France: The European Company: An Opportunity in France in the Near Future

Last Updated: 6 January 2005

Article by Marine Guyon-Godet and Marie-Laure Larget-Bozonnet

Council Regulation (EC) No. 2157/2001 of 8 October 2001 "on the Statute for a European company (SE1)" (the "Regulation") came into force on 8 October 2004 in all European Member States. The Regulation provides, however, that an SE may not be registered in a Member State unless an arrangement is concluded on the involvement of employees in accordance with 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"). To date, the Directive has been adapted in some of the Member States, where an SE may thus be formed and registered. This is not yet the case in France, but the adaptation process is on, and it should materialize in the coming months. This article will give an overview of the characteristics of the SE pursuant to the Regulation. It does not develop the issue of involvement of employees pursuant to the Directive.

The Formation of the SE

The Regulation provides for four means of creation of an SE by existing companies operating in more than one Member State. Creation of an SE would not be possible ex nihilo, because means of creation of an SE seem to be restricted to these four options, as follows:

By merger: Public limited liability companies2 (sociétés anonymes under French law) may form an SE by means of a merger, if (i) they are formed under the laws of a Member State, (ii) they have registered offices and head offices within the Community, and (iii) at least two of them are governed by the laws of different Member States. The absorbing company, or newly formed company, depending on the terms and conditions of the merger, shall take the form of an SE. The laws of the Member State governing each merging company shall apply to that company in the merger process for all matters not expressly provided for by the Regulation, including with regard to the protection of the interests of the merging companies’ creditors, holders of bonds and holders of securities other than shares.

By formation of a holding SE: Public and private limited liability companies (sociétés anonymes and sociétés à responsabilité limitée under French law) may promote the formation of a holding SE if (i) they are formed under the laws of a Member State, (ii) they have registered offices and head offices within the Community, and (iii) each of at least two of them is governed by the laws of different Member States or has for at least two years had a subsidiary company governed by the law of, or a branch situated in, another Member State. Formation of a holding SE is subject to review by independent experts and requires contribution of shares conferring the holding SE more than 50 percent of the permanent voting rights in each of the companies promoting the operation.

By formation of a subsidiary SE: Companies, firms, and other legal bodies governed by public or private law may form a subsidiary SE by subscribing for its shares if (i) they are formed under the laws of a Member State, (ii) they have registered offices and head offices within the Community, and (iii) each of at least two of them is governed by the laws of different Member States or has for at least two years had a subsidiary company governed by the law of, or a branch situated in, another Member State. Formation of such a subsidiary SE is governed by the national laws involved, including the law applicable to the formation of a subsidiary in the form of a public limited liability company in the Member State where the subsidiary SE is incorporated.

By conversion of an existing public limited liability company (société anonyme in France) into an SE: Such a company may be converted into an SE if it has (i) registered offices and head offices within the Community, and (ii) had since at least two years a subsidiary in another Member State. Conversion does not result in the creation of a new legal person. Conversion shall involve publication of draft terms of conversion and review of the situation of the company by independent experts.

In addition to these four means described in the Regulation, another means may be implied, as the Regulation provides that an SE may incorporate one or several subsidiary SE that may have a sole shareholder. The Regulation specifies that the sole shareholder subsidiary SE may be incorporated even in the Member States requiring more than one shareholder for the incorporation of a public limited liability company (for example, French legislation requires a minimum of seven shareholders for the incorporation of a société anonyme in France).

The Structure of the SE

The SE must be in the form of a public limited liability company (société anonyme in France), with a minimum capital of 120,000 euros divided into shares. The SE may be listed. The registered office of the SE must be located in the same Member State as its head office. The SE shall acquire legal personality on the date of its registration with the company register of the Member State where it has its head office. There is no European central register, but notice of registration, and of the deletion of such registration, is published for information purposes in the Official Journal of the European Communities. The SE shall comprise a shareholders meeting and (i) a management body (one-tier system) or (ii) a management body and a supervisory organ (two-tier system).

