up
In accordance with the Commercial Act (Art. 312), an SE can be wound up
either voluntarily or involuntarily. In the event of voluntary winding up, the
company should have sufficient assets to cover its debts. In this case, the SE
will cease to exist either following a decision by the general meeting to wind up
the company, upon expiry of the time period specified in its articles (if the SE
was established for a definite duration) or once it has achieved the objectives
set forth in its articles (if the SE was founded to achieve a specific purpose).
Alternatively, an SE can be wound up (involuntarily) by court order or through
22
Arts 176–178 Commercial Act.
247
the commencement of bankruptcy proceedings. Finally, the company may cease

its operations in other cases specified by law or in its articles.
2 Liquidation
If an SE ceases its operations, it shall be liquidated. One or more liquidators may
be appointed to conduct the liquidation process.23 Once a decision to liquidate
has been taken, it must be submitted to the Commercial Registry for recordation
within three days.
In order to protect creditors, a decision to liquidate an SE must be recorded by
the Commercial Registry and published in Latvijas Véstnesis, Latvia’s official
gazette. The liquidator must inform all known creditors of the liquidation. Cred-
itors are then given an opportunity to file their claims. The liquidation process
is complete once all claims have been satisfied, the property of the SE realised,
and the SE stricken from the Commercial Registry. If an SE has insufficient
assets to cover all claims, insolvency proceedings shall be commenced.
3 Insolvency
Insolvency proceedings are governed by the Company and Business Entities
Insolvency Act.24 Proceedings may be brought by the SE itself, a creditor or a
competent authority. The SE shall be required to submit an insolvency petition
if it is unable (or, based on proven circumstances, will not be able) to settle its
debts within three weeks of their due date and no arrangement with creditors has
been made or if the SE’s liabilities exceed its assets. Under these circumstances,
the law provides that the officers of an SE can be subject to criminal sanctions
if an insolvency petition is not submitted.
An insolvency petition is submitted to the competent court for review. If the
court finds the SE to be insolvent, it shall appoint a certified administrator
based on the recommendation of the Latvian Insolvency Administration. The
Insolvency Administration shall select at random an administrator from a list of
certified administrators in accordance with pre-approved procedure. Insolvency
administrators in Latvia must undergo a specific certification process in order
to be able to administer bankrupt estates. On the date the administrator assumes
his or her duties, the SE’s management board loses its mandate.
The outcome of insolvency proceedings depends on the SE’s financial situation
and perspectives, as well as on other considerations underlying a decision by
creditors, i.e., the SE’s creditors may decide to settle their claims, to restructure
the SE or to commence bankruptcy proceedings.
23
Liquidation is mainly governed by Section XIV of the Commercial Act (Termination of Oper-
ations and Liquidation of Capital Companies), Arts 312–333.
24
Act on the Insolvency of Companies and Business Entities (Par uzn,ēmumu un
uzn,ēmējsabiedrı̄bu maksātnespēju), effective 12 October 1996.
248
Latvia
IX Applicable law
If an SE is to be incorporated in Latvia, the incorporation shall take place in
accordance with Latvian law. Furthermore, an SE incorporated in accordance
with Latvian law shall be treated as a Latvian ‘resident’ company unless the SE
Act or the Regulation provides otherwise.
X Tax treatment
The general principles of Latvian tax law are set forth in the Taxes and Duties
Act,25 which provides for personal income tax, corporate tax, property tax,
value added tax, excise tax, customs duties, a natural resources tax, lottery and
gambling duties, and social security contributions. All of these taxes and duties
are governed by separate laws, such as the Corporate Tax Act, the VAT Act,
etc.26
1 Income tax
Latvia recently amended the Corporate Tax Act to cover the transfer of an
SE’s registered office to Latvia from another Member State. The Corporate
Tax Act transposes into national law Directive 2005/19 amending Directive
90/434/EEC on the common system of taxation applicable to mergers, divisions,
transfers of assets and exchanges of shares concerning companies of different
Member States. Aside from specific requirements applicable during the first
year following the transfer of an SE’s registered office to Latvia, other tax-
related matters are governed by the general provisions of the Corporate Tax Act
applicable to any other legal entity.
The current corporate tax rate is 15%. Taxable entities include resident com-
panies and companies with a permanent establishment in Latvia, as well as
non-resident companies that derive certain income in Latvia. An entity shall
be considered a tax resident if it has (or should have) been established and
registered in accordance with Latvian law. Thus, an SE, a subsidiary SE or a
branch office established and registered in Latvia shall be deemed a Latvian
tax resident subject to corporate tax at a rate of 15% on its worldwide income,
subject to the provisions of any applicable treaties on the avoidance of double
taxation.
For non-resident companies, corporate tax is based on income derived in Latvia
and is levied on payments made by resident companies to non-residents. Under
25
Taxes and Duties Act (Par nodokl, iem un nodevām), effective 1 April 1995.
26
The Personal Income Tax Act and the Social Security Act are not extensively discussed in this
report but are nonetheless highly relevant to any company operating (or considering operating)
in Latvia. The current effective rate of personal income tax applicable to salaries is 25%. Social
security contributions are paid on salaries and other employment-related income at a rate of
33.09%, 9% of which is paid by the employee and 24.09% by the employer.
249
the Corporate Tax Act, tax liability for non-residents arises in cases where a
Latvian company pays a certain type of remuneration to a non-resident or where
a permanent establishment is created as a result of a non-resident’s activities
in Latvia. The Corporate Tax Act also provides for withholding tax in certain
cases when payments are made by residents and permanent establishments to
non-residents. Thus, withholding tax at a rate of 10% is applied to dividends,
management and consultancy fees and royalty payments, while a 15% rate
applies to royalties for the use of copyright. Royalties for the use of other kinds
of intellectual property and in consideration for the use of property situated
in Latvia are subject to withholding tax at a rate of 5%, while income from
the sale of real property in Latvia is subject to withholding tax at a rate of
2%. Regardless of the foregoing, however, withholding tax at a rate of 15% is
levied on all payments or expenses in cash made by a Latvian resident (or the
permanent establishment of a non-resident) to legal entities, natural persons and
other persons located or established in territories with low tax rates or which
are considered tax havens.
2 Value added tax

Like any other company operating in Latvia, an SE will be subject to VAT
if it carries on activities to which VAT applies (i.e. the delivery or import of
goods or the provision of services). An SE must register as a VAT payer within
30 days if it has conducted taxable transactions having a threshold value of at
least LVL 10,000 in the preceding twelve months. The VAT rates are 18%, 0%
or 5%, as provided in the Value Added Tax Act (transposing the Sixth Company
Law Directive). The VAT tax period is one calendar month, thus VAT should
be accounted for and paid monthly. The deadline for filing a VAT return is
the fifteenth day of the following month. Starting from the date it registers as
a VAT payer, a company is entitled to deduct input VAT paid on goods and
services received.
3 Other taxes
Depending on the types of commercial activity pursued by an SE, it could also
be subject to natural resources tax, property tax or excise tax.
Natural resources tax at various rates is levied on natural resources acquired
as a result of any commercial activity as well as on environmental pollution,
packaging activities, the production of radioactive substances, certain means of
transport and similar activities.
Property tax is levied at a rate of 1.5% on cadastral income from real property.
The tax period is one year, but tax for the current year must be paid in four
instalments. Cadastral income is determined by the State Land Service, taking
250
Latvia
into account the fair market value of the property in question for the past two
years and any registered limitations on its use.
Excise tax is levied at various rates on alcohol, tobacco and other goods specified
in the Excise Tax Act.
XI Conclusion
Latvia has enacted minimum legislation to allow the formation and operation
of SEs on its territory. To date, however, no SEs have been formed in Latvia,
and it remains to be seen how well this legislation will work in practice.
251
9
Luxembourg
p at r i c i a f e r r a n t e a n d m a r c m e y e r s
NautaDutilh
I Introduction 253
III Formation 254
B Name 254
E Capital 258
D Formation by conversion 262
E Acts committed on behalf of an SE in formation 263
3 Management 266
A One-tier system/Two-tier system 266
D Liability 271
2 Auditors 278
252
Luxembourg

1 Winding up 279
2 Liquidation 279
3 Insolvency 280
X Tax treatment64 282
1 Income tax 282
2 Other taxes 284
A Net worth tax 284
B Value added tax (VAT) 285
C Capital tax1 285
XI Conclusion 285
I Introduction
The Regulation and the Directive were implemented in the Grand Duchy of
Luxembourg (‘Luxembourg’) by the Act of 25 August 2006 on the SE (the
‘SE Act’) amending the law of 10 August 1915 on commercial companies (the
‘CCL’), as amended, and an act of the same date supplementing the statute
of the SE with regard to employee involvement (the ‘Employee Involvement
Act’).

The main advantage of the SE over national corporate forms undoubtedly lies
in its European character, which could prove to be a useful marketing tool for
companies active across borders.
Indeed, the SE could become an attractive vehicle to allow multinationals to
combine their pan-European activities into, for instance, a holding SE, consid-
ering that an SE is easier to relocate, if necessary, based on the provisions for
the transfer of its registered office.
Moreover, until implementation of the Tenth Company Law Directive on cross-
border mergers, the SE represents a significantly more flexible vehicle for cross-
border transactions than national corporate forms in Luxembourg.
1
The Luxembourg government is currently reviewing the capital tax. Although it seems unlikely
that the tax will simply be abolished, the competent minister has announced that plans to reduce
the tax burden are currently under review. This could mean that a solution will be implemented
before the year end.
253
The foreseeable practical difficulties arising from implementation of the provi-

sions on employee involvement could, in certain circumstances, limit the SE’s
success.
III Formation
1 General remarks
A Founding parties
As a result of enactment of the option in Article 2(5) of the Regulation, com-

panies having their registered office, but not their head office, in a Member
State2 can still participate in the setting up of an SE provided they have been
incorporated in accordance with the laws of a Member State and they have a
continuous link with the economy of a Member State3 (Art. 26bis (4) CCL).
Prior to implementation of the Regulation, a Luxembourg public limited-
liability company (société anonyme or SA) had to have at least two share-
holders. Recognition of the single-member SA may facilitate the formation of
subsidiary SEs in Luxembourg.
B Name
An SE must be identified by a specific company name or by a designation of its
purpose, preceded or followed by the abbreviation ‘SE’. However, any company
incorporated before the date of entry into force of the Regulation, i.e. before 8
October 2004, whose name contains the abbreviation ‘SE’ shall not be obliged
to change it4 (Art. 25(2) CCL).
An SE’s name shall differ from that of other legal entities so as to avoid confusion
and mitigate the risk of litigation.

The traditional reference to a company’s principal establishment (siège réel)5
to determine its domicile, i.e. the lex societatis, and therefore whether it is
governed by Luxembourg law has been replaced by a reference to its place of
central administration (head office). However, scholars are of the opinion that
both concepts should have the same meaning6 and that, therefore, the criteria
to determine whether a company is subject to Luxembourg law should remain
unchanged.
2
References to ‘Member States’ throughout this report shall be construed to mean the Member
States of the European Union and of the European Economic Area (EEA).
3
See vol. 1, chap. 2, no. 19 of this book.
4 Ibid., vol. 1, chap. 2, no. 12. 5 Arts. 2 and 159 CCL.
6
The Chambre de Commerce’s comments on the bill from 24 November 2005, p. 21.
254
Luxembourg
Pursuant to the Regulation, both the head office and the registered office of an
SE must be located in the same Member State.7 However, an SE’s head office
and registered office may be located at different places within Luxembourg8
(Art. 23(2) CCL).
Unless indicated otherwise, a company’s head office shall be deemed to be
located at the same place as its registered office. It may be hard to prove that a
company’s head office and registered office are not located at the same place if
the company’s articles of association allow meetings of its management organ
to be held by any means of communication. Assuming there is sufficient proof
in this regard, the Luxembourg district court (tribunal d‘arrondissement) for
commercial matters (the ‘court’) may, at the public prosecutor’s request, order
the dissolution and liquidation of an SE whose registered office is situated
in Luxembourg but whose head office is located abroad (Art. 101(1) CCL).
The company may, however, be given six months within which to regularise
its situation, either by transferring its head office back to Luxembourg or by
transferring its registered office abroad pursuant to the procedure described
below.
When an SE’s head office, but not its registered office, is located in Luxembourg,
the public prosecutor shall inform the Member State in which its registered office
is situated.

While the CCL remains silent on this point, Luxembourg authors and practi-
tioners agree that an SA may transfer its registered office from Luxembourg
without the loss of legal personality, subject to the unanimous consent of both
shareholders and bondholders and provided the host Member State provides for
a similar set of rules.9
The procedure to transfer an SE’s registered office from Luxembourg is, in all
respects, similar to the rules laid down in the Regulation. The board of directors
or the management board must draw up a transfer proposal (Art. 101-2 CCL),
together with a report underlying the legal and economic aspects of the transfer
and its implications for shareholders, creditors and employees (Art. 101-4 CCL).
The transfer proposal must be filed with the Luxembourg Trade and Companies
7
Article 69(a) of the Regulation provides that within five years following its entry into force,
i.e. on 8 October 2009 at the latest, the Commission shall report to the Council on inter alia the
suitability of allowing SEs to have their registered office and head office in different Member
States.
8
The CCL, as amended, does not specify whether both the registered office and head office
shall be located at the same place in Luxembourg. However, the legal committee (Commission
juridique) is of the opinion that this need not necessarily be the case (Bill 5352/7, p. 10, §3).
Luxembourg has thus not enacted the option contained in Article 7 of the Regulation, requiring
SEs registered on its territory to have their head office and registered office at the same place.
9
Bill 5357/7, p. 12.
255
Register (the ‘Companies Register’) and published in Luxembourg’s official

gazette, the Mémorial C, Recueil des Sociétés et Associations (the ‘Mémorial’)
at least one month before the general meeting scheduled to vote on the transfer.
The general meeting may not approve the transfer for two months following the
date of publication of the transfer proposal. Since the transfer of an SE’s regis-
tered office from Luxembourg does not trigger a change in its nationality, the
decision-making rules are slightly different than those applicable to the transfer
of an SA, in which case the unanimous consent of shareholders and bondhold-
ers, if any, is required. With respect to an SE, the decision must be approved by
the quorum and majority needed to amend the company’s articles, i.e. at least
half the shareholders must be present or represented and the resolution must be
adopted by at least two-thirds of the votes cast.10
If the SE has issued securities, other than shares, which carry preferential rights,
the holders of such securities must be granted rights at least equivalent to those
they possessed before the transfer, unless they agree otherwise by the quorum
and majority required to amend the company’s articles. If no such meeting
is convened or if the proposed changes to the preferential securities holders’
rights are rejected, the securities must be redeemed at a price equal to their
value as stated in the transfer proposal and confirmed by an independent auditor
appointed by the board of directors or the management board (Art. 101-9(3)
CCL).
Although the Regulation allows the Member States to adopt provisions designed
to protect minority shareholders that oppose the transfer of an SE’s registered
office, Luxembourg has not enacted this option.
Creditors of an SE transferring its registered office are eligible for certain pro-
tection. Indeed, the transfer documents shall be made available to them, and
to shareholders, at the company’s registered office at least one month prior to
the general meeting scheduled to vote on the transfer, and they may request
copies of these documents free of charge. They also benefit from the same
protection afforded creditors of an SA in the event of a capital decrease by
means of either a repayment to shareholders or a waiver of their obligation to
pay up their shares. As a result, creditors of an SE whose claims arose prior to
publication of the transfer proposal in the Mémorial11 may, within two months
following such publication and notwithstanding any agreement to the contrary,
petition the competent court, ruling as in summary proceedings, to award col-
lateral (security) for any matured or unmatured debts if the transfer is liable to
impair their rights and satisfaction of their claims. A creditor’s request may be
10
See Section IV.2.A below. These quorum and majority requirements are referred to in this report
as ‘the conditions required to amend the articles’.
11
Luxembourg has not enacted the option contained in Article 8(7) of the Regulation extending
this protection to liabilities that arise (or which may arise) prior to the transfer.
256
Luxembourg
refused if the creditor is deemed to have adequate security or if such security

is unnecessary, considering the company’s assets following the transfer. If the
company is ordered to grant security and fails to do so within the prescribed
timeframe, the claim shall become immediately due. The company may also
settle claims by paying off creditors, even for term debts.
The Regulation provides that the Member States can object to the transfer of
an SE’s registered office on grounds of public interest. Although the original
bill granted this right to the Ministry of Justice or any applicable financial
supervisory authority, Luxembourg ultimately decided not to enact this option.
The notary responsible for legalising the minutes of the general meeting approv-
ing the transfer shall issue a certificate stating that all formalities to be completed
before the transfer have been fulfilled. This certificate is then produced in the
Member State where the new registered office will be located for registration
purposes. The transfer from Luxembourg is effective on the date the SE’s new
registered office is recorded in the appropriate register in the other Member
State.
The transfer of an SE’s registered office to Luxembourg entails a restatement of
its articles by notarial instrument in order to comply with mandatory provisions
of the CCL. The transfer is effective upon recordation in the Companies Register.
However, recordation with the Companies Register is contingent on the issuance
of a certificate by the competent authority of the Member State where the SE’s
registered office was located prior to the transfer attesting to completion of the
requisite pre-transfer acts and formalities.
In the event of a transfer to or from Luxembourg, the new registration or deletion
of the old entry, as the case may be, shall be notified to the Companies Register
and published in the Mémorial.
It should be noted that an SE subject to proceedings for bankruptcy, insol-
vency, liquidation, a moratorium on payments (sursis de paiement), manage-
ment control (gestion contrôlée) or any other similar procedure is forbidden
from transferring its registered office.
D Corporate purpose
Pursuant to Luxembourg law, the corporate form adopted by a company, and
not its purpose, is the criterion used to determine whether it should be treated
as a civil or commercial company. Accordingly, a company incorporated as a
commercial company will be subject to the provisions of the CCL even if it
carries on civil activities.
The corporate purpose of Luxembourg companies, including SEs, must be
clearly defined in their articles, and the company may be ordered to wind up if
its corporate purpose is found to be unlawful or contrary to public policy.
257
As a general rule, a company shall not be bound by ultra vires acts committed
by its representatives, i.e. directors or members of its management board, as
the case may be. The consequences of such a violation are described in more
detail under Section IV below.
E Capital
The minimum share capital of an SE is €120,000.12 Even though the share

capital of an SA may be expressed in a foreign currency as long as the amount
converted into euros is equivalent to the minimum share capital, it can be
inferred from Article 4 of the Regulation that an SE’s share capital may only
be denominated in euros.
The share capital must be fully subscribed,13 and at least one-fourth of each
share shall be paid up in cash or in kind14 (contributions in kind must be fully
paid up within five years following the date of incorporation).

(i) Procedure
As of the time of writing, Luxembourg law only recognises domestic mergers
between companies that take the form of a société anonyme. There is currently
no national legislation allowing cross-border mergers or mergers between other
corporate forms.15 Implementation of the Regulation goes one step further, as
SAs set up in different Member States may now merge to form an SE, even if they
are newly incorporated and/or have a different corporate purpose. Accordingly, a
duly registered SE should also be entitled to merge with another SE, governed
by the laws of a different Member State, in accordance with the following
procedure.
Formation of an SE by merger is contingent on the satisfaction of three cumu-
lative conditions. The merging SAs must each: (i) be incorporated under the
laws of a Member State; (ii) have their registered office and head office in the
EU; and, (iii) with respect to at least two of them, be governed by the laws of
12
Without prejudice to national legislation requiring a higher threshold for companies that conduct
specific activities, such as credit institutions and insurance companies.
13
Pursuant to Article 26-3 CCL, the subscribed share capital can only consist of assets capable
of being valued in monetary terms. An undertaking to perform work or supply services does
not qualify as such.
14
Contributions in kind shall be valued by a réviseur d’entreprises (Art. 26-1(2) CCL).
15
The European Court of Justice’s judgment of 13 December 2005, commonly known as the
SEVIC decision, clearly states that these types of restrictions violate the principle of freedom
of establishment enshrined in Article 43 of the EC Treaty. Luxembourg Bill 4992 widens the
scope of recognised restructuring transactions to include cross-border mergers initiated by any
type of entity with legal personality.
258
Luxembourg
different Member States. Accordingly, two Luxembourg SAs cannot form an

SE by merger.
The formation of an SE by merger shall be carried out by the Luxembourg
participating SA in accordance with Articles 26bis (1), 261 et seq. of the CCL.
The merger can be realised either by absorption or by the incorporation of a new
company. In the former case, the acquiring company takes the form of an SE,
and the employees of the acquired company become those of the SE, whereas
in the latter case, the SE will be a newly formed entity. The place where the
acquiring company is established will therefore be decisive in determining the
location of the SE’s registered office and applicable law.
The boards of directors or, as the case may be, the management boards of the
merging companies shall jointly draw up draft terms of merger including the
following information: the address of the registered office of each merging
company and of the future SE; the share-exchange ratio; the delivery terms for
the shares; the effective date of the merger; and, if the SE is being formed by
incorporation of a new company, its articles of association and information on
the procedure to determine employee involvement. The draft terms of merger
must be published in the Mémorial and in the national gazette of each Member
State involved at least one month prior to the date on which the general meeting
is scheduled to vote on the merger. The publication shall indicate the SE’s
registration number and creditors’ rights.
All of the abovementioned documents related to the merger, together with
financial statements and the other documents mentioned in Article 267 of the
CCL, shall be made available to shareholders at the company’s registered office
at least one month prior to the date of the general meeting scheduled to vote on
the draft terms of merger.
Each merging company shall appoint one or more experts to examine the draft
terms, unless the merging companies jointly decide to petition the president of
the court in the judicial district in which one of them has its registered office
to appoint a single expert. The expert’s report shall state inter alia whether the
share exchange ratio is fair and reasonable and shall indicate and assess the
suitability of the methods used to determine this ratio.
For one month prior to the date of the general meeting scheduled to vote on
the draft terms of merger, the reports referred to above, together with other
corporate and financial documents,16 shall be made available to shareholders at
the companies’ registered offices for inspection (Art. 267 CCL).
16
See Vol. 1, chap. 2, no. 28 of this book.
259
The merger must be approved by the general meeting of each merging company,
including, where appropriate, the holders of securities other than shares.17 The
general meeting must also approve the arrangements for employee involvement
and can make registration of the SE subject to its express ratification of these
arrangements. The merger must be approved by the quorum and majority
required to amend the company’s articles of association.18 It should be noted
that, pursuant to Article 264 of the CCL, approval of the merger by the acquiring
company is not necessary if certain conditions are met.
The minutes of the general meeting, or the draft terms of merger if the merger
need not be approved by the general meeting, must take the form of a notarial
instrument, the notary being the authority competent by law to scrutinise the
legality of the merger. Indeed, the notary will issue a certificate attesting to
completion of the relevant pre-merger acts and formalities. For an SE to be
registered in Luxembourg, the Luxembourg notary must be provided with the
certificate referred to above, duly drawn up by the competent authority in the
Member State concerned, within six months of its issuance, together with a copy
of the approved draft terms of merger. Failure to comply with the procedure
to scrutinise the legality of a merger may be a ground for dissolution of an SE
thus formed.19
Luxembourg has not enacted the option contained in Article 19 of the Regulation
to forbid a company governed by Luxembourg law from taking part in the
formation of an SE by merger if any competent Luxembourg authority objects
to its participation before the notary issues the abovementioned certificate.
In contrast to the rules applicable to SAs (Arts 272 and 273 CCL), the merger
and subsequent formation of an SE are effective between the parties thereto
and against third parties as from the SE’s registration date with the Companies
Register, which is contingent upon completion of the formalities described
above (Art. 273bis CCL).
The formation of an SE by merger has consequences similar to those of a
traditional merger, i.e. all assets and liabilities of the acquired company are
transferred to the acquiring company; shareholders of the acquired company
become shareholders in the SE; the acquired company ceases to exist; and the
acquiring company takes the form of an SE.
17
The holders of securities other than shares are protected by rules laid down in Article 270 CCL,
which are in all respects similar to those set forth in Article 101-9, applicable to such holders
in the event of the transfer of an SE’s registered office.
18
According to Bill 4992, which should be enacted shortly, if the share capital of the merging
companies is divided into several classes of shares and the decision to merge is liable to affect
the rights of the holders of multiple classes, the same majority and quorum requirements must
be met in each class.
19
Luxembourg has accordingly enacted the option contained in Article 30 of the Regulation.
260
Luxembourg
A merger intended to form an SE may only be avoided prior to registration of

the SE with the Companies Register.
The above procedure also applies to a merger by incorporation of a new company
(an SE), in which case the draft terms of merger, containing the SE’s draft
instrument of incorporation, must be approved by the general meeting of each
company that will cease to exist.
(ii) Protection of creditors and minority shareholders

If the merger will jeopardise the rights of the merging companies’ creditors, the
latter shall be entitled to the same level of protection as that afforded creditors
of a company transferring its registered office abroad (see Section III.1.C (ii),
para. 6).
It should be noted that Luxembourg has not adopted any specific rules designed
to protect minority shareholders who oppose the formation of an SE by merger
or by any other means described below.
It should first be mentioned that both SAs and private limited-liability companies
(société à responsabilité limitée or S.à r.l.) incorporated under the laws of a
Member State and having their registered office and head office within the EU,
at least two of which are governed by the laws of different Member States or
have had a subsidiary or branch in another Member State for at least two years,
can form a holding SE.
In addition, given that the companies forming a holding SE survive the trans-
action and that it is not necessary to transfer employees from the participating
companies to the SE, the applicable procedure is quite similar to the proce-
dure to form an SE by merger. Management (that is, the board of directors, the
management board or the managers) of the Luxembourg promoting company
and of the other participating companies shall jointly draw up draft terms for
the formation of a holding SE, focusing on the legal and economic aspects of
the operation and highlighting the consequences thereof for shareholders and
employees. These draft terms shall contain the information set forth in Articles
20(1)(a), (b), (c), (f), (g), (h) and (i) of the Regulation and shall fix the minimum
percentage of shares of the participating companies to be contributed to the SE
by their shareholders in exchange for shares in the SE, considering that the latter
must hold more than 50% of the voting rights in each participating company.
The draft terms shall be published in the Mémorial at least one month prior to the
date of the general meeting scheduled to vote on them. A report to shareholders
prepared by one or more statutory auditors (réviseurs d’entreprises) appointed
by management shall mention, in addition to the information required by Article
32(5) of the Regulation, whether the share exchange ratio is fair and reason-
261
able (Art. 26sexies (2) CCL). As allowed where an SE is formed by merger,

one or more independent experts may draw up the report for all participating
companies, in accordance with the procedure described in Section III.2.A.(i)
above.
The terms of formation, as well as the arrangements for employee involvement,
shall be approved by the general meeting of shareholders and by the holders of
securities other than shares, if any, of each participating company. As from the
date of approval, the shareholders of each participating company shall have three
months to decide whether to contribute their shares to the SE. Incorporation can
take place only if the 50% threshold set forth in the draft terms of formation is
met.20 Shareholders who have not indicated whether they intend to contribute
their shares to the SE by the aforementioned deadline shall have an additional
month within which to do so (Art. 26octies CCL).
A notary’s certificate that all formalities required to incorporate a holding SE,
as described in Article 33 of the Regulation, have been complied with must
be published. Registration of the SE is contingent upon the fulfillment of this
requirement.
Any civil or commercial company with legal personality, as well as legal entities
governed by public law, is entitled to form a subsidiary SE. The establishment
by an SE of a wholly owned (100%) subsidiary SE will be facilitated by the
introduction into Luxembourg law of the single-member SA.
The participating companies must meet the same conditions as described in
the first paragraph of Section III.2.B above. As the Regulation and the CCL
are silent on the formation procedure, the incorporation of a subsidiary SE will
follow the rules of national law on the incorporation of an SA.
D Formation by conversion
Apart from Article 3 of the CCL, Luxembourg law contained few provisions
on conversion until the enactment of the Regulation.
Any SA (but not any other corporate form) may be converted into an SE,
provided it can prove that it has held for at least two years a subsidiary governed
by the laws of another Member State (Art. 3(6) CCL). A branch is thus not
sufficient. The conversion of an SA into an SE will not result in the winding up
of the company or in the formation of a new legal entity (Art. 3(8) CCL).
20
See Vol. 1, chap. 2, nos. 41 and 42 of this book.
262
Luxembourg
The SA’s management shall draw up draft terms of conversion on the legal and
economic aspects of the operation and the potential consequences thereof for
the company’s shareholders and employees. The draft terms shall be published
in the Mémorial at least one month before the general meeting scheduled to
vote on the conversion. An independent auditor appointed by management shall
certify that the company’s net assets are at least equal to its share capital plus
any reserves not available for distribution according to law or the company’s
articles. The draft terms of conversion shall be approved by the general meeting
263
of shareholders by the same quorum and majority required to amend the articles.
Upon registration of the SE, any agreements (and obligations arising therefrom)
entered into by the converted company, including those with employees, shall
be transferred to the SE.
The registered office of an SA may not be transferred while it is in the process
of being converted into an SE. In practice, the SA should first complete the
conversion process and then transfer its registered office (Art. 31-3(6) CCL).
An SE with its registered office in Luxembourg can be converted into an SA
if it has been in existence for two years and has approved two sets of annual
accounts. The procedure shall be in all respects similar to the procedure to
convert an SA into an SE. In addition, all provisions of Luxembourg law with
respect to the incorporation of an SA shall apply (Art. 31-1 CCL).
E Acts committed on behalf of an SE in formation
Any person who commits an act on behalf of an SE in formation, which is

therefore without legal personality, shall be personally, jointly and severally
liable, subject to any agreement to the contrary, if the SE does not assume the
act within two months following its incorporation or if the SE is not incorporated
within two years after the commitment was first entered into. Any commitments
assumed by the SE shall be deemed to have been entered into by it from the
outset (Art. 12bis CCL).21

Pursuant to Luxembourg law, any act, instrument or document of any kind that
must be published by law shall be filed with the Companies Register within one
month of being finalised. Publication shall occur within two months thereafter.
Accordingly, any reference in this report to a publication requirement shall be
understood to refer to both filing and publication procedures (Art. 9 CCL).
An SE shall be incorporated by means of a notarial instrument published in its
entirety in the Mémorial. Amendments to the articles must also be published.
Pursuant to the fourth paragraph of Article 9 of the CCL, documents that require
publication are only valid against third parties as of their publication date in the
Mémorial, unless the company can prove that the third party in question knew
of the document. Third parties may, however, rely on a document even if it has
yet to be published.22
Following publication in Luxembourg, pursuant to Article 14 of the Regulation,
a notice of registration of the SE shall be published in the Official Journal of
the European Communities for information purposes.23
21 Ibid., Vol. 1, chap. 2, no. 55. 22 Ibid., Vol. 1, chap. 2, no. 53.
23
Ibid., Vol. 1, chap. 2, no. 52.
264
Luxembourg

Whereas other Luxembourg private legal entities validly exist as of their date of
incorporation, recorded by means of a notarial instrument, an SE only has legal
personality upon registration (i.e. the filing of its articles) with the Companies
Register.

1 General remarks
Implementation of the Regulation gave the Luxembourg legislature the chance
to update national corporate law, going beyond the mere enactment of rules in
connection with the SE and the extension of these rules to the SA. Consequently,
meetings of the corporate bodies of an SA or an SE may now be validly held
by any means of communication and, for general meetings, by way of corre-
spondence, the members’ physical presence no longer being necessary. This
welcomed initiative will undoubtedly facilitate the decision-making process in
Luxembourg companies as most shareholders/members of management are not
Luxembourg residents.
Decision-making power has traditionally been divided between the general
meeting, endowed with sovereign authority, and the board of directors, which
wields residual powers. Implementation of the Regulation led to the introduction
of a new organisational model. Indeed, the traditional one-tier system lost its
supremacy with the restatement of the CCL, which now allows any SA to opt
for either a one-tier or a two-tier management structure.
Even though the two-tier system could be considered more in line with today’s
corporate governance rules, foreign investors setting up a Luxembourg entity,
most often an SPV, may not be overly enthusiastic about it, as they typically
seek flexibility and a fast decision-making process. It should be noted that
the Luxembourg legislature was influenced by the French legal framework,
whose rigidity has prevented the two-tier system from achieving much suc-
cess.24 Moreover, given that the management organ’s, supervisory board’s and
auditors’ respective spheres of influence are not clearly defined in the CCL,
practitioners should draft the company’s articles of association carefully. How-
ever the two-tier system is likely to meet expectations for large companies
(specifically listed ones) and institutional investors, especially those from coun-
tries where the two-tier system is the only model available to incorporate in
Luxembourg.25
24
Mémento Pratique Francis Lefèvre, Sociétés Commerciales, 2006, 581, no. 9467.
25
Bill 5352/3, Avis de la Chambre de Commerce, 16-17.
265

According to the Regulation, an annual general meeting must be held within six
months following the close of the financial year for the purpose of approving
the SE’s annual accounts and deciding on the allocation and/or distribution of
profits, if any. Since the option contained in Article 54 of the Regulation has
been enacted in Luxembourg, the first general meeting of an SE may be held at
any time within eighteen months following its incorporation26 (Art. 70 CCL).
If the company has only one shareholder, this shareholder shall exercise the
powers of the general meeting (Art. 67(1) CCL).
Any organ of an SE, including its auditors, can call a general meeting at any
time. In fact, a meeting must be held when shareholders representing at least
10% of the share capital so request in writing, indicating the agenda.27 If no
general meeting is held within one month’s time, it may be convened by a
representative appointed by the president of the competent court (commercial
division, ruling as in summary proceedings) at the request of shareholders
representing the abovementioned percentage of the share capital (Art. 70 CCL).
A meeting must also be held if so requested by shareholders representing at
least the above percentage of the share capital: (i) within a period not to exceed
two months from the time a loss of half the share capital has been or should have
been recorded in order to vote on dissolution of the company; and (ii) within the
same time period mentioned in (i) in the event of a loss equal to three-quarters
of the share capital, provided, in this case, that dissolution shall be effective if
approved by one fourth of the votes cast at the meeting (Art. 100 CCL).
Notices of a general meeting shall contain the agenda. One or more additional
items may be added to the agenda at the written request of shareholders repre-
senting at least 10% of the subscribed capital, sent to the SE’s registered office
by registered mail at least five days prior to the date scheduled for the meeting
(further to the option contained in Article 56 of the Regulation).
Decisions shall be approved by a majority of votes validly cast, unless where the
articles or the CCL require a greater majority. Indeed, the obligations of share-
holders may be increased only with the unanimous consent of both sharehold-
ers and bondholders. Moreover, amendments to the articles require a quorum
of at least half the shareholders and must be approved by at least two-thirds
of the votes validly cast (including abstentions and blank or spoilt ballots).
Despite discussions regarding the introduction of the option in Article 59(2)
26
This time period should not be confused with the potential eighteen-month term of the first
financial year.
27
Enactment of the option provided for in Article 55(1) of the Regulation.
266
Luxembourg
of the Regulation, the Luxembourg legislature ultimately decided not to allow

shareholders to include in the company’s articles a provision allowing amend-
ments thereto by a simple majority. If an SE has different classes of shares and
the resolutions to be adopted affect the rights of various classes, they shall be
put to a separate vote by each class, respecting the aforementioned quorum and
majority requirements.
Each shareholder shall be entitled to vote either in person or by proxy. If the
articles so provide, votes may be cast by videoconference or any other means of
communication allowing for identification of the participants (Art. 67(3) CCL)
or even in writing, in which case the form shall be determined in the articles
(Art. 67(3bis) CCL).
Each share shall carry only one vote at general meetings, i.e. plural voting is not
allowed. However, if a capital call has been issued and a shareholder has failed
to respond accordingly, that shareholder’s voting rights shall be suspended until
the requested payment is made.

The rights and obligations of an SE’s shareholders are set forth in the CCL and
in the company’s articles. Indeed, shareholders of an SE have rights similar to
those of any other corporate form, such as the right to equal treatment, to receive
dividends, to exercise pre-emptive rights, to vote and inspect certain corporate
documents prior to the general meeting of shareholders, etc.
At first sight, implementation of the Regulation could be seen as resulting in
increased protection for minority shareholders. However, while the ownership
threshold required to request that a general meeting be held has been lowered
(from 20% to 10%), undoubtedly a positive development, the threshold for cer-
tain other actions by minority shareholders, such as postponement of a general
meeting, remains unchanged. In the end, it appears that minority shareholders’
rights were not actually a matter of priority for the Luxembourg legislature,
which chose to focus instead on implementation of the Regulation’s mandatory
provisions.
3 Management
A One-tier system/Two-tier system
(i) General remarks

Founders of an SA or an SE may opt for either a one-tier or a two-tier man-
agement structure, both at the time of incorporation and at any time during the
company’s lifetime. In both systems, an SE is bound by any acts committed by
its management organs, members of management with authority to represent
the company, and persons entrusted with day-to-day management, even if these
267
acts fall outside the scope of the SE’s corporate purpose, unless it can prove
that the third party in question was or should have been aware of the ultra vires
nature of the act (Arts. 60bis and 60bis-10 CCL).
Any member of an SE’s management organ with an interest in a transaction
submitted for that organ’s approval which conflicts with the company’s interests
shall call the matter to the attention of the organ, except for standard transactions
concluded at arm’s length and at market conditions (Arts. 57, para. 4 and 68bis-
18 CCL).
Members of an SE’s organs may not divulge any information in their possession
that relates to the company if such disclosure could be prejudicial to the com-
pany’s interests, except when required to do so by law or if disclosure would
be in the public interest. This duty of confidentiality survives termination of the
members’ functions and extends to any persons allowed to attend meetings of
an SE’s organs.

In the one-tier system, the board of directors manages the SE and has the
power to take any actions necessary or useful to realise the company’s corporate
purpose, with the exception of those reserved by law or the company’s articles
to the general meeting. Moreover, the articles may specify transactions that
must be expressly approved by the board of directors (Art. 53 CCL).
The board of directors shall meet at intervals specified in the articles, at least
once every three months, to discuss the progress and foreseeable development
of the SE’s business (Art. 64(3) CCL). Unless otherwise stated in the articles or
the CCL: (i) decisions shall be adopted by a majority of the votes cast by those
directors present or represented, the board validly deliberating if at least half
the members are present or represented; and (ii) the chair casts the deciding
vote in the event of a tie. Practice indicates that resolutions may be adopted by
other means if the articles so allow. For instance, resolutions may be adopted
by videoconference or by any other means of communication, if the articles so
provide (Art. 64bis 3), in which case the meeting shall be deemed to have been
held at the SE’s registered office.

In the two-tier system, the management board manages the SE and wields
extensive powers, similar to those of the board of directors in the one-tier
system, except that the articles must include a list of transactions whose adoption
is subject to the prior authorisation of the supervisory board. However, the
Luxembourg legislature opted for flexibility. Accordingly, it did not enact the
options contained in Articles 48(1)(2) and 48(2) of the Regulation as the SE Act
does not: (i) grant the supervisory board discretionary authority to make certain
268
Luxembourg
categories of transactions subject to its prior authorisation; or (ii) determine

categories of transactions which must be indicated in an SE’s articles.
If the supervisory board vetoes a decision taken in connection with a transaction
listed in the SE’s articles, the general meeting shall settle the matter, if asked
to do so by the management board (Art. 60bis-7 (2) CCL).
The management board is permanently monitored by the supervisory board,
which, however, may not interfere in the SE’s management without risking
recharacterisation as a de facto director (dirigeant de fait) and incurring liability
as such.
The management board shall: (i) report in writing28 to the supervisory board at
least once every three months on the progress and foreseeable development of
the SE’s business; (ii) promptly inform the supervisory board of any events likely
to have a material effect on the SE;29 and (iii) submit to the supervisory board
each year financial statements and a related report,30 which are then submitted
to the general meeting together with the supervisory board’s comments thereon
(Arts. 60bis-12 and 60bis-13 CCL).
The supervisory board may conduct investigations for the purpose of auditing
transactions of any kind by: (i) inspecting at the SE’s registered office any cor-
porate or financial document; (ii) undertaking or arranging for any investigation
necessary to perform its duties; and (iii) instructing the management organ to
provide information of any kind.
The board of directors’ internal procedure, detailed in Section IV.3.A.2 §2
above, applies to both the management board and the supervisory board. How-
ever, the supervisory board shall meet at the request of its chair, who shall call
a meeting when asked to do so by at least two supervisory board members or
by the management organ. Members of the management board may be asked
to attend meetings of the supervisory board, but in an advisory role only.

Directors (in the one-tier system) and members of the supervisory board (in the
two-tier system) are appointed and removed by the general meeting, although
28
By specifically requiring a written report, the Luxembourg legislature went beyond the require-
ments of Article 41(1) of the Regulation (although the Regulation could be interpreted as
implicitly requiring a written report) in order to avoid discussion as regards the form of the
report.
29
Noncompliance with this duty may result in the imposition of criminal sanctions on members
of the management organ. As the scope of this obligation is vague, members of the management
organ could be tempted to provide the supervisory board with any information, relevant or not,
in order to avoid, to the extent possible, liability under Article 173bis CCL (Bill 5352/3, Avis
de la Chambre de Commerce, 29).
30
Including all documents listed in Article 72 CCL.
269
the first appointments may be made in the company’s articles (Arts. 51 and
60bis-14 CCL).
Members of the management board are appointed by the supervisory board,
unless the general meeting has been granted exclusive authority to appoint them
in the articles (Art. 60bis-3). Members are removed by the supervisory board,
together with the general meeting of shareholders if the articles so provide (Art.
60bis-3 and 60bis-5).31
The number of members of each corporate body can be freely determined in
the SE’s articles.32 The board of directors and the supervisory board,33 however,
must have at least three members34 where employee participation is regulated in
accordance with the Directive (Art. 51(2) CCL). It can be inferred from Article
60bis-2(2) CCL that the management board must have at least two members,35
except in the case of a single-member SE or if the company’s share capital does
not exceed EUR 500,000.
Members of an SE’s organs, regardless of whether they are shareholders, are
appointed for a term set forth in the articles not to exceed six years and may
be re-appointed and removed from office ad nutum. They may be remunerated,
but this is not necessary.36
Natural persons or legal entities can be appointed to an SE’s organs. It should be
noted that a legal entity must appoint a natural person to exercise its functions
in its name and on its behalf. These personal representatives can incur civil
liability as if they act in their own name, notwithstanding their joint liability
with the company they represent (Arts. 51bis and 60bis-4 CCL).
No one may sit at the same time on both the management board and supervisory
board of an SE.
In the event of a vacancy on the board of directors, the management board or the
supervisory board, the remaining members of the respective body, unless the
31
The Luxembourg legislature discussed the possibility of granting the power to remove members
of the management organ to the supervisory board only (Bill 5352/5). However, the Council of
State (Conseil d’Etat) emphasised that such a provision would effectively release the members
of the management organ from liability to shareholders (Bill No 5352/6). It was finally decided
to enact the option granted by the Regulation and to allow shareholders to remove members of
the management organ if the articles of the company, be it an SA or an SE, so allow.
32
The board of directors of an SA shall be composed of at least three directors, except for a
single-member SA, which can have one director.
33
Art. 60bis-14 cross refers to Articles 51, 51bis and 52 CCL.
34
Enactment of the option contained in Article 40(3) of the Regulation; with respect to the board
of directors, Luxembourg law already provided for a minimum of three directors.
35
Enactment of the option contained in Article 39(4) of the Regulation
36
The first bill (Art. 60bis-6) provided for remuneration of members of the management organ.
The Council of State did not see any reason to so distinguish between members of the board of
directors and of the management organ, however.
270
Luxembourg
article provide otherwise, shall appoint a temporary replacement. A permanent

member shall be named at the next general meeting of shareholders (for direc-
tors and supervisory board members) or the next supervisory board meeting or
general meeting of shareholders (for management board members) (see Sec-
tion IV.3.B.2 above). In the event of a vacancy on the management board, a
member of the supervisory board can temporarily step in, in which case his
or her functions on the supervisory board shall be suspended.37 In any case,
the substitute member shall remain in office only until the end of the outgoing
member’s term.
The board of directors, the management board and the supervisory board shall
each select a chair from amongst their members. If half the members of an SE’s
organ are appointed by employees, only a member appointed by the general
meeting can serve as chair (Art. 64(2) CCL). It should be noted that the chair
is not entrusted with the same extensive powers as in France and can in no case
be considered a corporate organ.
Extracts of any instrument relating to the appointment or removal of any member
of an SE’s organs, including the personal representatives of legal entities, shall
be filed with the Companies Register and published as required by law.
C Representation
The board of directors in the one tier-system and the management board in the
two-tier system represent the SE vis-à-vis third parties and in legal proceedings,
as plaintiff or defendant. Legal documents served on behalf of, or on, an SE
shall be validly served if they are in the name of the company alone.38
Any limitations on such powers resulting from either the articles or a decision
of the competent corporate organ are not valid against third parties, even if pub-
lished. However, the articles may authorise one or more directors or members
of management to bind the company, either singly or jointly. Such a clause will
be effective against third parties, subject to its publication.
The rules on the delegation of authority applicable to SAs apply to both the board
of directors and the management board of an SE. Thus, day-to-day managerial
authority and the power to represent the SE in relation thereto can be delegated
to one or more directors or members of the management board or to any other
37
Luxembourg law does not stipulate any specific time limit as permitted by Article 39(3) of the
Regulation.
38
Such a provision is standard and applied to various Luxembourg corporate forms prior to
implementation of the Regulation, as confirmed by the case law, despite a rule of civil procedure
to the effect that a summons is validly issued against a company when served on the corporate
body authorised to represent it. It would have been worthwhile to amend this provision so as to
bring it into line with the spirit of the Regulation, which requires that each legal entity appoint
a natural person to represent it.
271
person, who need not be a shareholder, acting singly or jointly. Pursuant to

implementation of the Regulation, such a delegation of authority is no longer
subject to the prior authorisation of the general meeting (Art. 60 and 60bis-8
CCL).39 , 40
In the two-tier system, the supervisory board may set up sub-committees and
grant specific powers of attorney, which shall not be deemed a delegation of
authority (Art. 60bis-15 CCL).
D Liability
The liability rules applicable to an SA also apply to members of the board of
directors, the management board and the supervisory board of an SE, who are
liable to the SE, in accordance with general principles of law, for the perfor-
mance of their duties and for any misconduct in relation thereto, i.e. management
of the company’s affairs (for the board of directors and the management board)
and supervision (for the supervisory board). Furthermore, they shall be jointly
and severally liable to both the SE and third parties for any damage resulting
from violation of the CCL or the SE’s articles. Liability can be avoided if it can
be demonstrated that the member in question was not a party to the violation,
no misconduct can be attributed to him or her, and the member disclosed the
violation at the first general meeting after learning of it (Arts. 59, 60bis-10 and
60bis-16 CCL).
Members of the management organ may not claim a release from liability on
the ground that the decision was adopted with the prior authorisation of the
supervisory board (Art. 60bis-10).
Members of an SE’s organ may also incur criminal liability.
1 General remarks
The structure and content of the Employee Involvement Act mirror those of
the Directive, for the most part. The Employee Involvement Act aims at imple-
menting minimum rules to guarantee application of the before/after principle.
As a result, an SE is not obliged to introduce rules on employee participation
if none of the participating companies was subject to such rules beforehand.41
Indeed, this should be the case when, for example, the company to be converted
into an SE does not provide for employee participation.
39
With respect to the board of directors, such rules could be found in the CCL prior to enactment
of the SE Act.
40 Enactment of the option contained in Article 39(1) of the Regulation. 41 Bill 5435/3, p. 7.
272
Luxembourg
The Employee Involvement Act has, in fact, not introduced any new substantive
concepts into Luxembourg labour law, considering that:
(i) The mechanism to create an SNB was first introduced into national law
following the transposition of Directive 94/45/CE (the ‘EWC Direc-
tive’)42 by the Act of 28 July 2000 on the establishment of a European
works council or specific information and consultation procedures in
Community-scale undertakings and Community-wide groups of under-
takings (the ‘EWC Act’);
(ii) Employee participation in SAs with at least 1,000 salaried employees for
the past three years and in companies in which the Luxembourg govern-
ment holds a stake of at least 25% is provided for by the law of 6 May
1974 on works councils (comités mixtes) and employee representation in
the SA (the ‘1974 Act’). One drawback of the 1974 Act is that it only
provides for employee participation in an SA with a board of directors,
the two-tier management system being unknown in Luxembourg prior
to implementation of the Regulation.43 As a result, there was initially
no legal obligation for an SA with a two-tier management structure to
provide for employee participation on its supervisory board.44 This has
since been amended by the Employee Involvement Act (Arts. 23 and 24);
and
(iii) The Employee Involvement Act expressly refers to certain provisions of
the law of 18 May 1979 on staff delegations (délégations du personnel),
as amended (the ‘1979 Act’ or the ‘Staff Delegations Act’).
For the above reasons, the following overview is not a comprehensive guide to
employee involvement in the SE, as set forth in the Employee Involvement Act,
but rather focuses on the distinctive features in this regard under Luxembourg
law.

