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Corporate Governance and Company Law News

Topics: European Private Company (SPE), 14th Company Law directive; Communication from the Commission on the review of the SE Directive; Corporate Governance Forum; Number of SEs; Enforcement of the European company law.

European Private Company (SPE)

The EU Commission’s proposal for a Council Regulation on the Statute for a European Private Company (SPE) is a rare example of its kind within the ‘Small Business Act’ that is intended to make it easier for small and medium-sized enterprises to operate in the Single Market. Although strongly criticised by a number of stakeholders throughout Europe, and for a number of different reasons, the legislative process is proceeding in the Council. The French EU presidency has declared the SPE one of its top priorities. Among the issues raised by the critics are various company law provisions (for example, minimum capital), the missing cross-border element and especially the inadequacy of rules on – at least pre-existing – workers’ participation. Although considered to embody a real ‘European approach’ it cannot to be found any comprehensive concept for workers’ participation in this draft bill. Thus, a more general approach would seem to be required. This would involve orienting the rules on workers’ participation more closely with the acquis of European social rights, namely the SE directive (2001/86/EC) and the SCE directive (2003/72/EC). As the SPE is regarded as a provision for SMEs, according to the trade unions the 50-employee threshold of the SCE directive should also be implemented in the SPE statute. In SPEs with more than 50 employees there should be a standard provision obliging employers to implement a negotiation procedure on the modalities of workers’ involvement as regards cross-border information and consultation, as well as boardroom participation.

Because of the shortcomings of the Commission proposal it seems improbable that the SPE statute will be adopted by the end of 2008, during the French presidency. Rather more realistic might be adoption under the Swedish presidency in the second half of 2009.

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14th Company Law Directive

In October the European Parliament’s (EP) Committee on Legal Affairs issued a draft report for an EP resolution on the 14th company law directive for the cross-border transfer of the registered office of a company (2008/2196(INI)). The purpose of the 14th directive is to make it easier for companies to move across borders. The resolution invites the Commission to submit a legislative proposal to the EP during 2009. The resolution should be related to Art. 192 II EC, which means that the EP would be able to proceed against the Commission in case of inactivity. The EP intends to adopt the resolution within the current legislative period (which ends in summer 2009).

The 14th company law directive could be an important instrument to safeguard workers’ participation rights in the future. Clearly, company mobility always has a social impact. This is why the ETUC has called for the 14th directive to be used to enhance the role and importance of employees by granting them an obligatory and fully recognised role in decision-making, at both workplace and board level, in cases of cross-border transfer of company headquarters.

In this regard, Point 5 of the resolution deals with the rules on workers’ participation. Thus, the wording of the following section is of particular concern to European trade unions:

‘Employee participation shall be governed by the legislation of the host Member State. However, the legislation of the host Member State is not applicable:

(a) where the host Member State does not provide for at least the same level of participation as operated in the company in the home Member State, or

(b) where the legislation of the host Member State does not give employees of establishments of the company situated in other Member States the same entitlement to exercise participation rights as such employees enjoyed before the transfer.

In these cases, the provisions of Article 16 of Directive 2005/56/EC should apply accordingly.’

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Communication from the Commission on the Review of the SE Directive

In September 2008 the Commission presented a Communication on the review of Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a European company with regard to the involvement of employees (COM(2008)591 final).

Generally, the EU Commission agrees with the view taken by the European trade unions that, in fact, there is no reason to revise the SE directive because too little practical experience has been accumulated so far. However, the EU Commission has recognised a problem in the high number of SEs established without employees and, consequently, without any negotiations on employee involvement. Against this background, the EU Commission has stated its concern that many member states have not adopted measures to avoid misuse of the provision when transposing the Directive into national law.

Furthermore, the EU Commission recalls that the adoption of the Directive was the result of a delicate compromise that took more than 30 years of negotiations to achieve. The Commission will decide at the end of 2009, in light of a review of the SE Regulation, whether the SE directive should be reviewed.

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Corporate Governance Forum

The European Corporate Governance Forum held its last meeting on 25 November 2008. In 2008 the Commission has appointed several new members to the Forum. One new member is Niklas Bruun of the Swedish School of Economics and Business Administration in Helsinki, who is also a member of the SEEurope Network. In the meantime the Corporate Governance Forum has published its working programme for 2008–2011. The following items will be part of the programme: empty voting and transparency of investors' positions; cross-border voting; application of CG codes in cross-border situations (double listings, and so on); rules on acting in concert; Working Group on Minority Shareholder Protection; Working Group on Corporate Governance Infrastructure.

In light of the current financial crisis there might be some concern whether the EU Commission is addressing the most relevant problems with these priorities. The European trade unions have always underlined the importance of workers’ participation in Europe, making workers ‘citizens’ in their workplaces and realising Social Europe at grassroots level. The disastrous failure to properly supervise cross-border financial companies has brought back onto the political agenda demands for stronger mechanisms to control companies involving other stakeholders, not just shareholders. This may herald a new dawn for obligatory workers’ participation in management decisions in European companies. The following items should therefore also be on the agenda of the Forum: workers’ representation in company boards; executive pay, pension funds and the financial crisis; the impact of hedge funds, private equity and sovereign wealth funds.

The Corporate Governance Forum also has published its Annual Report 2007.

Number of European Companies (SE)

The ETUI has published its latest update of data outlining the number of European Companies established across the EU. After a period of incubation, more dynamic development can now be observed, with the total number of SEs registered increasing from 183 (June 2008) to 284 (October 2008). Whilst 17 new ‘normal SEs’ have been created, with a total of 58 employees, ‘UFO SEs’ with no indication of their business purpose or the number of employees are conspicuous.

Our database now contains updated information on European Companies. Further information on workers’ participation in SEs and related subjects may also be found there.

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Enforcement of European Company Law by the Commission

The European Commission has initiated proceedings before the European Court of Justice against Belgium, Greek, Spain, France, Portugal and Sweden because of their failure to implement the cross-border merger directive (2005/56/EC).

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