Germany: The legal form of a European Stock Corporation is an interesting alternative for mid-sized partnerships and also for large corporations

Last Updated: 30 September 2009
Article by Friedrich Merz, Dr. Ulrike Binder and Dr. Hendrik Otto
Most Read Contributor in Germany, September 2016

Originally published September 27, 2009

Keywords: legal form, European Stock Corporation, formation, commercial register, EU, EEA, Societas Europaea, SE, SE Regulation

Formation of a European Stock Corporation

Organizational Possibilities and Advantages

A European Stock Corporation ("Societas Europaea", abbreviated "SE") is a type of corporation which can be established in any European Union member state pursuant to European Law. In early 2009 there were approximately 350 SEs throughout the EU, a significant number of which were established in Germany. Many companies are currently considering their possible transformation into the legal form of an SE. The spectrum of companies that have either already transformed into an SE or are considering transforming varies from large, listed companies to mid-sized partnerships.

Legal framework

As of October 2004, it is possible to establish and enter an SE into the commercial register of any member state of the European Union ("EU") and the European Economic Area ("EEA"). The establishment of an SE is governed by the Regulation regarding the Statute for the European Company ("SE Regulation"), valid in all EU and EEA member states as uniform and directly enforceable law. In addition to regulating the establishment of an SE, the SE Regulation also contains regulations regarding the minimum capital, internal constitution, shareholder meetings, accounting and liquidation of an SE as well as governing the transfer of an SE's registered office to another EU or EEA member state. However, it does not contain any concluding regulations. An SE is treated as a stock corporation of the respective member state in which the company has its registered office and is subject to:

  • the SE Regulation,
  • the SE's articles of association (which must be in accordance with the SE Regulation or national corporation law, as the case may be),
  • as well as in regards to areas, which are not or only partially regulated in the SE Decree
  • the national legal provisions that have been specifically enacted for the regulation of SEs (for example, in Germany this is the Act to Establish the European Company (Gesetz zur Einführung der Europäischen Gesellschaft, SEEG) and
  • the legal provisions that are applicable to stock corporations in the member state in which the company has its seat (for example, in Germany such legal provisions would include the Stock Corporation Act (Aktiengesetz), the Law Regulating the Transformation of Companies (Umwandlungsgesetz) and the Commercial Code (Handelsgesetzbuch).

Employees' participation in SEs is regulated by an EU directive which was implemented in Germany by the Law regarding the Employees' Participation in a European Company (Gesetz über die Beteiligung der Arbeitnehmer in einer Europäischen Gesellschaft, SEBG).

SEs are established in accordance with the SE Regulation (irrespective of member state in which it has its registered office). However, their legal organizational form will differ depending on the national laws under which the SE is registered, just as is the case for stock corporations.


Over the last few years SEs have gained in popularity, particularly in Germany. An SE offers advantages that other company forms do not, in particular:

  • Corporate governance structures in SEs can be organized more flexibly and efficiently. An SE can choose between the two-tier system of governance (with a board of directors and a supervisory board) and the one-tier system of governance (with just an administrative board).
  • SEs facilitate dealing with cross-border issues. For example, structures in internationally operating groups of companies can be organized uniformly and an SE's registered office can simply be relocated from one member state to another without the need for liquidation and formation of a new company.
  • The employee involvement model is negotiated and agreed upon on the establishment of the SE. An increase in the number of employees does not lead to a corresponding increase in the number of employees serving on the supervisory board or executive board. Therefore, the employee involvement agreement can be "frozen" by the establishment of an SE.
  • The establishment of an SE emphasizes the company's international orientation to the public and supports the construction of a European image and European market appearance.

The establishment of an SE

An SE can only be established in accordance with the forms of establishment (or numerus clausus) as set out in the SE Regulation. The SE Regulation provides four primary forms of establishing an SE:

  • the merger of a national stock corporation with an SE,
  • the transformation of a national stock corporation into an SE,
  • the establishment of a joint holding SE, and
  • the establishment of a joint subsidiary SE.

An existing SE can also establish a subsidiary SE.

The establishment of an SE inevitably raises cross-border issues. Only certain legal entities are permitted to establish the different forms of an SE, as set out in the SE Regulation. For instance, private persons can be the founders of an SE via their interest in the holding entity of the SE and participate in the establishment of an SE. However, it is not possible to establish an SE via a hive-off or spin-off in accordance with the Transformation Act (Umwandlungsgesetz). Therefore, certain preparatory measures may be necessary prior to the establishment of an SE. The use of shelf SEs, which are combined into an existing company or companies is becoming increasingly common.

The primary forms of establishment, as set out in the SE Regulation, are as follows:

Corporate Governance

The law governing SEs permits corporate governance models, which neither the German stock corporation nor the limited liability companies laws permit. The law governing SEs allows a choice between the two-tier management system (consisting of a board of directors and a supervisory board), and the one-tier management system (consisting of an administrative board which combines the functions of the board of directors and the supervisory board).