An SNB shall be established as soon as possible following publication of the
draft terms of merger, the intention to set up a holding SE, approval of the draft
terms of formation for a subsidiary SE, or the conversion of an SA into an SE,
as the case may be (Art. 31 Employee Involvement Act).
The rules in the Employee Involvement Act on composition of the SNB closely
resemble those set out in the Directive and also provide for additional members
42
See Vol. 1, chap. 1, p. 17 and chap. 3, no. 50 of this book.
43
In fact, pursuant to Article 44 of the 1974 Act, this rule should apply de facto if a two-tier
system is introduced into national law. However, as this provision was a transitional measure,
to avoid confusion it has been abrogated by the Employee Involvement Act (Bill 5435/7 p. 2).
44
Bill 5435 no 3, p. 2.
273
when an SE is formed by merger.45 However, the Luxembourg legislature has

introduced additional provisions designed to take into account changes that
are liable to occur after formation of the SNB. Indeed, the functions of SNB
members shall come to an end when they cease to represent employees46 as a
result of an amendment to the terms of formation of the SE to which they are
affiliated. In addition, the composition of the SNB shall be adapted accordingly
in the event of substantial changes, such as a transfer of the SE’s registered
office, a change in its composition or amendments that may affect the distribu-
tion of seats on the SNB in one or more Member States (Art. 3(3) Employee
Involvement Act).
Representatives of Luxembourg employees to the SNB shall be elected or
appointed by the employee delegation, i.e. by central delegations,47 if any,
or principal delegations48 created in accordance with the Employee Delega-
tions Act, from amongst either the employees themselves or their trade union
representatives.49 Such appointments are subject to quite complex provisions
which provide, for instance, for balanced representation of various categories
of employees, i.e. white-collar employees and blue-collar workers (Art. 4(2) §2
and (4) Employee Involvement Act). In addition, if the Luxembourg employees
come from several entities, each of which has one or more employee delega-
tions, representatives shall be appointed or designated by the delegations in a
general meeting, in accordance with a specific procedure (Art. 4 (5) Employee
Involvement Act).
The Employee Involvement Act specifies that employee representatives for
Luxembourg public entities shall be appointed by the employees’ committee
45
See Vol. 1, chap. 3, nos. 6 to 8 of this book.
46
Unless stated otherwise herein, references to ‘employee(s)’ or ‘worker(s)’ shall mean all cate-
gories of employees without distinction.
47
A central delegation shall be formed when more than one establishment forms a single entity,
and each constituent establishment employs at least 15 salaried workers. Such a delegation is
composed of three effective and three substitute representatives, elected by the principal dele-
gations of the relevant establishments. When the latter have separate delegations representing
white-collar employees and blue-collar workers, there must be a central delegation for each
category (Art. 3 Staff Delegations Act).
48
Principal delegations are set up in private legal entities employing at least 15 salaried workers
and in public legal entities with at least 15 blue-collar workers on a regular basis. A single
delegation for both white-collar and blue-collar employees shall be formed in establishments
with less than 100 employees. Above this threshold, if the legal entity regularly employs at least
15 employees in each category, there must be a delegation for white-collar employees and one
for blue-collar employees. If the number of regular salaried employees falls below 15, a single
delegation shall suffice (Art. 1 Staff Delegations Act).
49
This option is granted by Article 3(2)(b)(2) of the Directive and reflected in Article 4(1) of
the Employee Involvement Act, the scope of which is limited to trade unions with national
or sector-level membership and which have taken part in a collective bargaining agreement
applicable within a participating company, relevant subsidiary or establishment.
274
Luxembourg
mentioned in Article 36 of the law of 16 April 197950 on the general status of

state employees.
Employee representatives shall include both effective and substitute members,
elected by a simple majority of the votes cast. Elections are supervised by the
Labour and Mining Inspectorate (Inspection du Travail et des Mines).
Once an SNB is formed, negotiations with the competent bodies of the partici-
pating companies with a view to reaching an agreement on employee involve-
ment shall continue for six months, which period may be extended up to one
year. The final agreement51 should at least mention, for instance, the option of
introducing one or more information and consultation procedures rather than
having a representative body.52 The parties remain free to broaden the scope
of their agreement by providing, for example, that each participating company
shall bear: (i) the fees of more than one expert appointed to assist the SNB;53
and/or (ii) fees corresponding to the expert’s participation at more than one
meeting.
However, the SNB may freely decide not to enter into negotiations or, at a later
stage within the abovementioned time period, to break off negotiations. In both
cases, the provisions of the ECW Act shall apply, application of the standard
provisions being expressly excluded. Alternatively, the SNB can opt to apply
the standard rules. It should be noted that the standard rules shall also apply if:
(i) the SNB fails to reach an agreement within the time period allotted and the
SE has been duly registered; or (ii) the agreement is declared null and void due,
for instance, to non-compliance with the before/after principle. Considering
that the Luxembourg legislature did not enact the option contained in Article
7(3) of the Directive, the standard rules may also apply when an SE is formed
by merger.
It is important to note that the rules to appoint members of the representative
body to be created in accordance with the standard rules are in all respects similar
to the rules applicable to appoint SNB members, except that representatives of
national trade unions are not eligible, i.e. members of the representative body
shall be elected from amongst the employees only, by either the central or
50
Insofar as a subsidiary SE may be formed by companies and other entities governed by public
law, the law shall also cover representation rules for the employee representatives of such
entities.
51
See Vol. 1, chap. 3, no. 21 for comments on the additional requirements when an SE is formed
by conversion, as set forth in Article 6(3) of the Employee Involvement Act.
52
Art. 6 Employee Involvement Act.
53
Ibid., Arts. 5(4) and (7). Based on the option contained in Article 3(7) of the Regulation, the
SE Act provides that, unless otherwise regulated by the agreement on employee involvement,
each participating company shall bear the costs of a single expert to assist the SNB, limited to
expenses directly related to the expert’s attendance at meetings.
275
principal delegations, as the case may be (Art. 10 Employee Involvement Act).

The term of office of members of the representative body of an SE with its
registered office in Luxembourg is five years.
It is important to note that, with respect to the standard rules for information and
consultation, Luxembourg has enacted the options contained in Part 2(d) and (h)
of the Annex to the Directive, which provide for information and consultation
meetings to be chaired by the chairman of the board of directors or of the
management board (Art. 11(4) Employee Involvement Act) and, unless agreed
otherwise, limit the costs to be borne by the SE in relation to experts to one
expert per nine members of the representative body (Art. 11(8) §2 Employee
Involvement Act).
Unlike the EWC Directive, which provides only for consultation and informa-
tion, the scope of the Directive extends to employee participation. In accordance
with Article 13(2) of the Directive, and in order to avoid the concomitant appli-
cation of two similar systems, the 1974 Act does not apply to SEs with their
registered office in Luxembourg.54 In this case, the term of office for employee
representatives on the board of directors or the supervisory body shall be equiv-
alent to that of other directors or board members, as the case may be, and shall
be renewable. Employee representatives cannot be removed from office by the
general meeting of shareholders.55
With respect to the standard rules for participation (regardless of where the
SE’s headquarters are located), Luxembourg representatives to the employee
representative body shall be appointed by the employees’ committee based
on a list system, following the rules on proportional representation amongst
employees applicable in the relevant company. The allocation of seats between
white-collar and blue-collar employees shall be pro rata to their respective
numbers.56
In the event different participation systems exist in the participating com-
panies promoting the formation of a holding or a subsidiary SE, the SNB,
applying the standard rules, shall opt for one form of participation within two
54
With respect to the standard rules for employee participation in an SE, Article 12 of the
Employee Involvement Act mirrors Part 3 of the Annex to the Directive; see also Vol. 1, chap.
3, no. 51 with respect to the applicable rules and nos. 41 to 49 for further information on the
content of the arrangements for employee participation.
55
Arts. 51 paras. 3 to 6, 52 and 60bis-15 of the CCL are not applicable to employee representatives
on the board of directors or supervisory board.
56
The Règlement Grand Ducal of 24 September 1974 on the election of employee representa-
tives to employee delegations and boards of directors shall apply as regards the ballot-related
rules.
276
Luxembourg
months from the time it is requested to do so by the competent organs of the

promoting companies (Art. 8(2)(3) SE Act), the latter being otherwise enti-
tled to select the applicable system provided they inform the SNB of their
decision.57

With a view to ensuring consistency with the existing rules on the protection
of employee representatives set forth in the EWC Act, which refers to the
1979 Act, similar protective measures apply to members of the SNB and the
employee representative body and to employee representatives on the super-
visory or administrative board of an SE (collectively referred to as the ‘repre-
sentatives’). Indeed, representatives are, for instance: (i) protected against dis-
missal58 for the duration of their term of office and up to six months following the
expiry thereof or the date on which their functions cease (Art. 16(1) Employee
Involvement Act); (ii) allowed, with the prior approval of the employer or its
representative, to use working time to complete their duties under the Employee
Involvement Act without any adverse financial consequences (Art. 16(2) and
(3) Employee Involvement Act); and (iii) granted one week off per year to
take part in training sessions organised by the trade unions or any other spe-
cialised institution on topics liable to improve their economic, labour or tech-
nical knowledge and which are deemed useful in the performance of their
duties as representatives (congé-formation) (Art. 16(6) Employee Involvement
Act).
Representatives must also abide by certain duties and may not, for instance,
reveal trade or commercial secrets or any information received on a confidential
basis from the SE. Articles 309 and 458 of the Luxembourg Criminal Code set
forth sanctions for violation of this duty of confidentiality.

In keeping with the Regulation, the provisions of Luxembourg accounting law
applicable to SAs shall apply to SEs with their registered office in Luxembourg.
The annual accounts comprise the balance sheet, income statement, in which the
necessary depreciation must be taken, and an annex summarising the company’s
57
Enactment of the option contained in Article 7(2) of the Directive.
58
According to Article 55 of the EWC Act and Articles 34 and 35 of the 1979 Act, candidates
for the employees’ committee shall also benefit from protection for a period of three months
as from the date on which submit their candidacy. The employer may, in the event of serious
misconduct by one of its employees, ask that employee to leave the company immediately (mise
à pied immédiate) and file a petition with the labour court to obtain a favourable decision with
respect to termination of the employment contract.
277
commitments and the liabilities of its directors, the members of its management
organ and supervisory board, and auditors, as the case may be, attached to a
list indicating the value of all movable and immovable property, as well as any
debts owed to and by, the company. All such financial statements are prepared
by management59 (Arts. 72 and 204 CCL). The format of the balance sheet and
income statement shall follow that described in Articles 213 or 214 CCL for
the former and in Articles 227 to 230 CCL for the latter. However, companies
may draw up an abridged balance sheet when, on the closing date of the balance
sheet and for two consecutive financial years thereafter, they have not met two
of the following three criteria: balance sheet total of €3.15 million, net turnover
of €6.25 million and 50 full-time staff members on average during the financial
year (Arts. 215 and 216 CCL).60
In addition to the above documents, management shall draft an annual report
on the development of the company’s business and its position, which shall be
submitted to the company’s auditors (commissaires aux comptes or réviseurs
d’entreprises, as the case may be) one month prior to the general meeting of
shareholders mentioned below. The auditors in turn shall prepare a report setting
forth their proposals. Both reports shall be presented to the ordinary general
meeting called to approve the annual accounts, which must be held within six
months following the close of the financial year, on the date provided for in the
company’s articles of association (Arts. 74 and 163 CCL).
In the two-tier system, Article 60bis-13 CCL provides that the management
board is obliged to submit a management report61 to the supervisory board
within the same time period mentioned above (i.e. one month before the annual
general meeting). The supervisory board will then provide the general meeting
of shareholders with its comments on both this report and the annual accounts.
However, some questions remain unanswered as regards, for instance, the
form and content of such comments and their impact on the general meeting’s
decisions.
Members of management may be released from liability (quitus) at the general
meeting called to approve the annual accounts. The validity of such a discharge
may not be challenged if the balance sheet gives a true and fair view of the
company’s financial situation and if the notice of the meeting mentioned any
ultra vires acts by management (Art. 14 CCL).
59
References to ‘management’ shall be construed to include both the board of directors (in the
one-tier system) and the management board (in the two-tier system).
60
The same holds true for the income statement when the following criteria are met: a balance
sheet total of €12.5 million, net turnover of €25 million, and an average of 250 full-time staff
members during the financial year (Art. 231 CCL).
61
It is assumed that, in practice, management will submit such a report to the general meeting of
shareholders along with its the management report.
278
Luxembourg
The balance sheet and the income statement, indicating the publication date of
the company’s articles of association, shall be published by management within
one month following their approval by the general meeting of shareholders (Art.
75 CCL).
In a group structure, subject to certain exceptions, the parent company must
draw up consolidated accounts and a consolidated management report when:
(i) it holds a majority of the voting rights in an undertaking; or (ii) it is enti-
tled to appoint or remove the majority of the members of the management
or supervisory bodies of a subsidiary; or (iii) as a result of a shareholders’
agreement, it holds a majority of voting rights in a subsidiary. The audit-
ing and publication rules are similar to those described above for the annual
accounts.
2 Auditors
An SA must be supervised by statutory auditors, who may but need not be
shareholders, except when it meets two of the three criteria set out in Article
215 CCL (see above), in which case an independent auditor shall be appointed
instead.
In the former case, one or more statutory auditors are appointed by the gen-
eral meting of shareholders for a term not to exceed six years. They may be
removed from office ad nutum, and their liability is governed by the rules
applicable to directors and members of the management organ. The auditors
are vested with unlimited power to supervise the company’s transactions and
audit both the annual accounts and the management report. In this respect, they
may inspect the company’s records at any time, and management must provide
twice a year a summary of the company’s assets and liabilities. The auditors
may be assisted by experts for the purpose of verifying the company’ books and
accounts.
When the size of an SA justifies the appointment of one or more independent
auditors, the general meeting of shareholders must appoint them from amongst
the members of the Luxembourg Institute of Chartered Accountants (Institut des
Réviseurs d’Entreprises)62 for a fixed term. Unlike statutory auditors, indepen-
dent auditors are not considered a corporate organ and their duties are limited
to checking the consistency of the management report with the annual accounts
for the financial year.
62
In companies referred to in the 1974 Act on works councils and employee participation in
SAs, independent accountants are appointed by the general meeting of shareholders further to
a proposal from the work council (Art. 256(1)(a)).
279

Application of the Regulation is supervised by various national authorities,
depending on the provision in question and the SE’s stage of existence, e.g. the
notary for purposes of Articles 8(8) and 25(2) of the Regulation, the Trade and
Companies Register for Article 12, and the courts for implementation of the
provisions of Article 64(2).
VIII Dissolution
As there are no specific rules applicable to SEs, the following is an overview
of the various ways in which a SA, and hence a SE, can be wound up under
Luxembourg law.
1 Winding up
An SA may be wound up either voluntarily or involuntarily (by court order).
First and foremost, a company with a limited term of existence shall be wound
up on the date provided in its articles of association, unless its term has been
validly extended. In addition, the general meeting of an SA may resolve to
wind up the company in accordance with the conditions laid down to amend
its articles and in the presence of a notary public. In specific circumstances,
shareholders must decide whether to continue the company’s business, e.g. in
the event of a loss of half the share capital.
Involuntary dissolution can result from a court order issued pursuant to a petition
filed either by the Luxembourg public prosecutor, due to a violation of criminal
law, important provisions of the Commercial Code, the CCL or other laws
governing commercial companies,63 or by a shareholder to force the company
to liquidate (Art. 203 CCL).64
A company that has been wound up is deemed to exist for the sole purpose of
liquidation.
2 Liquidation
In the event of involuntary dissolution, the court shall appoint a supervisory
judge (juge-commissaire) and one or more liquidators and determine the method
of liquidation. It may also extend the rules governing liquidation in bankruptcy.
63
For instance, carrying on a commercial activity without a business licence when one is required
by law.
64
When, for example, a serious and continuous disagreement between shareholders definitively
impairs the proper functioning of the company.
280
Luxembourg
With respect to voluntary liquidation, the extraordinary general meeting called

with a view to winding up the company (thereby putting an end to the managers’
mandate) shall decide to liquidate the company. One or more liquidators shall be
appointed, and their powers, duties and remuneration determined. Liquidators
may, but need not, be shareholders and can be either natural persons or legal
entities. When no liquidator is appointed, the management board or members
of the management organ, as the case may be, shall be deemed liquidators (Art.
143 CCL).
The liquidators are entrusted with preparing a detailed list of the company’s
assets and liabilities, realising the company’s assets, reimbursing the company’s
debts and distributing any remaining proceeds to shareholders.
Unless provided otherwise in the articles or by the extraordinary general meeting
that appoints them, the liquidators shall be vested with certain powers provided
for by the CCL, the scope of which may be broadened by the general meeting in
order to allow the liquidators, for instance, to continue the company’s business
until of the completion of liquidation, borrow money to pay down the company’s
debts, pledge the company’s assets, transfer the company’s assets to another
company and, under certain conditions, redeem the company’s shares.
Once the liquidation procedure is complete, a second general meeting shall be
called to allow the liquidator(s) to submit a formal report on their activities
to the company’s shareholders. Following the submission of this report, the
shareholders shall appoint an auditor (commissaire) to check the liquidators’
performance and the liquidation procedure. In addition, the shareholders must
set a date for a third general meeting, at which time the auditor’s report on
the liquidation, describing the liquidators’ activities and commenting thereon,
shall be submitted for their approval and resolutions shall be passed to close
the liquidation.
The decisions to wind up the company, appoint liquidators and terminate liq-
uidation (indicating the place where the company’s documents shall be stored
and the steps taken in relation to the deposit of undistributed assets belonging
to creditors or shareholders) must be published.
3 Insolvency
Bankruptcy proceedings are governed by the Luxembourg Commercial Code
(‘LCC’) which grants exclusive jurisdiction to the district courts to declare an
SA bankrupt once it has been shown that the company has, notably, ceased to pay
its debts. Proceedings may be initiated by: (i) the company’s creditors, as is often
the case; (ii) the company itself, by filing a petition in bankruptcy with the com-
petent court (faillite sur aveu); or (iii) the public prosecutor’s office. The court
will appointment one or more trustees in bankruptcy (curateur) and a super-
visory judge (juge commissaire), at which time members of the management
281
organ shall be deprived of all managerial authority. The trustees in bankruptcy

are responsible for inter alia publishing the adjudication in bankruptcy in at
least two national newspapers and the Mémorial B; compiling an inventory of
the company’s assets; dealing with creditors’ claims; selling off the remaining
assets, if any; and distributing the proceeds to creditors in accordance with the
priority of their claims. They also verify the validity of transactions entered
into by the bankrupt company during the so-called relation-back period set by
the court, i.e. a period of six months and 10 days preceding the adjudication
in bankruptcy. Upon the completion of their duties, the trustees in bankruptcy
shall file a request to close bankruptcy with the competent court, whose final
judgment shall terminate the proceedings.
Although rare in practice, the court may grant a discharge (réhabilitation) if
the bankrupt company so requests and has paid off its debts, including interest
and fees.
Controlled management (gestion contrôlée) is a procedure rarely used in prac-
tice, instituted when a company is temporarily unable to pay its debts or its
business is threatened by difficulties that can lead, over a relatively short period
of time, to breach of its payment obligations (i.e., the company has not already
been declared bankrupt by a final judgment), and it seems likely, based on its
expected profits, that the company will recover, provided it has not committed
fraud, gross error or irregularities in the management of its business.
The debtor begins the procedure by applying to the competent court. The appli-
cation must be accompanied by a statement of the company’s assets and liabili-
ties as well as a list of its creditors. The commercial court will order controlled
management of the debtor’s business unless it appears that this will not result
in an improvement in the company’s financial situation or improve conditions
to realise its assets. If the court decides to move forward with the application:
(i) a judge will be appointed to investigate, together with one or more experts
(e.g., accountants), the debtor’s financial situation and prepare a report to the
court; (ii) all legal proceedings against the debtor brought by its creditors, while
allowed to begin or continue, as the case may be, shall cease to be enforceable
for the duration of the period of controlled management; and (iii) the debtor
will be unable to dispose of, pledge or otherwise mortgage any assets without
the express authorisation of the court.
Upon receipt and consideration of the report from the abovementioned judge, the
court may either order controlled management of the debtor’s estate (appointing
one or more receivers for this purpose) or dismiss the debtor’s application and
declare it bankrupt.
282
Luxembourg
IX Applicable law
An SE registered in Luxembourg shall be governed by the relevant provisions of
the CCL (i) applicable to SAs and (ii) enacted specifically for SEs, in accordance
with the Regulation, and by its articles when (i) and (ii) so allow.
X Tax treatment64
The law of 15 August 2006 does not provide for any specific direct or indirect
tax measures with respect to SEs, and the tax treatment of such entities remains
governed entirely by the rules applicable to any other Luxembourg company
(organisme à caractère collectif) or permanent establishment of a non-resident
company.
1 Income tax
A SE with its registered office or principal establishment in Luxembourg shall
be deemed a Luxembourg resident for tax purposes. Although not expressly
listed as a joint stock company (société de capitaux) in the current version
of Article 159 of the Income Tax Code (‘ITC’), a Luxembourg SE should be
considered as such and therefore be subject to corporate tax (impôt sur le revenu
des collectivités) and municipal business tax (impôt commercial communal). As
a Luxembourg resident company, an SE is taxed on its worldwide income at
an aggregate rate of 29.63% (including a solidarity surcharge) if established in
the City of Luxembourg, unless an exemption applies under national law or is
provided for in a double tax treaty.
A non-resident SE is liable for corporate tax (at 22.88%, including a solidarity
surcharge) on income realised through any Luxembourg permanent establish-
ment, fixed place of business or permanent representative established in the
City of Luxembourg. A Luxembourg permanent establishment, fixed place of
business or permanent representative of a non-resident SE is also subject to
municipal business tax at a rate of 6.75% if it is established in the City of Lux-
embourg. Municipal business tax applies to the income of such a permanent
establishment, fixed place of business or permanent representative to the extent
there is no deduction or exemption available.
Similar to any other Luxembourg resident company, an SE residing in the
Grand Duchy of Luxembourg for tax purposes also benefits from Luxembourg’s
extensive network of double tax treaties and the relevant EU directives (Parent-
Subsidiary Directive, Merger Directive, etc.).
64 The section was prepared by Jean-Marc Groelly and Emilie Fister from the tax department of
NautaDutilh Avocats Luxembourg.
283
Dividends received or capital gains realised on shares by an SE or a Luxem-

bourg permanent establishment of an SE now explicitly benefit from the partic-
ipation exemption under the same rules applicable to qualifying Luxembourg
companies. The same holds true for dividends distributed by a Luxembourg-
resident SE to qualifying shareholders (including another SE). This follows
from the law of 17 November 2006, which transposed into Luxembourg law the
latest amendments to the Parent-Subsidiary Directive (resulting from Directive
2003/123/EC of 22 December 2003).
Under Luxembourg’s current group tax relief system, losses realised by sub-
sidiaries can be set off against the parent’s profits if both the Luxembourg parent
company (or the PE of a non-resident joint stock company (société de capitaux))
and its subsidiaries are fully subject to tax in Luxembourg. This should also
apply to a Luxembourg permanent establishment of an SE (parent company) or
to a Luxembourg SE, although the definition of a joint stock company (société
de capitaux), as used in the ITC, does not expressly refer to the SE (see above).
Based on the current provisions, a foreign subsidiary of a Luxembourg SE (the
parent) cannot benefit from Luxembourg’s tax consolidation rules, as a Lux-
embourg parent is not allowed to deduct the losses of its foreign subsidiaries
from its worldwide income. According to a decision of the European Court of
Justice (ECJ) of December 13, 2005 (Case 446/03, Marks & Spencer), a group
tax relief system violates the principle of freedom of establishment if the parent
company is not able to use losses incurred by its EU subsidiaries in cases where
it is not possible to obtain relief for these losses in the subsidiaries’ countries
of residence. Neither the Luxembourg tax authorities nor the government have
officially drawn any conclusions from this case. However, in practice, the Marks
& Spencer decision should mean that a Luxembourg-resident SE or the perma-
nent establishment of a Luxembourg SE (parent company) should be able to
credit the losses of foreign subsidiaries in similar circumstances and under the
same conditions.
The liquidation of a Luxembourg-resident SE entails taxation at the standard
rate of any hidden reserves or unrealised profits. In the hands of shareholders,
profits received further to allocation of the company’s net assets are treated as
capital gains and are therefore not subject to withholding tax in Luxembourg.
For Luxembourg-resident shareholders of an SE, liquidation proceeds may
benefit from the participation exemption under the same conditions as dividends
(see above). In the absence of a Luxembourg permanent establishment, fixed
place of business or permanent representative, non-resident shareholders of
a Luxembourg SE are normally not subject to tax in Luxembourg on their
liquidation gains unless: (i) they hold or have held a substantial shareholding
in the SE (directly or indirectly, more that 10%); (ii) the SE is liquidated within
six months following the acquisition of their shares; and (iii) they do not benefit
from a double taxation treaty exempting these gains from Luxembourg tax.
284
Luxembourg
One of the major innovations brought about by the Regulation and the SE
Act of 25 August 2006 is the possibility for companies to transfer their reg-
istered office abroad without losing legal personality. Under Luxembourg tax
law, however, transfer of both the registered office and the principal estab-
lishment of an SE is treated as liquidation, and any hidden reserves or unre-
alised profits will be subject to corporate tax and municipal business tax unless
they benefit from an exemption (e.g., if the Luxembourg SE is a holding
company and its shareholdings benefit from the participation exemption upon
transfer).
However, since 2002, the immediate taxation of capital gains upon the transfer
of a company’s registered office outside Luxembourg can be avoided if the
Luxembourg joint stock company (société de capitaux), which definition cur-
rently includes the SE, maintains a Luxembourg permanent establishment and
any assets which could potentially generate capital gains are allocated to this
permanent establishment.
A Luxembourg public limited-liability company (société anonyme) or private
limited-liability company (société à responsabilité limitée) can, under certain
conditions, be converted into a Luxembourg resident SE without adverse tax
consequences.
Upon the merger of two SEs, the merger of a Luxembourg joint stock company
into a Luxembourg SE, or the formation by a Luxembourg company and another
EU company of a Luxembourg holding SE or subsidiary SE, tax neutrality can
be achieved by allowing the beneficiary of the assets to maintain the same
cost value in its books for tax purposes. This will result in tax deferral. In this
respect, it should be noted that since 2002, tax deferral has to a large extent been
available in cross-border mergers within the EU where assets are transferred
from a Luxembourg company to a company resident in another EU Member
State. Since the wording of these provisions expressly refers to Article 3 of the
Merger Directive (which in its current version indirectly refers to the SE), such
tax deferral should also be available to SEs.
2 Other taxes
A Net worth tax
A Luxembourg SE or the Luxembourg permanent establishment, fixed place
of business or permanent representative of an SE is subject to an annual net
worth tax at a rate of 0.5% based on the net asset value (valeur unitaire) of
the company or permanent establishment. In practice, this annual net worth
tax can be substantially reduced either by relying on exemptions (e.g. national
participation exemption on qualifying shares) or by using debt rather than equity
to capitalise the company or permanent establishment.
285
B Value added tax (VAT)
A Luxembourg SE will be subject to VAT under the same conditions as any

other Luxembourg-resident company.
66
C Capital tax
Contributions to the share capital of a Luxembourg SE are subject to a one-

off capital tax at a rate of 1%. The tax is levied on the nominal value of the
shares issued in consideration for the contribution (including any premium)
and the fair market value of the contributed assets. Exemptions are available
for qualifying EU mergers (e.g. share-for-share mergers of at least 65%) and
certain internal reorganisations. In practice, these reorganisations cover certain
types of contributions involving ‘all assets and liabilities’ or a branch of activity
to a Luxembourg joint stock company (sociétés de capitaux). Although the law
of 29 December 1971 on capital tax has not been amended to expressly refer
to the SE, the authors believe that the definition of a joint stock company
(sociétés de capitaux) used in the law should apply to Luxembourg SEs. For
the same reason, the conversion of a Luxembourg SA into an SE should not
be subject to capital tax, nor should the conversion of a Luxembourg SE into a
public limited-liability company (société anonyme) or a private limited-liability
company (société à responsabilité limitée).
The transfer to Luxembourg of an SE’s registered office is exempt from the
1% capital duty provided the SE has been subject to capital tax in another EU
Member State.
XI Conclusion
It is important to note that whereas the rules governing the SE may appear com-
plicated and the formalities on employee involvement burdensome, the Lux-
embourg legal community was initially more focused on the changes brought
about by the SE Act to the rules governing Luxembourg public limited-liability
companies (société anonyme or SA) and partnerships limited by shares (société
en commandite par actions or SCA), such as the introduction of: (i) a two-tier
management system; (ii) single-member SA; (iii) minority shareholders’ rights;
and (iv) changes to the rules on shareholder meetings.
As discussed in this report, the SE facilitates cross-border mergers and trans-
fers of companies. However, at the time of writing, the Luxembourg legislature
66
The Luxembourg government is currently reviewing the capital tax. Although it seems unlikely
that the tax will simply be abolished, the competent minister has announced that plans to reduce
the tax burden are currently under review. This could mean that a solution will be implemented
before the year end.
286
Luxembourg
was on the verge of enacting a law broadening the scope of recognised restruc-
turings to include cross-border mergers initiated by any type of Luxembourg
company with legal personality, thereby divesting the SE of one of its major
advantages.
To date, however, no SEs have been set up in Luxembourg, and the extent
to which Luxembourg, a politically stable and flexible environment with an
open economy and an enviable position as an international financial centre,
will succeed in attracting SEs remains to be seen.
287
10
Malta
dr. rosanne bonnici and dr. josianne brimmer
Fenech & Fenech Advocates
Implementation of Council Regulation 2157/2001 of 8 October 2001 on the

Statute for a European company (SE) into Maltese Law
Whilst Council Regulation 2157/2001 on the Statute for a European Company
(the ‘Regulation’) is applicable in Malta, legislation has not yet been adopted
to take into account the various options afforded the Member States by the
Regulation.
However, Article 425 of the Companies Act (Chapter 386 of the Laws of Malta)
has been amended to add a new sub-article (5), granting the competent minister
the power to issue regulations pertaining to the formation, constitution and
regulation of European companies (SEs).
Although work on these regulations has commenced, a final version has yet to
be published.
Implementation of Council Directive 2001/86/EC of 8 October 2001

supplementing the Statute for a European company with regard to the
involvement of employees
Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for
a European company with regard to the involvement of employees (the ‘Direc-
tive’) has been implemented into Maltese law by the Employee Involvement
(European Company) Regulations (Legal Notice 452 of 2004, the ‘Employee
Involvement Regulations’).
The Employee Involvement Regulations provide for a system of negotiations
with the employee representatives of the companies involved in setting up an SE
whose registered offices are in Malta. Specific criteria have been established
for setting up a special negotiating body (SNB). SNB members are elected
by the employees through special elections held for this purpose. The only
eligible candidates are employees of a participating company in Malta or of
a subsidiary or establishment of such a company who have completed their
probationary period or, if the management of the participating company so
permits, trade union representatives who are not employees of the relevant
287
participating company or any of its subsidiaries or establishments (Reg. 5(2)

Employee Involvement Regulations).
Management of the participating companies is responsible for making arrange-
ments for the elections and appointing a scrutineer to inter alia oversee the vote
and publish the election results.
Provision is furthermore made for the contestation by employees of any aspect
of the election of their representatives to the SNB, including eligibility to stand
for election or to vote and organisation of the ballot.
All expenses relating to the nomination and election of SNB members, including
costs relating to the appointment of the scrutineer, shall be borne by the Maltese
participating companies. The SNB may be assisted by experts of its choosing,
subject, however, to the limitation that the participating companies are only
obliged to bear the costs of one expert.
Both the competent organs of the participating companies and the SNB are
bound to negotiate in a spirit of cooperation with a view to reaching an agreement
on employee involvement. The participating companies must provide the SNB
with timely information on the progress made in establishing the SE until the
latter’s registration.
The Employee Involvement Regulations also provide for standard rules on
employee involvement in an SE, which are applicable when the parties so agree
or where the time period allotted by the Employee Involvement Regulations to
reach an agreement on employee involvement has expired and no decision has
been taken by the SNB to open or terminate negotiations with the participating
companies.
The Employee Involvement Regulations impose inter alia a duty of confiden-
tiality on SNB members and on any expert appointed to assist the SNB.
SNB members are afforded the same protection as employee representatives
in Malta under the Employment and Industrial Relations Act (Chapter 452 of
the Laws of Malta) (Reg.13 Employee Involvement Regulations). For example,
they are protected against dismissal on the sole ground of SNB membership.
The Employee Involvement Regulations also lay down sanctions for failure to
comply with any obligations arising there from.
288
11
Portugal
margarida pereira barrocas
Barrocas Sarmento Neves
I Introduction1 290
III Formation 291
B Name 291
E Capital 294
B Rights and obligation of shareholders 300
3 Management 302
D Liability 305
V Employee involvement2 306
1 Winding up 308
2 Liquidation 309
289
3 Insolvency3 310
X Tax treatment4 312
1 Income tax 312
A General aspects 312
B Tax issues when forming an SE 313
C Transfer of an SE’s registered office 314
3 Other taxes 314
XI Conclusion 314
I Introduction1
The European company or Societas Europaea (‘SE’) is a new corporate form
introduced into Community law through Council Regulation No 2157/2001
of 8 October 2001 on the Statute for a European company (the ‘Regulation’).
The Regulation has direct effect in all Member States and officially entered
into force on 8 October 2001. However, the Regulation expressly provides
that SEs shall be governed not only by its provisions but also by the national
laws of the Member States in many areas (both specific legislation adopted
for the purpose of allowing the formation of SEs as well as general legislation
applicable to national public limited-liability companies) and by the provisions
of their memorandum and articles of association.
Portugal has adopted a specific law, Law No 2/2005 of 4 January 2005 (the ‘SE
Act’), implementing the Regulation and enacting specific provisions where
the Regulation gave the Member States an option to apply or adopt their own
national rules.
The general rules applicable to national public limited-liability companies (the
sociedade anónima or SA) are mainly contained in the Portuguese Company
Code (the ‘Company Code’), which apply to SEs with their registered office in
Portugal unless the Regulation and the SE Act provide otherwise.
With respect to employee involvement in an SE, Portugal has implemented
Council Directive 2001/86/EC of 8 October 2001 (the ‘Directive’) through
Decree-Law No 215/2005 of 13 December 2005.

The main reason to opt for an SE, and also its chief advantage compared to
national corporate forms and other types of legal entities, is that companies
1 This section was prepared by Margarida Pereira Barrocas, a lawyer in the corporate department
of the firm Barrocas Sarmento Neves in Lisbon, Portugal (with the exception of Sections V and
X, which were prepared by other lawyers, as identified below).
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Portugal
from different Member States with a European dimension can benefit from a
uniform set of rules throughout the European Union and, as such, avoid poten-
tial obstacles and constraints caused by the application of different national
laws. As a result, the undertakings involved can speed up and simplify their for-
mation process and operating procedures and thereby improve their efficiency,
competitiveness and flexibility in the market.
III Formation
1 General remarks
A Founding parties
Pursuant to Article 1 of the SE Act and Article 1 of its Annex, the rules set forth
therein apply to SEs with their registered office in Portugal as well as to the
formation of an SE in which companies subject to Portuguese law are involved.
In general, pursuant to the Regulation, an SE can only be formed by companies
incorporated under the laws of a Member State which have both their head
office and registered office in the European Union. Furthermore, at least two of
the companies involved must be subject to the laws of different Member States.
Under certain circumstances, discussed in the first volume of this book, a com-
pany which does not have its head office in the European Union can participate
in the formation of an SE.
The above criteria, regarding the founders of an SE, have been fully imple-
mented in Portuguese law, which further provides that if an SE has its registered
or head office in Portugal, both must be at the same place. If not, the public
prosecutor’s office, any other public authority or any interested third party can
inform the Justice Department, which shall take the appropriate actions.
B Name
Under Portuguese law, there are no specific provisions regarding the name of an
SE and, therefore, Article 11 of the Regulation applies in full. Thus, the name
of an SE must be preceded or followed by the abbreviation SE, although it may
also contain the full wording Societas Europaea. In any case, the abbreviation
must be included as well.
Under Portuguese law, the authority competent to approve company names
is the Registo Nacional de Pessoas Colectivas (the ‘RNPC’). The proposed
name of an SE, as with any other company, must be filed with the RNPC for
approval. The RNPC will then issue a certificate attesting to acceptance of the
name. This certificate must be presented to the notary upon signing the SE’s
instrument of incorporation and to the commercial registry when filing the SE’s
final registration.
291
Any changes to the name of an SE must also be submitted in advance to the

RNPC for approval.
Pursuant to Article 2(3) and (4) of the SE Act, if an SE has its registered
office or head office within the Portuguese territory, they must be at the same
place, failing which the public prosecutor’s office, any other public authority
or any interested party can inform the Justice Department, which shall take the
appropriate action.
This follows from Article 7 of the Regulation.
If an SE with its registered office in Portugal fails to meet the abovementioned
requirement, pursuant to Article 16(1) of the SE Act, the company’s board of
directors shall, on its own initiative or at the request of any shareholder, adopt
the necessary measures to regularize the situation through (i) re-establishment
of the SE’s head office in Portugal or (ii) transfer of the SE’s registered office,
pursuant to the procedure set forth in Article 8 of the Regulation, to the Member
State where its head office is located.
Pursuant to Article 16(4) of the SE Act, as long as the situation has not been
duly regularized, any shareholder or creditor of the SE or the public prosecutor’s
office can file for involuntary dissolution of the SE.
Notwithstanding the foregoing, an SE which has not regularized its situation
for a period of one year shall be considered immediately wound up and, in
this case, the SE’s directors shall assume the roles and wield the powers usu-
ally granted to the liquidators, without the need to accomplish any further
formalities.
The SE’s directors shall be held liable for any violation of Article 7 of the
Regulation.
Pursuant to Article 4(1) of the SE Act, the transfer of an SE’s registered office to
Portugal, which implies an amendment to its articles of association, is subject
to the execution of a public instrument before a notary as well as to registration
and publication requirements.
Pursuant to Article 4(2)(c) of the SE Act, a proposal to transfer an SE’s registered
office from Portugal to another Member State is subject to registration and
publication requirements. In this case, the Portuguese authority competent to
issue the certificate provided for by Article 8(8) of the Regulation is the notary.
The transfer of an SE’s registered office within Portugal or from another Member
State to Portugal is also subject to the approval of the RNPC, which shall
decide if the SE can maintain its name. A certificate from the RNPC is a
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Portugal
necessary precondition to amendment of the SE’s articles of association and its

registration.
Article 13 of the SE Act provides that any shareholder who has voted against
the transfer of an SE’s registered office to another Member State has the right
to exit the company.
Pursuant to Article 7 of the SE Act, such a shareholder must, within 30 days
following the SE’s decision to transfer its registered office, issue a written
statement informing the company of its decision. Upon receipt of this statement,
the company shall acquire or cause a third party to acquire the shareholder’s
shares. If a shareholder has exercised this right, before the notary issues the
certificate provided for in Article 8(8) of the Regulation, the company must
prove that the shareholder’s shares have been redeemed or, if not, that this is
through no fault of the company. If the company cannot prove this and express
confirmation to this effect is not provided by the shareholder, the company may
ask the notary to have the shareholder execute the public instrument for the
acquisition of its shares.
A shareholder who is responsible for the non-redemption of its own shares will
not be allowed to exit the company.
If the company is responsible for the lack of redemption, it will not be allowed to
transfer its registered office. However, in this case, if the company promotes the
execution of a public instrument, it shall be obliged to acquire the shareholder’s
shares and pay any applicable damages. The directors shall be held jointly liable
with the company.
If a shareholder who has voted against the transfer of an SE’s registered office
to another Member State does not execute its right to request redemption of its
shares, the company shall make this fact known to the notary prior to issuance
of the abovementioned certificate, as provided in Article 8(8) of the Regulation.
Article 14 of the SE Act provides for the following safeguards with respect to
the transfer of an SE’s registered office from Portugal to another Member State.
Prior to issuance of the abovementioned certificate, as provided in Article 8(8)
of the Regulation, and as a necessary precondition thereto, the company must
prove, through the presentation of a certificate, that its tax and social security
situation has been duly regularized. Furthermore, with respect to any amounts
due employees under their employment contracts or resulting from breach or
termination of the same, the company must supply a bank guarantee in order to
obtain the aforementioned certificate. In special cases, if an SE transferring its
registered office from Portugal to another Member State is subject to supervision
and regulation by specific authorities, and the transfer will result in a change in
the applicable laws, these authorities must be notified of the intended transfer
in advance and are entitled to raise objections.
293
D Corporate purpose
There are no specific provisions under Portuguese law regarding an SE’s corpo-
rate purpose and, therefore, the general rules governing public limited-liability
companies in this respect shall apply.
It should be noted that the proposed corporate purpose of an SE, as with any
other company, must be submitted to the RNPC for prior approval. The RNPC
shall issue a certificate to this effect.
This certificate must be presented to the notary upon signing the SE’s instru-
ment of incorporation and to the commercial registry when filing the SE’s final
registration.
Any modification to an SE’s corporate purpose is also subject to prior approval
of the RNPC.
E Capital
There are no specific provisions under Portuguese law regarding an SE’s share
capital. Therefore, the generally applicable rules on the share capital of public
limited-liability companies shall apply, taking into account the specificities with
respect to SEs set forth in the Regulation (see Volume One of this book).

With respect to the general procedure to form an SE and the various means of
formation, the provisions of the Regulation, covered extensively in volume one
of this book, are not discussed herein. Rather we focus on the specificities of
Portuguese law for each means of formation, it being understood that topics
not specifically dealt with herein are not foreseen in the applicable Portuguese
legislation, namely the SE Act, and, therefore, Community law applies, i.e. the
Regulation.
If the company to be formed by merger shall have its registered office in Portugal,
the instrument of incorporation must be executed before a notary. Furthermore,
in this case, registration and publication are also required. The merger plan is
also subject to registration and publication, and the type of merger proposed
must be mentioned. Final recordation of an SE formed by merger is also subject
to the presentation of a certificate issued by the RNPC (see Section III above).
Without prejudice to any other publication requirements that might apply under
general provisions of Portuguese company law to specific types of public
294
Portugal
limited-liability companies, the notices mentioned in Article 21 of the Reg-

ulation shall be published in the Diário da República.
The certificate provided for in Article 25(2) of the Regulation shall be issued by
the Portuguese notary, mentioning that all acts and formalities required to form
an SE by merger have been duly completed and identifying the documentary
proof to this effect.
Pursuant to the Company Code, creditors of companies involved in a merger can
oppose the merger if they feel it will jeopardize the satisfaction of their claims.
The time limit to file such opposition is thirty days from the abovementioned
publication in the Diário da República.
Article 7 of the SE Act provides that any shareholder who has expressly voted
against a company’s decision to form an SE by merger has the right to exit
the company. Within 30 days following adoption of the decision to merge,
the shareholder must issue a written statement to this effect. Upon receipt of
this statement, the company shall acquire or cause a third party to acquire the
shareholder’s shares. If the shareholder is responsible for the failure to redeem
its shares, it shall lose the right to exit the company.
If the company is responsible for the failure to redeem the exiting shareholder’s
shares, the merger cannot go through. However, even in this case, if the company
promotes the execution of a public instrument and records the merger, the
resulting SE shall be obliged to acquire the shareholder’s stake and pay any
applicable damages. The directors of the disappearing company and of the SE
shall be jointly liable with the SE.
Article 8 of the SE Act provides that a merger which results in the establishment
of an SE must be notified in advance to the Portuguese Competition Authority
and, if the participating companies are subject to particular supervision and
regulation, the specific regulatory authorities. The abovementioned authorities
must be notified of the merger plan within seven working days following its
approval by the general meeting of shareholders of the participating company.
The authorities may oppose the company’s participation in the formation of
an SE by merger on grounds of public interest. Any such opposition must be
made within thirty days from receipt of the abovementioned notice. In this
case, the participating companies shall have at least fifteen days to respond. As
soon as the authorities receive an answer from the participating companies or
if they do not receive a response within the allotted time period, they shall take
a decision within fifteen days. If the authorities fail to act within any of the
abovementioned time periods, their silence shall be construed as tacit approval
of the merger. If the authorities issue an objection to the merger, the relevant
company will not be allowed to participate. The authorities’ decision can be
appealed to the courts within one month of notification.
295
Pursuant to Article 10 of the SE Act, the abovementioned authorities shall issue

a certificate of no objection to the merger within ten days from being notified
of the same by the participating companies. This certificate is contingent on the
prior issuance by the notary of the certificate referred to in Article 25(2) of the
Regulation.
If a holding SE is to have its registered office in Portugal, it will be necessary
to execute a public instrument before a notary. Furthermore, in this case, reg-
istration and publication are also required. The proposal to set up a holding SE
is also subject to registration and publication.
In accordance with Article 33(3) of the Regulation, fulfillment of the conditions
for the formation of a holding SE is also subject to registration (by way of an
appendix to the proposal to form a holding SE) and publication.
The final registration of a holding SE is also subject to the presentation of a
certificate issued by the RNPC (see Section III.1 above).
Pursuant to Article 11 of the SE Act, Article 7 of the same (regarding share-
holders’ right to request redemption of their shares) shall apply to the formation
of a holding SE, with the necessary adaptations. Therefore, reference is made
to the above discussion on this issue in the context of the formation of an SE
by merger. If a shareholder has exercised its right in this regard and a holding
SE is set up without having acquired the shares of the exiting shareholder for
reasons that cannot be attributed to the latter, the holding SE shall be jointly and
severally liable with the promoting company to perform this obligation, without
prejudice to the joint and several liability of the directors of both companies.
This right is only available to shareholders of closed companies.
With respect to the protection of creditors’ rights, Article 12 of the SE Act
provides that when a holding SE acquires, during formation or as a result
thereof, assets of any promoting company, it is liable, up to the respective value
thereof, for the liabilities of the company whose assets it acquired which were
in existence on the date of incorporation of the holding SE.
For this means of formation, the provisions of national law on the formation
of national public limited-liability companies (sociedad anónima or SA) shall
apply.
If the subsidiary SE is to have its registered office in Portugal, a public instrument
must be executed before a notary. Furthermore, registration and publication will
also be required.
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Portugal
As is the case with national companies and SEs formed by other means, the
proposed name of a subsidiary SE must be filed with the RNPC for approval.
The RNPC will issue a certificate of acceptance of the name, which must be
presented to the notary upon signing the SE’s instrument of incorporation and
to the commercial registry when filing the SE’s final registration.
Any amendments to an SE’s name are also subject to prior approval of the
RNPC.
The formation of an SE by conversion of an SA requires the execution of a
public instrument before a notary. Furthermore, registration and publication
are also required The proposal to form an SE by conversion is also subject to
registration and publication.
The proposed name of an SE must be submitted to the RNPC for approval.
The RNPC will issue a certificate of acceptance of the name, which must be
presented to the notary upon signing the SE’s instrument of incorporation and
to the commercial registry when filing the SE’s final registration.
Any amendments to the name of an SE are also subject to the prior approval of
the RNPC.

There are no specific provisions in the SE Act regarding this issue and therefore,
the provisions of Article 16 of the Regulation apply in full, as described in more
detail in Volume One of this book.

The provisions of the Regulation on this issue apply in full, with the specifi-
cations discussed above with respect to the various means of formation, as set
forth in the SE Act.
An SE established in Portugal must be recorded with the commercial registry of
the place where its registered office is located. An SE acquires legal personality
upon registration.
A proposal to form an SE by merger or conversion or a holding SE is also
subject to registration.
In addition to the formation of an SE, the following acts are also subject to
registration:
297
(i) the submission of annual accounts and, if applicable, consolidated

accounts;
(ii) a proposal to transfer the registered office of an SE to another Member
State;
(iii) amendments to an SE’s articles of association;
(iv) a plan to convert an SE into a Portuguese public limited-liability company
(SA);
(v) the conversion of a public limited-liability company into an SA;
(vi) winding-up;
(vii) the close of liquidation or an SE’s recommencement of corporate activity;
(viii) any other facts related to SAs which are subject to registration under
Portuguese law.
Furthermore, fulfilment of the conditions to form a holding SE is also subject
to registration by way of an appendix to the draft terms of formation.
The following information, in addition to the company’s name, must be men-
tioned on an SE’s registration certificate:
(i) the address of its registered office;
(ii) its term of existence, if definite;
(iii) its corporate purpose;
(iv) its share capital;
(v) its paid-up capital;
(vi) the number of shares, par value and type;
(vii) the members of its board of directors;
(viii) the members of its supervisory board;
(ix) the means of binding the company; and
(x) the means of formation of the SE.
The registration certificate for draft terms of merger or de-merger, as well as
for the formation of an SE by merger, must include the following informa-
tion: the type of merger or de-merger, the name of each participating com-
pany and the address of its registered office, and any foreseen amendments
to the articles of association of the incorporating company or the company to
be split up regarding its name, registered office, corporate purpose and share
capital or any references to the same in the articles of the company to be
established.
The registration certificate for draft terms of formation of a holding SE must
include the following information: the name and address of the registered office
of each participating company and the proposed articles of association of the
SE with a specific mention of its name, registered office, corporate purpose and
share capital.
The registration certificate for draft terms of conversion of an SA into an SE or
vice versa must mention any expected amendments to the articles of association
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Portugal
of the company to be converted with respect to its name, registered office,

corporate purpose and share capital.
The registration certificate for the transfer proposal of an SE’s registered office
to another Member State must mention the address of the SE’s new registered
office as well as any foreseen amendments to the company’s articles with respect
to its name, registered office, corporate purpose and share capital.

There are no specific provisions in the SE Act regarding this issue and, therefore,
the provisions of Article 1 of the Regulation apply in full, as described in more
detail in Volume One of this book.
Furthermore, it should be noted that pursuant to Article 5 of the Company
Code, an SE acquires legal personality upon final registration of its instrument
of incorporation with the relevant commercial registry.