The Legal Regime of the SE

The SE is not governed by a single set of rules that would apply uniformly all over the EU, but by several sets of rules applying in order of precedence, as follows: (1) the Regulation, (2) the provisions of its statutes where expressly authorized by the Regulation, (3) for those matters not covered by the Regulation: (i) Member States’ laws adopted in implementation of Community measures relating specifically to the SEs, (ii) Member States’ laws applying to public limited liability companies formed in the Member State in which the SE has its registered office, (iii) the provisions of its statutes in the same way as for a public limited liability company formed in the Member State in which the SE has its registered office.

Subject to the Regulation, the SE will be treated in every Member State as if it were a public limited liability company formed under the law of the Member State in which it has its registered office. An SE having its registered office in France will be treated as if it were a French société anonyme, subject to the Regulation.

The Necessary Adaptation of the Local Laws

Before proceeding with the incorporation of an SE, an arrangement must be concluded on the involvement of employees as provided in the Directive. Pursuant to the Directive, the arrangement to be concluded should result from negotiation between a special negotiating body representative of the employees and the competent organs of the participating companies, and should address employees’ representation, information, and consultation and, if applied in one or more of the participating companies prior to creation of the SE, employees’ participation. Such negotiation process involves complicated representation and majority rules and a heavy and time-consuming process that may continue for a six-month period of time, extendable to a year3, at the end of which standard rules would apply, as defined by the Directive, if no agreement is reached. The Directive is not directly applicable, and the Member States have to adopt the laws, regulations, and administrative provisions necessary to comply with the Directive. Such legislation was to be adopted by the Member States by 8 October 2004.

To date, nine Member States have complied with that requirement: Austria, Belgium, Denmark, Finland, Hungary, Malta, Slovakia, Sweden, and the United Kingdom. Iceland, as a member of EFTA and EEA, has also adopted the Regulation and complied with the Directive4. SEs may thus be incorporated in all these countries, which should also be the case in France in the near future.

The Advantages/Limits of the SE

The SE entails two main advantages: (i) the SE is the sole vehicle currently existing that allows the realization of cross-border mergers5, and (ii) the SE may, as expressly provided by the Regulation, transfer its registered office from one Member State to another Member State without such transfer resulting in the winding up of the SE or in the creation of a new legal person6.

There are, however, certain limits to the advantages of the SE, which result from the lack of a uniform status for the SE. Actually, the SE, apart from its formation, will essentially be governed by the laws of the Member State in which it has its registered office, and there will be as many legal statuses for the SE as Member States. Furthermore, the form of the SE is restricted to that of a public limited liability company, which, at least under French law, is highly regulated and leaves little room for contractual liberty. Member States, however, are encouraged to amend their domestic corporate law to render it more attractive in the situation of "forum shopping" established by the Regulation. In this respect, draft bills have been filed in France proposing amendments to the legislation applicable to sociétés anonymes to render it less constraining7. Member States may also adopt legislation specifically applicable to the SEs registered on their territory.

Furthermore, there is currently no specific tax regime applicable to the SE. Therefore, it should be subject to tax in all countries where it has a permanent establishment (i.e., business activities) pursuant to the general international tax principles.


1. The initials "SE," which are the abbreviation of the Latin expression "Societas Europaea," are used in all European countries to designate the European company (Article 1 of the Regulation).

2. This is the wording of the Regulation, which includes both listed and non-listed limited liability companies.

3. The initial six-month deadline may be extended to one year by agreement between the parties.

4. Liechtenstein and Norway are in the same situation as Iceland (members of EFTA and EEA) and therefore should also adapt the Directive and apply the Regulation.

5. A draft Directive on cross-border mergers was presented by the EC Commission on November 18, 2003, but it still needs to be finalized at the EC level and then incorporated in the laws of the Member States before being applicable.

6. In this respect, the draft finance law for 2005 in France provides that the transfer of the registered office of a French company to another EU Member State would no longer trigger taxation of the latent capital gains. If enacted, this new piece of legislation would put an end to the current situation according to which such transfer of registered office is treated, from a tax viewpoint, as a taxable cessation of activity.

7. As an example, proposed amendments concern the reduction of the minimum number of shareholders of a société anonyme, which is currently seven.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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