An SE can, like a German stock corporation, have a two-tier management system. The SE is managed by a board of directors which is supervised by a supervisory board. The supervisory board's size is not dependent upon the number of employees in the SE (as is the case for a German stock corporation). This makes it possible for companies with equal representation of employees and representatives of the employer on the supervisory board to reduce the supervisory board's size by changing the legal form of the entity into an SE and thereby increasing the efficiency with which decisions are made in the organization. Additionally, it is possible to include a provision in the SE's articles of association that the board of directors' chairperson has a veto right. In this case the board of directors' chairperson has a particularly strong position.


An SE with a one-tier management system has an administrative board which manages the company, determines and supervises the implementation of its guiding principles. If the SE has a share capital of EUR 3 million, the administrative board must consist of at least three people. Under certain circumstances a veto right can also be incorporated in the articles of association of the SE for the administrative board's chairperson.

The administrative board appoints one or more managing directors. Administrative board members can also be managing directors if the majority of the administrative board consists of non-managing directors. The managing directors manage and represent the company (both in court and out of court). They can be removed from office by the administrative board at any time, except to the extent that the articles of association provide otherwise. It should be noted that a legal representative of an SE dependent company cannot also be an administrative board member. However, the legal representative of a dependent company can be a managing director for the controlling SE.

The one-tier management system creates a concentration of power which is not possible to achieve with a stock corporation. This system is therefore particularly interesting to small and family-operated companies. The one-tier management system is also advantageous to companies with Anglo-American stockholders, as their stockholders are more familiar with the one-tier board governance system from their native legal system, rather than with the German stock corporation's two-tier management system. Finally, the one-tier management system makes it possible for groups of companies operational throughout Europe to implement subsidiaries with a uniform management system.

Labor law aspects of an SE

A company's employee involvement is established differently in an SE than is applicable in the German employee involvement laws. The SEBG provides that employees and employers must generally negotiate how the employees' involvement will be organized in the SE prior to its establishment. This statutory requirement includes negotiations regarding the implementation of instruments to secure the employees' rights to be informed and heard, as well as negotiations regarding the organization of the company's employee involvement in the SE's supervisory bodies.

Generally, there is a timeframe of six months, up to a maximum of one year, in which the employees and employer have to agree a solution on employee involvement. If within the statutory prescribed timeframe no agreement has been reached, the existing statutory minimum requirements for employee involvement will be effective. In relation to an SE, the employee involvement of the participating legal entity will then be applicable, which provides for the highest quota of employees in the company's supervisory or executive boards. If a stock corporation transforms into an SE, and the employee involvement negotiations are unsuccessful in the prescribed timeframe, the employee involvement statute which was in place in the transformed company shall remain in force, and any negotiations will be frozen permanently. Therefore, the negotiations, which are led on the employees' side by a special negotiating body established for this particular purpose, do not enable a unilateral "escape" from the German company employee involvement law. The employee involvement regulations in SEs are independent of the number of employees employed by the SE. Therefore, an increase in employee numbers does not lead to a higher employee quota in the SE's supervisory or executive board, i.e. employees' influence is not increased by an increase in employee numbers.

Tax aspects

No independent tax law was created for SEs, the tax laws generally applicable to corporations apply. However, the tax laws were slightly modified in relation to SEs in the SE Regulation's implementation in 2006. Furthermore, the implementation of the SE as a legal form was a catalyst for changes to the German transformation tax law, bringing German tax law more in line with the rest of Europe and making the transfer of a company's registered office easier.

Tax issues should be considered during the SE's planning phase and before its establishment. As noted previously, it is possible to establish an SE in more than one member state of the EU or EEA. The following should be considered when deciding on the appropriate member state registered office: the effective tax burden, the net of double tax treaties, existing group tax regimes, the regulation regarding the taxation of dividends, the tax deductibility for financing expenditures and possible substance requirements for cross-border activities. When choosing one of the forms of establishment of an SE, one should bear in mind the taxation effects of such form, for example, an imminent disclosure and taxation of secret reserves or demise of existing losses carried forward upon establishment of all participating legal entities and their shareholders.

The SE's ongoing taxation is no different to the taxation of other corporations, for example, a stock corporation (AG) or a limited liability company (GmbH). The "general" tax limits become particularly important regarding cross-border activity. As the SE and its shareholders, or, as the case may be, subsidiaries, are always domiciled in at least two EU member states, the applicability of different taxation systems can lead to a double taxation, as the tax authorities in different countries want to tax the SE on the same basis. If the SE is active within the EU predominantly via permanent establishments, the profit limitation between the parent company and permanent establishments and the assignation of the economic assets are of great relevance. Questions regarding transfer prices are the centre of attention for foreign subsidiaries.

The cross-border transfer of an SE's registered office from Germany to another member state in the EU or EEA only initiates a taxable disclosure of the secret reserves insofar as the economic assets are "detangled", i.e. access to German taxation is withdrawn and the assets do not remain in a domestic permanent establishment of the SE. It is advisable to pursue in-depth tax advice as well as to regularly co-ordinate with the tax authorities in advance of establishing an SE.

Visit us at

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.