1 General remarks
In accordance with the Regulation, Article 278(1) of the Company Code pro-
vides that the founders of an SA (the statutory provisions governing which apply
to SEs by default) can select the company’s management and supervisory struc-
ture: either an administrative organ and an accountancy body or, alternatively,
a management organ, a supervisory board and an official auditor.
The general meeting of shareholders is the main corporate body, which shall
deliberate on all matters specifically assigned to it by law or by the company’s
articles and which are not reserved to other corporate organs.
With respect to voting in all corporate bodies, Article 17 of the SE Act provides
that, if an SE has its registered office in Portugal, abstentions shall not be counted
in determining statutory majorities. Moreover, under no circumstances shall the
votes of members of the corporate bodies who are prohibited from voting by law,
on either general or specific matters, be taken into account. Finally, voluntarily
established voting restrictions, even those legally based, shall not be deemed
valid.
2 General meeting
Article 21 of the SE Act provides that the chairperson of the board shall call
a general meeting of shareholders when required to do so by law or whenever
the administrative or management organ, the supervisory body or one or more
299
shareholders holding jointly at least 5% of the company’s share capital so

request.
The accountancy body, the supervisory board or the courts can call also a general
meeting of shareholders if the law so allows and if the chair fails to do so within
fifteen days from receipt of a request to this effect.
Article 376 of the Company Code provides that an annual general meeting shall
be held within three months following the close of the financial year (or within
five months for companies that file consolidated accounts or apply the asset
equivalence method) in order to deliberate on the following matters: (i) the
management report and annual accounts; (ii) the proposed allocation of profits;
(iii) the management and supervision of the company and, if applicable, the
removal of any directors or managers; and (iv) any other matters within its
powers.
Article 22 of the SE Act provides that any shareholder or shareholders holding
jointly at least 5% of the company’s share capital can request that certain items
be added to the agenda of a general meeting.
Article 383 of the Company Code provides that, on first call, the general meet-
ing of shareholders can deliberate regardless of the number of shareholders
present or represented, subject to the requirements of the company’s articles
of association and to the fact that at least one-third of the share capital must
be present or represented on first call to amend the articles or take a decision
regarding a merger, split-up, conversion, winding-up or any other matter for
which an unspecified qualified majority is required by law.
On second call, the general meeting can deliberate regardless of the number of
shareholders present or represented and the share capital they represent.
The general meeting takes decisions by a majority of votes cast, regardless
of the percentage of share capital represented by the votes, unless otherwise
provided by law or the company’s articles of association.
Draft terms of conversion, amendments to the company’s articles of association,
and decisions regarding a merger, split-up or winding up must be approved by
two-thirds of the votes cast. If shareholders holding at least half the company’s
share capital are present or represented at a meeting on second call, resolutions
regarding any of the aforementioned matters can be adopted by a majority of
votes casts.
B Rights and obligation of shareholders

Pursuant to Article 288 of the Company Code, shareholders have a right to
receive certain information from the company. If a shareholder holds at least
1% of the company’s share capital, it has the right to inspect the following
documents and receive the following information, for any valid reason, at the
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Portugal
company’s registered office: (i) the management reports and accounting docu-
ments for the past three years, as well as the opinions of the accountancy board
and the supervisory board and any reports of the company’s auditor which are
subject to publication; (ii) notices for general meetings of shareholders, as well
as the minutes of and attendance lists for such meetings; (iii) the total remu-
neration of members of the administrative or management board and of the
supervisory board for the past three years; (iv) the remuneration of the five
or ten highest paid employees for the past three years, depending on whether
the company has up to or more than 200 employees; and (v) the shareholders’
register.
If any of the above information is not provided or is presumed false, incomplete
or not self-explanatory, shareholders holding at least 1% of the share capital
can petition the courts to investigate the company.
Furthermore, at least fifteen days prior to a general meeting, the following
information shall be made available to shareholders at the company’s registered
office or sent within eight days to the holders of registered or bearer shares
corresponding to at least 1% of the company’s share capital who so request:
(i) the full names of all members of the administrative or management board,
the accountancy board and the board of directors; (ii) any other companies
for which members of these corporate bodies perform any other functions;
(iii) the proposed resolutions to be submitted to the general meeting by the
administrative or management board; (iv) if the election of board members is
on the agenda, the names of the proposed candidates to the administrative or
management board, their professional qualifications and professional activities
for the past five years as well as the number of shares they hold in the company;
(v) for the annual general meeting, the management report, accounts and other
accounting documents; and (vi) any requests to include certain items on the
agenda. Furthermore, during a general meeting, any shareholder has the right
to request accurate, complete and self-explanatory information regarding the
matters on the agenda.
Shareholders holding at least 10% of the company’s share capital can also
request, in writing to the administrative or management board, certain informa-
tion related to any corporate matters.
If any of the above information is not produced or is presumed false, incomplete
or not self-explanatory, shareholders holding at least 10% of the share capital
can petition the courts to investigate the company.
Shareholders also have the right to receive profits in accordance with a specific
set of statutory provisions, pursuant to Articles 294 to 296 and Article 21(a) of
the Company Code.
Pursuant to Article 297 of the Company Code, and if the company’s articles so
permit, shareholders can receive dividends subject to a specific set of rules.
301
Finally, pursuant to Article 21(b) and (d) of the Company Code, shareholders
are entitled to participate in the decision-making process and deliberations and
to be appointed to the administrative and supervisory boards.
Each shareholder is obliged to contribute assets or cash to the company’s share
capital, pursuant to Articles 20(a) and 285 of the Company Code.
The company’s articles can also provide that all or certain shareholders are
obliged to make additional contributions to the company, in addition to their
initial contribution, pursuant to Article 287 of the Company Code.
Shareholders are obliged to participate in the company’s losses, pursuant to a
specific set of rules, namely in proportion to their capital contributions pursuant
to Article 20(b) of the Company Code.
3 Management
Article 278(1) of the Company Code provides that the management structure
of an SA (and thus of an SE) shall consist of an administrative organ and
an accountancy organ (in the one-tier system) or, alternatively, a management
body, a supervisory board and an official auditor (in the two-tier system).
Pursuant to Article 20 of the SE Act, the administrative body to which Article
43 of the Regulation refers shall be composed of an uneven number of members,
with no maximum number.
The administrative body is in charge of managing the company’s activities and
is subject to the authority of the general meeting of shareholders and the accoun-
tancy board if so provided by law or the company’s articles. The administrative
body has exclusive and plenary powers to represent the company.
The administrative body shall meet when called upon to do so by its chair or any
other two members. It shall meet at least once a month, unless the company’s
articles provide otherwise. The administrative body can only deliberate if a
majority of its members is present or represented. Decisions are passed by a
majority of those members present or represented. If the articles so allow, voting
by post shall be permitted.
The accountancy board or an individual accountant shall be entrusted with
supervising the company in the one-tier system. The accountancy board shall
have three effective members, but the articles may increase this number to five.
It shall meet at least once each quarter. Decisions are taken by a majority of
those members present or represented.
In the two-tier system, there is a management body, a supervisory board and an
official auditor.
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Portugal
Pursuant to Article 18 of the SE Act, the management body to which Article 39

of the Regulation refers shall be composed of an uneven number of members,
with no maximum number.
The management body has authority to manage the company’s activities but
certain decisions may be made subject to the prior approval of the supervisory
board, either by law, the company’s articles or the supervisory board itself. The
management body has plenary powers to represent the company before third
parties, although the supervisory board has authority to represent the company
in its relations with directors.
Pursuant to Article 19 of the SE Act, the supervisory board to which Article 40
of the Regulation refers shall be made up of an uneven number of members,
to be determined in the articles. There is no maximum number stipulated, but
the supervisory board must always have more members than the management
body.
The supervisory board has, amongst other powers, authority to supervise the
activities of the management body. The supervisory board shall meet whenever
it is called upon to do so by its chair or any two members. The supervisory
board shall meet at least once per quarter. The management board may convene
a meeting of the supervisory board if the latter’s chair fails to do so within fifteen
days following receipt of a request to this effect from the management body.
The official auditor or accounting firm shall examine the company’s accounts
and wield the powers and duties attributed by the Company Code to the
accountancy board and its members.

Members of the administrative board are appointed in the company’s memo-
randum of association or elected by the general meeting for the term set forth in
the memorandum, which shall not exceed four years. For this purpose, the year
in which they are appointed shall count as a full year. If the memorandum is
silent on this point, members of the administrative board shall be appointed for a
renewable four-year term. If the administrative board is not properly composed,
due to the fact that there are not enough effective members, and the vacancies
have not been filled for a period of more than 60 days, or if more than 180
days have passed from the end of the members’ term and elections have not
been held, any shareholder can petition the courts to appoint a member of the
administrative board, who shall remain in office until the next elections. The
company’s memorandum may provide that the general meeting, when electing
the administrative board, shall appoint the latter’s chair as well. If no provision
to this effect is contained in the memorandum, the administrative board shall
elect its own chair. The chair shall cast the deciding vote, if the memorandum so
provides.
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Members of the administrative board may be removed from office by the accoun-
tancy board under certain circumstances or if their term is definitively termi-
nated by the same for reasons of incapacity or incompatibility. Members of the
administrative board may also retire. Furthermore, the general meeting of share-
holders can remove, at any time, any member of the administrative board who
was not appointed by the state or a legally equivalent entity. Finally, members
of the administrative board may resign in writing.
Members of the accountancy board and the company’s official auditor are
appointed by the general meeting of shareholders for the term specified in
the company’s memorandum of association, which cannot exceed four years.
The first appointments may be made in the memorandum. If the memorandum
is silent on this point, the accountancy board members and the auditor shall be
appointed for a renewable four-year term. The company’s memorandum or the
general meeting also appoints the chair of the accountancy board. The official
regulatory body for accountants (Câmara dos Revisores Oficiais de Contas)
shall appoint an official auditor for the company if the competent corporate
body fails to do so within the statutory time limit. Under certain circumstances,
the administrative board or any shareholder can also petition the court to appoint
members of the accountancy board or an auditor.
The general meeting can remove, for cause, members of the accountancy board
or the auditor, with the exception of court appointees. The courts can also
remove for cause members of the accountancy board or the auditor if requested
to do so by the administrative board or by the parties who initially requested
their appointment.
Directors are appointed either in the company’s memorandum of association
or by the supervisory board for the term provided in the memorandum, which
cannot exceed four years. For this purpose, the year in which they are appointed
counts as a full year. If the memorandum does not specify a term, a renewable
four-year term will be implied.
The foregoing rules regarding court appointment of members of the adminis-
trative board also apply to directors.
The chair of the management body is appointed and removed by the supervisory
board. The chair casts the deciding vote in the management body’s deliberations.
An employment director, in charge of labour relations within the company, shall
also be appointed by the supervisory board if there are several directors.
The supervisory board may remove any director from office for cause. Directors
may also resign.
Members of the supervisory board are appointed in the company’s memoran-
dum of association or elected by the general meeting. The supervisory board
appoints its own chair. For this purpose, if the number of supervisory board
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members is not sufficient, the management body, any member of the super-
visory board or any shareholder can petition the courts to appoint additional
supervisory board members.
The company’s official auditor or accounting firm is appointed by the general
meeting of shareholders for a period not to exceed three years. The Câmara dos
Revisores Oficiais de Contas shall appoint an auditor if the competent corporate
body fails to do so within the specified time period.
The general meeting can remove the company’s official auditor or account-
ing firm from office for cause, with the exception of court appointees. The
courts can also remove for cause the official auditor or accounting firm if
requested to do so by the management body or by the parties who requested the
appointment.
C Representation
The management body (i.e. the directors) is the corporate organ entitled to
represent the company. These representative powers are held jointly by all
directors, and the company is bound by any acts performed or ratified by the
majority of its directors (or fewer if its articles so provide).
The company may enforce against third parties any acts by its directors that
fall outside its objects if it can prove that the third party in question knew
or should have known of the ultra vires nature of the act and if the company
did not subsequently expressly or implicitly assume the consequences of the
act.
D Liability
Directors are liable to the company for any damage resulting from their acts
or omissions in violation of any statutory or contractual provision, unless they
can prove that they did not act willfully or that they have acted in accordance
with reasonable managerial standards.
Directors who did not vote in the contested decision or who opposed it will not
be held liable.
Directors’ liability is joint and several, and directors have the right to recover
proportionally from amongst themselves in accordance with who was at fault
in performing the acts or omissions under consideration.
All other persons exercising administrative powers within the company, includ-
ing members of the supervisory board and the auditor or accountants, can be
held liable in the same way as directors for their acts and omissions.
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V Employee involvement2
The provisions of Council Directive 2001/86/EC of 8 October 2001 have been
transposed into Portuguese law by Decree-Law No 215/2005 of 13 December
2005.
Therefore, implementation of the provisions of the statute for a European com-
pany with respect to employee involvement is complete in Portugal.

The composition of the special negotiating body (SNB) is governed by special
rules.
The SNB is established to discuss and negotiate with the participating compa-
nies the involvement of all employees in the SE. For this purpose, and in order
to ensure that all information is passed on to the employees and their repre-
sentatives, Decree-Law No 215/2005 requires that the following information
be provided: the identity and form of each participating company, as well as
any subsidiaries and establishments, and the number of employees working for
each participating company, subsidiary and establishment.
According to Article 39 of Decree-Law No 215/2005, depending on the form(s)
of employee representation in the participating companies, subsidiaries or estab-
lishments, members of the SNB are appointed either: (i) by the relevant works
council(s) together with the relevant trade union(s); or (ii) by the works coun-
cil(s) alone if there are no unions. SNB members can also be appointed directly
by the employees if there are neither works councils nor trade unions or if
one-third of the employees request direct elections.
Representatives from trade unions that represent the company’s employees can
sit on the SNB even if they are not themselves employed by the company.
Article 35(1)(a) of Decree-Law No 215/2005 provides that the participating
companies must bear the SNB’s costs in relation to negotiations in such a way
that the latter can perform its tasks adequately. Article 35(1)(b) further stipulates
that the participating companies must provide the necessary material resources
for the functioning of the SNB, including installations and a notice board for
announcements. According to Article 35(1)(c), the SNB is entitled to funding
for ‘at least one expert’. This can be interpreted broadly to mean ‘one or more’
or more narrowly to mean ‘no more than one’. The expert’s expenses are to be
divided amongst the participating companies in accordance with the number of
employees at each.
2 This section was prepared by José Miguel Oliveira, a lawyer in the employment department of
the firm Barrocas Sarmento Neves in Lisbon, Portugal.
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The SNB can freely select an expert to assist it in its work. It is not expressly
stated whether this expert can be a representative of a national and/or European-
level trade union organisation.
Employees of an SE, its subsidiaries and establishments and/or their representa-
tive bodies are entitled to elect, appoint, recommend or oppose the appointment
of a certain number of members of the administrative or supervisory organ of
an SE.
Article 42 of Decree-Law No 215/2005 provides that the appointment or elec-
tion of employee representatives to the administrative or supervisory organ
shall be in accordance – with the necessary modifications – with the procedure
set forth in Article 39. Thus, depending on actual worker representation in the
participating companies, subsidiaries and establishments, employee represen-
tatives to the administrative or supervisory organ shall be appointed: (i) by the
relevant works council(s), together with the trade union(s); (ii) by the works
council(s) alone if there are no trade union(s); or (iii) directly by the employees
themselves if there are neither works councils nor trade unions.
Employee participation on the supervisory or administrative board is based on
the principle of equality. Employee representatives have the same rights and
obligations as others members.

According to Article 44 of Decree-Law No 215/2005, employee representatives
enjoy special protection.
In fact, members of the SNB, the employee representative body and the super-
visory or administrative board are entitled: (i) to be excused from their normal
duties; (ii) to continue to receive wages during periods of absence taken to
perform their duties; and (iii) to protection against disciplinary measures, dis-
missals or transfer.

If the company has a supervisory board, the management body must present its
annual report and the annual accounts to the supervisory board and to the auditor
at least thirty days before the date of the annual general meeting scheduled to
analyse the accounting documents.
A supervisory board member who is a chartered accountant or the company’s
official auditor or accounting firm, depending on the type of company, shall
analyse the management report and examine the accounts in order to certify
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them correct, which entails rendering an opinion as to whether the accounts

accurately reflect the company’s financial position and meet the applicable
statutory criteria. This opinion can be made with or without reservations, be
negative in nature, or simply consist of a waiver (i.e. no opinion is given).
The supervisory board must subsequently express its agreement or disagreement
with the abovementioned certification, which must be sent to the management
board within fifteen days from the date on which it receives all documentation
concerned from the official auditor.
Finally, the general meeting analyses the annual management report and the
management board’s supervision of the company.
If the company has both a board of directors and a supervisory board, the man-
agement body must present its annual report and the annual accounts to the
official accountant and the board at least thirty days before the date of the gen-
eral meeting scheduled to analyse the accounting documents. The subsequent
approval process is the same as that discussed above, with certification of the
accounts being done by the official auditor.
Approval of annual or consolidated accounts must be recorded with the appli-
cable commercial registry.

A merger that results in the establishment of an SE must be notified in advance
to the Portuguese Competition Authority as well as to the applicable sector
regulatory authorities if the entities involved are subject to supervision or reg-
ulation.
These authorities can oppose the intended merger on grounds of public interest.
Furthermore, if an SE’s registered office is being transferred from Portugal to
another Member State, thereby resulting in a change in the applicable legisla-
tion, such a transfer must also be notified in advance to the applicable regulatory
authority if the company is subject to supervision or regulation. Likewise, this
authority can oppose the transfer on grounds of public interest.
VIII Dissolution
1 Winding up
A company can be immediately wound up under the following circumstances:
• its term of existence, as set forth in its memorandum of association,

expires;
• its shareholders so request;
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Portugal
• its corporate purpose has been performed in full;

• its corporate purpose turns out to be illegal;
• it is declared bankrupt.
The courts can also order a company to dissolve (so-called involuntary disso-
lution) following a formal request to do so or if the company’s shareholders so
decide under the following circumstances:
• if the law or the company’s memorandum of association states a cause for

dissolution;
• if, for a period in excess of one year, the number of shareholders is less
than the minimum number required by law;
• if the activities that constitute the company’s corporate purpose turn out
to be impossible to perform;
• if the company has not conducted any activity for the preceding two years;
• if the company performs any activity not provided for in its corporate
purpose.
A company can be ordered to dissolve by the applicable registration entities,

acting on their own initiative, under the following circumstances:
• if, for the two preceding years, the company has not filed its account-
ing documents and the tax authorities inform the applicable registration
authorities that no tax returns have been filed for that same period;
• if the tax authorities inform the applicable registration authorities that the
company conducts no effective activity under the applicable tax laws;
• if the tax authorities notify the applicable registration authorities that the
company has ceased all activity.
Dissolution must be recorded with the relevant commercial registry.
2 Liquidation
Unless the law provides otherwise, a dissolved company is immediately liqui-
dated.
A decision to liquidate can be taken by the court or by the company’s share-
holders.
If the company has no debts on the date of dissolution, its assets can be imme-
diately realised and the proceeds distributed.
If there are outstanding debts, these must be settled. Only then can the remaining
assets be realised and the proceeds distributed. The proceeds are used first to
refund shareholders’ capital contributions. Any remaining profit is subsequently
distributed.
309
The close of liquidation must be recorded with the relevant commercial

registry.
3 Insolvency3
The Portuguese Bankruptcy Act applies when a debtor becomes insolvent,
according to the definition contained in Article 3 of the Insolvency and Cor-
porate Recovery Code (the ‘ICRC’), that is, the debtor is prevented from
promptly fulfilling its obligations due to the insufficiency of its assets to cover its
liabilities.
Companies and independent groups of assets and liabilities for which no indi-
vidual has unlimited personal liability shall also be considered insolvent when
their liabilities clearly exceed the value of their assets.
The ICRC provides for a single type of proceedings, without distinction between
corporate recovery and insolvency. Creditors are required to assess the com-
pany’s financial viability and decide jointly whether recovery or liquidation is
more appropriate and under what terms.
To start proceedings, it must be shown that the debtor is unable to meet its
liabilities as they fall due or, if a company or independent group of assets is
concerned, that the debtor’s liabilities clearly exceed its assets.
As a rule, insolvency proceedings must be brought before the court of the place
where the debtor’s registered office or residence is located. The court assumes
the key role in ensuring compliance with the relevant statutory provisions and,
if it finds that the facts so justify, in declaring insolvency. The court is also
responsible for ruling on proof of claims and their ranking and, finally, decides
when to close the proceedings.
The court appoints an administrator, who is responsible for ensuring payment
of the insolvent party’s debts from its assets, protecting the debtor’s rights
and allowing it to continue to exercise them, and enabling the company to
continue operating, if applicable, so as to avoid, insofar as possible, any further
deterioration in its financial position.
A creditors’ committee may also be formed pursuant to a decision of the cred-
itors’ meeting.
The debtor is obliged to apply for a declaration of insolvency within sixty days
from the date on which it first learns of its insolvency or the date on which
it should have become aware of this fact, except for individuals who, on the
date of insolvency, are not the owners of a company. If the debtor is the owner
3 Parts 3 and 4 of Section VIII were prepared by José Alves do Carmo, a lawyer in the corporate
department of the firm Barrocas Sarmento Neves in Lisbon, Portugal.
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of a company, there is a statutory presumption of knowledge of insolvency

three months after a general failure by the company to meet its tax or social
security obligations or obligations arising from employment contracts or lease
agreements.
Creditors are entitled to request that a debtor be declared insolvent and may
also withdraw their application or abandon proceedings any time before a final
decision is taken.
With respect to the debtor’s assets, the effect of a declaration of insolvency is
to deprive the debtor immediately of the power to administer and dispose of the
assets that make up its estate. As from that time, these powers are vested in the
administrator, who assumes the role of the debtor’s representative for all finan-
cial matters relating to the insolvency. As a rule, acts undertaken by an insolvent
party in violation of these arrangements are ineffectual, and the declaration of
insolvency causes all obligations of the insolvent party to immediately fall
due.
The law stipulates that, as a general rule, all acts taken within four years
before the commencement of insolvency proceedings may be declared void
if they reduce, frustrate, hinder, threaten or delay the settlement of creditors’
claims.
The ICRC provides for a single type of procedure, without distinction between
corporate recovery and insolvency (the former ICRC provided for two different
types of procedures, namely bankruptcy/insolvency and recovery).
Under Portuguese law, creditors must decide whether satisfaction of their claims
should be achieved by liquidating the debtor’s assets or by restructuring the
company and keeping it in business, either under the debtor’s ownership or that
of a third party. The creditors’ views must be set out in an insolvency plan
approved by the creditors’ meeting.
If the creditors opt for recovery, they are free to choose the most appropriate
measures to achieve this goal.
IX Applicable law
An SE with its registered office in Portugal is subject to the provisions of the
Regulation, its articles of association and the SE Act and, in the alternative, the
national legislation applicable to public limited-liability companies, in partic-
ular the Company Code.
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X Tax treatment4
1 Income tax
A General aspects
Portuguese tax law does not contain specific provisions regarding the tax treat-
ment of SEs. From a tax perspective, therefore, a Portuguese SE or a Portuguese
branch of a foreign SE will be treated the same as any other Portuguese company
or Portuguese branch of a foreign company.
For this purpose, companies with their head office or place of effective man-
agement in Portugal shall be deemed Portuguese tax residents.
A Portuguese SE, as a resident taxpayer, is subject to corporate tax on its world-
wide income (including income earned abroad, whether directly or indirectly
through a foreign permanent establishment (PE)) at a rate of 25%, to which is
added a municipal surcharge (derrama) of up to 10% of the corporate tax rate
(i.e. up to 2.5%), meaning the effective corporate tax rate can reach 27.5%.
Conversely, a Portuguese branch of a foreign SE (a non-resident entity) will be
subject to tax only on the profits imputable to it. The taxable income attributed
to a Portuguese PE of a non-resident SE is assessed under the same rules
applicable to resident companies (e.g. overhead charged by the SE to its PE
may be deducted in accordance with defined criteria and within reasonable
limits, taking into account the transfer pricing rules). The general corporate tax
rate applies. No further tax on remittances to the head office will be imposed
(e.g. no withholding tax is due as such payments are not considered dividend
distributions).
With respect to the deduction of tax losses, Portuguese companies can deduct
losses from their taxable profit for a period of up to six tax years from the time
the losses arose, including those generated by a PE located outside Portugal. A
Portuguese PE of a foreign SE may also deduct, over this same six-year period,
tax losses from the profits imputable to it but may not deduct losses incurred
outside Portugal.
These rules do not apply if, at the close of the tax year (generally 31 December)
in which the deduction is taken, there is a substantial change in the company’s
purpose, the nature of its activities or one involving at least 50% of its registered
capital or the majority of its voting rights. In special circumstances, the Ministry
of Finance may permit, where appropriate, a relaxation of or exception to this
restriction.
Carry-back of tax losses is not allowed.
4 This section was prepared by Joana Neto, a lawyer in the tax department of the firm Barrocas
Sarmento Neves in Lisbon, Portugal.
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Portugal
Dividends paid by a Portuguese resident company to other EU companies may

benefit from the withholding tax exemption under the Parent-Subsidiary Direc-
tive (Directive 90/435/ECC, as amended by Directive 2003/123/CE, which
includes the SE in its annex). Please note, however, that according to the Cor-
porate Tax Code (IRC), the requirements for the participation exemption must
be satisfied in order to benefit from the exemption from withholding tax.
Dividends received by a Portuguese SE from companies in other Member
States (if the requirements of the Parent-Subsidiary Directive are satisfied) are
excluded from taxable income if the Portuguese SE holds a direct stake of at
least 10% in the distributing company’s capital or the acquisition value of the
shareholding was at least €20,000,000 and it has held this stake for an unin-
terrupted period of at least one year prior to the dividend distribution or, if this
holding period is not satisfied, the time necessary to do so will be completed
soon.
B Tax issues when forming an SE
(i) Conversion into an SE
The formation of a Portuguese SE through the conversion of an existing public
limited-liability company does not trigger capital gains tax, as the identity of
the company has not changed. In these circumstances, tax losses will not be
lost, unless the abovementioned conditions are not met.
(ii) Formation by merger
Given that the SE is referred to in the Merger Directive, the creation of an SE
by means of a cross-border merger (by formation or absorption) could qualify
for the tax-neutral treatment under the IRC if the elements transferred by the
Portuguese entity to the foreign SE remain, in practice, in the possession of a
Portuguese PE of the SE and are included in the taxable income imputed to
that PE. In other words, the assets must remain in Portugal (i.e. the transferred
assets and liabilities should be accounted for in the same way and at the same
value as they were in the merged entity).
(iii) Formation of a subsidiary SE
The creation of a subsidiary SE can be tax neutral provided the assets to be
transferred constitute a branch of activity. When transferred to a foreign SE,
the contributed assets and liabilities must remain in Portugal in the form of a
Portuguese PE in order to qualify for tax-neutral treatment. In other words, the
assets must remain in Portugal (i.e. the transferred assets and liabilities should
be accounted for in the same way and at the same value as they were in the
transferring company).
(iv) Formation of a holding
The creation of a holding SE by way of an exchange of shares need not nec-
essarily trigger adverse tax consequences (i.e. if the value of the shareholdings
for tax purposes does not change).
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C Transfer of an SE’s registered office
The transfer of a Portuguese SE’s registered office gives rise to a taxable capital
gain or loss equal to the difference between the market value of the assets
and their net book value, unless the assets and liabilities remain in Portugal
within a Portuguese permanent establishment. If a request is filed with the tax
authorities, losses relating to tax periods that occurred prior to the transfer of the
company’s registered office or place of effective management can be deducted
by the surviving PE, provided they relate to assets connected to this permanent
establishment.
2 Value added tax

The formation of an SE is not subject to Portuguese VAT. A Portuguese SE will
be subject to Portuguese VAT at the same terms as other Portuguese companies.
3 Other taxes
The tax on capital contributions in Portugal takes the form of stamp duty at
a rate of 0.4% of the real value of the contribution (in cash or in kind) upon
the: (i) formation of a company or a capital increase; and (ii) the conversion of
a non-stock company into a stock company. Exemptions may be available for
the: (i) formation or capital increase of a stock company as a result of a merger,
division or transfer of assets; (ii) the formation or capital increase of a holding
company; (iii) the conversion of a stock company into another corporate form;
(iv) the transfer from another Member State to Portugal of a stock company’s
place of effective management and/or registered office, etc.
XI Conclusion
The SE is a new type of corporate form in Portugal which has already been
implemented in practice, although with moderate enthusiasm due to its apparent
legal complexity and to certain particularities of the SE legislation, especially
the legislation on employee involvement
Notwithstanding the foregoing, we are of the opinion that the SE will be widely
accepted in years to come owing to its inherent advantages, as described under
Section II above.
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12
Romania
c a r m e n p e l i a n d g e o r g e ta d i n u
Nestor, Nestor, Diculescu, Kingston, Petersen
I Introduction 315
II Formation 316
A Main features 316
B Founding parties 316
C Name 317
D Capital 317
4 Registration and publication requirements 319
D Liability 326
VII Dissolution 328
1 Winding up – voluntary liquidation 328
2 Insolvency and cessation of payments 330
VIII Tax treatment 332
1 Income tax and dividend withholding tax 332
3 Other taxes 334
IX Conclusion 335
I Introduction
The main Community legislation governing the European company or Societas
Europaea (‘SE’) includes Council Regulation (EC) No 2157 of 8 October 2001
315
on the Statute for a European company (the ‘Regulation’) and Council Directive
No 2001/86/EC of 8 October 2001 supplementing the Statute for a European
company with regard to the involvement of employees (the ‘Directive’).
The Regulation is directly applicable in all EU Member States (including Roma-
nia, starting 1 January 2007, the date of Romania’s accession to the EU),
although Romania has not adopted any national legislation implementing the
Regulation. As regards the Directive, it was transposed into Romanian law by
Government Decision No. 187 of 20 February 2007 on the information and
consultation procedures and other modalities of employee involvement in the
activities of a European company, effective 7 March 2007.
The Romanian legal framework regulating business organisations centres on the
Companies Act 31/1990, as amended and republished (the ‘Companies Act’),
complemented by the Capital Markets Law 297/2004, as amended (the ‘Capital
Markets Law’), and the Trade Registry Law 26/1990, as amended (the ‘Trade
Registry Law’), amongst others.
Due to the fact that the Regulation has yet to be implemented in Romania, no
derogations from the Regulation, as concerns the thirty-two options afforded
the Member States to impose certain limitations and restrictions, have been
adopted.
II Formation
1 General remarks
The formation of an SE shall be governed by provisions of national law appli-
cable to public limited-liability companies of the Member State where the SE’s
registered office is located.
A Main features
When incorporating a joint-stock company, the paid-up capital must represent
at least 30% of the subscribed share capital, and the remainder of the share
capital must be paid in within twelve months from incorporation, in the case
of shares issued in return for cash contributions, or within no more than two
years following incorporation, for shares issued in return for a contribution in
kind.
B Founding parties
Romania has not adopted the option expressed in Article 2(5) of the Regulation
to allow a company whose head office is located outside the EU to participate
in the formation of an SE under certain conditions.
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Romania
C Name
The competent trade registry shall verify whether the proposed name of an SE
is identical to another name already registered (regardless of the abbreviation
indicating the entity’s corporate form).
D Capital
Under Romanian company law, the registered share capital of a company may
consist of:
(a) contributions in cash, which are mandatory upon the establishment of a
company;
(b) contributions in kind, which must be valued by an independent expert and,
in the case of a joint stock company, by an authorised expert appointed
by the competent trade registry judge;
(c) contributions of receivables, which must be valued by an independent
expert and, in the case of a joint stock company, by an authorised expert
appointed by the competent trade registry judge; this type of contribution
is not allowed in the case of joint stock companies established through a
public offering.
(i) Types of instruments attesting to contribution to a company’s

registered capital
The shares of a joint stock company are equal and indivisible fractions of its
share capital. The Companies Act mentions two types of shares: bearer and
registered (actiuni nominative).
Registered shares may be issued either in material or dematerialised form. The
shares must indicate the name and term of existence of the company, the date of
its articles of association, its trade registry incorporation number, the amount
of its share capital, the number of shares issued and their registration numbers,
the nominal value of the share, any payments made and the privileges granted
to the founders. In addition, registered shares must also mention the holder’s
first and last name, personal identification number and address, if the holder is
a natural person, or, if the holder is a legal entity, its name, the address of its
registered office, and it registration number and code.
The types of shares issued by a company and their nominal value shall be
determined in the articles of association; however, the nominal value of a share
cannot be less than RON 0.1 (approximately €0.03). Should the articles of
association fail to expressly mention the type of shares issued, the shares shall
be presumed to be registered; furthermore, any shares that are not fully paid up
will be considered registered shares.
317
Bearer shares can be converted into registered shares and vice versa, provided
the abovementioned conditions are met, through a decision of the extraordinary
general meeting of shareholders. The required quorum is one-quarter of the
total voting rights on first call and one-fifth of the total voting rights on second
call; the required majority is a simple majority of the voting rights present. The
articles of association can provide for higher quorum and majority requirements.
The Companies Act provides for the existence of two classes of shares: ordinary
(common) shares and shares with a preferred right to dividends but without
voting rights (so-called preferred shares). The value of the latter cannot exceed
25% of the total share capital.
Shares can be converted from one class to another through a decision of
the extraordinary general meeting of shareholders. The quorum and major-
ity required are the same as those mentioned above for the conversion of bearer
shares into registered shares.
The holders of each class of shares meet at special meetings, in accordance with
the terms and conditions set forth in the company’s articles of association.
(ii) Issuance of shares

A company may issue shares only after it has been registered with the trade
registry. Shares, irrespective of their type, cannot be issued for a value lower
than their nominal value. The share capital cannot be increased and new shares
cannot be issued until previously issued shares have been fully paid up.
(iii) Transfer of shares

Registered shares are transferred through recordation in the shareholders’ reg-
ister and a mention on the share certificate itself, signed by the assignor and the
assignee or their agents. Bearer shares are transferred through physical delivery
of the share certificates. Shares traded on a stock exchange are transferred in
accordance with the capital markets legislation.
The articles of association may require other formalities to be observed with
respect to the transfer of shares.

No specific rules regarding the various means of formation have been imple-
mented under Romanian law; therefore, the relevant provisions of the Regula-
tion regarding the formation of an SE by merger, of a holding or subsidiary SE
and conversion into an SE shall apply.

The founders, representatives and any other persons who have undertaken var-
ious acts during the period of incorporation shall be jointly and severally liable
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Romania
to third parties in relation to any agreements entered into, if the company, fol-
lowing its incorporation, fails to ratify them. If the company confirms that the
agreements have been entered into for the purpose of its incorporation, these
agreements shall be binding on the company.
4 Registration and publication requirements

Each company in Romania must be registered with the competent trade registry
before starting to do business.
The articles of association submitted for registration must be drafted in accor-
dance with the statutory requirements applicable to each type of company. An
authenticated version is required only upon the contribution of real property to
a company’s share capital or upon the establishment of a joint stock company
by means of a public offering.
The articles of association must include, regardless of the type of company:
(a) identification of the founders, including the general partners, if applicable;
(b) the type of company, its trade (company) name and headquarters;
(c) the company’s main scope of business;
(d) the amount of subscribed, paid-up and, if applicable, authorised share
capital;
(e) the nature and value of any assets contributed in kind, the type and number
of shares granted in exchange, and the name of the contributor;
(f) the number and nominal value of any shares issued and whether they are
bearer or registered;
(g) if there is more than one class of shares, the number of shares, in each
class, their nominal value and the rights attached to each class;
(h) any restrictions on the transfer of shares;
(i) the names of the initial members of the board of directors or of the super-
visory board or, if applicable, of the partners representing the company;
(j) the powers granted to members of the board of directors or to the managers
and the manner in which such powers can be exercised;
(k) the names of the first censors or of the company’s auditor, as the case
may be;
(l) the company’s term of existence;
(m) the method for distributing profits and losses;
(n) any branches, agencies, representation offices and other such units with-
out legal personality;
(o) any provisions regarding the dissolution and liquidation of the company.
Before commencing its activities and no later than fifteen days from the execu-
tion date of its articles of association, the company must submit an application
for registration to the competent trade registry, along with the following:
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(a) its articles of association;

(b) documents proving subscription for, and actual payment of, the share
capital, in accordance with the provisions of the articles of association;
(c) proof of the address of the company’s headquarters and the availability
of its name/logo;
(d) if there have been any contributions in kind, documents attesting to own-
ership and, for real property, any encumbrances on the property;
(e) the company’s opening balance sheet, as approved by its shareholders;
(f) a sworn statement by the founders, the initial directors and, if applica-
ble, the first members of the directorate, supervisory board and censors,
attesting to compliance with the applicable statutory provisions;
(g) any other acts or authorisations required by law.
Provided the requirements are met, registration should be accomplished within
five days from submission of the above documents. The trade registry’s deci-
sion approving incorporation of the company shall be published in the Official
Gazette.
The costs of incorporation include:
(a) the registration fee to the trade registry, the cost of publication of docu-
ments in the Official Gazette of Romania;
(b) fees to obtain tax records;
(c) notarisation, translation and legalisation costs, if applicable;
(d) related stamp duties.

A newly incorporated company is granted legal personality upon its registration
with the trade registry.

Joint stock companies may have either a one-tier system of management (with
a board of directors and executive officers) or a two-tier system (with a super-
visory board and a directorate).
1 General meeting
The ordinary general meeting of shareholders meets at least once a year, no
later than five months from the close of the fiscal year.
The ordinary general meeting of shareholders has the following powers, as
provided for in the Companies Act:
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(a) to discuss, approve and/or amend the annual financial statements and
determine the dividends to be distributed, if any;
(b) to appoint and remove members of the board of directors/ supervisory
board and the statutory auditors;
(c) if need be, to appoint and remove the company’s auditor and to set the
minimum term of the audit agreement;
(d) to establish the remuneration of members of the board of directors or
supervisory board and of the statutory auditors, if this is not mentioned
in the articles of association;
(e) to analyse the activities of the board of directors and the directorate and
release their members from liability;
(f) to adopt a budget for revenue and expenses together with a financial plan
for the next fiscal period;
(g) to approve the pledge, lease or dissolution of one or more of the company’s
units.
A quorum of 25% of the voting rights is required for an ordinary general meet-
ing of shareholders to be held, and decisions are passed by a majority of votes
cast (unless the company’s articles or by-laws provide for a higher threshold).
Where the ordinary general meeting of shareholders is not convened for want
of the required quorum, the meeting subsequently called may address those
items on the agenda at the first meeting regardless of the registered capital rep-
resented by those shareholders in attendance and takes decisions by a simple
majority of votes cast. The articles of association cannot provide for a min-
imum quorum or for a higher majority for an ordinary general meeting on
second call.
An extraordinary general meeting of shareholders can be called whenever a
decision is needed in relation to:
(a) a change in the company’s corporate form;

(b) a change in the location of the company’s headquarters;
(c) a change in the scope of the company’s business;
(d) the incorporation or liquidation of branches, agencies, representative
offices or any other such units without legal personality, unless the com-
pany’s articles of association provide otherwise;
(e) an extension of the company’s term of existence;
(f) an increase or decrease in the registered share capital;
(g) the issuance of new shares;
(h) a merger with another company;
(i) the premature dissolution of the company;
(j) the conversion of shares from one category to another;
(k) the conversion of bonds from one category to another or the conversion
of bonds into shares;
(l) the issuance of bonds;
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(m) any amendment to the articles of association and any other decision for
which the approval of an extraordinary general meeting of shareholders
is required.
A quorum of 25% of the share capital is required for an extraordinary general
meeting of shareholders to be held on first call, and decisions are taken by a
majority of votes cast. Where an extraordinary general meeting of shareholders
is not validly convened for want of a quorum, the meeting subsequently con-
vened may address the items on the agenda at the first meeting if 20% of the
voting rights are present or represented and shall adopt decisions by a majority
of votes cast. The articles of association may provide for higher quorum and
majority requirements.
The following decisions must be approved by two-thirds of the voting rights
held by those shareholders present or represented: amendments to the com-
pany’s corporate purpose; share capital increases or decreases; changes to the
company’s corporate form; and a merger, spin-off or dissolution. Neither the
articles of association nor the resolution may stipulate a lower threshold.
Joint stock companies are required to keep a register containing the minutes of
their general meetings and mentioning fulfilment of the statutory requirements
concerning general meetings of shareholders.
Shareholders’ main rights are: (i) the right to receive dividends; (ii) the right
to vote at general meetings on specific matters identified by law and in the
company’s articles (unless they hold preferred shares, in which case they are
not entitled to vote); (iii) a pre-emptive right with respect to any share capi-
tal increase; and (iv) a right to share in the proceeds following the voluntary
liquidation of the company (in proportion to their shareholdings).
Other rights include:
(a) the right to be informed of and access certain corporate documents, such as
the annual financial statements, the board of directors’ annual report, the
internal auditors’ or censors’ reports, proposals related to the distribution
of dividends, and any other written materials necessary to form an opinion
with respect to items included on the agenda of a general meeting;
(b) the right to request that items be added to the agenda of a general meeting
(for shareholders representing at least 5% of the share capital);
(c) the right to put written questions to the board of directors and to receive
answers;
(d) the right to request the appointment of experts (for shareholders represent-
ing, individually or collectively, at least 10% of the share capital) with
a view to analysing certain transactions undertaken by the company’s
management;
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(e) the right to notify the internal auditors or censors of facts falling within
the latter’s powers;
(f) the right to request that a general meeting of shareholders be held (for
shareholders representing, individually or collectively, at least 5% of the
share capital).
(g) the right to challenge resolutions of the general meeting before the com-
petent courts;
(h) the right to file a claim for damages on behalf of the company against
the latter’s directors, founders, managers, censors or auditors (for share-
holders representing, individually or collectively, at least 5% of the share
capital);
(i) the right to exit the company under certain circumstances (including a
transfer of the company’s headquarters abroad).

(i) General remarks
Since the reform of the Companies Act in December 2006, shareholders may
opt for either a two-tier system, comprising a directorate and a supervisory
board, or a one-tier system, comprising a board of directors (in certain cases,
with the delegation of certain powers to managers).

Under the one-tier system, a joint stock company is managed by its board of
directors. The number of members must always be uneven and, if the company
is subject to the statutory audit obligation, there must be at least three directors.
The members of the board of directors can be either natural persons or legal
entities.
The board of directors generally takes all measures needed and required to
achieve the company’s corporate purpose as stated in its articles of association,
except for those reserved to the general meeting by law.
Unless the articles provide otherwise, at least half the directors must be present
in order for the board to validly take decisions. The board meets whenever
necessary and must meet at least once every three months.
The board of directors may, or if the company is subject to the statutory obli-
gation to be audited, must delegate its administrative duties to managers. The
managers, including the general manager, are appointed and removed from
office by the board of directors, whose members can also serve as managers.
However, a majority of the directors must be non-executive members, i.e. they
cannot also be managers.
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The chair (person) of the board of directors can also serve as the general manager
if a provision to this effect is contained in the articles of association or in
a shareholder resolution. Managers must be natural persons and can also be
members of the board of directors.
Notwithstanding this, the board of directors must retain certain exclusive author-
ity, such as the power to determine the company’s main areas of activity and
development, its accounting and financial oversight systems, approval of the
financial plans, and filing of requests to commence insolvency proceedings.
Unless the articles of association provide for a higher quorum, at least half the
members of the board of directors must be present to validly take decisions.
Decisions are adopted by a simple majority of votes cast, unless the articles
provide otherwise.
A member of the board of directors cannot also serve as a director of more than
five Romanian joint stock companies (unless the member in question owns
one-quarter of the shares of that company). As a general rule, if a member of
management has a conflict of interest with the company, it must inform the
other directors, the managers, the censors and/or auditors and may not take part
in the deliberations with respect to the operation in question.

Under the two-tier management system, the company is managed by a direc-
torate and a supervisory board.
The directorate takes all measures needed and required to achieve the company’s
corporate purpose, as stated in its articles of association, except for those matters
reserved to the general meeting of shareholders or the supervisory board by law,
and, for this purpose, it shall meet as often as necessary.
The supervisory board’s main duty is to oversee the activities of the directorate.
This supervisory role mainly consists of:
(a) exercising permanent control of the directorate’s management;
(b) appointing and removing members of the directorate from office;
(c) verifying compliance of management’s decisions with the law, the com-
pany’s articles of association and resolutions of the general meeting;
(d) providing the general meeting of shareholders with an annual report on
its supervisory activities;
(e) requesting that the directorate provide any information as it sees fit.
The supervisory board cannot undertake measures relating to the manage-
ment of the company. However, it can be granted, through the articles of
association, a veto in relation to certain operations or types of operations.
Should the supervisory board refuse to approve an operation following a
request from the directorate to do so, the general meeting of shareholders can
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approve the operation by a three-quarters majority of those shareholders in

attendance.
Unless the articles of association provide for a higher quorum requirement,
at least half the members of the directorate or the supervisory board must be
present to validly take decisions. Decisions are adopted by a simple majority
of votes cast, unless the articles provide otherwise.
A supervisory board member cannot sit on the supervisory board of more than
five other Romanian joint stock companies (unless the member owns one-
quarter of the shares of that company). As a general rule, if a member of
management has an interest contrary to that of the company, it must inform the
other members as well as the censors and/or auditors and may not take part
in the deliberations on the operation in question. The company may not grant
loans to members of its management.

In the one-tier system, members of the board of directors are appointed and
removed from office by the general meeting of shareholders. The term of office
for a director shall be set forth in the company’s articles of association but
cannot exceed four years. A director may serve for an additional term, insofar
as this is not prohibited by the articles of association.
In the two-tier system, the supervisory board, which must meet at least once
every three months, must have between three and eleven members, appointed
and removed by the general meeting of shareholders (or by the articles of
association, for the first members). Members of the directorate are appointed and
removed by the supervisory board, and their number must be uneven. A person
cannot sit simultaneously on both the supervisory board and the directorate.
C Representation
In the one-tier system, the board of directors represents the company in relation
to third parties and in legal proceedings through its chairperson. If management
of the company has been delegated to managers, the power to represent the
company lies with the general manager, and the board of directors represents
the company in relation to its managers.
In the two-tier system, the directorate represents the company in relation to
third parties and in court and, unless the articles provide otherwise, members
of the directorate can represent the company only by acting unanimously. In
the absence of a stipulation to the contrary, a member of the directorate can be
authorised unanimously by the other members to represent the company with
respect to the conclusion of specific acts or certain types of acts. The name(s)
of the person(s) so authorised must be submitted to the trade registry. The
supervisory board represents the company in its relations with the directorate.
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D Liability
Members of the management bodies act on the basis of powers conferred on

them by the company. These powers were recently extended to managers as
well, who had previously been viewed as employees. In accordance with the
OECD 2004 Recommendations, the Companies Act explains in greater detail
the abovementioned relationship and introduces concepts that were previously
only implied.
Thus, it expressly provides that all members of management shall exercise their
duties with loyalty and in the company’s interest. Members of management do
not breach their duty of loyalty if, when taking a business decision, they are
reasonably entitled to believe that they are acting in the company’s best interest
and on the basis of adequate information.
The standard according to which the liability of management is assessed is that
of the prudent business person. Therefore, even slight negligence may give rise
to liability.
In this regard, as a rule, each management body is liable for failure to fulfil the
tasks entrusted to it by higher-ranking corporate bodies or by law.
Romania has transposed the Directive by adopting Government Decision No.
187/2007 on the information and consultation procedures and other modalities
of employee involvement in the activities of a European company, effective 7
March 2007 (the ‘Employee Involvement Decision’).
Romania has implemented Article 8 of the Directive on confidentiality by
closely following the provisions of the Directive, providing that: (i) the duty
of confidentiality of members of the special negotiating body (SNB) or the
representative body as well as of experts and the employee representatives
continues in effect even after expiry of their term of office; (ii) the super-
visory/administrative organ need not transmit information if doing so could
seriously harm the functioning of the SE (although any such decision must be
justified and explained to the employee representatives); and (iii) there is a right
of recourse to the competent courts in the event that such a refusal to transmit
information is deemed unsubstantiated.
Romania has implemented Article 9(2) of the Directive and has consolidated in
a single article the relevant provisions of Articles 9(1) and 9(2): the competent
organ of an SE, the supervisory or administrative organ of the SE, the repre-
sentative body or the employee representatives, as the case may be, shall work
together in a spirit of cooperation, with due regard for their reciprocal rights
and obligations.
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Romania
Romania has not implemented Article 11 of the Directive on the misuse of

procedures, although it does not seem to have been the legislature’s intention
not to prevent the misuse of an SE for the purpose of depriving employees of
rights to employee involvement or withholding such rights.

Romanian accounting practice is governed by the provisions of Law No.
82/1991, as amended (the ‘Accounting Law’). Romanian accounting legislation
has been significantly modified in recent years with a view to harmonisation
with Community directives. Currently, most Romanian entities conduct their
accounting in accordance with Ministry of Public Finance Order No. 1752/2005
on the accounting regulations in accordance with Community directives. Sim-
plified measures are available for small enterprises.
The accounting regulations, harmonised with Community directives, are appli-
cable to companies which, as of the preparation date of their annual financial
statements, meet two of the following three criteria: (i) total assets of €3.65
million; (ii) net turnover of €7.3 million; (iii) 50 employees on average during
the year.
Simplified measures are available for companies that do not meet two of the
abovementioned three criteria.
In addition, International Financing Reporting Standards must be observed by
certain categories of Romanian companies, such as credit institutions, insurance
companies, listed companies, etc.
(i) Internal audit

Companies whose annual financial statements are subject to the statutory audit
obligation or who have opted to have their financial statements audited must
organise their internal audit in accordance with the norms issued by the Roma-
nian Chamber of Financial Auditors.
Any other joint stock company must appoint an odd number of censors to verify
the company’s management.
(ii) External audit

The financial statements of commercial companies subject to the statutory audit
obligation must be audited by financial auditors, who may be either natural
persons or legal entities, as provided by law. All joint stock companies that
have opted for the two-tier management system are subject to the statutory
audit obligation. Whether a company is subject to this obligation depends on
if it meets the criteria set out in Order 1752/2005 of the Ministry of Public
Finance.
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(iii) Special provisions for companies subject to the obligation to have

their financial statements audited (‘audited companies’)
Audited companies must organise their internal audit in accordance with
the provisions adopted by the Romanian Chamber of Financial Auditors.
Furthermore, the general meeting of shareholders has the power to fix the
minimum length of the audit agreement and to remove the auditor(s) from
office.
The articles of association of a joint stock company must include, amongst
other provisions, the identity of the company’s first auditor if it opts to, or must
have, its financial statements audited.
The creation of an audit committee within the board of directors is mandatory
within all audited companies. This committee is made up exclusively of non-
executive directors and at least one of its members must be experienced in
applying bookkeeping or auditing principles.
For audited joint stock companies, delegation of managerial authority by the
board of directors to managers is mandatory.

An SE incorporated in Romania shall be subject to supervision in accordance
with the relevant provisions of national law, including, for example, and depend-
ing on the scope of its business, stock exchange rules and rules governing
financial institutions and banks, electronic communications, employment and
environmental legislation, tax and social security laws, and other regulated
areas.
Moreover, it may be subject to supervision by the national competition authority,
the Competition Council, or the European Commission, for the purpose of
competition regulation.
VII Dissolution
1 Winding up – voluntary liquidation
As a general rule, the dissolution of a company has the effect of initiating liq-
uidation. Dissolution may occur without liquidation, in the event of the merger
or total demerger of the company or under express statutory conditions.
(i) General dissolution provisions of the Companies Act

The Companies Act contains general dissolution provisions that apply regard-
less of the type of company and specific dissolution provisions applicable to
certain types of companies.
Thus, the general cases of dissolution under Romanian company law are:
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(a) the company’s term of existence expires;

(b) it is impossible to achieve the company’s corporate purpose;
(c) the company’s purpose is declared invalid;
(d) the general meeting of shareholders passes a resolution to dissolve the
company;
(e) the court orders the company to dissolve, at the request of any member, for
good reason such as a serious misunderstanding between the shareholders
that obstructs the proper functioning of the company;
(f) insolvency;
(g) other cases provided by law or in the company’s articles of association.
(ii) Specific dissolution provisions of the Companies Act

A joint stock company shall be dissolved in the following cases: if the company’s
net asset value falls below less than half its subscribed capital and the situation
is not rectified or the number of shareholders falls below the statutory minimum
and no new shareholder is brought in for more than nine months.
Following dissolution, a company may not develop any new commercial activ-
ities. Dissolution gives any member the right to request the company’s liquida-
tion and must be recorded with the trade registry and published in the Official
Gazette.
(iii) Procedural aspects related to dissolution

The dissolution of a company must be recorded with the trade registry and
published in the Official Gazette. Registration and publication shall be effected
through publication of the general meeting’s resolution amending the articles of
association or on the basis of a court order ordering the company to dissolve (in
which case, registration and publication must be accomplished within fifteen
days from the date on which the court order became irrevocable).
Any interested party may challenge the court order within thirty days of its
publication.
(iv) Procedural aspects related to winding up

The liquidation of a company shall be coordinated by a liquidator (either a
natural person or a legal entity), appointed by the company and supervised by
its censors.
Any shareholder may request the appointment of a liquidator if the directors
have failed to request the competent court to appoint one.
The activities performed by the company during liquidation shall be subordi-
nated to the needs of liquidation and are limited to operations in existence at
the time of dissolution.
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The liquidators cannot pay members of the company (shareholders) any

amounts to which they are entitled by virtue of liquidation before paying the
company’s creditors. However, shareholders may request that a cash reserve be
formed if the company has sufficient funds to meet all of its obligations and an
excess amount of at least 10% of the value thereof exists.
Liquidation must be finalised within three years from the dissolution date,
although this period may be extended by the competent court.
2 Insolvency and cessation of payments

(i) Applicable legislation
The applicable legislation is Law No. 85/2006 on insolvency proceedings (the
‘Insolvency Law’).
For banks and insurance companies, special legislation applies.
(ii) Competent bodies

The bankruptcy judge, the trustee in bankruptcy and/or the liquidator (insol-
vency practitioners) and the creditors’ bodies are the main parties involved in
applying the provisions of the Insolvency Law.
(a) The bankruptcy judge
• formally opens and closes the proceedings;
• confirms the appointment by the creditors bodies of the trustee in
bankruptcy and/or the liquidator and replaces such persons;
• approves and confirms the reorganisation or liquidation plan, as the
case may be; and
• rules on claims and objections raised during judicial reorganisation
and bankruptcy proceedings.
(b) Insolvency practitioners
Such practitioners operate either as professional partnerships or individually
as independent office holders. Insolvency practitioners are regulated by the
National Association of Insolvency Practitioners (‘UNPIR’), an independent
regulatory body which also maintains a register with respect to all profes-
sional partnerships formed by insolvency practitioners. Foreign practitioners
may carry on reorganisation and liquidation activities in Romania in accor-
dance with the provisions of bilateral conventions entered into for this purpose
by UNPIR with similar foreign bodies.
Insolvency practitioners monitor the debtor’s business activities in general,
including:
• examining the debtor’s activities and preparing a report on the causes and
circumstances of insolvency;
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• drafting a reorganisation plan with respect to the debtor’s activity, based

on the aforementioned report, as the case may be;
• managing the debtor’s business;
• concluding transactions;
• in the case of liquidation, preparing an inventory of the debtor’s assets and
liabilities and maintaining the debtor’s assets in good repair and condition;
and
• other duties established by the bankruptcy judge.
(iii) Creditors’ bodies

During insolvency proceedings, creditors are organised into:
(a) the creditors’ meeting which has the power to: (i) accept a reorganisation
plan; (ii) propose various measures; (iii) take decisions with respect to
the appointment of an insolvency practitioner as the debtor’s trustee or
liquidator; and
(b) the creditors’ committee, consisting of three to seven creditors holding
secured, state-budget or unsecured receivables with the highest value,
which may assist the bankruptcy judge during the proceedings and request
that the latter enjoin the debtor from managing its estate.
(iv) Insolvency procedures

A debtor may be subject to either the general procedure (involving the possibility
of reorganisation) or a simplified procedure (implying immediate commence-
ment of bankruptcy proceedings).
The insolvency procedure commences pursuant to a decision of the bankruptcy
judge, taken following an application by either the debtor or a creditor with a
mature claim that has been due for more than 30 days and with a value of at
least RON 10,000 (approximately €3,00).
Upon commencement of this procedure, all claims for enforcement, either in
or out of court, are suspended, and no interest, penalties or expenses in relation
to unsecured debts may be charged against the debtor.
The debtor, the trustee in bankruptcy or one or more creditors holding jointly
at least 20% of the total value of all receivables may propose a reorganisation
plan, which must indicate and describe the means of repayment.
The bankruptcy judge may approve a plan that meets the statutory requirements
and has an objective chance of success.
A reorganisation plan can only be implemented once it has been approved by
the debtor’s creditors.
Bankruptcy proceedings shall start if the debtor cannot be restructured or if
restructuring fails.
331
The bankruptcy judge shall declare the debtor dissolved and appoint a liquidator.
Following this decision, the liquidator must prepare an inventory of the debtor’s
assets and liabilities, verify the existence and value of any receivables incurred
after the commencement of bankruptcy, which must be registered with the
court, and of receivables whose value has been modified as a result of payments
effected after the commencement of bankruptcy, and sell the debtor’s assets
either separately or in bulk.
The proceeds from the sale of the debtor’s assets subject to security inter-
ests shall be distributed amongst the secured creditors, after the deduction of
enforcement and maintenance expenses and costs.
Any remaining proceeds shall be distributed amongst the creditors, in accor-
dance with their rank as provided by law.
VIII Tax treatment

The Romanian tax system is regulated mainly by Law No. 571/2003 on the Tax
Code, as amended (the ‘Tax Code’).
1 Income tax and dividend withholding tax

(i) Corporate tax
Pursuant to Title II (‘Corporate Tax’) of the Tax Code, domestic companies
(i.e. those incorporated in Romania) are subject to corporate tax on their profits
realised both inside and outside of Romania. Moreover, resident natural per-
sons associated with Romanian companies, through associations lacking legal
personality, are subject to corporate tax on income arising both in Romania and
abroad,
Foreign companies (i.e. those incorporated outside Romania) are subject to
corporate tax, as follows:
(a) income obtained through a permanent establishment in Romania;
(b) income in relation to immovable property located in Romania, including:
• income from the rental or use of immovable property located in
Romania;
• gains from the sale of ownership rights or other rights related to immov-
able property located in Romania;
• gains from the sale of participation rights in a legal entity, if at least 50%
of the value of the fixed assets of that legal entity constitutes, either
directly or through one or more legal persons, immovable property
located in Romania;
• income from the exploitation of natural resources located in
Romania, including gains from the sale of any right related to such
natural resources.
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Romania
(c) income from the sale of shares in a Romanian legal person.

The general corporate tax rate is 16%.
Taxable income (profit) is the difference between income from any source and
expenses incurred for the purpose of making such income during a given fiscal
year, from which non-taxable income is deducted and to which non-deductible
expenses are added.
(ii) Dividend withholding tax

The distribution of dividends (profits) to domestic companies is subject to a
10% withholding tax. If the distribution is made to a natural person, the tax
rate is 16%, and the tax is withheld by the paying company. Since January
2007, dividends paid by one Romanian legal entity to another are not subject
to withholding tax, if the beneficiary has held at least 25% of the shares in the
paying entity on the date the dividend is paid for a period of at least two years.
Dividends distributed to non-resident entities are subject to a 16% withholding
tax, unless a treaty for the avoidance of double taxation applies and provides
for more favourable rates.
In January 2007, the Parent-Subsidiary Directive, which has been transposed
into Romanian law, became applicable. This directive provides that if a mini-
mum 15% (10% starting 2009) shareholding has been held for an uninterrupted
period of two years, dividend payments will no longer be subject to withholding
tax.
2 Value added tax

A VAT taxable person is any person who carries on, in an independent manner
and irrespective of the place, certain economic activities provided for by law,
regardless of the purpose or results of these activities.
In this respect, the economic activities indicated include those of manufacturers,
traders and service providers, including extraction and agricultural activities
and the liberal professions or activities treated as such. The term economic
activity also includes the use of tangible or intangible goods for the purpose
of obtaining income in a continuous manner. Employees and other persons
connected to an employer by means of an employment contract or by any other
legal instrument that creates an employer-employee relationship as regards the
terms and conditions of employment, remuneration or other obligations of the
employer are not considered to act in an independent manner.
On 1 January 2007, a new VAT system was implemented in Romania based on
the principles set out in the Sixth VAT Directive on the harmonisation of the
laws of the Member States relating to turnover taxes. In addition, Romania has
333
transposed into national law the provisions of the Eighth and Thirteenth VAT
Directives on VAT refunds to EU and non-EU taxable persons.
New VAT-related concepts also became applicable in Romania on 1 January
2007, namely intra-Community delivery and acquisition, VAT triangulation,
and operations that constitute transfers and non-transfers for VAT purposes.
The standard rate of VAT is 19% and applies to any taxable operation that is
not exempt from VAT or that is not subject to the reduced rate of VAT.
The reduced rate of VAT is 9% and applies to the following supplies of services
and/or deliveries of goods:
(a) admission to castles, museums, memorial houses, historical monuments,
architectural and archaeological monuments, zoos, botanical gardens,
fairs, exhibitions and similar cultural events or facilities, cinemas, etc;
(b) the delivery of books, newspapers and magazines, school manuals, with
the exception of those intended exclusively or substantially for publicity
purposes;
(c) the delivery of prostheses of any type and accessories to them, with the
exception of dental prostheses;
(d) the delivery of orthopaedic products;
(e) the delivery of medicines for human and veterinary use;
(f) the supply of accommodations within the hotel sector or within sectors
having a similar function, including the rental of land for camping.
The VAT legislation provides for two different kinds of exemptions: those with
a deduction right and those without a deduction right.
Registered VAT payers may deduct monthly output VAT from their input VAT,
but only in relation to goods and services destined for taxable operations. Should
their output VAT exceed their input VAT, the difference must be paid.
3 Other taxes
(i) Local taxes
Title IX of the Tax Code mentions the categories of taxes owed to the local
authorities by Romanian natural and legal persons. Most of these taxes are levied
on goods (e.g. tax on buildings or land, vehicles, etc.). The local authorities have
limited authority to create and levy new taxes, such as the tax on equipment or
polluting activities and for the use of public property, etc.
(ii) Excise tax

On 1 January 2007, the Community directives setting a general framework
for the taxation of products subject to excise duties were transposed into the
Tax Code.
334
Romania
Harmonised excise duties are imposed on alcoholic drinks and other alcoholic
products, tobacco products, energy products and electric power.
(iii) Registration fees and stamp duties

All court actions are subject to a stamp duty at a regressive rate (between
10% and 1% of the value of the object of the litigation). Registration with the
competent registries of real property ownership rights, mortgages and security
interests are also subject to a registration fee or stamp duty.
IX Conclusion
Even though the Regulation is directly applicable in Romania, the adoption
of specific national rules is recommended in order to indicate, for example,
Romania’s approach to the options left open by the Regulation. The Directive,
which has already been transposed into Romanian law, has not yet found any
practical application due its very recent enactment and the novelty of the SE in
Romania.
335
13
Republic of Slovenia
m at e j a o r g i č , j u r i j d o l ž a n a n d e va p e r g a r e c
Odvetniki Jurij Dolžan, Mitja Vidmar & Igor Zemljarič
I Introduction 337
III Formation 339
B Name 339
E Capital 342
3 Management 350
D Liability 352
3 Duty of confidentiality and the protection of employee
representatives 355
2 Auditors 356
336

1 Winding up 357
2 Liquidation 357
3 Insolvency 358
X Tax treatment 359
1 Income tax 359
3 Other taxes 360
XI Conclusion 361
I Introduction
The Republic of Slovenia (‘Slovenia’) transposed Council Regulation No
2157/2001 of 8 October 2001 on the Statute for a European company (the
‘Regulation’) into national law with some delay by the new Commercial Com-
panies Act (Zakon o gospodarskih družbah or ZGD), published in the Uradni
list (Official Journal RS, No. 42/2006) on 19 April 2006. The ZGD entered
into force on 4 May 2006 and provides not only a legal framework for SEs
in Slovenia but also amends Slovenian company law in certain important
respects, including in previously unregulated areas such as squeeze-outs, shares
with no par value, and the introduction of the euro into Slovenian company
law.
Directive 2001/86/EC supplementing the Statute for a European company with
regard to the involvement of employees (the ‘Directive’) has been transposed
into national law by the Law on Employee Participation in the Management of
the European Company (SE) (Zakon o sodelovanju delavcev pri upravljanju
evropske delniške družbe or ZSUEDD; Official Journal RS, No. 28-1126/2006).
Implementation of the Regulation appears to have inspired the Slovenian Par-
liament and, as a result, some of the regulatory concepts in the Regulation have
been extended to other corporate forms (e.g. the choice between a one-tier or a
two-tier management system). Since the process of registering companies with
the competent court register (the ‘Companies Register’) is regulated in detail
by the Governmental Decree on Company Registration (Uredba o vpisu družb
in drugih pravnih oseb v sodni register) (the ‘Decree’) (Official Journal RS,
No. 18/02), the Decree will also need to be amended to reflect the provisions
of the new ZGD.
As provided in the Regulation and the Directive, the Member States have options
with respect to certain issues. Please find below a summary of those options the
Slovenian legislature has adopted and those it has decided not to apply.
337
Options Slovenia has adopted:

Regulation: Articles 8(5), 21, 24(2), 39(1), 39(2), 39(4), 40(3), 41(3), 43(1),
50(3), 55(1) and 59(2).
Directive: Article 3(2)b (second paragraph) and 3(7).
Options not applied by Slovenia:
Regulation: Articles 2(5), 7, 8(7), 8(14), 12(4), 19, 31(2), 34, 37(8), 39(3),
39(5), 43(2), 43(3), 48(1), 48(2), 54(1), 56, 67(1), and 67(2).
Directive: Articles 3(2)b (first paragraph), 7(2), 7(3), 8(2), 8(3) and 13(4).
Unless indicated to the contrary, references in this report to:
• a ‘company’ are to a legal entity established in Slovenia that takes the form
of a joint stock company (delniška družba), as opposed to other corporate
forms (such as the družba z omejeno odgovornostjo or limited-liability
company and the komanditna družba or company limited by shares) or
entities without legal personality (such as the družba z neomejeno odgov-
ornostjo or unlimited-liability company);
• ‘articles’ are to the constitutive document of a company, i.e. its articles of
association;
• a ‘management board’ are to the corporate body in the two-tier man-
agement system, entrusted with managerial functions (referred to as the
‘management organ’ in the Regulation);
• a ‘supervisory board’ are to the corporate body in the two-tier management
system, entrusted with supervising the company’s management (referred
to as the ‘supervisory organ’ in the Regulation);
• a ‘board of directors’ are to the corporate body in the one-tier manage-
ment system, entrusted with both managerial and supervisory functions
(referred to as the ‘administrative organ’ in the Regulation);
• an ‘administrative body’ are to both the board of directors (in the one-
tier system) and the management and supervisory boards (in the two-tier
system); and
• the ‘general meeting’ are to the shareholders’ meeting (skupščina
delničarjev) of a company.

Due to the limited size of the Slovenian market, companies in Slovenia are often
forced to expand their business abroad or to cooperate with foreign partners. In
order to facilitate cross-border transactions, many Slovenian companies have
established subsidiaries in other EU Member States or elsewhere. The SE offers
Slovenian companies even greater flexibility to respond to market and busi-
ness needs, such as the possibility to transfer their registered office to another
338
jurisdiction within the EU without having to first wind up as well as unified

reporting and corporate governance procedures.
III Formation
1 General remarks
A Founding parties
There are no special provisions on the founding parties of an SE in the ZGD,

meaning that the provisions of the Regulation apply. In accordance with Article
2(5) of the Regulation, Slovenia does not allow a company with its registered
office outside the EU to participate in the formation of an SE.
B Name
An SE with its registered office in Slovenia is referred to as an evropska delniška
družba.1 The name must be followed by the abbreviation ‘d.d.’ (which stands
for delniška družba or joint stock company). According to Article 11(1) of
Regulation, the name of an SE must be preceded or followed by the abbreviation
‘SE’.

According to Article 7 of the Regulation, the registered office of an SE must be
in the same Member State as its head office. Slovenia did not enact the option
to require an SE’s registered office to be at the same place as its head office;
however, based on the general provisions of the ZGD, a company (including an
SE, pursuant to Article 9 of Regulation) may register its office only at the place
where: (i) it pursues operations; or (ii) conducts business; or (iii) its management
is located.
Pursuant to the Article 433 of the ZGD, when the management of an SE is
transferred to another Member State, it must (if so requested by the Companies
Register) re-establish its management in Slovenia within an appropriate time-
frame or transfer its registered office to that state pursuant to Article 8 of the
Regulation. If the SE does not comply with the Companies Register’s request,
the court can order that it be dissolved.

Slovenia has chosen to adopt additional provisions designed to protect minor-
ity shareholders who oppose the transfer abroad of an SE’s registered office
(Art. 8(5) Reg.). Pursuant to the Article 434 of the ZGD, in addition to the
1
The literal translation is ‘European joint stock company’.
339
information set forth in Article 8 of the Regulation, the transfer proposal shall
include an offer to acquire in return for ‘fair monetary compensation’ the shares
of those shareholders who voted against the transfer. Any shareholder who did
not attend the general meeting due to duress, invalid notice or irregular publi-
cation is also entitled to seek compensation.
The compensation should be ‘appropriate and just’, and the amount thereof
must be audited. The auditor’s report shall include an opinion as to whether the
compensation offered is appropriate and just for the shares to be acquired.
The SE’s supervisory board is obliged to review the transfer proposal on the basis
of the management board’s report and the auditor’s report on the adequacy of the
share-exchange ratio and draft a report on the proposed transfer (Art. 436 ZGD).
At least two months prior to the date of the general meeting scheduled to
vote on the proposed transfer, the transfer proposal must be submitted to
the Companies Register and a notice to this effect published. In this notice,
the company shall inform: (i) shareholders of their right to receive monetary
compensation in return for their shares; and (ii) creditors of their right to
request security, as set out below.
At least one month prior to the general meeting scheduled to vote on the
proposed transfer, various documents must be made available for inspection
at the SE’s registered office, including those mentioned in Article 8(4) of the
Regulation, the auditor’s report on the adequacy of the share-exchange ratio,
the supervisory board’s report on its review of the proposed transfer, and the
company’s annual report for the previous year.
At the general meeting of shareholders, the board shall explain the content of
the transfer proposal. If the company’s articles provide for special rights for
certain (classes of) shares, Article 438 of the ZGD requires that the transfer be
approved by each class of shareholders, unless their rights will not be affected
by the transfer.
Shareholders who object to the transfer of the SE’s registered office at the
general meeting (and whose objection is recorded in the minutes) are entitled
to ask that the company (or any other person obliged to pay compensation, as
set forth in the transfer proposal) redeem their shares. The same holds true for
shareholders unlawfully prevented from attending the general meeting or who
do not attend due to an invalid notice or irregular publication of the agenda.
The offer of compensation is valid for one month following publication of
the notice of recordation of the new registered office. The payment obligation
expires three years after this publication.
Pursuant to Article 441 of the ZGD, the following are not grounds for
challenging a resolution of the general meeting approving the transfer of an
SE’s registered office:
340
(a) the amount of compensation is not adequate or was not properly offered
or no compensation was offered at all;
(b) the discussion on the adequacy of the share-exchange ratio in the
management board’s report, the auditor’s report or the supervisory
board’s report does not meet the requirements of the ZGD.
However, shareholders who objected to the resolution (and whose objection is
recorded in the minutes of the general meeting) are entitled to request judicial
review of the adequacy of the share-exchange ratio (Art. 441 ZGD).
Creditors of the SE are entitled to request security for undue, contingent
or unascertained claims (Art. 442 ZGD). Such a request must be made
within one month following the date of the general meeting approving the
transfer.
The management board must record the company’s intention to transfer its
registered office with the Companies Register (Art. 443 ZGD). The documents
required to support such a request for registration include:
(a) a statement by the management board that no action has been filed
against the general meeting’s resolution approving the transfer;
(b) the transfer proposal;
(c) the minutes of the general meeting at which the transfer was approved;
(d) the SE’s annual report for the previous financial year;
(e) proof of publication of the transfer proposal pursuant to the provisions
of the ZGD (Art. 437 ZGD);
(f) proof that any applicable statutory requirements aimed at ensuring the
protection of shareholders and creditors have been met.
After having reviewed whether all statutory requirements have been met, in
particular those related to the protection of shareholders’ and creditors’ rights,
the Companies Register shall record the intention to transfer the SE’s registered
office and issue a certificate pursuant to Article 8(8) of the Regulation. Slovenia
chose not to enact the option contained in Article 8(14) of the Regulation,
allowing the national authorities to oppose the transfer of an SE’s registered
office if it would result in a change in applicable law.
Upon receipt of a notice that the transfer has been recorded in the competent
register of another Member State, the Companies Register shall delete the SE’s
entry (Art. 443 ZGD).
(iii) Transfer of an SE’s registered office to Slovenia

If an SE with its registered office outside Slovenia wishes to transfer its
registered office to Slovenia it must request permission to do so from the
Companies Register. The documents to be submitted in support of such a
request include (Art. 444 ZGD):
341
(a) the documents required by the ZGD to register a joint stock company;
(b) the transfer proposal;
(c) the minutes of the general meeting at which the transfer was approved;
(d) the company’s annual report for the previous financial year;
(e) a certificate from the competent authority of the Member State from
which the SE is transferring its registered office;
(f) an excerpt from the competent register of that Member State, dated after
the issuance of the certificate referred to in subparagraph (e); and
(g) a statement by the management board that no proceedings for winding
up, liquidation, insolvency or suspension of payments or similar
proceedings have been brought against the SE.
After registering the transfer, the Companies Register must notify the
competent authority in the other Member State.
D Corporate purpose
Since there are no specific rules regarding the corporate purpose of an SE, the
general rules applicable to all Slovenian companies apply. This means inter alia
that an SE must set out a framework for its intended activities in its constitutive
documents (e.g. its articles of association) and register these activities with the
Companies Register.
In principle, a company may only conduct activities that fall within the scope
of those registered with the Companies Register (Art. 6 ZGD). Nevertheless, a
company may engage in activities that are incidental or conducive to its regis-
tered activities. An act committed or obligation incurred outside the scope of a
company’s registered activities is valid and binding, unless it can be established
that the other party was, or should have been, aware of the ultra vires nature of
the act. Such knowledge on the part of a contracting party cannot be assumed,
even when the company’s activities are registered.
Special requirements may apply to certain types of activities (e.g. arms produc-
tion, media, banking and insurance activities, etc).
E Capital
The minimum share capital for a Slovenian joint stock company is €25,000.
The minimum share capital for an SE (Art. 4 Reg.) is significantly higher (i.e.
€120,000). Until the end of 2006, the share capital of Slovenian companies had
to be denominated in Slovenian tolars (SIT). However, since Slovenia joined
EMU and adopted the euro as its national currency on 1 January 2007, share
capital must henceforth be expressed in euros (Art. 170 ZGD).
Shares can be subscribed for in cash or in kind; however, at least one-third of
the share capital must be paid up in cash. Prior to registration of a joint stock
342
company in the Companies Register, at least 25% of the nominal value of each
share subscribed for in cash must be paid in.

Public limited-liability companies can form an SE by merger if at least two of
them are from different Member States.
In accordance with Article 15 of Regulation, the formation of an SE is governed
by the law applicable to public limited-liability companies in the Member State
where the SE’s registered office is or will be located. National law shall also
apply to matters not covered by Section 2 of the Regulation (Arts. 17–31)
and, where a matter is covered only in part by the Regulation, each company
involved in the formation of an SE by merger shall be governed by the provisions
of national law of the Member State to which it is subject for those aspects not
covered (Art. 18 Reg.). For merging companies in Slovenia, the applicable rules
are set out in the ZGD (Arts. 580–616).
Some differences exist between the Regulation and the ZGD regarding the draft
terms of merger, which must be drawn up by the management boards of the
merging companies and approved by the general meeting of shareholders of
each merging company. In Slovenia, a merger agreement is usually entered
into before being submitted to the Companies Register for inspection or to the
general meeting for approval.
The Slovenian legislature decided to enact legislation to protect shareholders
who oppose the formation of an SE by merger (Art. 24(2) Reg.). Therefore,
shareholders who object to the merger at the general meeting are entitled to
have their shares redeemed in cash. Pursuant to Article 445 of the ZGD, the
merger agreement must therefore, in addition to the information required by
Article 17 of the Regulation, include an offer to redeem, for fair monetary
compensation, the shares of those shareholders who oppose the formation of an
SE by merger. Shareholders who do not attend the general meeting retain the
right to have their shares redeemed if their non-attendance was due to an invalid
convocation or irregular publication or if they were unlawfully prevented from
attending.
In addition to the merger agreement, each Slovenian merging company shall
also prepare: (i) a management board’s report on the proposed merger; (ii) an
auditor’s report on the merger; and (iii) a report on the merger by the supervisory
board, based on the auditor’s report and the management board’s report.
The merger agreement, as reviewed by the supervisory board, shall be submit-
ted to the Companies Register at least one month before the general meeting
scheduled to approve the merger and a notice to this effect published in the
343
Official Journal RS. In addition to the particulars set out in Article 21 of the
Regulation, the notice shall specifically call the attention of shareholders and
creditors to their rights under the ZGD to request redemption of their shares or
security, as the case may be (Art. 447 ZGD). If the company has only a single
shareholder or if all shareholders have waived their right to request redemp-
tion of their shares by way of a notarial instrument, no offer of redemption is
required (the so called ‘simplified merger’ procedure; Art. 448 ZGD).
Pursuant to Articles 450 and 604 of the ZGD, the resolution approving the
merger may not be challenged in court if the general meetings of the companies
in those Member States that do not provide for special judicial appraisal and
review of the share-exchange ratio explicitly agree that the shareholders of a
Slovenian merging company can request judicial review of the share-exchange
ratio for an SE registered in Slovenia or, subject to certain conditions, for an
SE with its registered office in another Member State.
Shareholders of an acquired company from another Member State are also enti-
tled to request judicial review of the share-exchange ratio in Slovenia, provided
the conditions set out in Article 450 of the ZGD are met.
Creditors of a merging company transferring its assets to an SE registered out-
side Slovenia shall benefit from the same protection afforded to creditors where
a Slovenian-based SE transfers its registered office abroad (Art. 442 ZGD),
i.e. the right to request security for undue, contingent or unascertained claims.
A Slovenian merging company transferring its rights and assets to an SE with
its registered office outside Slovenia must notify the Companies Register of its
intent to merge. The filing must include a number of documents, the most sig-
nificant being: (i) the merger agreement; (ii) the minutes of the general meeting
approving the merger; (iii) the permission of special authorities, if necessary;
(iv) the management board’s report on the merger; (v) the auditor’s report; (vi)
the acquired company’s last financial statements; (vii) proof of publication of
the notice of intent to merge; and (viii) proof that any statutory requirements
designed to protect shareholders’ and creditors’ rights have been met.
After having reviewed whether the statutory requirements have been met
(especially the provisions of the ZGD regarding the rights of shareholders and
creditors), the Companies Register shall issue a certificate pursuant to Article
25(2) of the Regulation.
The ZGD specifies that a notarial instrument containing the articles of a holding
SE can only be drawn up after expiry of the additional time period mentioned
in Article 33(1) of the Regulation, so that all members of the holding SE are
known. This additional period starts to run on the date the requirements for
344
formation of a holding SE are fulfilled and a notice to this effect published. In

addition to the particulars set out in Article 32 of the Regulation, the articles
must indicate: (i) the minimum share capital needed to form a holding SE; and
(ii) the maximum share capital if all shares of the promoting companies are
contributed to the holding SE.
With respect to the management report and the auditor’s report, publication
of the notice of the draft terms of formation, ability to challenge the general
meeting’s resolution in court, and judicial review of the share-exchange ratio,
the provisions of the ZGD on formation of an SE by merger apply mutatis
mutandis.
The companies promoting the formation of a holding SE must notify the Com-
panies Register that all formation requirements have been fulfilled. The docu-
ments required for this filing include the draft terms of formation, the minutes
of the general meeting, the results of the vote approving the formation, the man-
agement board’s report on the formation, the auditor’s report on the formation,
proof that the draft terms of formation have been submitted to the Companies
Register, and a statement by the management board that no legal proceedings
have been brought against the resolution approving the formation of a holding
SE.
The Companies Register shall review whether the shareholders of the promoting
companies have actually contributed their shares to the holding SE, as provided
in the draft terms of formation. In addition, the Companies Register shall verify
if the other conditions for formation of a holding SE have been met and if
all procedural requirements have been observed. If all of these requirements
are satisfied, the Companies Register shall issue a certificate attesting to the
formation of a holding SE in accordance with the ZGD and the Regulation.
After registration of the holding SE, the administrative boards of the promoting
companies shall notify the competent authorities in their respective Member
States of the registration. An excerpt from the holding SE’s registration shall
be attached to this notification.
If a holding SE is to be registered in Slovenia, the registration application must
include:
(a) all information required to register a delniška družba or joint stock com-
pany (Art. 199 ZGD);
(b) the draft terms of formation;
(c) the minutes of the general meeting approving the formation of a holding
SE;
(d) the auditor’s report on the formation;
(e) proof of fulfilment of the conditions for formation of a holding SE in
accordance with Article 33(3) and (5) of the Regulation;
345
(f) a certificate from the competent authority that a holding SE has been
formed in accordance with the provisions of the ZGD and the Regulation;
and
(g) for promoting companies with their registered offices outside Slovenia,
an excerpt from the companies register or other competent authority.
The Slovenian legislature has not enacted any specific rules regarding the for-
mation of a wholly or partially owned subsidiary SE. As a result, the generally
applicable rules on the formation of a joint stock company in Slovenia shall
apply.
Only a joint stock company (delniška družba) can be converted into an SE and
vice versa. The ZGD regulates only certain aspects of conversion, relating to
the protection of shareholders’ rights, and provides that shareholders must be
comprehensively and accurately informed of the consequences of conversion.
In this case, an audit will be required.
In order to convert a delniška družba into an SE, the company’s management
board must prepare draft terms of conversion, including various information
such as the name of the existing company, the address of the (future SE’s)
registered office, draft articles of association, the envisaged timetable for the
conversion, and a management board report on the conversion pursuant to Arti-
cle 37(4) of the Regulation. The draft terms of conversion must be audited, and
the auditors shall draft a report on the conversion, with special attention being
paid to whether the company’s net asset value is at least equal to the minimum
capital required to form an SE (subject to increase by any reserves the company
is obliged to make).
At least one month prior to the date of general meeting scheduled to vote on
the proposed conversion, the management board must submit to the Companies
Register the draft terms of conversion, as reviewed by the supervisory board.
A notice to this effect must be published, calling shareholders’ attention to the
following:
• their right to review the conversion documents, including the draft terms of
conversion, the management board’s report on the conversion, the audi-
tor’s report, and the company’s annual accounts for the previous year,
which must be made available at the company’s registered office at least
one month prior to the date of the general meeting;
• their right to request, free of charge, copies of documents prepared with
respect to the conversion (to be provided the next business day).
346
At the general meeting, these same documents must be made available to share-
holders, and the management board must explain the justifications for and impli-
cations of the conversion. In addition, before putting the resolution to a vote,
shareholders must be informed of any possible material changes to the com-
pany’s assets from the time the draft terms were prepared until the date of the
general meeting.
The conversion must be registered with the Companies Register, along with the
following documents:
• the draft terms of conversion;

• the minutes of the general meeting approving the conversion;
• the management board’s report on the conversion;
• the auditor’s report;
• the company’s last financial statements;
• proof of publication of a notice of the intended conversion;
• approval of the competent authority, if required.

There are no specific rules regarding acts committed on behalf of an SE in
formation. The generally applicable provisions on legal personality shall thus
apply. An SE acquires legal personality upon its registration with the Companies
Register.
If a person acts in a company’s name or on behalf of a company prior to its
registration, that person shall be held personally liable for the consequences of
his or her actions, up to the value of his or her assets. If more than one person
acts on a company’s behalf, they shall be held jointly and severally liable. If,
as a result of such actions, shareholders acquire rights of any sort, these rights
must be transferred to the company after its registration, unless the company
refuses to accept them. Relations between such persons prior to recordation in
the Companies Register shall be governed by the rules applicable to civil law
partnerships.

An SE with its registered office in Slovenia shall be entered in the Companies
Register. An SE only exists once it has been registered.
The Companies Register shall monitor and ensure compliance with all statutory
requirements before deciding whether to register an SE (some of the formali-
ties and documentation required for registration are discussed elsewhere in his
report; see the sections on the formation of an SE by merger, the formation of
347
a holding SE, etc.). Once an SE has been registered, the Companies Register
shall cause a notice of registration to be published in the Official Journal RS.

As outlined above, an SE acquires legal personality upon recordation in the
Companies Register.

1 General remarks
According to the Regulation, an SE may choose between a one-tier and a two-
tier system of management. Following recent changes in Slovenian company
law (the new ZGD), all companies may now opt for either a one-tier or a two-
tier management structure; prior thereto, all joint stock companies (delniška
družba) incorporated in Slovenia were obliged to have a two-tier structure.
2 General meeting
The general meeting of an SE takes decisions (i) on matters for which it is given
authority by the Regulation or by legislation implementing the Regulation and
(ii) on matters that fall within the powers of the general meeting of a public
limited-liability company under the law of the Member State in which the SE’s
registered office is located or pursuant to its articles. In Slovenia, the provisions
of the ZGD regulating the general meeting of a delniška družba shall apply,
unless the Regulation provides otherwise.
Slovenian company law distinguishes between annual (regular) general meet-
ings and extraordinary general meetings. Pursuant to Article 295 of the ZGD,
a general meeting shall be convened in those cases provided for in the ZGD
or in the company’s articles. Since only the general meeting is authorised to
decide on the distribution of profits (possibly along with adoption of the annual
report, if it has not already been approved by the supervisory board), it must be
convened at least once a year.
The general meeting may be convened by the management board, the super-
visory board and shareholders representing at least one-twentieth of the com-
pany’s share capital. (Slovenia has adopted the option set forth in Article 55(1)
of the Regulation, as opposed to the one-tenth threshold.)
Shareholders must be notified of a general meeting at least one month in
advance. The notice must identify the company, indicate the date, time and
place of the meeting and provide details of the resolutions on the agenda. The
348
precise wording of the proposed resolutions must be set out. A notice of the
general meeting must be published.
General meetings are usually held at the company’s registered office unless
otherwise provided in the company’s articles. If the company’s shares are listed
on the Ljubljana Stock Exchange, general meetings may be held at the Stock
Exchange.
Shareholders are entitled to vote in proportion to the face value of their shares.
The company’s articles may, subject to certain conditions, provide for restric-
tions on voting rights (e.g. the number of votes to which an individual share-
holder is entitled based on the number of shares held may be limited to a certain
number of votes or to a certain percentage). Shares that carry preferential rights
(to dividends or liquidation proceeds) need not be allowed to vote.
Quorums and other restrictions or requirements with respect to the validity
of resolutions are generally set forth in the company’s articles. However, for
certain decisions (such as amendments to the articles, changes in capital, etc.),
the ZGD stipulates a minimum quorum if a resolution can be passed by a simple
majority (e.g. at least half the share capital must be present or represented at
the meeting).
Resolutions are normally passed by a simple majority (navadna večina or ordi-
nary resolution) unless a special (three-quarters) majority is required either by
the ZGD or the company’s articles.
The general meeting has sole authority to take decisions on the following matters
(which authority may not be transferred to other corporate bodies):
• distribution of dividends;
• approval of the annual report (unless it has been approved by the super-
visory board);
• appointment and removal of supervisory board members;
• release from liability of management board members;
• appointment of auditors;
• amendments to the company’s articles;
• changes to the share capital;
• winding up of the company;
• corporate changes (such as conversions, mergers, etc).

The most significant rights of shareholders are the right to vote, the right to
receive dividends, if declared, and the right to share in liquidation proceeds.
Shareholders holding at least 20% of a company’s share capital have the right
to cause an item to be placed on the agenda of a general meeting.
349
Shareholders have the right to be informed of significant corporate matters.

They can request certain information and documents for inspection, which the
company may withhold for limited reasons.
3 Management
The ZGD provides that the shareholders of a company can choose either a two-
tier management structure or a single board. The board of directors (upravni
odbor) in the one-tier system exercises both managerial and supervisory func-
tions. In the two-tier system, these functions are split between a management
board (uprava) and a supervisory board (nadzorni svet).
(i) One-tier system

Members of the board of directors are appointed by the general meeting of
shareholders. Members of the board of directors cannot sit at the same time on
the supervisory or management board of five or more other companies. One
member of the board of directors may be an employee representative (see the
section on employee representation).
The board of directors may appoint executive directors from amongst its mem-
bers (Art. 290 ZGD, implementing the option contained in Art. 43(1) Reg.).
Subject to certain statutory conditions, the executive directors need not be board
members, however.
All members of the board of directors, both executive and non-executive, have
the same powers. However, if executive directors are appointed, they jointly
represent and act on behalf of the company, unless the company’s articles pro-
vide otherwise. The board of directors may also give authority to executive
directors to run the company on a day-to-day basis. Executive directors shall
abide by the instructions and limitations set forth in the company’s articles or
which emanate from the board of directors or the general meeting as well as
any standing orders.
The board of directors may appoint one or more committees (e.g. an audit
committee, appointments committee, remuneration committee, etc.) to prepare
proposals for its consideration and supervise the implementation of resolutions.
Employees may appoint representatives to these committees. The ZGD regu-
lates in more detail the audit committee which must be formed if employees
exercise their right to board representation, unless agreed otherwise.
(ii) Two-tier system

Before adoption of the new ZGD, joint stock companies (delniške družbe) could
only have a two-tier management structure, comprised of a management board
and a supervisory board. This structure is still an option.
350
The supervisory board is generally responsible for long-term planning and pol-
icy, while the management board handles the company’s day-to-day business.
The supervisory board does not have power to act on behalf of the company
(the articles may provide that it is only required to approve certain types of
transactions).
The number of members of the management board or supervisory board shall
be set forth in the SE’s articles. For certain types of companies (such as banks,
insurance companies, management companies and the like) the law may stipu-
late a minimum number of members.

Members of the administrative bodies (i.e. the board of directors or management
board and supervisory board) may be appointed for a term of up to six years,
subject to any limitations set forth in the company’s articles. Members may be
reappointed. Subject to certain specific statutory requirements, an administra-
tive board must have at least three members, one of whom shall be named the
chair. If the number of members is not sufficient, members may be appointed by
the competent court at the request of an interested party (including shareholders,
members of other corporate organs, etc.).
In the two-tier system, members of the management board are appointed by the
supervisory board. Members may be removed from office under the circum-
stances set forth by law (e.g. for material breach of their obligations, inability to
run a business, no discharge granted by the general meeting, and other business-
related reasons).
Members of the supervisory board are appointed by the general meeting. If
registered shares are issued which can only be transferred with the company’s
consent, these shares shall entitle their holders to appoint up to one-third of the
supervisory board members representing shareholders. In addition, according
to the Act on Employee Participation in Management (Zakon o sodelovanju
delavcev pri upravljanj, Official Journal RS, Nos. 42/1993 and 56/2001, here-
inafter the ‘ZSDU’) and the ZSDUEDD, the articles of a company with a
supervisory board and the arrangements for employee involvement shall spec-
ify the number of employee representatives on the supervisory board. Members
of the supervisory board appointed by shareholders can be removed from office
by a majority of at least three-quarters of the votes cast at a general meeting;
employee representatives are removed by the works council. Members of the
supervisory board can also be removed from office for good reason pursuant to
a court order at the request of the remaining supervisory board members or at
least 10% of the shareholders.
The principles outlined above in respect of the supervisory board apply mutatis
mutandis to the board of directors of an SE. The board of directors may appoint
351
executive directors from amongst its number. Subject to certain statutory con-
ditions, the executive directors need not be members of the board of directors.
There is no general limitation on the number of executive directors on the board
of directors. However, public companies with shares listed on the Ljubljana
Stock Exchange must appoint at least one executive director, subject to the rule
that no more than half the board members can be executive directors.
The board of directors may also recall executive directors; to this end, no specific
conditions are required by law.
C Representation
In the two-tier system, members of the management board are empowered to
jointly represent and act on behalf of the company, unless the company’s articles
provide otherwise. In general, two members of the management board can be
authorised to represent and bind the company (for certain types of companies,
e.g. banks, insurance companies, etc., this is mandatory). The signatures of
all members of the management board must be registered with the Companies
Register. Although the power of management board members to represent and
bind the company may be restricted by the company’s articles, the supervisory
board or the general meeting, such limitations are not effective or enforceable
against third parties.
In the one-tier system, the company is represented either by the members of
its board of directors acting jointly (provided there are no specific rules to the
contrary in the company’s articles) or by its executive directors. The company
may also be represented by one or more proxies (prokuristi), appointed by
the shareholders or the administrative body subject to the provisions of the
company’s articles. Proxies may be authorised to represent the company either
severally or jointly along with an executive director or another proxy.
D Liability
Pursuant to Article 263 of the ZGD, members of a company’s administrative

bodies are required to act in the interests of the company, in good faith and with
the skill and care expected of a prudent business person. They are obliged to
keep the company’s business information confidential.
Administrative body members shall be jointly and severally liable to the com-
pany for damage caused as a result of breach of their duties, unless they can
prove that they acted with due care in performing their obligations. No obli-
gation to make good the damage exists if the action was based on a valid and
binding shareholder resolution.
Members of the administrative body shall be obliged to indemnify the company
for any damage caused, even if the supervisory board or the board of directors
352
approved the act concerned, if, amongst other things, contrary to the provisions
of the ZGD:
• contributions are returned to shareholders;

• interest or dividends are paid to shareholders;
• the company’s own shares or the shares of another company are subscribed
to, acquired, taken in pledge or withdrawn;
• shares are issued before the par value, or a higher amount, is paid in;
• the company’s assets are divided up;
• payments are made after the company has become insolvent or debt-
ridden;
• in the event of a conditional capital increase, shares are issued in violation
of the company’s corporate purpose or prior to the full payment of their
value.
Any claim against a member of the administrative body can only be waived or set
off by the company after three years have passed, subject to the approval of the
general meeting, and if no objections have been raised by minority shareholders.
A claim for compensation brought by a company against the members of its
administrative body may also be pursued by the company’s creditors if the
company is unable to repay its debts.
As mentioned in the introduction, the provisions of the Directive have been
transposed into Slovenian law by the ZSDUEDD. This law regulates, amongst
other items, the special negotiating body, the conduct of negotiations between
employees and the companies participating in the formation of an SE, and the
consequences of successful or failed negotiations.

Pursuant to the ZSDUEDD, a special negotiating body (‘SNB’) shall be cre-
ated to represent employees in negotiations with the administrative boards of
the companies participating in the creation of an SE. The SNB represents all
employees of the participating companies, subsidiaries and establishments with
the aim of reaching an agreement on employee participation in the SE’s man-
agement.
For the purpose of creating an SNB, the administrative boards of the participat-
ing companies should, as soon as possible, start negotiations with the employee
representatives. For that reason, the ZSDUEDD provides that the employees and
their representatives shall be informed of the identity and structure of the par-
ticipating companies and their subsidiaries and establishments, the number of
353
their employees, the number of employee representatives in each, and the num-
ber of employees entitled to take co-decisions in these companies’ corporate
organs.
The number of members of the SNB shall be in proportion to the number of
employees employed by the participating companies and concerned subsidiaries
and establishments in each Member State. Employees from each Member State
are allocated one seat per portion of employees employed in that Member
State equalling 10% of the number of employees employed by the participating
companies and concerned subsidiaries or establishments in all Member States
taken together.
According to Article 3(2)(b) of the Directive, Slovenian members of an SNB
are elected by the employee representative body. Trade union representatives
may also appoint a member of the SNB. Slovenia did not enact special measures
to ensure that an SNB in Slovenia shall include at least one member from each
Slovenian participating company. All expenses related to the SNB shall be
borne by the participating companies. The law also allows the SNB to appoint
an expert of its choosing to provide assistance. Pursuant to Article 3(7) of the
Directive, Slovenia has limited the number of experts whose expenses shall be
borne by the participating companies to one.
With respect to the decision-making process, Slovenian law requires a quorum
of at least half the members of the SNB, which must represent collectively more
than half the entire number of employees.
In the event a decision is taken not to open or to terminate negotiations, it
must be approved by two-thirds of members representing at least two-thirds
of the employees, including members representing employees in at least two
Member States. Two years after such a decision, the SNB shall be reconvened
at the written request of at least 10% of the SE’s employees, subsidiaries and
establishments, unless the parties agree to reopen negotiations sooner.
The provisions regulating the content of the agreement and the duration of nego-
tiations have been faithfully transposed into Slovenian law from the Directive
with no significant changes.
In accordance with Article 7 of the Directive, the ZSDUEDD provides that
the standard rules on employee involvement shall apply for SEs registered in
Slovenia if the parties so agree or if, at the end of six months, no agreement has
been reached and the competent body of each participating company decides
to accept the standard rules, provided a decision to proceed with registration
is also taken.
354
For the purposes of informing the employees and in order to start the consulta-
tion process, a works council (svet delavcev) shall be established, representing
the employees of the SE, its subsidiaries and establishments. Employees from
each Member State are allocated one seat per portion of employees employed
in that Member State which equals 10%, or a fraction thereof, of the number of
employees employed by the participating companies and concerned subsidiaries
or establishments in all Member States.
Members of the works council are elected by the employee representatives in
non-public elections. After four years, the works council shall pass a resolu-
tion on whether to commence negotiations in order to reach an agreement on
employee involvement. If no agreement can be reached, the standard rules shall
continue to apply.
The law further provides that if no agreement is reached, the works council shall
verify once a year whether there have been changes in the SE, its subsidiaries
or establishments that require the establishment of a works council.
3 Duty of confidentiality and the protection of employee representatives

The administrative body and the works council are obliged to work together in a
spirit of cooperation with due regard for their reciprocal rights and obligations.
The same holds true for the management or supervisory board and the employee
representatives regarding the procedure for the information and consultation of
employees.
A duty of confidentiality shall apply in respect of information provided in con-
fidence to members of the SNB and the works council and to experts. Slovenia
did not specifically transpose the provisions of Article 8(2) of the Directive for
the supervisory or administrative organ since such an obligation already existed
under the provisions of the (former and new) ZGD.
The provisions set out in Article 10 of the Directive concerning the protection
of, and guarantees afforded, SNB members, members of the works council
and employee representatives are regulated in Slovenia by two laws: (i) the
Employee Involvement Act (Zakon o sodelovanju delavcev pri upravljanju,
Official Journal RS, Nos. 42/93 and 56/01); and (ii) the Labour Relations Act
(Zakon o delovnih razmerjih, Official Journal RS, No. 42/02)) which is also the
basic law governing employment and related issues.
Pursuant to Article 13(4) of the Directive, the Slovenian legislature specifically
decided not to enact measures to guarantee that the structure of employee rep-
resentation in participating companies that will cease to exist as separate legal
entities is maintained after registration of an SE.
355

According to Articles 61 and 62 of Regulation, the preparation of an SE’s
annual accounts shall be subject to the applicable national rules. Basic account-
ing principles for companies registered in Slovenia are set out in the ZGD (Arts.
53–75). More detailed provisions can be found in the Slovenian Accounting
Standards (Slovenski računovodski standardi, Official Journal RS, No. 67/2003,
as amended and supplemented, hereinafter ‘SRS’). SRS are issued by the Slove-
nian Institute of Auditors (Slovenski inštitut za revizijo), subject to approval by
the Ministries of Finance and Economy. The law provides that SRS shall reflect
the content of Council Directives 78/660/EEC and 83/349/EEC and shall not
be contrary to international accounting standards (as defined in Regulation No
1606/02).
Certain companies (including banks, insurance companies, companies whose
securities are admitted to trading on a regulated market within the EU, etc.) are
required to prepare their consolidated accounts in accordance with international
accounting standards.
Companies are obliged to prepare an annual report within either three months or
four months (if they have consolidated accounts) of the close of their financial
year (which may differ from the calendar year).
2 Auditors
Pursuant to Article 57 of the ZGD, the annual financial statements of the fol-
lowing companies shall be audited:
• companies which, according to Article 55 of the ZGD, are considered

large or medium sized;
• dual companies (dvojna družba); and
• companies whose securities are admitted to trading on a regulated market.
The annual reports must be submitted to the Agency of the Republic of Slove-
nia for Public Legal Records and Related Services (‘AJPES’) for publication.
Auditors are appointed by the general meeting.

For purposes of the Regulation, the national supervisory authority differs
depending on the subject matter. In principle, the Companies Register, admin-
istered by eleven district courts, is entrusted with supervising compliance with
the formalities and rules of corporate law necessary to register an SE.
Special rules apply to certain types of companies, such as banks, insurance
companies, brokerage firms, etc.
356
VIII Dissolution
1 Winding up
Pursuant to Article 402 of the ZGD, a company shall be wound up:
• upon the expiry of its term of existence;

• by a resolution of the general meeting, approved by a majority of at least
three-quarters of the share capital represented, unless a higher majority (or
other requirements/formalities) apply pursuant to the company’s articles;
• if the administrative board has been inactive for more than 12 months;
• if a court finds that the company’s registration is null and void;
• upon bankruptcy;
• on the basis of a court order;
• when the company is amalgamated (merged) with another company;
• if the company’s share capital falls below the legal minimum.
2 Liquidation
A resolution to voluntarily liquidate a company must be approved by a special
majority of the general meeting. The resolution shall mention the registered
name and office of the company; the body that adopted the resolution; the
reason for dissolution; the time limit within which creditors and the holders of
bearer shares must register their claims (not less than 30 days from the date of
publication of the resolution); and the name and address of the liquidator.
A liquidation resolution may also contain other information in relation to the
liquidation. The resolution must be filed with the competent court in order for
the start of liquidation to be recorded with the Companies Register.
Liquidation shall be carried out by one or more liquidators after recordation of
the start of liquidation with the Companies Register. The liquidators shall be
members of the administrative board unless the company’s articles, the general
meeting or the liquidation resolution provide otherwise. For good reason, further
to a proposal of the supervisory board, the board of directors or shareholders
holding one-twentieth of the share capital, a liquidator shall be appointed by
the court.
The liquidator shall, inter alia, represent the company in liquidation; prepare
an opening balance sheet; close any unfinished business; pay off the claims of
creditors; publish an invitation to creditors to file their claims within a period
of no less than 30 days from the date of publication of the aforementioned
invitation; recover the company’s claims; sell off the company’s assets to the
extent necessary to pay creditors; prepare a progress report on the liquidation
and division of assets; propose that the company’s entry be deleted from the
register; and carry out any other tasks connected with the liquidation as laid
down in the ZGD, the company’s articles or the liquidation resolution.
357
After the repayment of all debts, any remaining assets shall be realised and the
proceeds divided amongst the shareholders in proportion to their contributions
to the company’s capital. Contributions that have not been paid in must be paid
in before this division of proceeds, in accordance with the articles.
Once the division of proceeds is complete, the liquidator shall submit to the
court a progress report on the liquidation, approved by the general meeting,
along with the general meeting’s resolution on the division of assets, and shall
declare that all proceeds have been divided in accordance with the resolution
and propose that the company’s entry be deleted from the Companies Register.
3 Insolvency
Insolvency proceedings are regulated by the law on compulsory settlement,
bankruptcy and liquidation (Zakon o prisilni poravnavi, stečaju in likvidaciji
or ‘ZPPSL’).2 These proceedings may take one of the following forms:
(a) bankruptcy (stečaj), whereby the debtor’s assets are realised and the pro-
ceeds distributed to creditors, following which the debtor ceases to exist;
(b) composition with creditors (prisilna poravnava), whereby the debtor’s
financial affairs are reorganised to enable it to recover; or
(c) (involuntary) liquidation (prisilna likvidacija).
Bankruptcy proceedings can only be initiated against debtors with a history
of insolvency or that are heavily burdened by debt. Bankruptcy proceedings,
subject to certain exceptions cannot be commenced against debtors with only a
single creditor. A proposal to commence bankruptcy proceedings may be filed
by a creditor, the debtor or a personally liable shareholder (i.e. one who may
be held liable to the debtor’s creditors).
Insolvent or seriously debt-ridden debtors may suggest a settlement to creditors
before the initiation of bankruptcy proceedings. Once bankruptcy proceedings
have been initiated, a bankruptcy estate is formed, comprising the whole of
the debtor’s property, and a trustee in bankruptcy is appointed by the court to
manage the estate.
After obtaining the opinions of the creditors’ committee and the trustee in
bankruptcy, and on the basis of an expert opinion, the court may proceed to
sell off the assets in the estate by public auction. The decision must contain the
following information: the mode of sale, the price, the deadline for payment,
the amount of and method for paying deposits, the methods of transfer and the
payment guarantees (no longer than six months following the conclusion of the
sales agreement).
2
The government has proposed a new law to replace, in 2007 or 2008, the existing ZPPSL
(as amended), which dates back to 1993, to regulate all proceedings and aspects of corporate
dissolution.
358
All information concerning the initiation and termination of bankruptcy pro-

ceedings shall be entered in the Companies Register and published in the Official
Journal RS. After the termination of bankruptcy proceedings, the company’s
entry in the Companies Register shall be deleted.
Cessation of payments is an act which must be taken by a company in financial
difficulty (as defined in the Financial Operations of Companies Act or Zakon o
finančnem poslovanju podjetij, Official Journal RS, No. 54/1999, as amended,
hereinafter ‘ZFPPod’). The administrative board is obliged to cease payments
upon the occurrence of insolvency or over-indebtedness, with the exception of
those payments necessary to continue the company’s regular activities.
Certain payments made to creditors shortly before the commencement of insol-
vency proceedings may be challenged as voidable preferences.
IX Applicable law
The Regulation and the provisions of the ZGD (together with secondary legis-
lation) shall govern the formation, organisation and winding up of SEs incor-
porated in Slovenia.
X Tax treatment
1 Income tax
On 1 January 2007, Slovenian tax law was amended once again. The most
relevant changes are outlined below.
All legal entities with a registered office in Slovenia (domestic legal entities)
and legal entities with a registered office outside Slovenia performing business
in Slovenia (foreign legal entities) are subject to corporate tax in accordance
with the Corporate Tax Act (Zakon o davku od dohodkov pravnih oseb, (uradno
prečiščeno besedilo), Official Journal RS, No. 117/2006, the ‘ZDDPO-2’). The
extent of taxation in Slovenia depends on two criteria: (i) the source of the
income; and (ii) residency.
An entity is a resident of Slovenia if its registered office or place of manage-
ment (kraj dejanskega upravljanja) is in Slovenia. Residents are subject to
corporate tax on income generated in Slovenia as well as on foreign-source
income. Non-residents are subject to tax only on income generated in Slove-
nia. Certain items of income deemed to have their source in Slovenia are listed
in Article 8 of the ZDDPO-1 (e.g. gains made on the sale of real property in
Slovenia, etc).
359
The general corporate tax rate has been reduced from 25% to 23% and shall be
further reduced gradually to 20% over the next few years. Corporate tax is levied
on taxable income (davËna osnova or net profit). Taxable income in general
is defined as gross income minus deductible expenses, meaning expenses a
taxpayer is allowed, according to the applicable regulations and accounting
standards, to deduct as necessary for conducting a business. The list of benefits
has been narrowed (certain investments made in connection with research and
development and costs and expenses incurred to employ physically disabled
persons); qualifying benefits are deducted from taxable income in a prescribed
percentage.
The determination and payment of income tax is based on the principle of self-
taxation, meaning taxpayers calculate and pay their tax on the basis of their
own calculations. Corporate tax is payable during the fiscal year in one- or
three-month instalments. Within three months following the close of a given
fiscal year, the taxpayer shall submit to the tax authorities its calculation for
that year. The difference between the amounts already paid and the tax liability
reflected in the year-end calculation must be paid within thirty days following
submission of the calculation.
Pursuant to ZDDPO-2 and subject to certain exceptions, certain income is
subject to a 15% withholding tax, such as dividends and similar income, interest
(except for interest on loans to the Republic of Slovenia or securities issued
by the Republic of Slovenia, loans between banks or financial institutions,
etc.), royalties and lease payments. Withholding tax may be reduced or avoided
altogether pursuant to the applicable double taxation treaties.
2 Value added tax

VAT is regulated by the Value Added Tax Act (Zakon o davku na dodano vred-
nost, Official Journal RS, No. 117/2006, hereinafter ‘ZDDV-1’). In principle,
goods sold or services provided in or to Slovenia are currently subject to value
added tax at a general rate of 20% or a special reduced rate of 8.5%. Legal enti-
ties and natural persons that reside in Slovenia who perform an independent
activity are subject to VAT, regardless of the purpose and results of such activ-
ity, provided their annual turnover exceeds a certain amount (approximately
€21,000).
When issuing an invoice, a taxpayer whose goods or services are subject to VAT
must charge the payer VAT at the appropriate rate. The latter can then deduct
the VAT paid from that charged to its clients.
3 Other taxes
Other relevant taxes include: (i) a tax on motor vehicles imported from other EU
countries; (ii) real property sales tax (currently 2% of the value of the property);
360
(iii) an insurance policy tax (currently 6.5% of the premium); (iv) payroll tax
on gross salary (the rate depends on the level of salary and currently ranges
from 0% on salaries of up to approximately €690 to 11.8% on salaries above
approximately €3,130); and (v) an excise duty on alcohol, tobacco, fuel and
the like.
XI Conclusion
Since the Regulation and the Directive were implemented into Slovenian law
only a short time ago, few, if any, steps have been taken towards the formation
of SEs. In addition, extensive efforts have not been made so far to analyse the
practical implications of the relevant statutory provisions. It thus remains to be
seen whether and how the SE will take shape in Slovenia.
361
14
Spain
m i g u e l l i r i a p l a ñ i o l
Urı́a Menéndez
I Introduction 363
II Formation 363
B Name 364
E Capital 366
A Two-tier system/One-tier system 374
D Liability 376
2 Auditors 379
VII Dissolution 379
1 Winding up and liquidation 379
362
Spain
2 Insolvency and cessation of payments 380

1 Income tax 382
A Taxation of shareholders 382
B Losses of foreign branches 384
C General taxation of an SE 385
D Group taxation: two or more companies treated as one
for tax purposes 385
3 Other taxes 386
4 Taxation on the establishment of an SE 386
X Conclusion 388
I Introduction
1. In Spain, Act 19/2005 of 14 November 2005 on the European public limited-
liability company domiciled in Spain (‘Ley 19/2005 de 14 de noviembre, sobre
la sociedad anónima europea domiciliada en España’, hereinafter the ‘SE
Act’) implemented Council Regulation 2157/2001/EC of 8 October 2001 on
the Statute for a European Company by inserting an additional chapter in
the Public Limited-Liability Companies Act (Ley de Sociedades Anónimas
or ‘LSA’) (Arts. 312–338). The SE Act entered into force on 16 November
2005.
2. The Directive has been implemented by means of Law 31/2006 of 18 Octo-
ber 2006 on the participation of employees in European public limited-liability
companies and cooperatives (‘Ley 31/2006 de 18 de octubre sobre implicación
de los trabajadores en las sociedades anónimas y cooperativas europeas’
hereinafter ‘Law 31/2006). Law 31/2006 entered into force on 20 October
2006.
3. This report focuses on the implementation in Spain of the Regulation and the
Directive, highlighting the available options for SEs established in Spain.
II Formation
1 General remarks
A Founding parties
4. The SE Act does not contain any specific provisions regarding the require-
ments to be fulfilled by the founders of an SE; therefore, the rules set forth in
the Regulation shall apply in this regard.
5. Spain has enacted the option contained in Article 2(5) of the Regulation.
Therefore, a company whose head office is not based in a Member State may
363
participate in the formation of an SE, provided: (i) the company is domiciled in

a Member State; and (ii) it has a real and continuous link with the economy of
a Member State (Art. 317 LSA). For these purposes, a real and continuous link
shall be understood to mean an establishment from which the company carries
out and manages its activities.
B Name
6. The name of an SE must contain the abbreviation ‘SE’. Article 314(4) LSA
(as amended by the SE Act) provides that, in order to be duly registered with
the commercial registry, the name of an SE cannot be identical to that of any
other Spanish company.

7. Article 312 LSA provides that an SE must be domiciled in Spain if its head
office is located within the Spanish territory. In addition, Article 6 LSA provides
that a company must have its registered office within the Spanish territory at the
place where its effective management and administration, its principal place of
business or its main centre of operations are located. If the address of an SE’s
registered office is different from that of an office that meets these requirements,
third parties may take either to be the company’s registered office.
8. Article 313 of the LSA states that an SE established in Spain which ceases
to have its management in Spain must regularise its situation within one year
by either transferring its registered office to the Member State where its man-
agement is located or transferring its head office back to Spain. If the SE fails
to do so, it shall be wound up and liquidated in accordance with the general
rules set forth in the LSA (Art. 260 et seq.). In this case, the government shall
appoint a liquidator to oversee the liquidation process and ensure compliance
with the relevant laws.
(ii) Transfer
9. The management body of an SE that wishes to transfer its registered office
abroad must draft a transfer proposal pursuant to Article 8 of the Regulation.
The proposal shall be filed with the commercial registry and published in the
latter’s official gazette (Art. 316 (2) and (3) LSA).
The transfer of an SE’s registered office to another Member State must be
approved by the general meeting of shareholders and recorded with the com-
petent commercial registry (Arts. 149 and 150 LSA and Art. 160 of the Com-
mercial Registry Regulation).1 Once adopted, the resolution must be published
1
Royal Decree 1784/1996 of 19 July 1996.
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Spain
in the commercial registry’s official gazette and in two major newspapers cir-
culated in the province where the company’s registered office is located.
10. The Spanish government, further to a proposal of the Ministry of Justice or
the relevant regional government (Comunidad Autónoma), can oppose the trans-
fer abroad of an SE’s registered office on grounds of public interest (Art. 316
LSA). In addition, if the SE is subject to a specific supervisory authority (such
as the Spanish Securities Exchange Commission or the Energy Commission),
this authority may also oppose the transfer. The objection must be voiced within
two months following publication of the transfer proposal in the official gazette.
Moreover, the objection can be challenged before the competent courts.
11. Shareholders of a Spanish SE who vote against the transfer of its registered
office to another Member State are entitled to request a redemption of their
shares (Art. 315 (1) LSA). This right must be exercised within one month
following publication of the resolution in the commercial registry’s official
gazette.
If any shareholder exercises this right, the company’s share capital shall be
reduced accordingly. A notice to this effect must be published in the official
gazette and in two major newspapers circulated in the province where the com-
pany’s registered office is located. The capital decrease must be recorded with
the competent commercial registry simultaneously with the transfer.
12. Creditors of an SE whose claims arose prior to publication of the transfer
proposal are entitled to oppose the transfer until they receive a guarantee from
the company for any claims that are not yet due and payable (créditos no
vencidos) as of the publication date (Art. 315 (1) LSA). This right must be
exercised within one month following the final publication in the commercial
registry’s official gazette of the shareholder resolution approving the transfer
(see no. 9 of this report).
The SE Act contains no provisions with respect to the option set forth in Article
8(7) of the Regulation. Therefore, creditors may not challenge the transfer with
respect to any claims against the SE that arise after publication of the transfer
proposal.
13. The commercial registry of the place where the SE’s registered office is
located is competent to issue the certificate attesting to completion of the req-
uisite pre-transfer acts and formalities (Art. 315(2) LSA).
D Corporate purpose
14. The general rules contained in the LSA apply to SEs. These rules provide that
the company’s activities must be clearly identified and defined in its corporate
purpose. A company is only entitled to carry out activities that fall within
or are incidental to its corporate purpose. With respect to the content of a
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company’s corporate purpose, specific rules may apply to certain sectors (such
as banking). Listing illegal activities or activities that are contrary to public
policy in a company’s corporate purpose can render the incorporation process
void and result in the company’s liquidation.
E Capital
15. Pursuant to Article 12 LSA, at least 25% of an SE’s share capital (a minimum
of €120,000, according to Article 4(2) of the Regulation) must be paid-up upon
incorporation.
16. According to Article 4(3) of the Regulation, if an SE carries out any of the
following activities, its minimum share capital must be higher than the threshold
set forth in the Regulation and the payment requirements will vary:
• For banking activities (credit institutions), the minimum share capital is
€18,030,363.13, which must be paid-up in full.
• For insurance activities, the minimum share capital is either
€2,103,542.37, in certain areas, or €3,005,060.52 or €9,015,181.57 in
others. In all cases, 50% of the capital must be paid-up upon incorpo-
ration.
• For variable capital investment companies (sociedades de inversión de
capital variable or SICAVs), the minimum share capital is €2,400,000,
which must be paid-up in full.
17. According to Article 5 of the Regulation, contributions in kind to an SE
established in Spain, made either upon its incorporation or pursuant to a capital
increase, are governed by Article 38 et seq. of the LSA.
One or more independent experts, appointed by the commercial registrar of the
place where the SE’s registered office is located, shall issue a valuation report on
any contribution in kind, containing a description thereof, the recordation details
(if any), the valuation criteria used, and an indication of whether the determined
value corresponds to the number and par value of the shares issued in return
plus any premium on the same. This report must be appended to the notarial
instrument formalising the incorporation or capital increase. If listed securities
are contributed to the company, the governing body (Sociedad Rectora) of the
relevant stock exchange can be named an expert by the commercial registrar
and shall issue a certificate on the value of the shares contributed, which shall
be considered an integral part of the aforementioned valuation report.
The contributor shall be held liable to the company in accordance with the
following general rules: (i) if personal or real property, or any rights attached
thereto, is contributed, the contributor must deliver the contribution free of any
defects in title in accordance with the rules set forth in the Spanish Civil Code
on sale and purchase contracts, and the provisions of the Commercial Code on
the transfer of risks shall apply; (ii) if the contribution consists of creditor’s
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Spain
rights, the contributor shall be liable for their authenticity and for non-payment
by the debtor; (iii) if a business or establishment is contributed, the contributor
shall be liable for any defect in title that affects the business as a whole or any
element essential to its normal operation, as well for any defect in title relating
to material assets of the business.
When a contribution in kind is made, in whole or in part, the notarial instrument
must state the value of the contribution and, in the event of partial payment,
whether future payments are to be made in cash or in kind. If future payments
are to be made in kind, the instrument shall indicate the nature, value and content
of the future contributions as well as the procedure and period for tender, which
shall not exceed five years as from the date of incorporation or the relevant
capital increase.

18. Pursuant to Article 2 of the Regulation (and Annex I thereto), only public
limited-liability companies, i.e. the Spanish SA (sociedad anónima), can take
part in the establishment of an SE by merger.

19. To start the merger process, the directors of the merging companies must
draft a so-called merger plan (proyecto de fusión), the content of which is
defined in Article 20(1) of the Regulation. The merger plan, duly executed by
the directors of each company involved in the merger, must be filed with the
commercial registry of the place where the registered office of the Spanish
company involved in the merger is located. Within five days following the
filing date, provided the merger plan meets the relevant statutory requirements
and has been duly executed, the commercial registrar will acknowledge receipt
thereof. The merger plan will then be published in the commercial registry’s
official gazette. Notices of a general meeting to approve the merger may only
be published after this.
In addition, the directors of the merging companies must draft a report explain-
ing and justifying, from both a legal and economic standpoint, the merger plan,
the share exchange ratio (ecuación de canje) and any assessment difficulties
that may exist (Art. 237 LSA).
Under Spanish law (Art. 236 LSA), one or more independent experts for
each merging company must be appointed by the competent commercial reg-
istry. Notwithstanding the foregoing, the merging companies may request the
appointment of a joint expert or experts. In this regard, pursuant to Article 319
LSA, the commercial registrar of the place where the registered office of the
Spanish merging company, or of the resulting SE, is or shall be located is the
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competent authority to appoint a joint expert(s) to draft the report referred to

in Article 22 of the Regulation, provided the registrar receives a joint request
from the merging companies in this regard.
The independent experts must draw up a report reviewing the share exchange
ratio proposed in the merger plan.
The merging companies must also issue a so-called merger balance sheet
(balance de fusión), which can be the company’s last annual balance sheet
provided it has been prepared within six months prior to the date of the
shareholders’ meeting called to approve the merger. Otherwise, a special
balance sheet drawn up within the three-month period immediately preceding
the date of the merger plan shall be used (Art. 239 LSA). The balance sheet
must be audited if the relevant merging company is obliged to audit its annual
accounts (see no. 67 of this report).
Once a general meeting has been called, the merging companies must make
available to their shareholders the following documents: (i) the merger plan;
(ii) the directors’ reports; (iii) the independent experts’ report(s); (iv) the
merging companies’ merger balance sheets; (v) a copy of the last three annual
accounts and management reports of the merging companies, including their
respective audit reports (if applicable); (vi) the draft public instrument of
incorporation of the resulting company (if applicable) or the draft amendments
to the articles of association of the resulting company; (vii) a copy of the
current articles of association of the merging companies; and (viii) a list of the
current directors of the merging companies and of the directors to be appointed
for the resulting company (Art. 238 LSA).
20. The general meeting of shareholders of each merging company must
approve the merger plan and balance sheet. The resolution passed by the
general meeting to this effect must be published three times in the commercial
registry’s official gazette and once in two major newspapers circulated in the
province(s) where the merging companies’ registered offices are located.
Under Spanish law, in order to be effective against third parties, a merger must
be recorded by a notarial instrument of merger with the competent Spanish
commercial registry (Art. 245 LSA). In addition, the registration must be
published in the latter’s official gazette.
21. The competent authority to issue the certificate attesting to completion of the
pre-merger acts and formalities is the commercial registrar of the place where
the registered office of the Spanish merging company is located (Art. 321 LSA).
(ii) Opposition on grounds of public interest

22. The Ministry of Justice, the autonomous region where the company’s
registered office is located and, as the case may be, the relevant supervisory
authorities are the competent authorities for the purposes of Article 19 of the
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Regulation. Pursuant to Article 318 LSA, they must be informed immediately

of the filing of the merger plan and must voice any objections thereto prior
to the issuance by the commercial registrar of the certificate referred to in
Article 25(1) of the Regulation, i.e. prior to recordation of the notarial instru-
ment of merger with the competent Spanish commercial registry (Art. 321 LSA).
(iii) Protection of minority shareholders and creditors

23. According to Article 320 LSA, shareholders who voted against the
formation by merger of an SE with its registered office outside Spain are
entitled to request redemption of their shares. This right must be exercised
within one month following publication of the merger resolution in the
commercial registry’s official gazette (see no. 11 of this report).
24. According to Article 243 LSA, creditors and bondholders of the merging
companies can object to the merger within one month from final publication
of the merger resolution (see nos 12 and 20 of this report).
(iv) Mergers involving group companies

25. In the event of a merger between a holding company and a wholly owned
subsidiary (or vice-versa) or between two group companies directly or indi-
rectly owned by a third company, some of the abovementioned requirements
will not apply (Art. 250 LSA and Art. 31 Reg.) (e.g. with respect to the
directors’ report, the shares exchange ratio and the independent experts’
report).
Spain has not adopted any provisions regarding the merger of companies
where one holds 90% or more of the other’s share capital. Therefore, under
Spanish law, such a merger must take place in accordance with the ordinary
procedure described above.
26. The types of Spanish companies that can be involved in the establishment of a
holding SE are the sociedad anónima or SA (a public limited-liability company)
and the sociedad de responsabilidad limitada or SL (a private limited-liability
company).
27. The draft terms of formation must be filed with the commercial registry
and published in the latter’s official gazette (Art. 323 LSA). Notices calling a
general meeting of shareholders to approve formation of a holding SE can only
be sent or otherwise made public following publication of the draft terms.
28. An independent expert or experts must be appointed, to draw up a report
on the draft terms of formation for the shareholders of the promoting compa-
nies (Art. 32 (4) Reg.), (i) by the commercial registrar of the place where the
registered office of each Spanish company promoting the establishment of the
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holding SE is located; or (ii) if the holding SE will be established in Spain,

the commercial registrar of the place where its future registered office will be
located (Art. 324 LSA).
For the purposes of this appointment, an application must be filed with the
commercial registry in accordance with Article 338 et seq. of the Commercial
Registry Regulation.
29. Any shareholders of the Spanish promoting companies who vote against
the formation of a holding SE shall be entitled to request redemption of their
shares (Art. 325 LSA). This right must be exercised within one month follow-
ing publication of the resolution in the commercial registry’s official gazette.
Spain has not adopted any further provisions designed to protect creditors or
employees.
30. The formation of a subsidiary SE is subject to the general rules governing the
incorporation of a public limited-liability company in Spain. The incorporation
of a wholly owned subsidiary is permitted under Spanish law.
31. Only a public limited-liability company (SA) can be converted into an SE
under Spanish law.
32. The terms of conversion (Art. 37(4) Reg.) must be filed with the commercial
registry and published in the latter’s official gazette (Art. 326 (1) LSA).
33. An independent expert or experts shall be appointed by the commercial
registrar (of the place where the registered office of the Spanish company to
be converted is located) to issue a certificate with respect to the company’s net
assets (Art. 37 (6) Reg. and Art. 326 (2) LSA).
For the purposes of this appointment, an application must be filed with the
commercial registry (Art. 338 et seq. of the Commercial Registry Regulation)
at least twenty days before calling a general meeting to vote on the conversion
(i.e., fifteen days to appoint an expert and five days for the latter to accept the
appointment, thus with no provision being made for any setbacks such as non-
acceptance or a challenge to the appointment). The notice calling the general
meeting must be published at least one month prior to the date of the meeting
on first call.

34. In keeping with Article 16(2) of the Regulation, pursuant to Article 15 LSA,
individuals who enter into an agreement on behalf of an SE in formation shall
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Spain
be jointly and severally liable for any obligations arising from such an agree-
ment unless the enforceability of the agreement was made expressly subject to
registration of the company.
In addition, the company in formation shall be liable up to the value of the
assets contributed to it for: (i) any acts related to its incorporation; and (ii) acts
carried out by its administrators within the powers granted to them in the public
instrument of incorporation; or (iii) by individuals appointed by the company’s
shareholders. The company will also be liable for any acts it assumes within
three months from its registration.

35. In order to acquire legal personality as an SE in Spain, the establishment of
the SE (through merger, conversion or incorporation of a holding company or a
subsidiary) must be formalised in a public instrument before a Spanish notary
public and then filed with the commercial registry for recordation. A notice of
the registration will be published in the commercial registry’s official gazette.

36. No special rules apply. An SE acquires legal personality upon recordation
in the commercial registry (Art. 16(1) Reg.).

1 General remarks
37. The organisation and management of an SE are similar to that of a Spanish
public limited-liability company, except that an SE may have a two-tier man-
agement structure. Depending on the management structure selected, the rules
applicable to calling a general meeting may vary.
2 General meeting
38. Pursuant to the LSA, the general meeting must adopt appropriate resolutions
concerning the following matters: approval of the company’s annual accounts
and allocation of profits (including the payment of dividends); the appoint-
ment and removal of directors and auditors; capital increases and decreases;
conversion, merger and split-off; the issuance of bonds, debentures and other
debt instruments; authorisation to acquire treasury stock; onerous acquisitions
carried out during the first two years following the company’s incorporation,
except those conducted within the ordinary course of business or through an
official stock exchange or public auction; and amendments to the company’s
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articles of association. The SE Act adds to the foregoing list the decision to
form a holding SE.
39. General meetings are called by the management body by means of publi-
cation or a notice to this effect in the commercial registry’s official gazette and
in one major daily newspaper circulated in the province where the company’s
registered office is located, at least one month prior to the date of the first call
for the meeting. However, there is no need to call a general meeting if the
entire share capital is present or represented and all those in attendance agree
unanimously to hold a meeting (a universal general meeting of shareholders).
For an SE with a two-tier management structure, according to Article 337 LSA,
the general meeting is called by the management board. However, the super-
visory board may call a general meeting if it deems it is within the company’s
interest to do so or if the management board fails to do so. Apart from this, the
remaining provisions of the LSA apply to SEs in this respect.
40. General meetings are held at the company’s registered office. Unless oth-
erwise provided in the articles of association, the chairperson of the board of
directors chairs the meeting and leads discussions, with the support of a secre-
tary, who is usually also the secretary of the board of directors.
41. Resolutions passed by the general meeting, as well as any significant
oral comments, are transcribed literally in the minutes, which, once read and
approved by the general meeting, are signed by the secretary with the approval
of the chair.
42. In general, Spanish public limited-liability companies, especially listed
companies, must demonstrate good standards of corporate governance and have
their own General Meeting Regulations (Reglamento de la Junta General),
describing in detail the organization of, and procedure applicable to, the general
meeting of shareholders.
43. Shareholders may attend the general meeting and vote in person or grant
a proxy in favour of another for such purposes. Moreover, if the company has
implemented distance voting procedures, the grant of proxies and the exercise
of voting rights may be carried out through remote means (either by e-mail or
post). In practice, listed companies that allow such voting procedures usually
stipulate the details, including rules of preference with respect to the various
ways of casting votes and granting proxies, in their articles of association and
in the general meeting regulations.
44. As regards quorum requirements, the general rule in the LSA is that
resolutions must be approved by a majority of shareholders present or rep-
resented at the general meeting, with the exceptions indicated below. The
required quorum depends on the importance or nature of the resolution under
discussion:
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Spain
(i) For ordinary resolutions (Art. 102 LSA), shareholders representing at

least 25% of the subscribed voting shares must be either present or rep-
resented on first call. On second call, there is no quorum requirement,
unless the articles of association provide otherwise. However, any such
quorum must be less than that provided for in the company’s articles of
association or the LSA for meetings on first call.
(ii) For the issuance of bonds, a capital increase or decrease, a conversion,
merger or split-off involving the company, and, in general, any amend-
ment to the company’s articles of association (Art. 103 LSA), share-
holders representing at least 50% of the subscribed voting shares must
be either present or represented on first call. On second call, the quorum
requirement is 25% of such share capital. If the shareholders in attendance
represent less than 50% of the subscribed voting shares, the resolution
may only be validly adopted with the approval of two-thirds of the capi-
tal present or represented at the meeting. The articles of association may
raise these quorum and majority requirements, as set forth in Article 103
LSA.
45. A general meeting must be called at least once a year to approve the annual
accounts and the directors’ management during the preceding financial year
and to allocate any profit from that year. Such a mandatory general meeting (an
ordinary general meeting) must be held within six months following the close
of each financial year. No provisions have been adopted pursuant to Article
54(1) of the Regulation.
In addition to an ordinary general meeting, the management board must call an
extraordinary general meeting whenever it deems it is in the company’s interest
to do so or at the request of shareholders holding at least 5% of the company’s
share capital.
46. Previously, Article 97 LSA provided that the management board had to
call a general meeting at the request of shareholders holding at least 5% of the
company’s share capital, who had to state in their request the items to be placed
on the agenda. Article 97 has since been amended by the SE Act in order to
allow 5% of shareholders to request that new items be added to the agenda of
a general meeting which has already been called. In addition, Article 338 LSA
specifies that the rules on the rights of shareholders holding at least 5% of a
company’s share capital shall apply to SEs.

47. As regards shareholder information rights, the LSA sets forth certain min-
imum standards which can be increased by the articles of association. Once a
general meeting has been called, shareholders must be able to obtain, free of
charge and without delay (or via the company’s website, if any), all relevant
373
documents relating to the items on the agenda (i.e. annual accounts, manage-
ment report, audit report, complete text of proposed resolutions submitted by
the management board to the general meeting, as well as any report by the
management board on such proposals). In addition, from the time a general
meeting is first called up to and including the seventh day before the meeting,
shareholders may request from the board any reports or clarifications in writing
concerning the items on the agenda, which must be duly answered by the board
on or before the day of the meeting. During the meeting, shareholders may
request that information or clarifications be provided orally or, if an immedi-
ate response is not possible, in writing within seven days. Directors are only
exempt from this information duty if, in the chair’s opinion, the disclosure of
the requested information would adversely affect the company.

A Two-tier system/One-tier system
48. Spanish law does not provide for a two-tier management structure for pub-
lic limited-liability companies registered in Spain, with the exception of SEs.
Therefore, only an SE can opt for either a one-tier or a two-tier structure when
drafting its articles of association (Art. 327 LSA).
If the company’s articles provide for a two-tier management system, Articles
329–338 LSA set forth the corresponding rules, developing the content of the
Regulation. In any event, if no specific rule is provided in the Regulation or the
company’s articles, the provisions of the LSA on one-tier management systems
shall apply.
49. Article 333(1) LSA refers to the general rules contained in the LSA for all
matters not specifically regulated with respect to an SE’s supervisory board.
Therefore, the supervisory board must have at least three members, and there
is no maximum number.
Article 331(1) LSA provides that if a management board is established, it must
have at least three and no more than seven members.
50. The SE Act does not specifically refer to the right of each member of the
supervisory board to obtain the information provided by the management board
(Art. 41(3) Reg.). However, Article 127(2) LSA requires that all directors of an
SA be duly and diligently informed of the company’s activities at all times.
The supervisory board and the management board must both comply with a
general duty of care, a duty of loyalty and a duty of confidentiality. As part of
their duty of care, members of both bodies must be duly informed at all times
of the company’s activities.
In addition to the provisions of the Regulation (e.g. the management board
shall report to the supervisory board every three months on the progress and
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Spain
foreseeable development of the SE’s business and with respect to any event
liable to have an appreciable effect on the SE), Article 333(4) LSA provides
that, at the request of the supervisory board, the members of the management
board must attend the supervisory board’s meeting (but without the right to
vote).

51. Directors are appointed by the general meeting for a maximum term of six
years and can be re-elected. However, if a two-tier system is selected, only the
members of the supervisory board are appointed by the general meeting. Under
Spanish law, a legal entity can be appointed to the management or supervisory
board.
Spain has not enacted the option to require or permit the SE’s articles of associ-
ation to provide that members of the management board must be appointed and
removed by the general meeting (rather than by the supervisory board) (Art.
39(2) Reg.).
52. The maximum length of time a member of the supervisory board may sit
on the management board, in the event of a vacancy on the latter, is one year
(Art. 332 LSA).
53. The LSA does not contain any rules allowing minority shareholders or
the authorities to appoint members of a governing body. Notwithstanding the
foregoing, by way of proportional representation (Art. 137 LSA), shareholders
who voluntarily pool their shares to achieve a number of capital greater than or
equal to the number derived by dividing the total share capital by the number
of members of the board of directors or the supervisory board (as the case
may be) – disregarding fractional shares – have the right to appoint a number
of members in proportion to their share capital. If this right is exercised, the
shares thus pooled may not be voted for the remaining members.
The foregoing is without prejudice to implementation of the Directive on the
involvement of employees.
54. The directors may be removed from office at any time by the general meeting,
even if the decision to do so is not on the agenda.
C Representation
55. The management body or board of an SE (as applicable) represents the
company. The supervisory board may make certain decisions of the manage-
ment board subject to its prior approval. However, lack of prior approval is not
effective against third parties, unless the company can prove that the third party
in question acted in bad faith or fraudulently against the company’s interests
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(Art. 334 LSA). Moreover, any limitations on the powers of the management
board recorded with the commercial registry are not effective against third
parties.
D Liability
56. Under Spanish law, directors of an SA can be held liable to the board, to
shareholders and to the company itself. Should a derivative suit (acción social de
responsabilidad) or an individual action (acción individual de responsabilidad)
be brought against them, the directors can be held liable for any acts they have
committed in violation of the law, the company’s articles of association or
their general duty of care and which have harmed the company, any of its
creditors or an individual shareholder. All members of the board who approved
the resolution or performed the act that caused the damage shall be held jointly
and severally liable, except for those who can prove that they did not take
part in the approval or performance and were unaware of its existence or, if
aware, took steps to avoid the resulting harm, or at least expressly opposed the
resolution.
These general rules of liability are applicable to members of both the manage-
ment body and board and the supervisory board (as the case may be) (Art. 335
LSA).
57. Negotiations on employee participation in an SE begin once the companies
involved in the formation of the SE have drawn up an incorporation plan (Art.
5 Law 31/2006).
58. A special negotiating body (‘SNB’) is set up, composed of employees
from each applicable Member State, so that for each 10% (or portion thereof)
the employees from a given Member State account for the total number of
employees involved, they are awarded one seat on the SNB.
In the event of a merger, the number of members of the SNB is increased in
order to ensure that each disappearing company has at least one seat (Art. 7
Law 31/2006).
59. Negotiations take place over a six-month period, which can be extended
for up to one year from the time of incorporation of the SNB (Art. 10 Law
31/2006).
60. The agreement reached by the parties must contain the following provisions,
amongst others (Art. 11 Law 31/2006):
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(i) the scope of the agreement;

(ii) the composition, number and distribution of seats on the works council
through which the employees will exercise their information and consul-
tation rights;
(iii) the powers of the works council and the information and consultation
rules applicable;
(iv) the frequency of meetings of the works council and the economic and
material resources at its disposal;
(v) in the event of employee participation in management, the applicable
rules, including but not limited to, the number of members of the man-
aging body or supervisory board the employees have the right to elect,
appoint or recommend and which appointments they can oppose; the pro-
cedures to oppose, recommend, elect and appoint members, as well as
the employees’ rights.
61. If the parties so decide or if an agreement is not reached within the above-
mentioned six-month period (plus any extension, if applicable), the alternative
rules contained in Law 31/2006 (similar to those set forth in the Annex to the
Directive) shall apply.
62. As a general rule, Law 31/2006 states that employee participation in an
SE’s management, including the appointment of employee representatives to
the managing body or supervisory board, shall be determined pursuant to an
agreement between the employee representatives and management.
63. Law 31/2006 provides that the agreement between the employee represen-
tatives and management on employee participation must state which body shall
appoint the employee representatives.
In the absence of a specific agreement on this matter and in the event the standard
rules apply in accordance with the requirements mentioned under no. 61 above,
the representative body shall decide on the distribution of seats on the managing
body or supervisory board to be held by employees (Art. 20(4) Law 31/2006).
64. Law 31/2006 contains standard rules that apply if the employee represen-
tatives and management so agree or in the event the parties do not conclude
an agreement within the period set by law (Art. 14 Law 31/2006). Under these
rules, employee participation is mandatory:
(i) in an SE formed by conversion, if the former company provided for
employee participation prior to registration of the SE;
(ii) in an SE formed by merger if, prior to registration of the SE, at least
one of the participating companies provided for employee participation
covering:
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• at least 25% of the total number of employees in the participating

companies; or
• less than 25% of the total number of employees in the participating
companies if the negotiating body so agrees.
(iii) in a subsidiary or holding SE if, prior to registration of the SE, at least
one of the participating companies provided for employee participation
covering:
• at least 50% of the total number of employees in the participating
companies; or
• less than 50% of the total number of employees in the participating
companies if the negotiating body so agrees.

65. According to Article 20(5) of Law 31/2006, members of the managing
body or supervisory board elected, appointed or recommended by the employee
representative body or by the employees themselves have the same rights and
obligations as other members, including the right to vote.
Employee representatives in an SE, including those elected to the managing
body or supervisory board, enjoy the same rights and protection afforded by
Spanish labour law to employee representatives in the performance of their
duties (e.g. preference to remain with the company in the event of a collective
or objective dismissal, the right not to be dismissed during the performance
of their duties, the right not to be hindered in their economic or professional
advancement, etc.) (Art. 23 Law 31/2006).

66. Pursuant to Article 61 of the Regulation, an SE registered in Spain will
be subject to the rules contained in the LSA on the preparation, auditing and
publication of the annual and consolidated accounts.
The company must draft its annual accounts (balance sheet, income statement,
allocation of profit proposal, and management report) in accordance with Article
171 et seq. LSA and Article 34 et seq. of the Spanish Commercial Code, setting
forth the applicable accounting principles.
The accounts must be drafted by the management body within three months
following the close of the financial year (usually 31 December). Once audited,
the accounts are submitted to the general meeting within six months following
the end of the financial year and filed with the relevant commercial registry
within one month of their approval.
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Spain
2 Auditors
67. An SE must appoint auditors unless two of the following three criteria are
met:
(i) The value of the company’s assets does not exceed €7,200,000;
(ii) The company’s net turnover does not exceed €14,500,000; or
(iii) The aggregate number of employees during the relevant financial year
does not exceed 250.
68. The auditors must draft a report on the annual accounts, a copy of which
must be made available to shareholders prior to the annual general meeting.
The report must state whether the accounts provide a true and fair overview of
the company’s assets, financial situation and profit and loss.

69. The commercial registry with which a Spanish-based SE is recorded based
on the address of its registered office is competent with respect to registration
matters. The commercial registry is also the authority designated pursuant to
Articles 25 and 26 of the Regulation.
70. The commercial court of the place where an SE’s registered office is located
is the authority responsible for the matters referred to under Articles 54 and 55
of the Regulation (i.e. the calling of general meetings and the inclusion of new
items on the agenda).
71. Other authorities may also be competent to supervise SEs engaged in certain
activities or if the company is listed (e.g. the Comisión Nacional del Mercado
de Valores for listed companies, the Banco de España for financial institutions,
etc.).
VII Dissolution
1 Winding up and liquidation
72. With regard to winding up, liquidation and analogous processes, SEs incor-
porated in Spain will be subject to general rules of Spanish law. As a result
and aside from the causes for winding up that may be listed in the company’s
articles of association, an SE shall be wound up in the event that:
(i) the general meeting passes a resolution to this effect;
(ii) the term for which the company was incorporated expires;
(iii) the business which constitutes the company’s corporate purpose is com-
pleted or cannot be carried out;
(iv) the corporate bodies are stayed;
(v) as a result of losses, the company’s equity falls below 50% of its share
capital, unless the latter is sufficiently increased or reduced;
379
(vi) the company reduces its share capital below the statutory minimum
(€120,000);
(vii) the company is merged or spun off in its entirety.
Moreover, Article 313 LSA provides that an SE with its registered office in
Spain shall be wound up if its head office is transferred abroad and it does
not relocate its head office to Spain or transfer its registered office to the place
where its head office is located within one year’s time (see no. 8 of this report).
73. The liquidation process starts once a company is wound up. The LSA does
not contain any specific provisions regarding the duration of this process, which
shall thus remain open even if the liquidation is challenged before the courts.
2 Insolvency and cessation of payments

74. A single insolvency procedure known as a ‘composition with creditors’
(concurso) is applicable to all insolvent debtors (i.e. those unable to make their
payments regularly and in a timely manner or those that foresee such a situation
arising). There are two possible outcomes to this procedure: (i) a creditors’
agreement (i.e. the debtor and its creditors reach an agreement on the satisfaction
of the latter’s claims in order to allow the debtor to restructure its business);
or (ii) liquidation (the debtor’s assets are liquidated in order to pay off its
debts).
75. The Insolvency Act2 favours continuity and restructuring during insolvency.
Thus, during insolvency proceedings: (i) the enforcement of security interests
in assets pertaining to the debtor’s business is prohibited and/or suspended;
(ii) agreements with reciprocal obligations are continued; and (iii) credit facil-
ities are reinstated.
76. In order to protect creditors, the Insolvency Act: (i) brings the statement of
composition with creditors forward in time so as not to jeopardise the debtor’s
estate (i.e. directors’ liability is incurred if an insolvency petition is not filed
under certain circumstances); (ii) encourages creditors to apply for a declaration
of concurso (i.e. 25% of the unsecured or non-preferred claims of a creditor that
files an insolvency petition shall be given priority); (iii) sanctions the debtor
for failing to apply for a declaration of concurso; (iv) promotes the payment of
creditors through inter-creditor agreements; (v) reduces the privileges and pref-
erences of certain creditors’ claims (i.e. the tax and social security authorities);
and (vi) facilitates restructuring with employees.
77. In principle, the Insolvency Act maintains the administrators’ administrative
and divestment powers, although the authorisation of professional receivers –
a lawyer, an economist and one ordinary creditor – is required.
2
Law 22/2003 of 9 July 9 on insolvency (‘Ley Concursal’).
380
Spain
78. A composition with creditors may provide for a reduction of no more than
50% of the pre-insolvency claims, with a maximum deferral period of five
years. It may also include debt-equity swap proposals or the conversion of
regular claims into subordinated claims (although creditors are not obliged to
accept such proposals). However, the consent of the debtor and its shareholders
is required for debt to equity agreements, and the composition cannot include
the assignment of assets to creditors in satisfaction of their claims.
The debtor can veto the composition approved by its creditors by applying
for liquidation. In order to reach a creditors’ agreement, approval by creditors
holding 50% of the ordinary claims is necessary.
It is also possible to file a pre-arranged proposal for composition between the
debtor and those creditors holding jointly 20% of the pre-insolvency claims.
79. The following claims shall be considered subordinated: (i) claims of which
the receivers are not notified on time; (ii) claims contractually subordinated
to all other claims; (iii) unsecured interests; (iv) penalties; (v) claims held by
persons ‘closely related to the debtor’;3 and (vi) claims in favour of third parties
arising as a result of the termination of transactions that ended with clawback
actions, provided the third party acted in bad faith.
The classification of certain claims as subordinated entails the extinction of any
security granted in the creditor’s favour.
80. Transactions executed by the debtor during the two-year period immedi-
ately preceding the commencement of insolvency proceedings and which are
detrimental to the debtor’s estate can be challenged and set aside, even in the
absence of fraud.
Some transactions shall be presumed detrimental to the debtor’s estate, even if
there is no proof to this effect (e.g. the disposal of assets without consideration).
With respect to certain other transactions (e.g. the disposal of assets in favour
of persons closely related to the debtor; collateral granted to secure pre-existing
unsecured obligations, etc.), detriment is presumed, although this presumption
is rebuttable.
In all other cases, the harm must be evidenced by the party applying for a claw
back action.
3
Persons closely related to the debtor, within the meaning of the Insolvency Act, are the follow-
ing: (i) shareholders holding more than 10% of the debtor’s share capital (5% for listed compa-
nies); (ii) directors, liquidators, representatives and de facto and shadow directors of the debtor
holding a general power of attorney for at least two years prior to the declaration of concurso;
(iii) companies of the same group and their shareholders; and (iv) assignees of any claims held by
the above-mentioned persons if the assignment is made within two years prior to the declaration
of concurso.
381
Obligations assumed by the debtor in the ordinary course of business shall not
be subject to claw back.
VIII Applicable law

81. An SE registered in Spain shall be governed by: (i) the Regulation; (ii) its
articles of association, where expressly authorised by the Regulation; (iii) the
SE Act and Law 31/2006; (iv) the LSA; and (v) its articles of association under
the same conditions applicable to ordinary limited-liability companies.
In addition, special rules may apply to companies engaged in certain kinds of
activity (insurance, financial services, etc.) (Art. 9(3) Reg.).
IX Tax treatment
1 Income tax
A Taxation of shareholders
82. The taxation of shareholders varies depending on the shareholder’s tax status
(resident or non-resident) and the type of income arising from the investment.
We assume the SE shall be deemed a Spanish resident taxpayer for corporate
income tax (‘CIT’) purposes, since its registered office will be in Spain and to
the extent it will be effectively managed from Spain. As such, shareholders in
the SE will be treated, for CIT purposes, like any other shareholders investing
in a Spanish resident entity.
Briefly, and in general terms, the main features of the taxation of shareholders
are the following:
(i) Resident individuals
Dividends received by resident individuals are deemed income from movable
capital. As a general rule, the amount to be included in the shareholder’s tax
base is 140% of the gross dividend.4 This amount is subject to personal income
tax (‘PIT’) at generally applicable progressive rates, ranging from 15% to 45%.
A tax credit to prevent double taxation is available to the taxpayer, amounting
to 40% of the gross dividend paid.
In addition, upon payment of a dividend, the SE will generally withhold 15%5
PIT from the gross amount. The amount withheld is subsequently credited to
the taxpayer’s total tax liability.
Capital gains on the transfer of shares in an SE will be subject to tax at a fixed
rate of 15% (see footnote 5), provided they have been held for more than one
year prior to the transfer. Otherwise, the general progressive rates will apply.
4 As from 2007, dividends will be taxed at a rate of 18%. 5 18% in 2007.
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Spain
In the event of a transfer of shares acquired prior to 31 December 1994, the

capital gain can be reduced by applying reduction coefficients (25% for listed
shares and 14.28% for unlisted shares) for each year that has passed between
the acquisition date and 31 December 1994.
(ii) Resident entities

Gross dividends received are subject to CIT at the standard rate of 35%.6 Share-
holders are entitled to apply for a tax credit (to prevent double taxation) in the
amount of 50% or 100% of the tax due on the dividend (in the latter case, if the
shareholder’s stake is greater than 5% of the SE’s share capital and the shares
have been held for at least one year).
In addition, upon payment of a dividend, the SE will generally withhold 15%
CIT from the gross amount. The amount withheld is subsequently credited to the
taxpayer’s total tax liability. No withholding tax will be due if the shareholder
is entitled to a full tax credit on the dividend, as explained above.
Capital gains on the transfer of shares in an SE are subject to tax at a rate of
35% (see footnote 6). A full tax credit is available for the tax due on that portion
of the capital gain equal to the retained earnings of the SE generated during the
holding period of the transferred shares, provided the shareholder’s stake in the
subsidiary is greater than 5% of its share capital and the shares have been held
for at least one year.
Subject to the fulfilment of certain reinvestment conditions, the capital gain
may be eligible for a tax credit, which reduces the applicable tax rate to 15%
(see footnote 5).
As a general rule, non-resident persons acting through a Spanish permanent
establishment (‘PE’) will be subject to CIT in accordance with the same provi-
sions applicable to resident entities.
(iii) Non-resident persons acting without a PE

With respect to non-resident income tax (‘NRIT’), dividends received by non-
residents are subject to withholding tax at a rate of 15% (see footnote 5).
However, dividends distributed by Spanish subsidiaries to parent companies
residing in other EU Member States may be exempt from NRIT provided the
following conditions are met:
(a) The parent company holds a direct stake of at least 20% in the subsidiary’s
share capital.
(b) The aforementioned 20% stake has been held for an uninterrupted period
of at least one year prior to the date on which the dividend to be distributed
falls due or, if this is not the case, shall be held for at least one year.
6
32.5% in 2007 and 30% from 2008 onwards.
383
(c) Both companies are subject to, and not exempt from, a tax on the profits
of legal entities in a Member State of the European Union mentioned
in Article 2(c) of Council Directive 90/435/EEC of 23 July 1990 on the
common system of taxation applicable in the case of parent companies
and subsidiaries of different Member States.
(d) The distribution is not the result of the liquidation of the subsidiary.
(e) Both companies take one of the forms provided for in the appendix to
Council Directive 90/435/EEC of 23 July 1990 on the common system
of taxation applicable in the case of parent companies and subsidiaries of
different Member States.
It should be noted that this exemption shall not apply if the majority of voting
rights in the parent company is held, directly or indirectly, by natural persons
or legal entities that do not reside in a Member State of the European Union,
unless the parent company effectively carries on an entrepreneurial activity
directly related to that carried on by its subsidiary or if its corporate purpose is
to supervise and manage the subsidiary through the appropriate organisation of
material and human resources or if it can prove that it was incorporated for valid
economic reasons and not solely in order to unduly benefit from the exemption
from NRIT.
The 15% withholding tax rate may be reduced within the framework of an
applicable treaty for the avoidance of double taxation with Spain.
Any capital gain resulting from the transfer of shares in an SE shall be subject
to NRIT at the standard rate of 35% (see footnote 5).
However, the transfer of shares in an SE by a person residing in the European
Union will be exempt from NRIT unless: (i) the assets of the SE consist mainly
of real property located in Spain; or (ii) at some time in the twelve months
immediately preceding the transfer, the transferor has held, directly or indirectly,
at least 25% of the SE’s capital or equity.
In addition, the capital gain may be exempt from NRIT within the framework
of an applicable treaty for the avoidance of double taxation with Spain.
Finally, special tax exemptions may apply to income resulting from a share-
holding in a Spanish holding company.
B Losses of foreign branches
83. Losses recorded by foreign branches of an SE may be used to offset the

SE’s taxable income in Spain for CIT purposes.
Subject to certain requirements, profits allocated to a foreign branch which
constitutes a permanent establishment (PE) of the SE may benefit from an
384
Spain
exemption from Spanish CIT. The exemption will not apply to the extent the
PE’s losses have been used by the SE to reduce its own CIT liability.
C General taxation of an SE
84. As a general rule, an SE shall be taxed on its worldwide income as deter-
mined by its accounting profit, adjusted in accordance with the CIT Act.
The generally applicable tax rate is 35% (see footnote 6). Different rates may
apply to specific companies. In particular, the first €120,202.41 of taxable
income for small and medium-sized companies (i.e. entities with turnover of
less than €8 million) is taxed at a rate of 25%.
D Group taxation: two or more companies treated as one for tax purposes
85. Spanish law allows certain companies in the same group to be taxed on a
consolidated basis for CIT purposes.
For CIT purposes, a consolidated group consists of a resident controlling com-
pany (or a Spanish PE, which must be subject to, and not exempt from, Spanish
income tax) and its Spanish resident subsidiaries, in which it must hold an
effective direct or indirect stake of at least 75%. In order to request tax consol-
idation, the controlling company or PE must hold the aforementioned direct or
indirect stake of at least 75% in the capital of its Spanish resident subsidiaries
on the first day of the tax period in which the rules apply and maintain this stake
throughout the tax period.
Consolidation is optional, and the tax authorities must be informed accordingly.
Consolidated taxable income is determined by: (i) totalling the taxable income
of each company in the group; (ii) deducting profits and losses in respect of
operations and transactions between group companies, to the extent they are
included in the taxable income of the entities that form part of the group; (iii)
re-including deductions taken in previous years for transactions carried out with
third parties or if the company that carried out an intra-group transaction has
left the group; and (iv) offsetting negative taxable income insofar as the sum of
(i), (ii) and (iii) is positive. An important aspect of this is the offsetting of losses.
Negative taxable income (i.e. tax losses) obtained by the group in a given tax
period can be carried forward and offset against taxable income earned by the
group in tax periods that end in the next 15 consecutive years. Group companies
lose their right to offset tax losses individually as long as they apply for tax
consolidation. However, losses that arose prior to their joining the group can be
carried forward against group taxable income (excluding dividends and profit
shares referred in Article 30(2) CIT), which, for this purpose, is limited to the
taxable profit made by the company which generated the losses to be carried
385
forward, within the 15 consecutive years immediately following the end of the
period in which the losses arose.
In our view, and subject to the above mentioned statutory requirements, an SE
should be entitled to form part of a Spanish consolidated group, either as the
controlling or a controlled company.
2 Value added tax

86. Supplies of goods and services are divided into three categories for VAT
purposes: standard rate (16%); reduced rate (7%); and super-reduced rated (4%).
In addition, some goods or services are exempt from VAT.
87. An SE is subject to VAT on the sale of goods and the provision of services and
must register with the VAT authorities like any other Spanish limited-liability
company.
3 Other taxes
88. In principle, and subject to the comments made herein, the incorporation of
an SE with its registered office in Spain will give rise to capital tax at a rate of
1% on the face value of the issued shares plus any share premium contributed
by the SE’s shareholders.
In addition, notarial and registration fees will be levied on the incorporation of an
SE (approximately 0.06% of the contributions made). For capital contributions
in excess of €6,000,000, registration fees are capped at €2,260, and notarial
fees can be negotiated with the notary.
89. An increase in the share capital of an SE will be subject to capital tax at a
rate of 1% on the amount of capital increase and any share premium.
In addition, a capital increase will be subject to notarial and registration fees
(approximately 0.06% of the value of the contributions made). For capital con-
tributions in excess of €6,000,000, registration fees are capped at €2,260 and
notarial fees are negotiable.
4 Taxation on the establishment of an SE

90. The tax consequences of the establishment of an SE are the following:
(i) Tax consequences for merging (transferring and receiving) companies –
requirements for tax neutrality (exemption/deferral), carry-forward of
tax-exempt reserves and losses, etc.
In this section, we analyse the tax consequences resulting from a merger subject
to the general CIT rules.
386
Spain
(a) Formation of an SE by a cross-border merger (inbound-outbound

merger of foreign companies with domestic assets/shareholders)
In general, the merger or transfer of a Spanish resident company will give rise
to CIT on the difference between the fair market value and the book value of
the assets transferred.
Likewise, the transfer of a Spanish PE by way of a merger shall give rise to
NRIT on the difference between the fair market value and the book value of the
assets transferred.
The receiving company will record the assets received at their fair market value.
For tax purposes, tax credits and any losses carried forward by the transferring
entity will not be transferred to the receiving company.
(b) Formation of a (resident or non-resident) holding SE by means of a
share exchange
As a general rule, for Spanish tax purposes, a shareholder contributing shares
to the capital of an SE must include in its tax base a capital gain equal to the
difference between the fair market value and the net book value of the trans-
ferred shares. This capital gain will be subject to tax as described under no. 82
above.
The tax value for the SE of the shares received will be equal to their fair market
value.
(c) Formation of a subsidiary SE
The formation of a subsidiary SE by means of a contribution in kind is treated,
for CIT purposes, as an exchange of shares (which is also a type of contribution
in kind).
In the event the contribution consists of cash, no specific taxation will arise.
(d) Formation of an SE by conversion
As a general rule, the conversion of a Spanish entity, such as a sociedad anónima
(public limited-liability company) or a sociedad de responsabilidad limitada
(private limited-liability company), into a different legal form such as an SE is
not a taxable event.
(ii) Tax consequences for shareholders
The shareholders of the transferring company will be subject to tax on the
difference between the fair market value of the shares in the SE received and
the acquisition cost of the transferred shares, subject to the rules set forth under
no. 82 above.
(iii) Capital duties and transfer taxes
387
As a general rule, the abovementioned transactions will be subject to capital

tax at a rate of 1% of the face value of the share capital increased plus any share
premium.
The transfer of assets, other than shares, resulting from mergers or contributions
in kind will be subject to VAT unless the assets are transferred as a going concern.
Additional local taxes may also be imposed with respect to the transfer of real
property.
91. The tax consequences for the transfer of an SE’s registered office (to or
from Spain) are as follows:
(i) Tax consequences for the SE
If the registered office of an SE is transferred abroad, assuming the SE’s head
office is also transferred, the SE will be subject to CIT on the difference between
the fair market value and the net book value of the transferred assets, unless
they are allocated to a PE in Spain.
For the transfer of an SE’s registered office to Spain, no specific tax rules apply.
The SE will become a Spanish resident for tax purposes, assuming its head
office is transferred to Spain as well.
(ii) Tax consequences for shareholders
The transfer of an SE’s registered office abroad will not trigger Spanish tax for
the SE’s shareholders.
(iii) Capital duties and transfer taxes
The transfer to Spain of an SE’s registered office will be subject to capital tax
at a rate of 1% of the SE’s equity, unless the SE was previously subject to
a similar tax within the European Union. An exemption will apply once the
relevant amendments to Directive 90/434/EEC have been transposed into the
Spanish law.
X Conclusion
92. The incorporation of an SE in Spain will provide the following advantages:
(i) SEs are subject to clear rules for cross-border mergers, which are not
available to ordinary Spanish companies. In this regard, it should be noted
that although Spanish law permits cross-border mergers (Art. 9(11)(2)
Spanish Civil Code and Art. 233(1) LSA), it does not contain clear rules
describing the applicable process. In addition, it should be noted that SEs
will not face problems in merging with other SEs registered in Member
States whose national laws forbid cross-border mergers with national
companies (such as the Netherlands).
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Spain
(ii) Although the transfer of a Spanish company’s registered office abroad

was already possible under Spanish law in certain circumstances, an SE
will be able to transfer its registered office much more easily.
(iii) An SE can have either a one-tier or a two-tier management structure, an
option not available to regular Spanish companies.
93. Since Law 31/2006 was adopted relatively recently, no SEs have been
incorporated as yet in Spain. Therefore, it remains to be seen whether the
advantages of this new corporate form will result in the incorporation of a
significant number of SEs in this country.
389
National reports from EEA Member States
15
Liechtenstein
andreas schurti and alexander appel
Walch & Schurti
I Introduction 394
II Formation 395
B Name 395
C Registered seat 395
E Capital 396
B Decision-making process 400
C Rights and obligations of shareholders 401
B One-tier system 401
C Two-tier system 402
D Appointment and removal 403
E Liability 404
A Provision of information for the creation of an SNB 405
B Composition and appointment 405
C Members 405
393
D Meetings and decisions 405

E Adjournment/resumption of negotiations in the event of
substantial changes 406
3 Standard rules 406
A Works council 406
B Information and consultation 406
C Employee participation 407
5 Duty of confidentiality 407
2 Auditors 408
VII Dissolution 408
1 Winding up, liquidation and insolvency 408
1 Income tax 409
X Conclusion 410
I Introduction
Although not a Member State of the European Union, Liechtenstein has ratified
the European Economic Area (EEA) Agreement and has been a party thereto
since 1995. Consequently, Liechtenstein has had to bring its national laws into
line with Council Regulation (EC) No 2157/2001 on the Statute for a European
company (the ‘Regulation’). Furthermore, Liechtenstein has transposed into
national law Council Directive 2001/68/EC of 8 October 2001 supplementing
the Statute for a European company with regard to the involvement of employees
(the ‘Directive’).
In November 2005, the Liechtenstein Parliament passed legislation implement-
ing the Regulation, i.e. the SE Act (Gesetz über das Statut der Europäischen
Gesellschaft or SEG),1 and the Directive, the SE Employee Involvement Act
(SEBG).2 Along with this key legislation, which entered into force in Febru-
ary 2006, the Persons and Companies Act (Personen- und Gesellschaftsrecht
or ‘PGR’), the Banking Act (Bankengesetz), the Investment Undertakings Act
(Gesetz über die Investmentunternehmen), and the Insurance Surveillance Act
(Versicherungsaufsichtsgesetz) all had to be amended in order to bring them
into line with the Regulation and the Directive.
1 LGBl 2006 no. 26. 2 Ibid., no. 27.
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Liechtenstein
II Formation
1 General remarks
A Founding parties
The choice of how to form an SE (i.e. by merger, through the formation of
a holding or a subsidiary SE or by conversion of a national company into
an SE) will also determine the identity of the founding parties. Unlike many
other countries, Liechtenstein has availed itself of the option contained in
Article 2(5) of the Regulation, enabling the national legislature to allow a com-
pany whose centre of administration is located outside the EEA to participate
in the formation of an SE. According to Article 8 SEG, such a company must:
(i) have been formed in accordance with the relevant provisions of Liechtenstein
company law; (ii) have its registered seat in Liechtenstein; and (iii) maintain an
actual, permanent connection with the economy of an EEA member state.
B Name
An SE’s name must comply with the relevant provisions of Liechtenstein law
and must include the abbreviation ‘SE’.
C Registered seat
Article 4 SEG is based on the second sentence of Article 7 of the Regulation.
Article 4 provides that the registered seat of an SE, unless the company’s articles
of association provide otherwise, must be located at the same place as its centre
of administration. (In this sense, the SEG reflects the general provisions of
Liechtenstein law with respect to the registered seat of a national legal entity.)3
However, an SE’s articles may provide that the company’s registered seat and
centre of administration need not be at the same place. Thus, Liechtenstein has
not opted to implement the restriction contained in Article 7 of the Regulation.
Article 42 SEG further provides that the national rules4 on the transfer of a
Liechtenstein company’s centre of administration to another country shall not
apply to an SE. Rather Articles 43 and 44 SEG set forth specific rules on
the transfer of an SE’s registered seat abroad. The SEG does not contain any
provisions regarding the options set forth in Article 8(5), (7) and (14) of the
Regulation.
Upon request, the Liechtenstein Public Registry(Liechtenstein’s trade register)
shall issue a certificate attesting to the legality of a transfer within the meaning
of Article 8(8) of the Regulation. However, such a certificate will only be
issued if:
3 Art. 113 PGR 4 Ibid., Art. 234 et seq.
395
(i) the claims of all creditors entitled to request adequate security have been
satisfied; and
(ii) the annual accounts and annual report for the preceding financial year have
been filed with the Public Registry together with the auditor’s report; and
(iii) the Liechtenstein tax authorities have confirmed in writing that all taxes
due in Liechtenstein have been paid.
A creditor can only request adequate security as referred to in sub-section (i)
above if the claim arose no later than one working day following disclosure
of the transfer plan. Moreover, the creditor must prove that satisfaction of its
claim would be jeopardised by the contemplated transfer of the SE’s registered
seat. If need be, the creditor can assert its claim (as to both its legal basis and
amount) within two months following disclosure of the transfer plan.
D Corporate purpose
An SE may choose its corporate purpose within the limits set by Liecht-
enstein company law. The Regulation refers to national law in this respect
(Arts. 9(1)(c)(ii) and 10).
E Capital
According to Article 5 SEG, an SE may denominate its share capital in Swiss
francs,5 euros or US dollars (Art. 122(1a) PGR). As Article 4(2) of the Regu-
lation requires that the subscribed capital of an SE be at least €120,000, an SE
that denominates its share capital in Swiss francs or US dollars must ensure that
the value of its share capital in these currencies is at least equal to the preceding
amount. These provisions are in line with Article 67(1) of the Regulation.

Articles 9 through 12 SEG deal with the formation of an SE by merger. These
statutory provisions supplement Articles 17 through 31 of the Regulation.
Each merging company must ensure publication of the information referred
to in Article 21 of the Regulation in the official journal of the state to whose
laws it is subject. In Liechtenstein, this notification requirement is discussed
in Article 9 SEG, which provides that the information set forth in Arti-
cle 21 of the Regulation must be submitted to the Public Registry upon the
filing of the draft terms of merger. The Public Registry will subsequently
arrange for publication in the relevant Liechtenstein official gazettes. In view of
5
Due to a monetary union with Switzerland, the Swiss franc is the official currency of Liechten-
stein.
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Liechtenstein
Article 21 of the Regulation, no additional information need be published under

the SEG.
A Liechtenstein company involved in the formation of an SE by merger must
request a certificate (attesting to completion of the requisite pre-merger acts and
formalities) from the Public Registry, in accordance with Article 25(2) of the
Regulation (Art. 10 SEG). However, the issuance of such a certificate requires
that:
(i) preferred creditors requesting security for their claims have been ade-
quately secured;
(ii) the SE’s annual accounts and annual report for the last financial year, as
well as its auditor’s report, have been filed with the Public Registry and
the necessary arrangements for publication made; and
(iii) to the extent necessary, the general meeting of shareholders, when voting
on the draft terms of merger, have approved any procedures necessary
under Article 25(3) of the Regulation.
The SE may ask the Public Registry to submit this certificate to the competent
court, a notary public or another administrative authority of the state in which
its registered seat is located (Art. 10(3) SEG).
In a departure from the corresponding provisions of national law,6 the Liecht-
enstein legislature deemed it important to provide enhanced protection for
creditors in the event an SE is formed by means of a cross-border merger.
Furthermore, the legislature considered it important to enact, in addition to
Article 24(1)(a) of the Regulation, additional provisions limiting the creditors
entitled to request security. Pursuant to Article 11(2) SEG, only creditors of
the merging companies who meet the requirements of this article qualify for
protection. Once the information listed in Article 21 of the Regulation has been
published, eligible creditors must be informed of their entitlement to request
security (Art. 11(3) SEG).
As Liechtenstein law does not contain any particular provisions for the protec-
tion of minority shareholders in a domestic merger, the legislature decided not
to enact special provisions to this effect where an SE is formed by means of
a cross-border merger. Liechtenstein has furthermore not availed itself of the
options contained in Articles 19 and 24(2) of the Regulation.
Pursuant to Article 12 SEG, the Public Registry is competent to scrutinise the
legality of the formation of an SE by merger, in accordance with Article 26(1)
of the Regulation, provided the SE’s registered seat is in Liechtenstein.
6
According to Article 351(i) PGR, which applies to mergers between Liechtenstein companies,
it suffices for creditors to be granted security for six months upon publication of a notice of
recordation of the merger in the Public Register.
397
Article 13 SEG requires that draft terms of formation, drawn up pursuant to

Article 32(3) of the Regulation, be filed with the Public Registry. Subsequently,
the registry will publish this document in accordance with national law.
Article 14 SEG refers to Article 33(3) of the Regulation, which in turn requires
that: (i) the parties forming a holding SE have contributed the shares specified
in the draft terms of formation; and that (ii) all other conditions for formation
of the holding SE be fulfilled. Pursuant to Article 14 SEG, the Public Registry
must confirm in writing that the aforementioned conditions have been met.
Subsequently, the registry will arrange for publication of a notice to this effect
in accordance with Liechtenstein law.7
Liechtenstein decided not to implement additional provisions for the protection
of creditors, employees and minority shareholders who oppose the formation
of a holding SE. Consequently, there is no counterpart to Article 34 of the
Regulation in the SEG.
Article 15 SEG defines the types of legal entities that can participate in the for-
mation of a subsidiary SE. Basically, Liechtenstein law allows all legal entities,
both private and public, to do so. In addition, partnership-like enterprises which
are not separate legal entities may also take part in the formation of a subsidiary
SE. This arguably wide circle of potential founders is subject to one significant
restriction, however: any founder, regardless of whether it has legal personality,
must, according to its articles, pursue a commercial purpose (Erwerbszweck).
In accordance with Article 10 of the Regulation, Liechtenstein’s national rules
on the conversion of an existing Liechtenstein company into an SE apply. Con-
sequently, the SEG contains only one new provision in this respect. Pursuant to
Article 16 SEG, draft terms of conversion, required pursuant to Article 37(5)
of the Regulation, must be filed with the Public Registry. The registry will
then ensure publication of the draft terms in accordance with national law.8
The SEG does not impose any requirements pursuant to Article 37(8) of the
Regulation.

Liechtenstein law reflects Article 16(2) of the Regulation, which provides for
the joint and several liability of persons acting on behalf of an SE in formation
before the latter has obtained legal personality.
7 Art. 958(2) PGR. 8 Ibid.
398
Liechtenstein

Like any other Liechtenstein company, an SE must be entered in the Public
Register (Öffentlichkeitsregister), kept by the Public Registry in Vaduz.
In order to arrange for the publication of information about an SE and make
new entries, certain documents must be filed with the Public Registry. The
registry will subsequently arrange for publication, to the extent required by
national law. Unless the SE’s articles provide otherwise, publication shall be
via Liechtenstein’s two official gazettes, the Liechtensteiner Volksblatt and the
Liechtensteiner Vaterland.

Like most national corporate forms in Liechtenstein, an SE acquires legal per-
sonality only upon registration with the Public Registry.

1 General remarks
Traditionally, Liechtenstein company law requires companies (Aktienge-
sellschaft) to have a one-tier management structure. However, to a limited
extent, a company’s articles may provide for a two-tier structure. In practice,
this usually means that an additional supervisory body (e.g. Aufsichtsrat) is put
in place. More commonly, the articles provide for the delegation of various
duties and powers of the board of directors to one of its members or to one
or more third parties, who make up a so-called ‘directorate’. In the event of
such a delegation of authority, the person(s) to whom these tasks are delegated
is then responsible for the day-to-day management of the company. However,
core powers reserved by law to the board of directors can never be validly
delegated.
2 General meeting
A General remarks
The SEG contains only two provisions regarding the general meeting of share-
holders of an SE. This paucity of direct guidance is in line with the Regulation,
which states that the provisions of national company law shall apply to an SE’s
general meeting to the extent the Regulation itself does not contain specific
rules.9 Consequently, the provisions of national law regarding the powers of
the general meeting, convocation formalities and the decision-making process
shall apply.
9
Art. 52 Reg.
399
According to Article 338(2) PGR, the general meeting is in charge of:

(i) appointing members of the board of directors and auditors;
(ii)approving the annual report and dividend distributions;
(iii)
discharging members of the board of directors from liability;
(iv)passing resolutions to amend the articles and, unless the articles provide
otherwise, to form branches;
(v) passing resolutions on matters reserved to the general meeting by law or
by the company’s articles or which are submitted to it for resolution by
other corporate bodies.
The articles may delegate additional authority to the general meeting.10 More-
over, the articles may delegate the abovementioned duties of the general meet-
ing to another corporate organ (e.g. the board of directors),11 although such a
delegation of authority is rare in practice.
B Decision-making process
Under Liechtenstein law, the general meeting must convene at least once a year
in order to pass key resolutions for the coming year (see Art. 54(1) Reg.).
Unless the company’s articles provide otherwise, the board of directors (i.e.
the administrative body in the one-tier system) is responsible for calling and
convening the general meeting.12 According to Article 40 SEG, the Public
Registry shall convene the general meeting of an SE if, in accordance with
Article 55 of the Regulation, a shareholder whose stake in the company entitles
it to request that the SE convene an extraordinary general meeting pursuant to
Liechtenstein law or Article 55 has exercised this right but no general meeting
is held within two months’ time. In that case, the Public Registry shall rule on
the request in summary proceedings and may also appoint a chairperson for the
meeting.13
Under Liechtenstein law, notices of a general meeting must be published at least
20 days in advance. The notice must also mention the possibility to inspect the
company’s annual accounts and auditor’s report.
Minority shareholders representing at least 10% of the subscribed share capital
may request that additional items be placed on the agenda. It is not possible to
implement a lower threshold (as provided in Article 56 of the Regulation).
The board of directors is responsible for defining the requirements shareholders
must fulfil in order to be admitted to the general meeting. With respect to bearer
shares (Inhaberaktien), it is usually necessary to submit the original shares or an
original certificate of deposit prior to the meeting. Holders of registered shares
10 Art. 280 PGR. 11 Ibid., Art. 338 et seq.

12 Ibid., Art. 349 et seq. 13 Ibid., Art. 168 et seq.
400
Liechtenstein
(Namensaktien), however, must usually only identify themselves as their shares

are recorded in the company’s shareholders’ register.
Liechtenstein has enacted the option contained in Article 59(2) of the Regu-
lation regarding the majority and quorum required to pass valid shareholder
resolutions. Hence, Article 41 SEG states that an SE’s articles may provide
that resolutions to amend the articles can be passed by a simple majority of
votes cast, provided at least 50% of the subscribed capital is present or validly
represented. This provision is in line with Liechtenstein company law, which
requires a quorum for various shareholder resolutions unless the company’s arti-
cles set lower thresholds. Thus, an SE’s articles may derogate from the quorum
requirements imposed by law.14
C Rights and obligations of shareholders
Shareholders of a Liechtenstein company are entitled to receive dividends or a

share of the liquidation proceeds (to the extent approved by the general meeting);
they are also entitled to vote, as provided in the company’s articles. Furthermore,
shareholders are entitled to inspect the annual accounts and the auditor’s report.
In practice, the articles define shareholders’ rights with reference to national
law in this regard.
Under national law, shareholders are only obliged to pay up the subscribed
value of their shares15 and cannot be forced to make any further contributions
to the company.

A General remarks
As Liechtenstein law has traditionally favoured a one-tier management struc-
ture, the SEG sets forth rules governing the two-tier system applicable to the
SE.
B One-tier system
Articles 36 through 39 SEG deal with the one-tier management structure. As

Liechtenstein company law is based on a one-tier system, few provisions had
to be added in the SEG. Consequently, the option set forth in Article 43(4) of
the Regulation was not necessary.
An SE with a one-tier structure is represented vis-à-vis third parties by its admin-
istrative organ, i.e. the board of directors (Verwaltungsrat). Article 36(1) SEG
states that the board’s powers can be stipulated in the SE’s articles (Satzung) or
in separate regulations.
14 Ibid., Arts 174 et seq. and Art. 293. 15 Ibid., Art. 317.
401
In accordance with national law, the articles of an SE may provide that its
board of directors or general meeting can delegate managerial authority and
the power to represent the company to one or more natural persons or legal
entities, which need not be directors of or shareholders in the SE. If the del-
egation of authority is valid, the statutory provisions on directors’ liability
shall apply. In the absence of such a delegation, the members of the board
of directors remain jointly responsible for the day-to-day management of the
SE (Art. 38 SEG), which reflects the option contained in Article 43(1) of the
Regulation.
If an SE’s subscribed capital exceeds CHF 1 million, the board of directors
must have at least three members (Art. 37(1) SEG; see Art. 42(3) Reg.). This
requirement, however, does not apply if the SE merely administers assets and
has no other business activity in Liechtenstein.
For all other aspects of the one-tier system, the relevant rules of national law
apply.16
C Two-tier system
In the two-tier system, a supervisory body oversees the management organ. The
SEG refers to the management organ as the Vorstand, while the supervisory
body is referred to as the Aufsichtsrat. To the extent the SE’s articles or internal
regulations do not provide otherwise, the statutory provisions on the powers of
the management organ shall apply.
If the SE’s articles so provide, members of the management organ must deposit
a certain number of the company’s shares in their own name (Pflichtaktien).
The number of such shares shall be determined in the articles (Art. 18(1)
SEG).
Provided the SE pursues business other than the administration of assets (Art. 19
SEG), its management organ must have at least two members if the company’s
subscribed capital is at least CHF 1 million (see the option in Art. 40(3) Reg.).
If so permitted by the articles, the general meeting or the management organ, as
the case may be, can delegate managerial authority and the power to represent
the company to one or more natural persons, who can be members of the
management organ or third parties, who need not be shareholders in the SE.
If such a delegation of authority is valid, these persons will also be subject
to the statutory provisions on directors’ liability. Article 2(3) SEG provides
that the aforementioned duties can also be delegated to legal entities, which
may then serve as managers. Article 22 SEG thus reflects Article 39(1) of the
Regulation.
16
Ibid., Arts 180–191 and 341–349.
402
Liechtenstein
According to Article 23 SEG, the management organ is responsible for:

(i) preparing the agenda for the general meeting and executing the latter’s
resolutions; (ii) drafting the necessary regulations; (iii) providing necessary
instructions for this purpose; and (iv) ensuring that the minutes of the general
meeting, as well as the SE’s books, are properly kept, examined and, to the
extent necessary, published.
Members of the supervisory body are, in many respects, subject to rules similar
to those applicable to members of the management organ (e.g. with regard to
the deposit of shares in the SE, representation by proxy, etc.).
Moreover, the supervisory body can appoint one or more committees for spe-
cific tasks, such reporting on important matters, supervising the management
organ and overseeing implementation by the latter of the general meeting’s
resolutions.
Pursuant to Article 32 SEG, the supervisory body is responsible for: (i) supervis-
ing those persons entrusted with managerial authority and the power to represent
the SE in order to ensure compliance with statutory provisions, the SE’s arti-
cles and any internal regulations; and (ii) obtaining information on operating
activities and management. In this regard, individual members of the supervi-
sory body may request from the management organ any information required
to exercise their functions pursuant to Article 41(3) of the Regulation, provided
the SE has not restricted this right in its articles (Art. 33 SEG).
Article 34(1) SEG allows the supervisory body to represent the SE vis-à-vis
members of the management organ. In practice, such authority is important in
the event of a potential conflict of interest involving a member of the manage-
ment organ.
As an SE is not subject to the requirements set forth in Article 180(a) PGR,
Article 35 SEG provides that only the provisions of national law regarding a
domestic address for service of process are applicable.
D Appointment and removal

The SEG differentiates between the one-tier and the two-tier management
system.
For the two-tier system, Article 17(2) SEG permits the SE’s articles to provide
that members of the management organ can be appointed by the general meeting
rather than by the supervisory body. If the articles so provide, the relevant
national rules shall apply (see also the options contained in Article 39(2) and (4)
of the Regulation). If the articles stipulate that members of the management
organ must hold shares in the SE, these members may start to exercise their
functions only after having become shareholders (Art. 17(5) SEG). Article 17(6)
403
SEG, which deals with the issue of vacancies on the management organ, does
not incorporate the option contained in Article 39(3) of the Regulation.
Members of the supervisory body are appointed by the general meeting of
shareholders.
In the one-tier system, the general meeting appoints the board of directors in
accordance with national law.
Unless the articles provide otherwise, members of the board of directors or
of the management organ and the supervisory body may resign from office.
However, such a resignation should not occur at an undue time, as it could trigger
liability. It should be noted that if members of the management organ, the board
of directors or the supervisory body also have a contractual arrangement with
the SE (such as an employment contract), the contractual rules on termination
must be followed.
E Liability
Liechtenstein’s statutory provisions on the liability of members of corporate

organs apply to SEs.17 According to these provisions, board members and any
person involved in the management and/or administration of a company can be
held liable for damage resulting from an intentional or negligent breach of their
duties. The case law provides that the applicable duty of care is assessed on the
basis of objective criteria.
If managerial authority has been validly delegated, the delegating body (either
the management organ, the board of directors or the supervisory body) remains
liable only for its non-delegable duties. Otherwise, only the manager and/or offi-
cer to whom the duty was delegated can be held liable (provided the conditions
for liability have been met).
Depending on the case and provided certain requirements are met, members
of the management organs can be held liable not only to the SE but also to
creditors and even shareholders.
1 General remarks
The Liechtenstein legislature transposed the Directive by the Gesetz
über die Beteiligung der Arbeitnehmer in der Europäischen Gesellschaft
(SE-Beteiligungsgesetz or ‘SEBG’). The SEBG deals with how employee rep-
resentatives can influence the decision-making process within an SE and is
applicable if the SE: (i) has its registered seat in Liechtenstein; or (ii) to the
17
Ibid., Arts. 218 et seq.
404
Liechtenstein
extent an SE has employees in Liechtenstein (irrespective of the location of its

registered seat).

A Provision of information for the creation of an SNB
Article 3(g) SEBG defines the special negotiating body (SNB) as a body formed
to negotiate with management an agreement on employee involvement in an
SE. This agreement must be in writing (Art. 6 SEBG).
B Composition and appointment

The companies’ employee representatives or, in the absence thereof, the
employees themselves, are in charge of appointing members to the SNB. The
relevant management organs must submit a written request to the employee
representatives to arrange for the establishment of an SNB. This request must
include certain information, such as the intention to form an SE, the identity
and structure of each company involved, and the number of employees.
According to Article 8 SEBG, the number of SNB members corresponds to
the number of employees the companies and their subsidiaries employ in each
EEA member state. Article 8 sets out the criteria in greater detail. The Liecht-
enstein members must be appointed from amongst the companies’ Liechten-
stein employees. The SEBG has thus not enacted the option contained in Arti-
cle 3(2)(b) of the Directive.
Elections must be held within 10 weeks from the submission of management’s
request, pursuant to Article 7 SEBG.
C Members
Article 10 SEBG requires that the name, address and length of employment of
each SNB member be provided without delay to the participating companies’
management organs. This information is then forwarded to local management
and to various local employee representative bodies.
D Meetings and decisions

Upon receipt of the information mentioned in Article 10 SEBG, the management
organs of the participating companies shall convene, as soon as possible, the
first meeting of the SNB.
The SNB can draft its own regulations and appoint a chairperson as well as one
or more deputy chairs. The SNB is entitled to hold a preparatory meeting with
the respective management organ.
405
Article 12 SEBG sets out the principles that govern corporation between the
SNB and the SE’s respective management organ(s). Special emphasis is placed
on mutual trust and fair treatment.
Article 14 SEBG deals with the decision-making process within the SNB. In
particular, the SNB may approve an agreement that reduces the employees’ par-
ticipation rights, provided such a decision is supported by a resolution approved
by a qualified majority of those employees affected.
E Adjournment/resumption of negotiations in the event of substantial changes
Article 15(1) SEBG allows the SNB to decide not to commence negotiations
on an agreement on employee involvement or to terminate negotiations already
underway. According to Article 16 SEBG, terminated negotiations may be
resumed in the event of structural changes within the SE liable to lead to a
reduction in employee participation rights.
3 Standard rules
A Works council
Liechtenstein has not opted out of application of the standard rules contained
in the Annex to the Directive in the event an SE is formed by merger (Art. 7(3)
Dir.).
According to Article 26(1) SEBG, a representative body must be set up in accor-
dance with Articles 27 and 28 SEBG if no agreement on employee participation
is reached within the time limits stipulated in Article 20 SEBG.
To the extent such a representative body is made up of Liechtenstein members,
the relevant provisions of national law shall apply. Under Liechtenstein law, the
representative body for employees is referred to as an employee representative
body (Arbeitnehmervertretung) or works council (Betriebsrat).
Unless terminated prematurely, the term of a Liechtenstein member of the
representative body is four years, commencing upon election or appointment
(Art. 39 SEBG).
B Information and consultation

Pursuant to Article 37 SEBG, the employee representative body meets with the
SE’s management organ at least once a year in order to obtain information and
be heard regarding the development of the SE’s business and its perspectives.
The representative body is entitled to receive in advance any information and
documents needed to prepare for this meeting. This information must include
not only the SE’s annual reports but also copies of all documents submitted to
406
Liechtenstein
the general meeting of shareholders. Broader definitions of the terms ‘business

development’ and ‘perspectives’ can be found in Article 37(3) SEBG.
The employee representative body is entitled to be notified without delay of
any extraordinary circumstances liable to considerably affect the interests of
employees (such as the relocation of manufacturing sites or material parts of the
undertaking, as well as collective dismissals). If the management organ decides
not to act in accordance with the employee representative body’s opinion, the
latter is entitled to meet once more with management in order to try to reach an
agreement. However, the rights of the management organ shall not be prejudiced
by the rights of the employee representative body.
The principle of equality set forth in Part 3 of the Annex to the Directive is not
fully reflected in Liechtenstein law. In many cases, employee representatives
are not granted equal (or even any) voting rights and may only express their
views on an informative or consultative basis.
C Employee participation
Pursuant to Article 22 SEBG, employee participation must be ensured by an
agreement within the meaning of Articles 22 et seq. SEBG. If no such agreement
can be reached, employee participation is defined by the rules set forth in Part IV
SEBG.

According to Article 51 SEBG, members of the SNB and of other employee
representative bodies created within an SE are afforded the same level of pro-
tection and the same guarantees as members of other employee representative
bodies under national law.
5 Duty of confidentiality
Members of the SNB or of any other employee representative body are sub-
ject to a strict duty of confidentiality with regard to information they receive
in confidence. Article 50(2) SEBG provides that this duty of confidentiality
shall continue in effect until termination of the employee’s membership in the
representative body.
Article 50(1) SEBG contains an exception to the management organ’s duty
to inform. If disclosure of the information would considerably jeopardise or
restrain the SE’s business activities or those of any other company involved, the
management organ is exempt from its duty to inform within the framework of
Articles 24, 25, 37 and 38.
407

With regard to the preparation of an SE’s annual accounts, the general account-
ing principles contained in the PGR apply (relating to Art. 67(2) Reg.). The use
of internationally accepted accounting standards is also permissible.
An SE’s annual accounts must be prepared within six months from the close
of its financial year for approval by the general meeting. The management
organ or the board of directors, as the case may be, must submit the annual
accounts to the general meeting for approval, along with a proposal for the allo-
cation of profits. Dividends may be distributed only if approved by the general
meeting.
An SE must file its approved annual accounts and annual report, along with its
auditor’s report, with the Public Registry.
2 Auditors
Pursuant to national law, a company’s annual accounts and annual report must be
examined by a licensed auditor. For some transactions, review by a specialised
auditor licensed in accordance with the Certified Accountants and Auditors Act
is required.
Auditors must meet strict standards of independence at all times and are pro-
hibited from holding a substantial shareholding in a company they audit. Nor
may they serve as members of such a company’s management or staff.18

With regard to all matters pertaining to its registration, an SE is subject to
supervision by the Public Registry. Where the law requires judicial over-
sight, the competent court is the District Court (Fürstliches Landgericht) in
Vaduz.
VII Dissolution
1 Winding up, liquidation and insolvency
Provided it is registered in Liechtenstein, an SE is subject to national provisions
regarding winding up, liquidation and insolvency. Consequently, the PGR as
well as the Bankruptcy Act (Konkursordnung) and the Judicial Composition
Act (Nachlassvertragsgesetz) shall apply if an SE becomes insolvent.
18
Ibid., Art. 192.
408
Liechtenstein
In addition, Article 45 SEG requires that Article 7 of the Regulation be respected

at all times. Thus, if an SE no longer has its centre of administration in the
same country as its registered seat, this constitutes a material defect in its
articles.19 In this case, the Public Registry shall request the SE to remedy the
situation within a specified time limit by re-establishing its centre of admin-
istration in the place where its registered seat is located or by transferring its
registered seat in accordance with the procedure set forth in Article 8 of the
Regulation. If the defect is not remedied on time, the registry shall order that
the SE be dissolved and liquidated in special summary proceedings.
VIII Applicable law

Within the leeway granted by the Regulation, the Directive and the SEG, an
SE may include a choice-of-law clause in its articles. Furthermore, Article 2
SEG provides that, to the extent the Regulation and the SEG do not contain
any provisions to this effect, the PGR shall apply. If the SE is a regulated
undertaking, such as a bank or an insurance company, additional provisions of
national law shall also apply.
IX Tax treatment
1 Income tax
An SE is subject to corporate tax (Kapitalertragssteuer) at a rate of 7.5% to
20% if it pursues business activities in Liechtenstein. If it has only: (i) a holding
function in Liechtenstein; or (ii) business activities outside Liechtenstein, the
SE may be eligible for a reduced tax rate (a capital tax of 1%).
Dividends distributed by a Liechtenstein SE to its shareholders are subject
to a coupon tax amounting to 4% of the distribution. This tax qualifies as a
withholding tax, as the duty to remit falls on the SE. Shareholders receive the
dividend net of tax.
In general, an SE is also subject to a 1% issuance levy (Emissionsabgabe) on
capital contributions (including any amount above the par value of its shares).
2 Value added tax

Provided the relevant thresholds are met, an SE is subject to VAT in Liecht-
enstein. However, due to a bilateral tax treaty with Switzerland, the VAT rates
in Liechtenstein generally mirror the Swiss rates. Currently, the rate of VAT is
7.6% for most goods and services.
19
Ibid., Art. 125 et seq.
409
X Conclusion
To date, an SE has yet to be registered in Liechtenstein. This somewhat surpris-
ing finding should be viewed in light of the fairly complex rules applicable to
SEs. Moreover, Liechtenstein company law provides for more liberal types of
legal entities, which may often serve investors’ needs better than an SE.
Nonetheless, by adapting its legislation to the Regulation and the Directive,
Liechtenstein has made its contribution to the ongoing harmonisation of com-
pany law throughout the EU and the EEA.
410
16
Norway
lars kristian sande
Telenor
I Introduction 412
III Formation 413
B Name 413
E Capital 417
3 Management 425
B Representation 427
C Liability 428
2 Auditors 430
1 Winding up 432
411
2 Liquidation 432
3 Insolvency 432
X Tax treatment 434
1 Income tax 434
XI Conclusion 436
I Introduction
1. Norway has implemented the Regulation of 8 October 2001 on the Statute
for a European company (the ‘Regulation’) by Act N◦ 14 of 1 April 2005 on the
European company, implementing Annex XXII N◦ 10a of the EEA Agreement1
(the ‘SE Act’).2 The SE Act entered into force on 1 April 2005.3
The king4 was granted powers in the SE Act to enact regulations (forskrift)
governing employee involvement in SEs, as set out in the Directive of 8 October
2001 supplementing the Statute for a European company with regard to the
involvement of employees (the ‘Directive’). Accordingly, a national regulation
on employee involvement in SEs (the ‘Employee Involvement Regulation’) was
adopted on 1 April 2005, along with the SE Act, and entered into force that
same day.
2. The Regulation has been incorporated by reference into Norwegian law.
Section 1 of the SE Act provides that the Regulation applies as Norwegian law
(with the amendments contained in the first protocol of Annex XXII to the EEA
Agreement5 and elsewhere therein). The SE Act is quite short and consists of
only fourteen brief sections. Apart from incorporating the Regulation, the SE
Act mainly contains references to certain provisions of the Norwegian Public
Limited Companies Act 45/1997 (the ‘PLC Act’) where there was a need for
1
Norway is not an EU Member State but is a party to the EEA Agreement between the European
Union, Norway, Iceland and Liechtenstein.
2
The SE Act was ratified by the Council of State (made up of the government, i.e. the prime
minister’s cabinet, and the King) on 1 April 2005, after the necessary resolutions had been passed
in both chambers of the Norwegian parliament.
3
The preparatory works (forarbeid) to the SE Act consist of a consultation paper from the Ministry
of Justice of 13 May 2004, White Paper (ot.prp.) N◦ 17 2005–2005, Proposal to the Odelsting
(Innst. O.) N◦ 54 2004–2005, and Odelsting Resolution (Besl. O.) N◦ 47 2004–2005.
4
Norway is a parliamentary monarchy. References to the ‘king’ refer to the king and his council,
i.e. the Council of State (consisting of the prime minister and other ministers, formally headed
by the king). In practice, however, powers are delegated to the relevant ministries, in this case
the Ministry of Labour and Social Affairs, although all regulations must be formally ratified by
the king in council (i.e. the Council of State).
5
The protocol provides for the addition of the Norwegian allmennaksjeselskap (public limited-
liability company) to Annex I of the Regulation and the Norwegian aksjeselskap (private limited-
liability company) and allmennaksjeselskap to Annex II of the Regulation
412
Norway
country-specific regulation. Thus, the SE Act contains very few new rules in
addition to the Regulation (see Volume 1, chapter 2 of this book).

3. The SE has certain advantages compared to other corporate forms under
Norwegian law. The main advantage of an SE is its European nature, i.e. an SE
can transfer its registered office (and thus bring about a corresponding change in
governing law) without affecting its legal personality and ability to participate in
cross-border mergers (for more information, please refer to Volume 1, chapters
1 and 2).
An SE that is a resident of Norway for tax purposes will be subject to ordinary
Norwegian income tax on its worldwide income, in the same way as any other
Norwegian limited-liability company (i.e. an AS or ASA). However, the com-
plete tax treatment of a Norwegian SE is not clear at the time of writing, as the
Ministry of Finance has yet to finish a proposal for tax consequences (which
is expected to include implementation of the Merger Directive). Please refer to
Section X of this report for further details on the tax treatment of Norwegian
SEs.
III Formation
1 General remarks
A Founding parties
4. The SE Act contains no specific provisions with respect to the requirements
the founders of an SE must comply with, and thus the provisions of the Regu-
lation shall apply (see Volume 1, chapter 2, N◦ 18 et seq.).
5. If a merging party does not have its head office within the European Union, it
can still take part in the formation of an SE provided it meets the requirements
set out under Article 2(5) of the Regulation, i.e. it is formed under the laws of a
Member State, has its registered office in that Member State and has a real and
continuous link with the economy of a Member State.
B Name
6. In Norwegian, an SE is referred to as a europeisk selskap (European com-

pany). The name of an SE must contain the words europeisk selskap or the
abbreviation ‘SE’.6
6
Sec. 2-2, para 6. Business Names Act 79/1985.
413

7. The PLC Act (the provisions of which apply in general to Norwegian SEs)7
is only applicable to Norwegian public limited companies. Under Norwegian
law, whether a company is Norwegian or foreign is determined, at least with
respect to companies registered in an EU Member State or another EEA coun-
try, on the basis of several factors, including the location of the company’s
registered office.8 If a (public limited) company registered in an EU Member
State decides to transfer its head office to Norway, Norwegian company law
will not automatically apply to that company since it will remain subject to
the state where it is registered. If the (public limited) company wishes to be
registered as a Norwegian (public limited) company, it must abide by the rules
of formation (incorporation) set out in the PLC Act. On the other hand, trans-
ferring the head office of a Norwegian company abroad will not necessarily
result in that company losing its Norwegian status, at least not if it contin-
ues to maintain an office in Norway which can provide reasonable services to
shareholders, creditors and public authorities.9 Under certain circumstances,
however, the transfer of a company’s head office abroad could be considered a
violation of Norwegian company law and trigger the winding up of the com-
pany, but it is generally assumed that the threshold for this purpose is quite
high.10
If an SE no longer meets the requirements with respect to its registered office
and head office set out in Article 7 of the Regulation, the competent court shall
order the company to be wound up in accordance with the procedure set out in
Sections 16-15 through 16-18 of the PLC Act.11
Under the PLC Act, a Norwegian public limited company (and thus an SE) is
required to state in its articles the municipality where its registered office is or
shall be located.12 A company’s registered office need not be at the same place
as its head office, but it must maintain an office at the location of its registered
office in order to answer enquiries from third parties (e.g. shareholders, creditors
and public authorities).
7
According to Sec. 2, para. 1 of the SE Act, the provisions of the PLC Act apply to an SE with
its registered office in Norway subject to the provisions of the Regulation, the provisions of the
SE Act, and the company’s articles of association.
8
Magnus Aarbakke et al., Aksjeloven og allmennaksjeloven, kommentarutgave, 2nd ed., Uni-
versitetsforlaget, Oslo, 2004, 66–70, with further references.
9
See footnote 8.
10
See footnote 8. It has been argued that the general meeting of shareholders may have a duty to
wind up the company in such cases, and that the courts could have authority to force the company
to liquidate if the general meeting fails to do so, see A. Eckhoff and G. Knudsen, ‘Flytting
av hovedadministrasjonen til et norsk allmennaksjeselskap eller aksjeselskap til utlandet’ in
Festskrift til Finn Berg Jacobsen, Oslo 2000, 151–52.
11 Sec. 8 SE Act. 12 Sec. 2–3, para. 1, N◦ 2 PLC Act.
414
Norway

8. The SE Act provides that the provisions of Sections 16-14 through 16-17 of
the PLC Act (on the liquidation of companies) shall apply mutatis mutandis to
the transfer of a Norwegian SE’s registered office in accordance with Article
8 of the Regulation (i.e. the transfer of an SE’s registered office from Norway
to another Member State).13 In addition, specific rules govern the transfer of
financial institutions and insurance companies. Once the transfer resolution has
been duly adopted, the Norwegian SE must add the words under flytting (in
transfer) to its business name.14
9. The transfer proposal, drawn up in accordance with Article 8(2) of the Reg-
ulation, must be filed with the Register of Business Enterprises (the Foretak-
sregisteret, hereinafter the ‘Business Register’). The Business Register shall
then publish the decision to transfer the SE’s registered office and notify the
company’s creditors that any objections to the transfer must be submitted to
the SE within two months from the date on which the notice first appears in the
Business Register’s electronic publication.15 A notice of the transfer must be
posted in the Business Register’s electronic publication and published twice,
over at least a one-week interval, in a widely read newspaper in the area in which
the SE’s registered office is located. The newspaper notice may be in abridged
form and refer to the electronic notice. The SE Act contains no specific rules
on the drawing up of the report mentioned in Article 8(3) of the Regulation and
the making available of this report to shareholders, as required by Article 8(4)
of the Regulation (see Volume 1, chapter 2, N◦ 83).
10. If a creditor with an undisputed claim16 which has fallen due objects to
the transfer before expiry of the two-month deadline (see N◦ 8 above), the
merger cannot go through before the claim has been settled. A creditor with a
disputed claim or one that is not yet due may request adequate security. The
relevant district court shall hear disputes regarding the existence of claims and
the adequacy of security. The court can reject a creditor’s request for security
if it is clear that the claim is invalid or that the merger will not jeopardise
satisfaction of the claim.
11. The general meeting of shareholders must vote on the transfer of the SE’s
registered office. Prior to the meeting, shareholders must receive a copy of the
transfer proposal and the report of the board of directors or17 the management
board.
The transfer of an SE’s registered office is in effect an amendment to the com-
pany’s articles of association and, as such, requires the approval of at least
13 Sec. 7, para 2. SE Act. 14 Ibid., Sec. 7, para. 1 15 www.brreg.no

16
For this purpose, only monetary claims are considered ‘claims’ under these provisions (Secs.
13–14 and 13–15 PLC Act); see also Aarbakke et al., op. cit., 823.
17
Depending on whether the SE has a one-tier or a two-tier management structure.
415
two-thirds of the votes cast at the general meeting.18 Section 5-18 of the PLC
Act requires that the resolution be approved by at least two-thirds of both the
votes cast and the share capital represented at the general meeting. Norway has
not opted to allow any exceptions to this rule pursuant to Article 59(2) of the
Regulation.
12. The Business Register will issue a certificate attesting to the completion
of all acts and formalities required to transfer the SE’s registered office from
Norway to another Member State.19
13. Norway has enacted the possibility contained in the Regulation allowing
the competent authorities to oppose the transfer abroad of an SE’s registered
office.20 The king21 may thus prohibit the transfer of an SE’s registered office in
the public interest. It is not yet clear which transfers will be considered ‘against
the public interest’.22
In addition, SEs that conduct business governed by the legislation mentioned
in Section 7, second paragraph, points (a) through (f), must obtain advance
approval for the transfer.23 The businesses mentioned in this provision are super-
vised by the Norwegian Financial Supervisory Authority. The requirement to
obtain approval under the various acts must be exercised in accordance with
the provisions of the SE Act.24
14. Norwegian law does not yet provide tax exemptions for cross-border merg-
ers. However, exemptions are available for mergers between Norwegian limited-
liability companies, i.e. two Norwegian public limited companies can merge
without any (Norwegian) tax consequences for their shareholders or the compa-
nies themselves. As mentioned above, there is currently no proposal in Norway
to implement the Merger Directive or any proposal for SE-related tax issues.
Please refer to Section X of this report for further information on the tax treat-
ment of Norwegian SEs.
18
See Art. 59(1) Reg. and Volume 1, chapter 2, nos. 83 and 66.
19 Sec. 7 in fine SE Act. 20 Cf. Art. 8(14) Reg. 21 Cf. footnote 4.
22
The Ministry of Justice did not include such a provision in its original proposal for the SE Act.
A provision to this effect was later added by the parliamentary justice committee in its proposal
(Innst. O. N◦ 54 2004-2005) to the Odelsting (the first chamber of the Norwegian parliament),
which contains very few arguments justifying the inclusion. It is possible that the committee
was concerned about the adverse effects of transferring the headquarters of a company from
Norway (i.e. lost jobs, know-how etc). It is highly doubtful that such effects will be considered
against the public interest, however, within the meaning of the Article 8(14) of the Regulation.
This provision is completely generic, as it does not limit the public interest to certain grounds
(see Volume 1, chapter 2, N◦ 85), but it should most likely be interpreted in accordance with
the Regulation.
23
The Savings Bank Act of 24 May 1961 (N◦ 1), the Commercial Bank Act of 24 May 1961 (N◦
2), the Insurance Business Act 39/1988, the Act on Financial Services and Financial Institutions
40/1988, the Stock Exchange Act 80/2000, and the E-Money Act 74/2002.
24
Sec. 2, para. 1 SE Act and White Paper N◦ 17 2004-2005, 16, 26.
416
Norway
D Corporate purpose
15. The PLC Act requires25 that a company organised under Norwegian law
states the purpose of its business in its articles of association. The articles are
recorded with the Business Register and made available to the public. The cor-
porate purpose may be stated in general terms, e.g. the company will engage in
industrial activities or be an investment company. Third parties are assumed to
be familiar with a company’s corporate purpose as published by the Business
Register,26 but this does not mean that they will always be considered to know
whether an act of the company’s management or board of directors falls within
its corporate purpose, as this could depend on the justification for the trans-
action.27 Section 6-33 of the PLC Act states that actions taken by any person
representing an SE in accordance with Sections 6-30 to 6-32 of the PLC Act28
shall bind the company unless it can establish that the third party in question
was aware or should have been aware that the SE acted outside its corporate
purpose.
E Capital
16. The share capital of an SE should be at least €120,000. In order to register
the share capital, it must be fully paid up (regardless of whether the contributions
are made in cash or in kind), and thus registered share capital will always be
fully paid in. Norwegian law does not recognise the concept of ‘authorised
share capital’ (i.e. share capital which is registered but not yet paid in), but
the board of directors may be granted authority to increase the share capital
(by up to 50% of the existing amount) by the general meeting of shareholders,
which delegation of authority shall be recorded with the Business Register. A
Norwegian SE may denominate its share capital in Norwegian kroner (NOK).29
Shares in a Norwegian public limited company must be registered (i.e. it is not
possible to issue bearer shares), and the company is obliged to establish and
maintain a shareholders’ register with a securities registry established under the
Securities Register Act 64/2002.30
25
Sec. 2-2, para. 1, N◦ 4 PLC Act.
26
Sec. 10-1, para. 1 Business Register Act 78/1985.
27
See e.g. Aarbakke et al., op. cit., 112, 560 et seq.
28
That is, the board of directors, authorised signatories and the managing director.
29
Sec. 12 SE Act. According to Section 3-4 of Accounting Act N◦ 56/1998 (the ‘Accounting
Act’) a Norwegian public limited company may denominate its accounts in either Norwegian
kroner or the currency with which the business is most connected (i.e. its operational currency),
and its annual accounts may be denominated in either Norwegian kroner, euros or its operational
currency. These provisions also apply to Norwegian SEs.
30
Sec. 4-4, para. 1 PLC Act. In practice, shareholders’ registers are kept by the Norwegian Central
Securities Depository (Verdipapirsentralen or ‘VPS’) in electronic form.
417


17. A Norwegian public limited company (allmennaksjeselskap or ‘ASA’), as
opposed to a Norwegian private limited company (aksjeselskap or ‘AS’), may
participate in a merger to form an SE.31 The merger may be carried out by acqui-
sition (i.e. the acquiring company becomes an SE) or result in the formation of
a new SE.32
The formation of an SE by merger is initiated by the board of directors of each
participating company, which prepares draft terms of merger in accordance with
Article 20 of the Regulation.33 Section 5 of the SE Act states that the provisions
of the PLC Act on formation by merger shall apply mutatis mutandi to the
formation of an SE by merger, meaning the Norwegian participating company
(-ies) must abide by the provisions of Chapter 13 of the PLC Act.
It must be assumed that the obligation of the board of a Norwegian participating
company to prepare a so-called merger plan (fusjonsplan) in accordance with
Section 13-3 of the PLC Act has been replaced by its duty to prepare draft
terms of merger. However, the board must still prepare a report on the merger
in accordance with Section 13-9 and ensure that a merger statement is prepared
in accordance with Section 13-10 of the PLC Act. The merger report shall
contain a description of the merger’s effects on the company and explain the
reasons for the proposed merger and the significance of the merger for the com-
pany’s employees. The statement shall be prepared by one or more independent
experts who must be state authorised or registered public accountant(s). The
statement must at least indicate the methods used to determine the consideration
offered shareholders of the transferring company, whether these methods are
appropriate, whether any special difficulties arose in determining the amount
of consideration, and whether the consideration is fair and reasonable.
The PLC Act requires that the participating companies’ articles of association,
annual accounts, directors’ report and auditor’s report for the past three financial
years be enclosed with the draft terms of merger, along with an interim balance
sheet if the draft terms were prepared and signed more than six months after the
date of the last annual accounts. The interim balance sheet must be prepared
and audited in accordance with the rules governing annual accounts and must
not predate the draft terms of merger by more than three months.
18. The draft terms of merger (including all annexes, i.e. the abovementioned
reports, annual accounts, etc. for the past three years for each participating
31
Art. 2(1) Reg.; cf. Annex I (see footnote 5).
32
Please refer to chapter 2, N◦ 23 of volume 1 of this book for a further description.
33
Please refer to chapter 2, N◦ 25 of volume 1 of this book for a further description of the terms.
418
Norway
company, including an interim balance sheet, if applicable) must be filed with

the Business Register at least one month prior to the general meeting scheduled
to vote on the merger (Sec. 13-13(1) PLC Act). At that time, this information
must also be sent to all shareholders and made available at the company’s head
office.34
19. Under Norwegian law, participation by a Norwegian company in a merger
(including any amendments to its articles of association necessitated thereby)
must be approved by at least two-thirds of the votes cast and the share capital
represented at the general meeting. Any resolution to amend the company’s
articles of association that reduces the rights of an entire class of shareholders
must be approved by the holders of at least two-thirds of the share capital
represented by that class and, in addition, by at least half the votes held by
shareholders who do not own shares in any other class. The company’s articles
may provide for higher majority requirements. Under Norwegian law, the board
of directors of the acquiring company may, subject to certain conditions, take a
decision on the merger without the approval of the general meeting. However,
such authority cannot be used in the formation of an SE by merger due to the
wording of Article 23 of the Regulation.
The merger resolutions passed by the general meeting shall expire if not filed
with the Business Register within one month following approval of the merger.

20. The Member States are free to adopt appropriate provisions to protect
minority shareholders who oppose the formation of an SE by merger. Norway
has not adopted any specific rules in this regard.
(iii) Rights of creditors

21. Creditors of Norwegian companies participating in a merger enjoy special
protection. The merger may not be completed until two months following reg-
istration of the merger resolution with the Business Register (often referred to
as the ‘creditors’ period’). Any creditor of a participating company may object
to the merger by giving notice to the company within this two-month period. If
a creditor with an undisputed and overdue claim objects to the merger within
this period, the merger may not go through until the claim is paid in full. A
creditor whose claim is disputed or not yet due may object to the merger and
seek security for its claim, in which case the merger may not go through until
the company has provided adequate security. The courts will decide whether
a claim exists and whether the security is adequate. The courts can reject a
request for security if they find that the claim does not exist or that the merger
will not undermine the creditor’s ability to obtain satisfaction of its claim.
34
Sec 13-12 PLC Act; see also chapter 2, N◦ 28 of Volume 1 of this book.
419
(iv) Acquisition by a company holding 90% or more of the shares in

another company
22. Norwegian law does not contain an exception to the reporting requirement
for a merger by acquisition of a company holding at least 90% of the shares in
another company. However, a simplified procedure for the merger of a wholly
owned subsidiary is provided by Section 13-24 of the PLC Act, whereby the
boards of the participating companies can decide on the merger. Any shareholder
who, directly or indirectly through subsidiaries, acquires more than 90% of the
issued share capital and voting rights of a Norwegian PLC (and thus of a
Norwegian SE) can force the minority shareholders to sell their shares for cash
(and each minority shareholder has the right to oblige the majority shareholder
to purchase its shares). Thus, in order for a 90% shareholder to use the simplified
procedure, it must acquire full ownership of the company.35 The boards will
still be required to draft a merger report and file it with the Business Register.
There is also a two-month creditors’ period.
(i) Procedure
23. In Norway, private limited companies (aksjeselskap) and public limited
companies (allmennaksjeselskap) are entitled to participate in the formation of
a holding SE. There are no special rules on the protection of minority share-
holders,36 creditors or employees applicable to the formation of a holding SE.
The incorporation process will thus be the same as for the formation of a pub-
lic limited company (ASA), i.e. the founders must sign and register with the
Business Register a memorandum of incorporation that meets the requirements
of the PLC Act.
The memorandum of incorporation contains the company’s articles of associa-
tion which shall state at least: (i) that the company is an SE; (ii) the company’s
name; (iii) the municipality in which the company’s registered office will be
located; (iv) the company’s business; (v) the share capital; (vi) the par value
of the shares; (vii) the number of shares; (viii) the number of board members
(or the fewest and highest possible number, if applicable); (ix) whether the
company shall have several managing directors or if the board or the corporate
assembly (bedriftsforsamling) shall have authority to decide whether the com-
pany shall have several managing directors and, if so, whether they should be
regarded as a collective organ; and (x) the matters to be dealt with at the annual
general meeting. The memorandum shall also contain the company’s opening
audited balance sheet.
35
The shares are transferred to the majority shareholder immediately, and the shareholders sub-
sequently make payment to an escrow account.
36
Minority shareholders need not contribute their shares to the holding SE, in which case they
will remain shareholders in the holding SE’s subsidiary.
420
Norway
Since incorporation entails contributing the shares of the existing companies

to the holding SE, an auditor must draft a valuation report for the shares in
accordance with Section 2-6 of the PLC Act.
All shares must be subscribed for, and all contributions made, prior to registering
the company with the Business Register. The auditor shall confirm receipt
of the share capital contributions (cash and/or shares). The Business Register
must be notified of the incorporation within three months following the signing
of the company’s memorandum of incorporation. The company is officially
incorporated once it is registered with the Business Register.
24. The rules on the formation of a Norwegian public limited company (all-
mennaksjeselskap) apply to the formation of a subsidiary SE with its registered
office in Norway. As with the incorporation of a holding SE, there are no specific
national rules relating to the incorporation of a subsidiary SE.
25. In Norway, only a public limited company (allmennaksjeselskap) can be

converted into an SE (Art. 2(4) Reg.). Chapter 15 of the PLC Act contains rules
on the conversion of a public limited company (ASA) into a private limited
company (AS). These rules apply mutatis mutandis to the conversion of an
ASA into an SE (Sec. 6 SE Act).
The board of directors shall prepare a draft conversion resolution and the
required amendments to the company’s articles of association, stating the rea-
sons for the proposed conversion. The conversion must be approved by the
general meeting by the same majority required to amend the articles of associ-
ation of a Norwegian public limited company, i.e. two-thirds of the votes cast
and share capital represented. The Business Register must be informed of the
decision within three months following adoption of the resolution.

26. Prior to registration, a Norwegian public limited company may not incur
rights or obligations other than those stated in its memorandum of incorporation
or provided for by law.37 A person who incurs obligations on behalf of an SE
in formation (i.e. prior to its registration) for which the company is liable in
accordance with Section 2-10(1) of the PLC Act shall be held personally and
jointly and severally liable for these obligations, which the company shall, in
any case, assume upon registration.
37
Sec. 2-20(1) PLC Act.
421

27. An SE shall be registered with the Business Register, the central registry
for all Norwegian companies. Publication is done electronically via the Busi-
ness Register’s website (www.brreg.no). Certain information is made publicly
available free of charge, such as a company’s name and organisation number,
registered address, and the name(s) of its managing director(s). In addition, the
main details of all registrations are published. For a small fee, anyone can obtain
an extract from a company’s registration certificate, indicating, in addition to
the information mentioned above, its registered share capital and the names of
its board members and auditor, as well as its articles of association.

28. Norwegian public limited companies and SEs acquire legal personality
upon registration with the Business Register. From this point on, an SE has the
capacity to incur obligations (see N◦ 25 of this report).

1 General remarks
29. According to the SE Act, the rules applicable to Norwegian public lim-
ited companies (ASA) apply mutatis mutandis to Norwegian SEs, unless the
Regulation provides otherwise.
The highest authority in a Norwegian PLC is the general meeting of sharehold-
ers, followed by the board of directors and finally by management, headed by
a managing director who is in charge of the company’s day-to-day business.
The Norwegian system can thus be characterised as more one-tier than two-
tier. However, in companies with more than 200 employees there must be a
supervisory organ, a so-called corporate assembly (bedriftsforsamling), which
is elected by shareholders and whose main duties are to supervise and control
the board’s and the managing director’s management, elect board members
(including the chair), and take certain decisions of material importance to the
company, such as those involving significant investments and divestments and
reorganisations with a material effect on the company’s workforce. Thus, the
management structure of a Norwegian public limited company is in fact a cross
between a two-tier and a one-tier system. However, the provisions of the Reg-
ulation will take precedence over the PLC Act (with certain exceptions, see N◦
28 of this report).
The SE Act states that for SEs with a two-tier management structure, the pro-
visions of the PLC Act regarding the board shall apply mutatis mutandis to
the management organ, and the provisions regarding the corporate assembly
shall apply mutatis mutandis to the supervisory organ (Sec. 9, para. 1, second
422
Norway
sentence SE Act). For SEs with a one-tier structure, the provisions of the PLC
Act regarding the management of the company shall apply mutatis mutandis to
management of an SE, subject to the provisions of the Regulation, and the pro-
visions regarding the board shall apply mutatis mutandis to the administrative
organ (Sec. 10, para. 1 SE Act).
Certain types of public limited companies, in particular financial institutions
(i.e. banks operating under the Commercial Banking Act, insurance compa-
nies operating under the Insurance Providers Act, and providers of financial
services operating under the Financial Services Act), are required to set up spe-
cial administrative and supervisory organs. The Ministry of Justice interprets38
Article 9(3) of the Regulation to mean that the requirement to establish such
organs take precedence over the organisational requirements contained in the
SE Act, provided, however, the employees’ right to elect members of these
organs does not apply and employee involvement is regulated in full by the
Regulation. The Ministry’s interpretation would seem to be based on applica-
tion of the lex specialis principle and is supported by the Ministry of Finance
and the Norwegian FSA.39 In our opinion, it is unclear whether Article 9(3) of
the Regulation should be interpreted to mean that such national requirements40
take precedence over the provisions of the Regulation and that the principle of
lex specialis should apply. However, since both the Ministry of Finance and the
Norwegian FSA (the supervisory authorities for companies organised under the
abovementioned acts) support the Ministry of Justice’s position, the founders
of a Norwegian SE who do not wish to adhere to such national rules should, in
practice, request an exemption through the courts, pending a formal change in
the law.
Please refer to Section IV.3 of this report for further information on the one-
tier/two-tier management structures.
2 General meeting
30. As stated above, the provisions of the PLC Act apply to Norwegian SEs,
subject to the rules set forth in the Regulation.
At least one general meeting of shareholders must be held each year, no later
than six months following the close of the financial year, in order to approve
the annual accounts (including any dividend distributions and the remuneration
of board members and the company’s auditors) and to deal with other matters
38 Cf. White Paper N◦ 17 2004-2005, 29 et seq. 39 Ibid., 30.

40
We assume Article 9(3) of the Regulation should be interpreted to mean that national require-
ments regarding the running of businesses other than organisational requirements (e.g. capital
and other qualification requirements) should apply in full to SEs.
423
required by law or the company’s articles of association (typically, the election

of board members and members of the corporate assembly) (Sec. 5-6(1) PLC
Act). The first financial year may last up to 18 months, meaning that if the
company is incorporated in the latter half of a calendar year (or less than six
months before the end of the financial year), it need not prepare accounts for
the period between its incorporation and the end of the year in which it was
incorporated (Sec. 1-7, para. 2 Accounting Act). Therefore, an SE incorpo-
rated in the second half of a calendar year (i.e. less than six months before the
end of the financial year) need not hold an annual general meeting until after
the close of the following financial year.41 Thus, Article 54 of the Regulation,
which allows an SE to hold its first annual general meeting of shareholders at
any time during the first eighteen months of its existence, will apply to Norwe-
gian SEs, as long as there is a corresponding exemption not to prepare annual
accounts.
31. The board of directors is responsible for calling the general meeting (Sec. 5-
8 PLC Act).42 If the board fails to convene a general meeting which must be held
by law or pursuant to the company’s articles of association or to a decision of the
general meeting, the competent court shall call the meeting when requested to
do so by a board member or a member of the corporate assembly, the managing
director, the auditor or a shareholder. Since the Regulation takes precedence
over the PLC Act, it is assumed in the preparatory works to the SE Act that the
supervisory organ can also convene a general meeting43 and furthermore that
the Norwegian FSA’s authority to call general meetings of companies subject
to its authority shall extend to Norwegian SEs.44
As mentioned above, a company is required by law to hold an annual general
meeting to approve its annual accounts. In addition, it is obliged to convene an
extraordinary general meeting if requested to do so in writing by the board, the
corporate assembly (or its chair), the auditor or shareholders representing at
least 5% of the company’s share capital, in order discuss a specific issue (Sec.
11, para. 2 SE Act; cf. Sec. 5-7, para. 2 PLC Act). The board is responsible
for ensuring that a meeting is held within one month from receipt of a written
request. The district court of the judicial district where the SE’s registered office
is located can also call a general meeting pursuant to Articles 54(2) and 55(2)
of the Regulation (cf. Sec. 11, para. 1 SE Act).
The PLC Act requires that written notice of a general meeting be sent to all
shareholders whose addresses are known at least two weeks prior to the date
of the meeting, unless the company’s articles stipulate a longer period. Any
41
Cf. Aarbakke et al., op. cit., 343.
42
In a Norwegian PLC with a corporate assembly, the articles of association may provide that
the chair of the assembly shall call the general meeting. Since an SE does not have a corporate
assembly, this provision does not apply.
43 Cf. White Paper N◦ 17 2004-2005, 31-2. 44 Ibid., 32.
424
Norway
shareholder is entitled to request that an item be placed on the agenda of a

general meeting if it informs the board of directors sufficiently in advance so
that the matter can be mentioned in the notice of the meeting. (This right thus
supersedes the 10% requirement mentioned in Article 56 of the Regulation.)
32. Subject to any provisions to the contrary in a company’s articles of associ-
ation, the PLC Act provides that each share carries one vote. Treasury shares
(i.e. previously issued shares that have been acquired by the company) cannot
be voted. (A Norwegian PLC may not issue shares to itself.)
In general, decisions that shareholders are entitled to take under the PLC Act
or the company’s articles of association may be passed by a simple majority
of votes cast. For elections, the candidate who obtains the most votes shall be
elected. However, certain decisions, including, but not limited to, resolutions to:
(i) authorise an increase or decrease in the company’s share capital; (ii) waive
pre-emptive rights in connection with any share issue; (iii) approve a merger
or de-merger; and (iv) amend the company’s articles of association, must be
approved by at least two-thirds of both the votes cast at the general meeting
and the share capital represented. Certain decisions require a greater majority
(Secs. 5-19 and 5-20 PLC Act). There are no quorum requirements for general
meetings.

33. Shareholders may attend the general meeting either in person or by proxy.
They are not required to attend, however.
According to the PLC Act, all shares in a company carry equal rights. However,
the act permits a company’s articles of association to provide for different
types of shares (e.g. different classes). In this case, the articles must specify
the various rights, preferences and privileges and the total par value for each
class.
3 Management
(i) General remarks
34. The founders of an SE must decide whether to set up a one-tier or a two-tier
management structure. The Norwegian system for public limited companies is,
to a certain extent, a cross between a one-tier and a two-tier system (see Section
IV.1 above).
For a general description of the rights and obligations of the various bodies in
the one-tier and two-tier systems, please refer to Volume 1, chapter 2, n◦ . 67 et
seq. of this book.
425

35. As mentioned above, for SEs with a one-tier management structure, the
provisions of the PLC Act on management shall apply mutatis mutandis, subject
to the provisions of the Regulation, and the provisions regarding the board shall
apply mutatis mutandis to the administrative organ.
The SE Act stipulates that a Norwegian SE shall have a managing director
and that the provisions of the PLC Act on the managing director shall apply
mutatis mutandis to the managing director of an SE (Sec. 10, para. 2 SE Act;
cf. Art. 43(1) Reg.). This means, for instance, that the managing director is in
charge of the day-to-day management of a Norwegian SE but may not take
unusual decisions or decisions of material importance to the company. Fur-
thermore, the other obligations of the managing director under the PLC Act
shall apply to the managing director of an SE, e.g. the managing director must
prepare a written or oral report for the board; the board or a board member may
demand a written report regarding specific issues from the managing director;
and the managing director is responsible for ensuring that the SE’s accounts
comply with applicable law. The managing director also has the right, and is
in fact obliged, to participate in board meetings and general meetings. The
managing director further has the right (but is not obliged) to speak at general
meetings.
The administrative organ shall have at least three members (Sec. 10, para.
3 SE Act). The articles may stipulate a higher number, however. Members
of the administrative organ shall be elected by the general meeting (Sec. 10,
para. 3 SE Act; cf. Art. 43(3) Reg.). The provisions of the PLC Act regarding
the employees’ right to elect board members shall not apply to the election
of members of the administrative organ.45 Since the provisions regarding the
board in the PLC Act apply mutatis mutandis to the administrative organ, the
managing director may not also serve as chair of the administrative organ (Sec.
6-1(3) PLC Act).

36. As mentioned, the SE Act provides that, for SEs with a two-tier management
structure, the provisions of the PLC Act regarding the board shall apply mutatis
mutandis to the management organ and the provisions regarding the corporate
assembly shall apply mutatis mutandis to the supervisory organ (Sec. 9, para.
1, second sentence SE Act).
A Norwegian SE must have a managing director (Sec. 9, para. 1, third sentence
SE Act) who is in charge of the day-to-day running of the company (cf. nos.
28 and 34 of this report). There is no minimum number of members for the
management organ. The management organ shall supervise and organise the
45
Sec. 3 SE Act; cf. White Paper N◦ 17 2004-2005, 31.
426
Norway
running of the company but shall not participate in daily operations (see N◦
28 of this report). If the management organ has more than one member, the
members are considered to form a corporate body which takes decisions by a
simple majority. Members are elected by the supervisory organ (cf. Art. 39(2)
Reg.).46
The supervisory organ must have at least five members (Sec. 9, para. 2, first
sentence SE Act). The SE’s articles of association may prescribe a higher or
minimum number (which may not be less than five) as well as a maximum
number of members, the actual number of which can be determined by the
general meeting within the parameters set by the articles. Members of the
supervisory organ are elected by the general meeting.
The supervisory organ supervises the management organ’s and the managing
director’s running of the company. The supervisory organ also takes decisions
on certain material issues, authority for which is entrusted to the corporate
assembly in a PLC, such as material investments and divestments and reor-
ganisations that materially affect the company’s workforce (see N◦ 28 of this
report). However, a decision to file for bankruptcy can only be taken by the
management organ (Sec. 6-18(1) PLC Act).
37. No person can sit simultaneously on both the management organ and the
supervisory organ (Reg. Art. 39(3) and Sec. 6-36(2) PLC Act), and the man-
aging director may not be a member of the supervisory organ. However, the
supervisory board can appoint one of its members to temporarily fill a vacancy
for up to two months (Sec. 9, para. 3 SE Act).
B Representation
38. In the one-tier system, the board of directors represents the SE in its relations
with third parties (Sec. 6-30 PLC Act). The board can delegate this power to
certain of its members, the managing director or individual employees, and the
articles of association can also provide for such a delegation of authority (cf.
Sec. 6-31(1) PLC Act).
In the two-tier system, the management organ represents the SE in its relations
with third parties (cf. Sec. 9, para. 1 SE Act; Sec. 6-30 PLC Act). Furthermore,
the SE’s articles of association may provide that the company can be represented
by one or more members of its management organ, its managing director, an
individual employee or a specified number and/or combination of the foregoing
persons acting jointly.
The managing director represents the company with respect to matters of day-
to-day management (Sec. 6-32 PLC Act).
46
Cf. White Paper 17 2004-2005, 28.
427
If any of the foregoing persons acts beyond his or her authority to represent the
company, the company shall not be bound by its representative’s actions if it
can prove that the third party in question acted in bad faith, i.e. was aware or
should have been aware that the representative did not have authority to bind
the company.
C Liability
39. Members of the corporate organs of a Norwegian SE are liable for any
damage they cause whether wilfully or by negligence, including damage to the
SE itself, its shareholders, creditors and third parties.47 The general meeting
decides whether the company should take legal action against these members,
although shareholders representing at least 10% of the share capital or, if the
company has more than 100 shareholders, 10% of the total number of share-
holders, can file suit on behalf of the company. The shareholders shall bear
the costs of these proceedings but can claim reimbursement from the damages
award, if any. Certain other provisions, regarding release from liability, etc.,
also apply.
40. Norway has recognised a right for employees to be represented on corporate
management and supervisory organs since the mid-70s (Limited Liability Com-
panies Act 1976). The PLC Act contains several provisions regarding employee
representation on the board of directors and in the corporate assembly. In brief,
if the PLC has a corporate assembly, employees are entitled to elect one-third of
its members. If one-third of the members of the corporate assembly so request,
one-third of the board members shall be elected from amongst the employ-
ees. In practice, this means that corporate assemblies and boards of directors
in Norwegian PLCs are composed of one-third employee representatives. In
PLCs without a corporate assembly there are rules that guarantee employee
representation on the board if the company has more than 30 employees, at
which point the employees can appoint one board member and one observer.
If there are more than 50 employees, they have a right to appoint one-third of
the board members from amongst their number. Taking into account the fore-
going, Norwegian PLCs do not have a works council, unlike in many other EU
Member States.
Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a Euro-
pean company with regard to the involvement of employees (the ‘Directive’)
was incorporated into Norwegian law as part of the EEA Agreement by the EEA
Committee on 25 June 2002 (see Annex XVIII N◦ 32e to the EEA Agreement).
In addition, Section 3 of the SE Act stipulates that the king in council shall set
47
Cf. White Paper N◦ 17 2004-2005, 27; Chapter 17 PLC Act.
428
Norway
out further provisions on employee involvement in a regulation (which power

was delegated to the Ministry of Labour). The Ministry has adopted Regula-
tion 273/2005 on employee involvement in SEs (the ‘Employee Involvement
Regulation’), with a statutory basis in Section 3 of the SE Act, which provides
that the Employee Involvement Regulation, rather than the corresponding pro-
visions of the PLC Act, shall govern the employees’ right to be represented
on the management organs of an SE. The Employee Involvement Regulation
also takes precedence over the special rights granted employees in the Com-
mercial Banking Act and the Insurance Providers Act.48 However, due to the
‘before-after’ principle set forth in the Directive, if the employees of a newly
formed SE are taken over from a bank or insurance company and the SE is
organised under the Commercial Banking Act or the Insurance Providers Act,
the employees will still be entitled to representation in accordance with this
legislation pursuant to the ‘best representation principle’.49

41. The Employee Involvement Regulation reflects the provisions of the Direc-
tive on the composition of the special negotiating body (SNB), which is made up
of elected members from the participating companies. Please refer to Volume 1,
chapter 3 of this book for more information regarding the composition of the
SNB (p. 80 et seq.)
42. As stated under N◦ 39 of this report, Norwegian law has recognised for quite
some time the right for employees to sit on the management bodies of a PLC
(both the board of directors and the corporate assembly). If an SE is formed
through conversion of a Norwegian PLC, the employees’ right to representa-
tion shall continue. The Employee Involvement Regulation contains a standard
agreement between employees and the company on employee involvement.

43. Neither the SE Act nor the Employee Involvement Regulation contains spe-
cific rules regarding the protection of employee representatives. However, there
are several general rules in the Workplace Act (Arbeidsmiljøloven) designed to
protect employees against discrimination, as well as in the collective bargain-
ing agreement (CBA) concluded between the Norwegian Labour Organisation
(LO) and the Confederation of Norwegian Businesses and Industry, which also
contains specific rules on employee representatives.
48 Cf. White Paper N◦ 17 2004-2005, 35. 49 Ibid.
429

44. The SE Act does not contain any special provisions regarding an SE’s duty to
keep accounts. The SE Act provides that all provisions applicable to Norwegian
PLCs by law shall apply to Norwegian SEs (Sec. 2, para. 1, second sentence
SE Act). The obligation of a Norwegian SE to keep accounts is contained in
Accounting Act N◦ 56/2005 (Sec. 1-2, N◦ 2), which states that a Norwegian
PLC is obliged to keep accounts in accordance with the Accounting Act.
Under the PLC Act and the Accounting Act, the board of directors of a PLC
is responsible for ensuring that the company’s accounts are kept and prepared
in accordance with the Accounting Act and made available to shareholders in
accordance with the PLC Act. If the SE has a two-tier management structure,
this responsibility is vested in the management organ rather than the supervi-
sory organ (Sec. 9, para. 2, second sentence SE Act). In SEs with a one-tier
management system, the administrative organ bears this responsibility (Sec. 10,
para. 2, second sentence SE Act).
The keeping of books, records and accounts is regulated by the Accounting Act
and, to a certain extent, the PLC Act. Norway has adopted Council Regulation
1606/2002 on the application of international accounting standards through the
EEA Agreement (Annex XXII N◦ 10b) and the Accounting Act (Sec. 3-9).
As mentioned above, an SE has a duty to submit its annual accounts to the
general meeting of shareholders for approval no later than six months following
the close of its financial year. In Norway, the financial year follows the calendar
year, but a company can choose another financial year if, due to seasonal activity,
this will enhance the informational value of its annual accounts. In addition, if
the SE is a subsidiary of a foreign company, it can follow the financial year of
its foreign parent. Other exemptions may be granted.
The accounts of a Norwegian SE must be filed with the Company Accounts
Register (Regnskapsregisteret) within one month of approval (Sec. 8-2, para. 1
Accounting Act). The accounts must be made available to the public (i.e. to
all interested third parties) either via the Company Accounts Register or by the
company itself (Sec. 8-1, para. 1 Accounting Act).
2 Auditors
45. An SE is obliged to appoint one or more auditors and may elect substitute
(deputy) auditors (Sec. 7-1(1) PLC Act). The auditor shall be appointed by
the general meeting. It is not common to appoint more than one auditor. The
auditor may be a legal entity, e.g. an accounting firm, in which case it will
be regarded as a single auditor, even if the auditing tasks are performed by
several persons. Only registered or authorised accountants can serve as an SE’s
430
Norway
auditors. The auditor must be independent within the broad meaning of that
term, i.e. independent of the company and of other parties that could have an
interest in the company.
The auditor is not appointed for a specific term and serves until the general
meeting elects another (Sec. 7-2(1) PLC Act). According to the literature, this
means that it is not possible to include in the company’s articles of association
provisions specifying a fixed term for the auditor or for the company and the
auditor to agree on a defined term.50 The auditor can resign, but it is assumed
that the resignation will only take effect on the date of the next annual general
meeting and that the notice period cannot be longer than necessary to replace the
auditor.51 In addition, the auditor has a right under Auditing Act N◦ 2/1999 (Sec.
7-1) to resign if material violations of law have been discovered and brought
to the company’s attention and the company has not taken appropriate steps to
rectify the situation.
46. The auditor’s primary duties are to audit the company’s annual accounts and
to draft an audit report on the accounts for the SE’s general meeting of share-
holders (Sec. 7-4 PLC Act). The report shall contain a statement that the audit
has been carried out in accordance with the law and good accounting practices,
and the auditor shall give an opinion as to whether the accounts provide a fair
view of the company’s financial situation, in accordance with the applicable
accounting standards, if the accounts have been prepared in accordance with
the law (and applicable regulations), and if the information contained in the
board’s annual report is in accordance with the law and consistent with the
accounts.
The auditor shall attend general meetings if this is necessary due to the nature
of the issues to be discussed at the meeting. In any event, the auditor has a right
to attend any general meetings.

47. The Norwegian Business Register is the primary authority responsible for
registering SEs and approving all filings. Decisions of the Business Register can
be appealed to the Ministry of Trade and Industry, whose decisions may in turn
be challenged before the civil courts. Violations of the applicable legislation and
regulations can, as a general rule, result in criminal liability. A police inves-
tigation will be conducted and the public prosecutor’s office can commence
proceedings. In certain cases, in the Norwegian Authority for the Investiga-
tion and Prosecution of Economic and Environmental Crime (Økokrim) will
investigate the matter and bring proceedings.
50 Aarbakke et al., op. cit., p. 579. 51 Ibid.
431
VIII Dissolution
1 Winding up
48. The liquidation of a Norwegian SE can be either voluntary or involuntary.
Liquidation requires that all of the company’s debts be satisfied (before any dis-
tributions to shareholders can be made). If the company’s assets are insufficient
to cover its debts, the company must file for bankruptcy or seek a composition
with creditors (see below).
2 Liquidation
49. The general meeting can decide to liquidate an SE by the same majority
required to amend the company’s articles of association52 (Sec. 16-1 PLC Act).
The general meeting shall elect a liquidation committee, which shall replace
the board of directors and the managing director. It is not clear whether this
means that the liquidation committee also replaces the supervisory board in SEs
with a two-tier management structure. However, since the PLC Act does not
require the dissolution of the corporate assembly but rather states that the rules
governing the latter body shall continue to apply, to the extent possible, during
the liquidation process, it can be assumed that the liquidators do not replace the
supervisory body. The decision to liquidate the company must be filed with the
Business Register immediately, and the company is not allowed to make any
distributions, other than regular dividends, for two months thereafter, and even
then only provided all debts have been settled in full (or adequate funds have
been placed in escrow).
In addition, the courts can, in certain cases, order a company to liquidate (Sec.
16-15 PLC Act), e.g., in the event the company has not filed its annual accounts
by the prescribed deadline. The courts can also order a company to liquidate if
the company’s articles of association so provide and it is requested to do so by
a shareholder, and the general meeting has failed to adopt a resolution in this
respect, in accordance with Section 16-1 of the PLC Act.
If the court orders an SE to liquidate, the company shall be liquidated in accor-
dance with the rules governing estates in bankruptcy (see N◦ 50 of this report).
3 Insolvency
50. In order to place a debtor in bankruptcy in Norway, the court must find
that the debtor is insolvent by conducting a two-fold analysis, i.e. the company
must display a continuous inability to pay its debts as they fall due (which
inability cannot be merely temporary) (a cash-flow test) and have liabilities that
52
That is, two-thirds of the votes cast and shares represented at the meeting.
432
Norway
exceed the value of its assets (a balance-sheet test). Bankruptcy proceedings are
commenced by a petition from a creditor or the debtor filed with the court where
the debtor’s headquarters are located. The court will request a cash deposit of
NOK 42,250 from the creditor (not applicable to debtor) to cover court fees and
basic procedural costs.
Only the board of directors is entitled to file a petition in bankruptcy on behalf
of an SE. In keeping with the provisions of the SE Act, this authority is vested
in the management organ if the SE has a two-tier system (Sec. 9, para. 1 SE
Act) and in the administrative organ if the SE has a one-tier structure (Sec. 10,
para. 1 SE Act).
Individual board members can be held liable to the company (the bankruptcy
estate) and/or its creditors for any losses incurred due to the late commencement
of insolvency proceedings or for failure to commence such proceedings. It is
a criminal offence under Norwegian law not to file a petition in bankruptcy if
this results in losses to the company’s creditors. Continuing trading, even if
insolvent, does not, however, automatically give rise to liability.
51. A company in bankruptcy is controlled by a court-appointed liquidator
(generally an advokat, i.e. an experienced lawyer, as opposed to a jurist).
The liquidator is often assisted and supervised by a creditors’ committee. The
general role of the liquidator is to realise all assets in the manner most profitable
to the estate and distribute the proceeds to creditors. All of the company’s assets
will, in practice, be confiscated, and the debtor cannot dispose of any assets in
any way while bankruptcy proceedings are pending.
To give the liquidator sufficient time to realise the estate’s assets in the most
profitable way, the Bankruptcy Act provides for a six-month period follow-
ing the commencement of bankruptcy proceedings during which no secured
creditor can carry out any forced sale of the debtor’s pledged assets with-
out the liquidator’s express consent. The liquidator will decide that the busi-
ness should continue to operate only if this is in the best interest of the
estate.
Certain transactions conducted prior to the commencement of bankruptcy
can be set aside or reversed, e.g. extraordinary payments to certain credi-
tors, security granted for old debts and transactions carried out below market
value.
52. Norwegian insolvency law provides for a moratorium of payments (referred
to as ‘debt negotiations’ or gjeldsforhandling). This is an arrangement under
court supervision whereby creditors, if negotiations are successful, allow the
433
debtor to continue as a going concern. Negotiations may result in a voluntary

debt arrangement or a composition with creditors (a form of compulsory reor-
ganisation/settlement). A voluntary settlement requires that all creditors accept
the proposal. Compulsory reorganisation (composition) can only be initiated
by the debtor, provided there are sufficient funds or, in the alternative, its main
creditors guarantee that continuation of the business will not cause additional
losses to existing or new creditors.
At least 60% of the voting creditors representing at least 60% of the unsecured
claims must agree to a composition whereby the debtor agrees to settle at least
50% of its debts. At least 75% of the voting creditors representing at least 75%
of the unsecured claims must agree to a composition whereby the debtor agrees
to settle less than 50% of its unsecured claims. The court must approve any
composition with creditors. At least 25% of unsecured debts must be settled in
order to obtain court approval.
IX Applicable law
53. As mentioned under N◦ 2 of this report, Norway has incorporated the
Regulation into national law by reference, and the SE Act states that an SE with
its registered office in Norway shall be governed by the provisions of Norwegian
law applicable to Norwegian PLCs, provided the Regulation so allows (Sec. 2,
para. 1 SE Act).
X Tax treatment
1 Income tax
54. The introduction of the SE did not require amendments to Norwegian tax
law. The relevant issue, however, is whether such amendments will be necessary
in future in order to render it commercially interesting to establish SEs in
Norway. As mentioned above (see N◦ 3 of this report), at the time of writing,
there are no specific provisions of Norwegian law dealing with the tax treatment
of SEs registered in Norway. Furthermore, the Ministry of Finance has stated
that, at present, it is not planning any specific amendments to Norwegian tax law.
However, it is likely that amendments will be made. Until that time, however,
the applicable provisions of the Norwegian Tax Code on tax abatement can
possibly be relied on in the event an SE is formed by way of a cross-border
merger or if a Norwegian SE’s registered office is transferred to another EEA
country (see N◦ 55 of this report).
As the SE Act states that the statutory provisions applicable to Norwegian PLCs
shall apply to Norwegian SEs, a Norwegian SE will be treated as a Norwegian
PLC for tax purposes. This means that a Norwegian SE will be subject to
Norwegian corporate tax on its worldwide income (the current rate is 28%).
434
Norway
55. Under Norwegian law, several transactions carried out in connection with
the establishment or formation by merger of an SE under the SE Act are,
in principle, taxable events (such as a realisation of shares) for Norwegian
(tax) residents. For instance, an exchange of shares in connection with the
establishment of a holding SE (or a subsidiary SE if the company is incor-
porated with a contribution in kind) will be a taxable event for Norwegian
shareholders and, in principle, trigger capital gains tax (at the current rate of
28%).
However, Norwegian corporate shareholders are not taxed in Norway on capital
gains on the disposal of their shares, and losses related to such a disposal are
not tax deductible. Since only limited companies and public limited companies
(both legal entities) can participate in the incorporation of a holding SE, the
incorporation of such a company will not, under current tax law, trigger tax
for Norwegian corporate shareholders. Correspondingly, if a subsidiary SE is
incorporated with shares as the only contribution in kind, this will not be a
taxable event for Norwegian corporate shareholders. Incorporation of an SE
by merger where the surviving entity (the SE) is a foreign corporation (a non-
Norwegian SE) will be a taxable event for individual shareholders, but not for
corporate shareholders.
On 28 August 2006, the Norwegian Tax Directorate (Skattedirektoratet)
released a binding advance statement concerning the tax consequences of the
conversion of a public limited company into an SE and the subsequent transfer
of the SE’s registered office out of Norway.53 The Directorate stated that X
ASA (PLC) could be converted into X SE without incurring any Norwegian
tax liability and that (individual) shareholder A’s shares in the company would
maintain their current value for tax purposes. The Directorate also stated that
the transfer of the SE’s registered office to Germany pursuant to the SE Act
would not be viewed as a taxable event in Norway. It also concluded that the
SE’s withdrawal from Norwegian tax jurisdiction would not trigger taxation
of the shares held by shareholder A, who would continue to reside in Norway.
The advance ruling also dealt with certain other issues, such as the duty to pay
income tax when leaving Norwegian tax jurisdiction.
The Directorate’s ruling implies that full liquidation taxation cannot be imposed
upon conversion into an SE and subsequent transfer of the SE’s registered office
to another EEA country or EU Member State. The Norwegian authorities can
only impose Norwegian tax in accordance with the rules set forth in Section
14-64 of the Norwegian Tax Code, when company assets are withdrawn from
Norwegian tax jurisdiction (pursuant to which accelerated depreciation is taken
for income tax purposes), and in Section 14-48 of the Tax Code on the settlement
of certain tax positions in discontinuance of tax liability in Norway.
53
BFU (Binding Advance Statement) 37/06.
435
The ruling thus opens the door for a Norwegian SE to relocate to another EEA
country with no, or relatively few, tax consequences in Norway. After relocation,
the company will be subject to tax in the country to which it has relocated.
Relocation will not trigger taxation for the company’s shareholders. It should
be mentioned that the Directorate’s statement only concerns the conversion of
a Norwegian PLC into an SE, and the subsequent transfer of the SE’s registered
office to another EEA country, and does not purport to render an opinion on the
tax consequences of establishing an SE by merger, etc.
Relocation can be possible for Norwegian companies that control foreign com-
panies domiciled in low-tax countries and which are therefore subject to tax
on their share of income generated by these foreign companies, pursuant to the
Norwegian CFC (controlled foreign corporation) rules (the so-called NOKUS
regulations). Relocation means that the foreign companies will cease to be
Norwegian-controlled, so that the basis for application of NOKUS lapses
(although indirect ownership can also trigger inspection and application of
NOKUS). In addition, relocation to EEA countries with more beneficial tax
systems could be possible in future following the Cadbury Schweppes ruling
(provided there is an actual establishment and financial activity). Furthermore,
relocation may only be possible in order to avoid withholding tax on dividends
paid to foreign shareholders.
2 Value added tax

56. A Norwegian SE will be subject to VAT at the same terms and conditions
applicable to other Norwegian companies.
XI Conclusion
57. To the best of our knowledge, only one SE has been established in Norway
to date.54 In addition, one company listed on the Oslo Stock Exchange, Prosafe
ASA, has announced that its board of directors has decided to start the process
of converting the company into an SE. The reason behind the conversion is ‘to
achieve flexibility with regards to future localisation of the holding company.’55
There is cause to believe that one of the main reasons for the SE’s lack of
‘success’ in Norway is the current shortage of tax exemptions available upon
the incorporation of an SE (which, for Norwegian taxpayers, will usually be
a taxable event) and the general insecurity surrounding the tax treatment of
other transactions involving an SE. For instance, the participation of an SE in
a cross-border merger may not be very attractive if the transaction constitutes
54
On 1 December 2006, the company notified the Business Register that it intends to transfer its
registered office to England.
55
Company press release of 17 November 2006.
436
Norway
a taxable event under national law. In addition, the SE employee involvement

rules are complex and difficult to implement in practice, even if Norwegian
law already recognises a significant degree of employment involvement. Not
to mention the fact that the Regulation, like any new legislation, leaves many
questions unanswered.
As long as the SE’s ability to participate in ‘cross-border’ transactions is
impeded by national tax laws, there may be little reason to opt for an untested
corporate form, such as the SE, over the more familiar Norwegian PLC. How-
ever, as discussed above, this situation could create incentives to transfer the
company’s registered office to jurisdictions with conditions more favourable to
the company and its shareholders.
437
PA RT I II
Annexes
Annex Ia
Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a

European Company (SE)
Annex Ib
Public limited-liability companies referred
to in Article 2(1) of the Regulation
EU MEMBER STATES
AUS TRIA:
die Aktiengesellschaft
BELGI UM:
la société anonyme/de naamloze vennootschap
BULGA RY:
акционерното дружество
CYP RUS :

CZECH REPUBLIC:
akciová společnost’
DENM ARK:
aktieselskaber
ES TONI A:
aktsiaselts
F I NLAND:
julkinen osakeyhtiö//publikt aktiebolag
F RANCE:
la société anonyme
GERM ANY:
GREECE :

464
Public limited-liability companies referredto in Article 2(1) of the Regulation
HUN GARY:
részvénytársaság,
korlátolt felel´ósség´ú társaság
IREL AND:
public companies limited by shares
public companies limited by guarantee having a share capital
ITA LY:
società per azioni
LATVI A:
akciju sabiedrı̄ba
LITH UANI A:
akcinės bendrovės
uždarosios akcinės bendrovės’
LUXEM BOURG:
la société anonyme
MALTA :
kumpaniji pubbliċi / public limited liability companies
kumpaniji privati / private liability companies
THE NET HER LANDS:

de naamloze vennootschap
P OLAND:
spólka akcyjna,
spólka z ograniczona odpowiedzialnośı́a’
P ORTUGA L:
a sociedade anónima de responsabilidade limitada
ROMA NIA:
societate pe acţiuni
S LO VAKI A :
akciová spoločnos’,
spoločnost’s ručenı́m obmedzeným’
S LOV ENI A:
delniška družba,
družba z omejeno odgovornostjo
465
Annex Ib
S P AI N:
la sociedad anónima
S WED EN:
publikt aktiebolag
UNI TED KINGDOM:

public companies limited by shares
public companies limited by guarantee having a share capital
EEA MEMBER STATES

I CELAND :
Hlutafélag
LIECHTENSTEIN:
die Kommanditaktiengesellschaft;
NORW AY :
Allmennaksjeselskap.
466
Annex Ic
Public and private limited-liability companies
referred to in Article 2(2) of the Regulation
EU MEMBER STATES
AUS TR IA :
die Aktiengesellschaft,
die Gesellschaft mit beschränkter Haftung
BELGI UM :
la société anonyme/de naamloze vennootschap,
la société privée à responsabilité limitée/besloten vennootschap met beperkte
aansprakelijkheid
BULGARY:
акционерното дружество
дружество с ограничена отговорност
DENMARK:
aktieselskaber,
anpartselskaber
F IN LAND:
osakeyhtiö
aktiebolag
F RANCE:
la société anonyme,
la société à responsabilité limitée
GERMA NY:
die Aktiengesellschaft,
GREECE:

467
Annex Ic
I RELAND :
public companies limited by shares,
public companies limited by guarantee having a share capital,
private companies limited by shares,
private companies limited by guarantee having a share capital
I TALY:
società per azioni,
società a responsabilità limitata
LUXEM BOURG:
la société anonyme,
la société à responsabilité limitée
NET HER LANDS:

de naamloze vennootschap,
de besloten vennootschap met beperkte aansprakelijkheid
P ORTU GAL:
a sociedade anónima de responsabilidade limitada,
a sociedade por quotas de responsabilidade limitada
ROM ANIA:
societate pe acţiuni
societate cu răspundere limitată
S PA IN :
la sociedad anónima,
la sociedad de responsabilidad limitada
S WEDEN:
Aktiebolag
UNI TED KINGDOM :

public companies limited by shares,
public companies limited by guarantee having a share capital,
private companies limited by shares,
private companies limited by guarantee having a share capital
EEA MEMBER STATES

I CELAND :
Hlutafélag
Einkahlutafélag
468
Public and private limited-liability companies referred to in Article 2(2) of the Regulation
LIECHTEN STEIN:
die Kommanditaktiengesellschaft
NOR WAY:
Allmennaksjeselskap
Aksjeselskap
469
Annex II
Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for

a European Company with regard to the involvement of employees
Annex III
List of national laws implementing the Regulation and the Directive

Annex III
List of national laws implementing the
Regulation and the Directive
This Annex contains a list of the national legislation implementing the Regu-
lation and Directive in the countries of which reports are included in this book.
For the national legislation of the other EEA member states, please refer to
Annex III of the first volume.
BULGARIA
Tърговски закон, State Gazette issue No. 48, of 1 July 1991, and the latest
amendments, State Gazette issue No. 105, of 22 December 2006.
3АКОНза информиране и консултиране с работниците и служителите
в многонационални предприятия, групи предприятия и европейски
дружества, State Gazette issue No. 57, of 14 July 2006.
CYPRUS

(SE) !
2006, Cyprus Government Gazette 2006, Issue no 4119, Appendix 3,
Part I, p. 2303, of 11 August 2006.
" 277(I)/2004
# $
!

%
& '$
(

( #
)
*& +, - %& .- /
0

-
(SE), Cyprus Government Gazette 2004,
Issue no 3940, Appendix 1, Part I, page 3940, of 31 December 2004.
CZECH REPUBLIC
Zákon č. 627/2004 Sb., o evropské společnosti, Sbı́rce zákonů dne, of 14 Decem-
ber 2004
Vyhláška Ministerstva spravedlnosti č. 293/2005 Sb., o dokumentech, které
je třeba předložit notáři k vydánı́ osvědčenı́ při přemı́stěnı́ zapsaného sı́dla
evropské společnosti a při založenı́ evropské společnosti fúzı́, Sbı́rce zákonů
dne, of 21 July 2005.
487
Annex III
FRANCE
Loi n◦ 2005-842 of 26 July 2005 pour la confiance et la modernisation de
l’économie, Journal officiel n◦ 173, page 12160, text n◦ 2, of 27 July 2005.
Décret n◦ 2006-448 of 14 April 2006 relatif à la société européenne, Journal
officiel n◦ 9.,1 page 5780, text n◦ 12, of 16 April 2006.
Décret n◦ 2006-1360 of 9 November 2006 relatif à l’implication des salariés
dans la société européenne et modifiant le code du travail (deuxième partie:
Décrets en Conseil d’Etat), Journal officiel n◦ 261, page 16878, text n◦ 8, of
10 November 2006.
GREECE
" 3412/2005: $ ' # +

1! A’276/4.11.2005 [Government Gazette, Bulletin
A’ 276], of 4 November 2005.

2
& 91/2006
$
(

1! A’92/4.5.2006 [Government Gazette, Bulletin A’ 92], of 4 May
2006.
IRELAND
Statutory Instrument (Regulation or Order) of 14 December 2006, N◦ 623 of
2006, Iris Oifigiúl, of 19 December 2006.
The European Communities (European Public Limited-Liability Company)
Regulations 2007 (No. 21 of 2007).
The European Communities (European Public Limited-Liability Company)
(Forms) Regulations 2007 (No. 22 of 2007).
ITALY
Decreto Legislativo of 19 agosto 2005 nr. 188. Attuazione della direttive
2001/86/CE, GURI N◦ 220, of 21 September 2005.
LATVIA
Eiropas komercsabiedrı̄bu likums of 24 March 2005, Latvijas Vēstnesis, of
24 March 2005.
Latvijas Republikas Ministru kabineta noteikumi Nr. 344 par pieteikumu vei-
dlapām ierakstu izdarı̄šanai komercre‘gistrā par Eiropas komercsabiedrı̄bām of
17 May 2005, Latvijas Vēstnesis, of 27 May 2005.
488
List of national laws implementing the Regulation and the Directive
LIECHTENSTEIN
Gesetz über das Statut der europäischen Gesellschaft (SEG), LGBl. 2006 Nr.
26.
Gesetz über die Beteiligung der Arbeitnehmer in der europäischen Gesellschaft
(SEBG), LGBl. 2006 Nr. 27.
LUXEMBOURG
Loi du 25 août 2006 concernant la société européenne (SE), la société anonyme
à directoire et conseil de surveillance et la société anonyme unipersonnelle,
Mémorial A, Recueil de législation, numéro 152, of 31 August 2006.
Loi du 25 août 2006 complétant le statut de la société européenne (SE) pour ce
qui concerne l’implication des travailleurs, Mémorial A, Recueil de législation,
numéro 152, of 31 August 2006.
MALTA
Employee Involvement (European Company) Regulations, 2004, Legal Notice
452 of 2004, of 22 October 2004.
NORWAY
Lov om europeiske selskaper ved gjennomføring av EØS-avtalen vedlegg XXII
nr. 10a (rådsforordning (EF) nr. 2157/2001) (SE-loven), lov nr. 14/2005, 1 April
2005, Norsk Lovtidend Avd. 1, of 4 May 2005.
Forskrift nr. 273 om arbeidstakernes rett til innflytelse i europeiske selskaper,
1 April 2005, Norsk Lovtidend Avd. 1, of 4 May 2005.
PORTUGAL
Decreto-Lei N◦ 2/2005 of 4 January 2005,
Decreto-Lei N◦ 215/2005 of 31 December 2005, Diaro da Republica 237 Série
I-A.
ROMANIA
Hotararea de Guvern nr. 187 din 20 februarie 2007 privind procedurile de
informare, consultare şi alte modalităţi de implicare a angajaţilor ı̂n activitatea
societăţii europene (Monitorul Oficial nr. 161 din 7 martie 2007).
489
Annex III
SLOVENIA
Zakon o gospodarskih družbah – (ZGD-1), Uradni list RS 42/2006 (Official
Journal RS, No. 42/2006), of 19 April 2006.
Zakon o sodelovanju delavcev pri upravljanju evropske delniške družbe (SE)-
(ZSUEDD), Uradni list RS 28/2006, of 17 March 2006.
Zakon o sodnem registru- (ZSReg –UPB1), Uradni list RS 114/2005, of 19
December 2005.
Zakon o prisilni poravnavi, stečaju in likvidaciji (ZPPSL), (Uradni list RS
67/1993, 74/1994, 8/1996, 25/1997, 39/1997, 1/1999, 52/1999, 101/2001,
42/2002, 58/2003, 10/2006).
Slovenski računovodski standardi, (Uradni list RS 67/2003, 118/2005,10/2006,
58/2006).
Zakon o finančnem poslovanju podjetij (ZFPPod), (Uradni list RS št. 54/1999,
110/1999, 97/2000, 50/2002, 93/2002, 117/2006).
Zakon o davku od dohodkov pravnih oseb (ZDDPO-2), Uradni list RS 117/2006,
of 16 November 2006.
Zakon o davku na dodano vrednost (ZDDV-1), Uradni list RS 117/2006, of
16 November 2006.
Uredba o vpisu družb in drugih pravnih oseb v sodni register) (Decree on entry
of companies and other legal entities in the court register) (Uradni list RS
18/2002, of 28 February 2002).
SPAIN
Ley 19/2005 of 14 November 2005, sobre la sociedad anónima europea domi-
ciliada en España, Boletı́n Oficial del Estado, of 15 November 2005.
Ley 31/2006 of 18 October 2006, sobre implicación de los trabajadores en las
sociedades anónimas y cooperativas europeas, Boletı́n Oficial del Estado, of 19
October 2006.
490
Index
accounting principles see annual accounts and Luxembourg 278

consolidated accounts Norway 430–431
acts committed on behalf of SE in formation Romania 327–328
Bulgaria 32 Slovenia 356
Cyprus 75 Spain 379
Czech Republic 93 Bulgaria 47–52
France 129 Cyprus 80
Greece 160–161 Czech Republic 103–106
Italy 216 France 144–146
Latvia 239–240 Greece 169–170
Luxembourg 263 Ireland 195–196
Norway 421 Italy 224–225
Portugal 297 Latvia 245–247
Romania 318–319 Liechtenstein 408
Slovenia 347 Luxembourg 276–278
Spain 370–371 Norway 430–431
annual accounts and consolidated Portugal 307–308
accounts 458 Romania 327–328
accounting principles Slovenia 356
Bulgaria 47–51 Spain 378–379
Czech Republic 103–105 applicable law
Greece 169 Bulgaria 57
Ireland 195–196 Cyprus 83
Latvia 246 Czech Republic 108
Liechtenstein 408 France 148
Luxembourg 276–278 Greece 171
Norway 430 Latvia 249
Slovenia 356 Liechtenstein 409
Spain 378 Luxembourg 282
auditors Norway 434
Bulgaria 51–52 Portugal 311
Czech Republic 105–106 Slovenia 359
France 145–146 Spain 382
Greece 169–170 auditors see annual accounts and consolidated
Ireland 196 accounts
Italy 226 Austria
Latvia 246–247 employee involvement 11
Liechtenstein 408 SEs created 4, 5
491
Index
bankruptcy see cessation of payments; governing law 57

composition with creditors; holding SE, formation 29–30
examinership; insolvency; liquidation; income tax 57–61
receivership; schemes of arrangement; insolvency 54–57
winding up laws implementing the Regulation and the
banks 8 Directive 4n, 21, 45–47, 487
Belgium legal personality 33–34
number of SEs created 4 liability 43
Blanke, Thomas 10–11 liquidation 53–54
Bulgaria management
accession 20 appointment and removal 39, 42
acquis communautaire 20 generally 38
acts committed on behalf of SE in independence of board members 43–44
formation 32 liability 43
annual accounts and consolidated accounts one-tier system 34, 38–40
accounting principles 47–51 prohibited transactions 44
auditor 51–52 representation 39–40, 42–43
applicable law 57 two-tier system 34, 40–43
capital 25–26 merger
cessation of payments 57 formation by 26–29
conversion into SE 31–32 protection of creditors 28–29
corporate purpose 25 protection of minority shareholders
corporate tax 58, 60, 62 27–28
creditors, protection of 28–29 minority shareholders 27–28
dissolution 53–57 name 23–24
employee involvement 44–45 public limited-liability companies 22
collective bargaining agreements 45 publication 33
independent labour agreements 45 registered office 20, 24
formation registration 32–33
acts committed on behalf of SE in subsidiary SE, formation 30–31
formation 32 supervision by national authorities 52–53
capital 25–26 tax treatment 57–61, 62
conversion into SE 31–32 transfer of registered office 24–25,
corporate purpose 25 59–61
founding parties 22–23 value added tax 61
holding SE 29–30 winding up 53
merger 26–29
name 23–24 capital
registered office 24 Bulgaria 25–26
subsidiary SE 30–31 Cyprus 67
transfer of registered office 24–25 Czech Republic 88–89
founding parties 22–23 France 121
general meeting Greece 156–157
decision-making process 34–36 Ireland 181
shareholders’ rights and obligations Italy 209–210
36–38 Latvia 233, 235
generally 20–22 Liechtenstein 396
492
Index
Luxembourg 258 Ireland 181

Norway 417 Portugal 294
Portugal 294 corporate identity see name; registered office
Romania 317–318 corporate purpose
Slovenia 342–343 Bulgaria 25
Spain 366–367 Czech Republic 88
capital contribution tax France 121
Greece 173 Greece 156
capital tax Ireland 181
Luxembourg 285 Italy 209
Spain 386 Latvia 235
cessation of payments 458–459 Liechtenstein 396
Bulgaria 57 Luxembourg 257–258
Cyprus 81–82 Norway 417
Czech Republic 108 Portugal 294
Ireland 199 Slovenia 342
Luxembourg 281 Spain 365–366
Norway 433–434 corporate tax see income tax
Portugal 311 Council Directive 2001/86/EC (the
Romania 330–332 ‘Directive’) 473–483
Slovenia 359 compliance 479
Spain 380–382 content of agreement 477
composition with creditors duration of negotiations 478
Italy 228–229 information and consultation of employees
consolidated accounts see annual accounts and 479
consolidated accounts laws implementing see laws implementing
conversion into SE 6, 14, 453–454 the Regulation and the Directive
Bulgaria 31–32 misuse of procedures 479
Cyprus 73 negotiating procedure 475–478
Czech Republic 92–93 operation of representative body 479
France 128–129 protection of employee representatives 479
Greece 160 reservation and confidentiality 478–479
Ireland 176–177, 185–186 review of application procedure 14
Italy 215 special negotiating body 475–477
Latvia 239 standard rules 478, 481–483
Liechtenstein 398 transposition by Members States 3
Luxembourg 262–263 Council Regulation No 2157/2001 (the
Norway 421 ‘Regulation’) 443–460
Portugal 297, 313 formation
publication of draft terms 7 conversion to SE 453–454
Slovenia 346–347 holding SE 452–453
Spain 370, 387 merger 449–452
tax treatment and 9 subsidiary SE 453
conversion of SE into national company laws implementing see laws implementing
Cyprus 82 the Regulation and the Directive
corporate form Malta 287–288
Cyprus 66 report on application 14
493
Index
creditors powers 76
composition with, Italy 228–229 quorum 77
protection voting requirements 77
Bulgaria 28–29 generally 64–65
Czech Republic 91 holding SE 71–72
France 124 insolvency 81–82
Greece 158 laws implementing the Regulation and the
Ireland 181, 184 Directive 64, 487
Latvia 237–239 legal personality 65, 67
Luxembourg 261 liquidation 81–82
Norway 419 management
Spain 369 appointment and removal 78–79
creditors’ voluntary liquidation liability 78–79
Ireland 197 one-tier system 77–80
Cyprus powers and functioning 77–78
acts committed on behalf of SE in two-tier system 77–80
formation 75 merger 69–71
annual accounts and consolidated accounts acquisition by parent company holding at
80 least 90 of share capital of subsidiary
applicable law 83 70–71
articles of an SE 75–76 acquisition of wholly owned subsidiary
amendments 77 71
capital 67 name 66
cessation of payments 81–82 national company, conversion into 82
conversion public company 65
formation of SE 73 publication 74–75
of SE into national company 82 registered office 66–67
corporate form 66 registration 68, 73–74
corporate tax 84 special negotiating body 68
definition of an SE 65 subsidiaries 75
employee involvement 67, 68 formation by incorporation as subsidiary
employee participation 68, 79–80 72–73
formation termination 81–82
acts committed on behalf of SE in transfer of registered office 80–81
formation 75 winding up 81–82
capital 67 Czech Republic
conversion 73 acts committed on behalf of SE in
corporate form 66 formation 93
generally 67–69 annual accounts and consolidated accounts
holding SE 71–72 accounting principles 103–105
merger 69–71 auditors 105–106
name 66 applicable law 108
registered office 66–67 capital 88–89
subsidiary SE 72–73 cessation of payments 108
general meeting conversion into SE 92–93
amendments to articles 77 corporate purpose 88
organisation 76–77 creditors, protection of 91
494
Index
dissolution 107–108 minority shareholders 91, 92

employee involvement 101 name 86
confidentiality 103 publication 91, 92, 93
employee participation 102–103 registered office 86–87
special negotiating body 102 registration 93
formation subsidiary SE 92
acts committed on behalf of SE in supervision by national authorities 106
formation 93 tax treatment 108–112
capital 88–89 transfer of registered office 87–88
conversion into SE 92–93 value added tax 112
corporate purpose 88 winding up 107
founding parties 86
Directive, the see Council Directive
holding SE 92
2001/86/EC
merger 89–91
dissolution see cessation of payments;
name 86
composition with creditors;
registered office 86–87
examinership; insolvency; liquidation;
subsidiary SE 92
receivership; schemes of arrangement;
transfer of registered office 87–88
winding up
founding parties 86
dividend withholding tax
general meeting
Romania 333
decision-making process 94–96
shareholders’ rights and obligations employee involvement 10, 473–483
96–97 agreement, registration of SE and 11
generally 86 Austria 11
holding SE 92 Bulgaria 44–45
income tax 104, 108–112 confidentiality 478–479
insolvency 107–108 Czech Republic 103
laws implementing the Regulation and the France 141
Directive 86, 487 Ireland 194
legal personality 93 Italy 224
liability 101 Liechtenstein 407
liquidation 107 Malta 288
management Romania 326
appointment and removal 100 Slovenia 355
liability 101 Cyprus 67, 68
one-tier system 94, 97–99 Czech Republic 101–103
representation 100–101 the Directive and see Council Directive
two-tier system 93–94, 99–101 2001/86/EC
merger employee participation see employee
acquisition by company holding 90 or participation
more of shares in another company 91 France 139–144
avoidance 91 Germany 11
creditors’ rights 91 information and consultation 479
formation by 89–91 France 142
minority shareholders 91 Ireland 194
procedure 89–91 standard rules 481–482
publication 91 Ireland 191–195
495
Index
employee involvement (cont.) European Company (SE)

Italy 230 employee participation issues 10–14
Latvia 244–245 European economic interest grouping
Liechtenstein 404–407 (EEIG) distinguished 66
Luxembourg 271–276 implementation of the Regulation and
Malta 287–288 Directive 3–4, 487–490
Netherlands 11 no activity 4, 10
Norway 11, 428–429 no employees 4–5, 10–12
Portugal 306–307 numbers created so far 4–5
registration of SE and 10–11 reasons to opt for 6–9
Romania 326–327 cross-border mergers 6–7, 8–9
SEs without employees 4–5, 10–12 France 116–117
Slovenia 353–355 Greece 153–154
Spain 376–378 Italy 205
special negotiating body see special Latvia 232–233
negotiating body Luxembourg 253
standard rules 478 Norway 413
employee participation 482–483 Portugal 290–291
France 142–143 Slovenia 338–339
information and consultation 481–482 tax considerations 9
structural change and 12–13 transfer of registered office and head
Sweden 11 office 9
works councils shelf SEs 4, 10
France 142 European economic interest grouping (EEIG)
Liechtenstein 406 SE distinguished 66
employee participation 6, 9, 10–14 European Trade Union Institute (ETUI) 4, 10,
Bulgaria 68 11
Cyprus 68, 79–80 examinership
Czech Republic 102–103 Ireland 198–199
France 142–143 excise tax
Greece 168–169 Latvia 251
Ireland 193 Romania 334–335
Italy 223 Slovenia 361
Latvia 245
Liechtenstein 407 Finland
Luxembourg 275–276 SEs created 5
misuse of procedures and 12–13, 479 formation see capital; conversion; corporate
Norway 429 purpose; founding parties; head office;
Portugal 307 holding SE; merger; name; registered
Slovenia 354–355 office; subsidiaries; transfer of head
Spain 377–378 office; transfer of registered office
standard rules 482–483 founding parties
see also employee involvement; Bulgaria 22–23
representative body; special Czech Republic 86
negotiating body France 117
Estonia Greece 154
SEs created 5 Ireland 176–177
496
Index
Italy 205 decision-making process 131–132

Latvia 233 shareholders’ rights and obligations
Liechtenstein 395 132–133
Luxembourg 254 generally 115–116
Norway 413 holding SE 125–127
Portugal 291 income tax 148–150
Romania 316 laws implementing the Regulation and the
Slovenia 339 Directive 115–116, 488
Spain 363–364 legal personality 130, 140
France liability 138–139
acts committed on behalf of SE in liquidation 148
formation 129 management
annual accounts and consolidated accounts appointment and removal 137–138
annual accounts 144–145 generally 133–135
auditors 145–146 liability 138–139
consolidated accounts 145 one-tier system 135–136, 137
applicable law 148 representation 138
capital 121 two-tier system 136–137
conversion into SE 128–129 merger 122–125
corporate purpose 121 protection of creditors 124
creditors, protection 124 protection of minority shareholders 124
dissolution 147–148 minority shareholders 124
employee involvement name 117
confidentiality 141 publication 130
employee participation 142–143 reasons to opt for an SE 116–117
generally 139 registered office 117–118
information and consultation 142 registration 129–130
protection of employee representatives representation 138
141 SEs created 5
special negotiating body (SNB) 139–144 special negotiating body (SNB) 151
standard rules 142–143 complaints procedure 144
works council 142 composition 140
formation legal personality 140
acts committed on behalf of SE in negotiations with 141
formation 129 reconvention/reorganisation in event of
capital 121 substantial changes 143
conversion into SE 128–129 subsidiary SE 127
corporate purpose 121 supervision by national authorities 146–147
founding parties 117 tax treatment 148–150
holding SE 125–127 transfer of registered office 118–121, 151
merger 122–125 value added tax 150
name 117 winding up 147–148
registered office 117–118
subsidiary SE 127 general meeting 456–458
transfer of registered office 118–121 Bulgaria 34–38
founding parties 117 Cyprus 76–77
general meeting Czech Republic 94–97
497
Index
general meeting (cont.) annual accounts and consolidated accounts

decision-making process accounting principles 169
Bulgaria 34–36 auditors 169–170
Czech Republic 94–96 applicable law 171
France 131–132 capital 156–157
Greece 162–164 capital contribution tax 173
Ireland 187 conversion, formation of SE 160
Latvia 242 conversion into SE 160
Liechtenstein 400–401 corporate purpose 156
Luxembourg 265–266 creditors’ rights 158
Norway 423–425 dissolution 170–171
Portugal 299–300 employee involvement 168
Romania 320–322 employee participation 168–169
Slovenia 348–349 protection of employee representatives
Spain 371–373 169
France 131–133 special negotiating body 168
Greece 162–164 formation
Italy 216–218 acts committed on behalf of SE in
Latvia 241–242 formation 160–161
Liechtenstein 399–401 capital 156–157
Luxembourg 265–266 conversion 160
Norway 423–425 corporate purpose 156
Portugal 299–302 founding parties 154
Romania 320–323 holding SE 159–160
shareholders’ rights and obligations merger 157–159
Bulgaria 36–38 name 154
Czech Republic 96–97 registered office 155
France 132–133 subsidiary SE 160
Greece 164 transfer of registered office 155–156
Ireland 188 founding parties 154
Latvia 242 general meeting
Liechtenstein 401 decision-making process 162–164
Luxembourg 266 shareholders’ rights and obligations 164
Norway 425 generally 153
Portugal 300–302 holding SE
Romania 322–323 formation 159–160
Slovenia 349–350 minority shareholders 160
Spain 373–374 procedure 159
Slovenia 348–350 publication 159
Spain 371–374 income tax 172–173
Germany insolvency 171
employee involvement 11 laws implementing the Regulation and the
SEs created 4, 5 Directive 153, 488
governing law see applicable law legal personality 162
Greece liability 167–168
acts committed on behalf of SE in liquidation 171
formation 160–161 management
498
Index
appointment and removal 166 Luxembourg 261–262

liability 167–168 Norway 420–421
one-tier system 165 Portugal 296, 313
representation 167 publication of draft terms 7
two-tier system 154, 166 Slovenia 344–346
merger Spain 369–370, 387
acquisition by company holding 90 or Hungary
more of shares in another company SEs created 5
158–159
avoidance 159 income tax
creditors’ rights 158 Bulgaria 57–61, 62
formation by 157–159 Cyprus 84
minority shareholders 158 Czech Republic 104, 108–112
right to object to participating company France 148–150
158 Greece 172–173
types of companies involved 157–158 Ireland 200
minority shareholders 158, 160 Italy 229–230
name 154 Latvia 249–250
publication 159, 161–162 Liechtenstein 409
reasons to opt for an SE 153 Luxembourg 282–284
registered office 155 Norway 434–436
registration 161 Portugal 312–314
representation 167 Romania 332–333
special negotiating body 168 Slovenia 359–360
subsidiary SE 160 Spain 382–386
supervision by national authorities 170 insolvency 458–459
tax treatment 172–173 Bulgaria 54–57
transfer of registered office 155–156 Cyprus 81–82
value added tax 173 Czech Republic 107–108
winding up 170–171 Greece 171
group companies Italy 227–228
Italy 222–223 Latvia 248
Spain 369, 385–386 Liechtenstein 408–409
Luxembourg 280–281
head office Norway 432–433
transfer 9 Portugal 310–311
holding SE, formation by incorporation as Romania 330–332
452–453 Slovenia 358–359
Bulgaria 29–30 Spain 380–382
Cyprus 71–72 insurance policy tax
Czech Republic 92 Slovenia 361
France 125–127 Ireland
Greece 159–160 annual accounts and consolidated accounts
Ireland 176, 184–185 accounting principles 195–196
Italy 214 annual accounts 195–196
Latvia 238–239 auditors 196
Liechtenstein 398 consolidated accounts 196
499
Index
Ireland (cont.) management

capital 181 appointment and removal 190–191
cessation of payments 199 liability 191
conversion into SE 176–177, 185–186 one-tier system 186, 189–190
corporate form 181 two-tier system 186, 189–190, 201
corporate purpose 181 merger
creditors, protection 181, 184 creditors’ rights 184
dissolution 197–199 formation by 176, 181–184
employee involvement minority shareholders 184
confidentiality 194 opposition 184
employee participation 193 procedure and publication 182–184
existing employee rights 195 minority shareholders 180–181, 184
generally 191 name 177
information 194 negative aspects of SEs 202
protection of employee representatives publication 182–184, 186
193–194 receivership 198
special negotiating body 192–194 registered office 178
examinership 198–199 registration 186
formation schemes of arrangement 199
capital 181 special negotiating body (SNB) 192–193
conversion 176–177, 185–186 complaints procedure 194
corporate purpose 181 protection of employee representatives
founding parties 176–177 193
holding SE 176, 184–185 stamp duty 201
merger 176, 181–184 subsidiary SE 176
name 177 supervision by national authorities 196–197
registered office 178 tax treatment 199–201
subsidiary SE 176, 185 transfer of registered office 178–180, 201
transfer of registered office 178–180, 201 value added tax 200–201
founding parties 176–177 winding up 197–199
general meeting Italy
decision-making process 187 acts committed on behalf of SE in
ordinary resolution 188 formation 216
shareholders’ rights and obligations annual accounts and consolidated accounts
188–189 224–225
special resolutions 188 auditors 226
generally 175 capital 209–210
holding SE 176, 184–185 composition with creditors 228–229
income tax 200 conversion into SE 215
laws implementing the Regulation and the corporate purpose 209
Directive 3, 175, 488 employee involvement 230
legal personality 186 confidentiality 224
liability 191 employee participation 223
liquidation protection of employee representatives
compulsory liquidation 198 224
creditors’ voluntary liquidation 197 special negotiating body 223
members’ voluntary liquidation 197 formation
500
Index
acts committed on behalf of SE in Latvia

formation 216 acts committed on behalf of SE in
capital 209–210 formation 239–240
conversion into SE 215 annual accounts and consolidated accounts
corporate purpose 209 245–246
founding parties 205 accounting principles 246
holding SE 214 auditors 246–247
merger 210–214 applicable law 249
name 206 appointment and removal
registered office 206–207 management board 243
subsidiary SE 214 supervisory board 243
transfer of registered office 205, 207–209 capital 233, 235
founding parties 205 conversion into SE 239
general meeting 216–218 corporate purpose 235
generally 204 creditors, protection 237–239
group companies 222–223 employee involvement 244
holding SE 214 employee participation 245
income tax 229–230 protection of employee representatives
insolvency 227–228 245
laws implementing the Regulation and the special negotiating body 244–245
Directive 204, 488 excise tax 251
legal personality 216 formation
liability 221–222 acts committed on behalf of SE in
liquidation 227 formation 239–240
management capital 235
appointment and removal 221 conversion into SE 239
liability 221–222 corporate purpose 235
one-tier system 217, 218–219 founding parties 233
two-tier system 218–219, 220–221, 222 holding SE 238–239
merger merger 235–238
acquisition by company holding 90 or name 233–233
more of shares in another company 214 registered office 234
avoidance 214 subsidiary SE 239
minority shareholders 213 transfer of registered office 234–235
registration and publication 210–213 founding parties 233
name 206 general meeting 241–242
National Council of Notaries 204 decision-making process 242
publication 210–213 shareholders’ rights and obligations 242
reasons to opt for SE 205 generally 232
registered office 206–207 holding SE 238–239
registration 210–213, 216 income tax 249–250
special negotiating body 223 insolvency 248
subsidiary SE 214 laws implementing the Regulation and the
tax treatment 229–230 Directive 232, 488
termination 226–229 liability 244
transfer of registered office 205, 207–209 liquidation 248
winding up 226–227 management
501
Index
Latvia (cont.) Malta 489

appointment and removal 243 Norway 14, 412–413, 489
liability 244 Portugal 290, 489
one-tier system 242–243 Romania 3, 315–316, 489
representation 243 Slovenia 337–338, 490
two-tier system 242–243 Spain 363, 490
management board, appointment and United Kingdom 14
removal 243 legal personality
merger Bulgaria 33–34
acquisition by company holding 90 or Cyprus 65, 67
more of shares in another company 238 Czech Republic 93
avoidance 238 France 130, 140
creditors’ rights 237–238 Greece 162
formation by 235–238 Ireland 186
minority shareholders 237 Italy 216
objection to participating company 237 Liechtenstein 399
procedure 236 Luxembourg 264
publication 237 Norway 422
minority shareholders 237, 238–239 Portugal 299
name 233–233 Romania 320
property tax 250–251 Slovenia 348
publication 237, 238, 241 Spain 371
reasons to opt for an SE 232–233 liability of members
registered office 234 Bulgaria 43
registration 240–241 Cyprus 78–79
special negotiating body 244–245 Czech Republic 101
subsidiary SE 239 France 138–139
supervision by national authorities 247 Greece 167–168
supervisory board, appointment and Ireland 191
removal 243 Italy 221–222
tax treatment 233, 249–251 Latvia 244
termination 247–248 Liechtenstein 404
transfer of registered office 234–235 Luxembourg 271
value added tax 250 Norway 428
winding up 247–248 Portugal 305
laws implementing the Regulation and the Romania 326
Directive 3–4, 13–14 Slovenia 352–353
Bulgaria 4n, 21, 45–47, 487 Spain 376
Cyprus 64, 487 Liechtenstein
Czech Republic 86, 487 acts committed on behalf of SE in
France 115–116, 488 formation 398
Greece 153, 488 annual accounts and consolidated accounts
Ireland 3, 175, 488 accounting principles 408
Italy 204, 488 auditors 408
Latvia 232, 488 applicable law 409
Liechtenstein 394, 489 appointment and removal 403–404
Luxembourg 253, 489 capital 396
502
Index
conversion into SE 398 appointment 405

corporate purpose 396 composition 405
dissolution 408–409 information and consultation 406–407
employee involvement 404–405 meetings and decisions 405–406
confidentiality 407 members 405
employee participation 407 provision of information for creation of
protection of employee representatives SNB 405
407 standard rules 406–407
special negotiating body 405–407 works council 406
formation subsidiary SE 398
acts committed on behalf of SE in supervision by national authorities 408
formation 398 tax treatment 409
capital 396 value added tax 409
conversion 398 winding up 408–409
corporate purpose 396 works council 406
founding parties 395 limited-liability companies see public
holding SE 398 limited-liability companies; public and
merger 396–397 private limited-liability companies
name 395 liquidation 458–459
registered seat 395–396 Bulgaria 53–54
subsidiary SE 398 Cyprus 81–82
founding parties 395 Czech Republic 107
general meeting 399–400 France 148
decision-making process 400–401 Greece 171
shareholders’ rights and obligations 401 Ireland 197–198
generally 394 Italy 227
holding SE 398 Latvia 248
income tax 409 Liechtenstein 408–409
insolvency 408–409 Luxembourg 279–280
laws implementing the Regulation and the Norway 432
Directive 394, 489 Portugal 309–310
legal personality 399 Romania 328–330
liability 404 Slovenia 357–358
liquidation 408–409 Spain 379–380
management local taxes
appointment and removal 403–404 Romania 334
liability 404 Luxembourg
one-tier system 401–402 acts committed on behalf of SE in
two-tier system 402–403 formation 263
merger 396–397 annual accounts and consolidated accounts
name 395 accounting principles 276–278
publication 399 auditors 278
registered seat 395–396 applicable law 282
registration 399 appointment and removal 268–270
special negotiating body capital 258
adjournment/resumption in event of capital tax 285
substantial changes 406 cessation of payments 281
503
Index
Luxembourg (cont.) publication 263

corporate purpose 257–258 reasons to opt for an SE 253
creditors, protection 261 registered office 254–255
dissolution 279–281 registration 263
employee involvement 271–272 representation 270–271
employee participation 275–276 special negotiating body 272–275
special negotiating body 272–275 information and consultation 275
formation negotiations 274
acts committed on behalf of SE in protection of employee representatives
formation 263 276
capital 258 subsidiary SE 262
conversion 262–263 supervision by national authorities 279
corporate purpose 257–258 tax treatment 282–285
founding parties 254 transfer of registered office 255–257
holding SE 261–262 value added tax 285
merger 258–261 winding up 279
name 254
registered office 254–255 Malta
subsidiary SE 262 employee involvement 287–288
transfer of registered office 255–257 laws implementing the Regulation and the
founding parties 254 Directive 287–288, 489
general meeting management 288
decision-making process 265–266 special negotiating body 287–288
shareholders’ rights and obligations 266 management
generally 253 appointment and removal
holding SE 261–262 Bulgaria 39, 42
income tax 282–284 Cyprus 78–79
insolvency 280–281 Czech Republic 100
laws implementing the Regulation and the France 137–138
Directive 253, 489 Greece 166
legal personality 264 Ireland 190–191
liability 271 Italy 221
liquidation 279–280 Latvia 243
management Liechtenstein 403–404
appointment and removal 268–270 Luxembourg 268–270
liability 271 Portugal 303–305
one-tier system 266–267 Romania 325
representation 270–271 Slovenia 351–352
two-tier system 266–268 Spain 375
merger Bulgaria 38–44
formation by 258–261 Cyprus 77–80
procedure 258–260 Czech Republic 93–94, 97–101
protection of creditors 261 Ireland 186, 189–191, 201
protection of minority shareholders 261 Italy 217–222
minority shareholders 261 Latvia 242–243
name 254 liability see liability
net worth tax 284 Liechtenstein 401–404
504
Index
Luxembourg 266–271 merger

Malta 288 acquisition by company holding 90 or more
Norway 425–428 of shares in another company
one-tier system 455–456 Cyprus 70–71
Bulgaria 38–40 Czech Republic 91
Cyprus 77–80 Greece 158–159
Czech Republic 94, 97–99 Italy 214
France 135–136, 137 Latvia 238
Greece 165 Norway 420
Ireland 186, 189–190 acquisition of wholly owned subsidiary,
Italy 218–219 Cyprus 71
Latvia 242–243 avoidance
Liechtenstein 401–402 Czech Republic 91
Luxembourg 266–267 Greece 159
Norway 425, 426 Italy 214
Spain 374–375 Latvia 238
Portugal 302–305 Bulgaria 26–29
representation creditors’ rights
Bulgaria 39–40, 42–43 Bulgaria 28–29
Czech Republic 100–101 Czech Republic 91
France 138 Greece 158
Greece 167 Ireland 184
Latvia 243 Latvia 237–238
Luxembourg 270–271 Norway 419
Norway 427–428 cross-border mergers 6–7
Portugal 305 CBM Directive 6–7, 9
Romania 325 prevention 7
Slovenia 352 as reason to opt for an SE 6–7,
Spain 375–376 8–9
Romania 323–326 ‘rule of reason’ and 7
Slovenia 350–353 Cyprus 69–71
Spain 374–376 Czech Republic 89–91
two-tier system 454–456 formation of SE by 9, 14, 449–452
Bulgaria 40–43 Bulgaria 26–29
Cyprus 77–80 Cyprus 69–71
Czech Republic 93–94, 99–101 Czech Republic 89–91
France 136–137 France 122–125
Greece 154, 166 Italy 210–213
Ireland 186, 189–190, 201 Latvia 235–238
Italy 218–219, 220–221, 222 Liechtenstein 396–397
Latvia 242–243 Luxembourg 258–261
Liechtenstein 402–403 Norway 418–420
Luxembourg 266–268 Portugal 294–296, 313
Norway 425, 426–427 Slovenia 343–344
Spain 374–375 Spain 367–369
members’ voluntary liquidation France 122–125
Ireland 197 Greece 157–159
505
Index
merger (cont.) national authorities, supervision by see

Ireland 176, 181–184 supervision by national authorities
Italy 210–214 national company
Latvia 235–238 conversion into, Cyprus 82
Liechtenstein 396–397 net worth tax
Luxembourg 258–261 Luxembourg 284
minority shareholders see minority Netherlands
shareholders employee involvement 11
Norway 418–420 number of SEs created 4
objection to participating company Norway
Greece 158 acts committed on behalf of SE in
Latvia 237 formation 421
opposition annual accounts and consolidated accounts
Ireland 184 accounting principles 430
Spain 368–369 auditors 430–431
Portugal 294–296, 313 applicable law 434
reasons to opt for an SE and 6 capital 417
Slovenia 343–344 cessation of payments 433–434
Spain 367–369, 387 conversion into SE 421
minority shareholders, protection of corporate purpose 417
Bulgaria 27–28 creditors’ rights 419
Czech Republic 91 dissolution 432–434
France 124 employee involvement 11, 428–429
Greece 158, 160 employee participation 429
Ireland 184 protection of employee representatives
Italy 213 429
Latvia 237 special negotiating body 429
Luxembourg 261 formation
Norway 419 acts committed on behalf of SE in
Spain 369 formation 421
capital 417
name conversion 421
Bulgaria 23–24 corporate purpose 417
Cyprus 66 founding parties 413
Czech Republic 86 holding SE 420–421
France 117 merger 418–420
Greece 154 name 413
Ireland 177 registered office 414
Italy 206 subsidiary SE 421
Latvia 233–233 transfer of registered office 415–416
Liechtenstein 395 founding parties 413
Luxembourg 254 general meeting
Norway 413 decision-making process 423–425
Portugal 291–292 shareholders’ rights and obligations 425
Romania 317 generally 412–413
Slovenia 339 holding SE 420–421
Spain 364 income tax 434–436
506
Index
insolvency 432–433 corporate form 294

laws implementing the Regulation and the corporate purpose 294
Directive 14, 412–413, 489 dissolution 308–311
legal personality 422 employee involvement 306
liability 428 employee participation 307
liquidation 432 protection of employee representatives
management 307
liability 428 special negotiating body 306–307
one-tier system 425, 426 formation 294
representation 427–428 acts committed on behalf of SE in
two-tier system 425, 426–427 formation 297
merger capital 294
acquisition by company holding 90 or conversion 297, 313
more of shares in another company 420 corporate form 294
creditors’ rights 419 corporate purpose 294
formation by 418–420 founding parties 291
minority shareholders 419 holding SE 296, 313
procedure and publication 418–419 income tax and 313–314
minority shareholders 419 merger 294–296, 313
name 413 name 291–292
publication 418–419, 422 registered office 292
reasons to opt for an SE 413 subsidiary SE 296–297, 313
registered office 414 transfer of registered office 292–293, 314
registration 422 founding parties 291
representation 427–428 general meeting
subsidiary SE 421 decision-making process 299–300
supervision by national authorities 431 shareholders’ rights and obligations
tax treatment 434–437 300–302
transfer of registered office 415–416 generally 290
value added tax 436 holding SE, formation 296
winding up 432 income tax 312–313
formation and 313–314
one-tier management system see management insolvency 310–311
organisation see general meeting; management laws implementing the Regulation and the
Directive 290, 489
payroll tax legal personality 299
Slovenia 361 liability 305
Portugal liquidation 309–310
acts committed on behalf of SE in management
formation 297 appointment and removal 303–305
annual accounts and consolidated accounts liability 305
307–308 one-tier system 302–303
applicable law 311 representation 305
appointment and removal 303–305 two-tier system 302–303
capital 294 merger 294–296, 313
cessation of payments 311 name 291–292
conversion into SE 297, 313 publication 297–299
507
Index
Portugal (cont.) Latvia 234

reasons to opt for an SE 290–291 Liechtenstein 395–396
registered office 292 Luxembourg 254–255
registration 297–299 Norway 414
representation 305 Portugal 292
special negotiating body 306–307 Slovenia 339
stamp duty 314 Spain 364
subsidiary SE 296–297 registration
supervision by national authorities 308 Bulgaria 32–33
tax treatment 312–314 Cyprus 68, 73–74
transfer of registered office 292–293, Czech Republic 93
314 employee involvement and 10–11
value added tax 314 France 129–130
winding up 308–309 Greece 161
property tax Ireland 186
Latvia 250–251 Italy 210–213, 216
Slovenia 360 Latvia 240–241
public limited-liability companies 12, 461, Liechtenstein 399
464–466 Luxembourg 263
public and private limited-liability companies Norway 422
462–463, 467–469 Portugal 297–299
publication Romania 319–320
Bulgaria 33 Slovenia 347–348
Cyprus 74–75 Spain 371
Czech Republic 93 Regulation, the see Council Regulation No
France 130 2157/2001
Greece 159, 161–162 representation see management
Ireland 182–184, 186 representative body 479
Italy 210–213 composition 481
Latvia 237, 238, 241 increasing number of employee after
Liechtenstein 399 establishment 12–13
Luxembourg 263 misuse of procedures and 12–13
Norway 418–419, 422 structural change and 12–13
Portugal 297–299 see also employee involvement; special
Romania 319–320 negotiating body
Slovenia 348 Republic of Slovenia see Slovenia
Spain 367–368, 371 Romania
accession to EU 20
receivership acts committed on behalf of SE in
Ireland 198 formation 318–319
registered office annual accounts and consolidated accounts
Bulgaria 20, 24 327
Cyprus 66–67 Audited Companies 328
Czech Republic 86–87 external audit 327
France 117–118 internal audit 327
Ireland 178 appointment and removal 325
Italy 206–207 capital 317
508
Index
instruments attesting to contribution schemes of arrangement

317–318 Ireland 199
issuance of shares 318 SE see European Company
transfer of shares 318 shareholders see general meeting; minority
cessation of payments 330–332 shareholders
dissolution 328–330 shelf SEs 4, 10
dividend withholding tax 333 Slovenia
employee involvement 326–327 acts committed on behalf of SE in
confidentiality 326 formation 347
excise tax 334–335 annual accounts and consolidated accounts
formation 316 accounting principles 356
acts committed on behalf of SE in auditors 356
formation 318–319 applicable law 359
capital 317–318 appointment and removal 351–352
founding parties 316 capital 342–343
means 318 cessation of payments 359
name 317 conversion into SE 346–347
founding parties 316 corporate purpose 342
general meeting dissolution 357–359
decision-making process 320–322 employee involvement 353
shareholders’ rights and obligations confidentiality 355
322–323 employee participation 354–355
generally 315–316 protection of employee representatives
income tax 332–333 355
insolvency 330–332 special negotiating body 353–354
laws implementing the Regulation and the excise duty 361
Directive 3, 315–316, 489 formation
legal personality 320 acts committed on behalf of SE in
liability 326 formation 347
liquidation 328–330 capital 342–343
local taxes 334 conversion 346–347
management corporate purpose 342
appointment and removal 325 founding parties 339
liability 326 holding SE 344–346
one-tier system 323–324 merger 343–344
representation 325 name 339
two-tier system 324–325 registered office 339
name 317 subsidiary SE 346
publication 319–320 transfer of registered office 339–342
registration 319–320 founding parties 339
registration fees 335 general meeting 348
representation 325 decision-making process 348–349
stamp duty 335 shareholders’ rights and obligations
supervision by national authorities 328 349–350
tax treatment 332–335 generally 337–338
value added tax 333–334 holding SE 344–346
winding up 328–330 income tax 359–360
509
Index
Slovenia (cont.) employee involvement

insolvency 358–359 employee participation 377–378
insurance policy tax 361 protection of employee representatives
laws implementing the Regulation and the 378
Directive 337–338, 490 special negotiating body 376–377
legal personality 348 formation
liability 352–353 acts committed on behalf of SE in
liquidation 357–358 formation 370–371
management capital 366–367
appointment and removal 351–352 conversion 370, 387
liability 352–353 corporate purpose 365–366
one-tier system 350 founding parties 363–364
representation 352 holding SE 369–370, 387
two-tier system 350–351 merger 367–369
merger 343–344 name 364
name 339 registered office 364
payroll tax 361 subsidiary SE 370, 387
property tax 360 taxation on establishment of an SE
publication 348 386–388
reasons to opt for an SE 338–339 transfer of registered office 364–365
registered office 339 founding parties 363–364
registration 347–348 general meeting
representation 352 decision-making process 371–373
special negotiating body 353–354 shareholders’ rights and obligations
subsidiary SE 346 373–374
supervision by national authorities 356 generally 363
tax treatment 359–361 group companies 369, 385–386
transfer of registered office 339–342 holding SE 369–370, 387
to Slovenia 341–342 income tax
value added tax 360 general taxation of an SE 385
winding up 357 group taxation 385–386
Societas Europaea (SE) see European losses of foreign branches 384–385
Company taxation of shareholders 382–384
Spain insolvency 380–382
acts committed on behalf of SE in laws implementing the Regulation and the
formation 370–371 Directive 363, 490
annual accounts and consolidated accounts legal personality 371
accounting principles 378 liability 376
auditors 379 liquidation 379–380
applicable law 382 management
appointment and removal 375 appointment and removal 375
capital 366–367 liability 376
cessation of payments 380–382 one-tier system 374–375
conversion into SE 370, 387 representation 375–376
corporate purpose 365–366 two-tier system 374–375
creditors, protection of 369 merger
dissolution 379–382 formation by 367–369, 387
510
Index
group companies 369 Greece 169

procedure and publication 367–368 Ireland 193–194
protection of creditors 369 Italy 224
protection of minority shareholders Latvia 245
369 Liechtenstein 407
public interest opposition 368–369 Luxembourg 276
minority shareholders 369 Malta 288
name 364 Norway 429
publication 367–368, 371 Portugal 307
registered office 364 Slovenia 355
registration 371 Spain 378
representation 375–376 reconvention/reorganisation in event of
subsidiary SE, formation 370, 387 substantial changes
supervision by national authorities 379 France 143
tax treatment 382–388 Liechtenstein 406
taxation on establishment of an SE Slovenia 353–354
386–388 Spain 376–377
transfer of registered office 364–365 standard rules 481–483
value added tax 386 France 142–143
winding up 379–380 Liechtenstein 406–407
special negotiating body (SNB) 10, 11 structural change and 12–13
complaints procedure see also employee involvement; employee
France 144 participation; representative body;
Ireland 194 works councils
content of agreement 477 stamp duty
creation 10, 475–477 Ireland 201
Cyprus 68 Portugal 314
Czech Republic 102 Romania 335
France 139–144 statutes see articles
Greece 168 subsidiaries
Ireland 192–194 formation by incorporation as subsidiary
Italy 223 453
Latvia 244–245 Bulgaria 30–31
Liechtenstein 405–407 Cyprus 72–73
Luxembourg 272–275 Czech Republic 92
Malta 287–288 France 127
misuse of procedures and 12–13 Greece 160
negotiations Ireland 176, 185
applicable legislation 478 Italy 214
duration 478 Latvia 239
France 141 Liechtenstein 398
Luxembourg 274 Luxembourg 262
Malta 288 Norway 421
Norway 429 Portugal 296–297, 313
Portugal 306–307 Slovenia 346
protection of employee representatives 479 Spain 370, 387
France 141 setting-up, Cyprus 75
511
Index
supervision by national authorities termination see cessation of payments;

Bulgaria 52–53 examinership; insolvency; liquidation;
Czech Republic 106 receivership; schemes of arrangement;
France 146–147 winding up
Greece 170 transfer of head office 9
Ireland 196–197 transfer of registered office 9
Latvia 247 Bulgaria 24–25, 59–61
Liechtenstein 408 Cyprus 80–81
Luxembourg 279 Czech Republic 87–88
Norway 431 France 118–121, 151
Portugal 308 Greece 155–156
Romania 328 Ireland 178–180, 201
Slovenia 356 Italy 205, 207–209
Spain 379 Latvia 234–235
suspension of payments see cessation of Luxembourg 255–257
payments Norway 415–416
Sweden Portugal 292–293, 314
employee involvement 11 Slovenia 339–342
SEs created 4, 5 Spain 364–365
two-tier management system see management
tax treatment
Bulgaria 57–61, 62 United Kingdom
capital contribution tax 173 laws implementing the Regulation and the
capital tax 285, 386 Directive 14
conversion into SE and 9
Cyprus 84 value added tax
Czech Republic 108–112 Bulgaria 61
dividend withholding tax 333 Czech Republic 112
France 148–150 France 150
Greece 172–173 Greece 173
insurance policy tax 361 Ireland 200–201
Ireland 199–201 Latvia 250
Italy 229–230 Liechtenstein 409
Latvia 233, 249–251 Luxembourg 285
Liechtenstein 409 Norway 436
Luxembourg 282–285 Portugal 314
net worth tax 284 Romania 333–334
Norway 434–437 Slovenia 360
payroll tax 361 Spain 386
Portugal 312–314
property tax 250–251, 360 winding up 458–459
as reason to opt for an SE 9 Bulgaria 53
Romania 332–335 Cyprus 81–82
Slovenia 359–361 Czech Republic 107
Spain 382–388 France 147–148
see also excise tax; income tax; stamp duty; Greece 170–171
value added tax Ireland 197–199
512
Index
Italy 226–227 Spain 379–380

Latvia 247–248 withholding tax
Liechtenstein 408–409 Romania 333
Luxembourg 279 worker participation see employee
Norway 432 participation
Portugal 308–309 works councils
Romania 328–330 France 142
Slovenia 357 Liechtenstein 406
513

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The European Company

The European Company (‘SE’) is a legal entity offering a European

dirk van gerven is a Partner at NautaDutilh, Brussels, and is a

This publication is in copyright. Subject to statutory exception

First published 2008

Printed in the United Kingdom at the University Press, Cambridge

ISBN 978-0-521-86000-0 hardback

Cambridge University Press has no responsibility for the persistence or

National reports from EU Member States

National reports from EEA Member States

BULGARIA Marc Meyers

Dirk Van Gerven

I Implementation by Member States 3

I Implementation by Member States

II SEs created thus far

Alfred Berg SE Sweden 320 C7 Banking

BASF Germany 65500 C Chemicals

7 C means that the relevant SE was formed by conversion.

III Why opt for an SE?

IV Some employee participation issues

companies or the converted public limited-liability company, as the case may

The last sentence of recital 18 to the Directive reads:

‘Consequently, that approach [securing employees’ acquired rights as

subsidiaries or establishments in the definition of ‘structural changes’, or put

• The Commerce Act of 1991 as amended (‘CA’) – the main legislation

The abovementioned laws are supplemented by relevant secondary legisla-

The transfer of shares in an AD (provided the shares are not dematerialised)

C Registered office and transfer

Publication of the transfer proposal may be proved by producing a copy of the

2 Different means of formation

(i) Protection of minority shareholders

(ii) Protection of creditors

• the acquisition, management, evaluation and sale of interests in Bulgarian

• the acquisition, evaluation and sale of patents and the assignment of

There are two possibilities to establish a holding AD:

legal entities participating in the formation of a subsidiary SE shall be subject

3 Acts committed on behalf of an SE in formation

4 Registration and publication

• the members of the AD’s management body or bodies;

5 Acquisition of legal personality

III Organisation and management

2 General meeting of shareholders

• amend the company’s articles;

• elect and remove members of the board of directors or the supervisory

B Rights and obligations of shareholders

(i) Non-material rights in connection with the management of an AD:

(ii) Non-material rights in connection with the control of an AD:

(iii) Economic rights:

auditors to examine all accounting documents of the AD and report on

A One-tier management system

B Two-tier management system

No person may simultaneously be a member of the supervisory board and

(i) Appointment and removal

D Additional requirements for the management of a public AD

• a member of a management or supervisory body, a managerial agent or

V Transposition of the Directive of 8 October 2001

Firstly, with regard to the method to be used to elect or appoint members of

VI Annual accounts and consolidated accounts

The consolidated financial statements consist of a consolidated balance sheet,

A Non-application of the requirement to prepare consolidated accounts

VII Supervision by the national authorities

inspections may be conducted jointly with the Financial Investigations Agency,

Insolvency proceedings are commenced by filing a petition with the regional

Furthermore, upon the commencement of insolvency, all judicial and arbitral