Opinion of the Economic and Social Committee on a "European Company Statute for SMEs"

(2002/C 125/19)

On 26 April 2001, the European Economic and Social Committee, acting under Rule 23(3) of its Rules of Procedure, decided to draw up an own-initiative opinion on a "European Company Statute for SMEs".

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 4 February 2002. The rapporteur was Mr Malosse.

At its 389th plenary session of 20 and 21 March 2002 (meeting of 21 March) the European Economic and Social Committee adopted the following opinion by 81 votes to 0, with 2 abstentions.

1. The needs of SMEs

1.1. An observation

1.1.1. For decades, the interest of lawyers and of the European authorities has been concerned almost exclusively with large companies, which appeared to be the essential actors of EU integration. Nowadays, everyone recognises that small and medium-sized enterprises (SMEs) play a fundamental role in the European economy, where they account for more than 90 % of all firms and 2/3 of the jobs. It is therefore illogical that, at a time when a European company statute has been adopted, only the form most suitable for large companies has been retained: the company which can call upon the savings of the general public. Neither would it be justified, at the very moment that the European Commission is planning to end double taxation by means of a single basis for the assessment of corporation tax, to have a situation where, once again, it should be large and medium-sized firms that benefit from such arrangements through the European Company Statute (SE).

1.1.2. From now on it is important to encourage co-operation between SMEs in Europe, as the Feira European Council requested in adopting a "European Small Business Charter". A study published in October 1997 by the EU Commission and covering the period 1989-1995 (Business Law Research Centre of the Chamber of Commerce and Industry of Paris - CREDA -: "Propositions pour une société fermée européenne", under the direction of J. Boucourechliev, Office for Official Publications of the European Communities, 1997. See in particular in this work, S. Urban, U. Mayrhofer and P. Nanopoulos "Analyse des rapprochements d'entreprises en Europe", p. 11 et seq.) notes that joint ventures are proportionally more common between SMEs than between large firms. However, this movement is hampered by the existence of numerous barriers and long and expensive procedures, which mainly penalise SMEs.

1.2. The need to set up a suitable tool for SMEs

1.2.1. The only supranational European legal structure which existed up until now was the European Economic Interest Grouping (EEIG); this can provide specific services to some SMEs, but it is only a partial solution.

1.2.2. The European Company, the statutes of which have finally just been adopted(1), is strongly influenced by the rules on public limited companies and was designed for big companies. Although it is undoubtedly a step forward the SE, which goes back more than thirty years, is based on an old concept, and its foundations clearly show the symptoms of this: it is cumbersome and complex, unsuited to SMEs' needs, and has difficulty in incorporating social advances. In its report on the last Draft Council Regulation on the SE, the European Parliament stresses that the draft "does not take enough account of SMEs, when the European SME is the engine of a major part of the European economy" (H.P. Mayer report).

1.2.3. Moreover, harmonisation efforts mainly concern public limited companies. The legislation applying to private limited companies or one-man businesses is still very marked by national law.

1.2.4. The European Commission itself is aware of this situation, since on 4 September 2001 it instructed a working party of experts in company law to look into "the pan-European rules on take-overs initially, then the key priorities for modernising company law", including "the possible need for new legal forms (for example, a European private company, which would be of particular interest to small and medium-sized enterprises)".

1.2.5. In recent opinions, the European Economic and Social Committee has also emphasised the need for a European legal form for SMEs. In its own-initiative opinion "The social economy and the single market" of 2 March 2000(2), the Committee noted: "It should also be possible for individuals and small businesses to establish such European legal forms, should they wish to be involved in cross-border co-operation in order to strengthen their competitiveness." Similarly, the additional own-initiative opinion on the European charter for small enterprises(3), adopted on 28 November 2001, calls for a "study on a European Private Company Statute".

1.2.6. Finally, this idea has already been advocated by several European employers' associations, and a working party made up of lawyers of various nationalities, experts and academics has drafted a very detailed draft paper on the European private company. (See the CREDA study referred to above and published by the Office for Official Publications of the European Communities. This study has been extended by the work of the Paris Chamber of Commerce and Industry and the French Enterprise Movement, MEDEF, within a group of experts and representatives of business heads of different nationalities: "La société privée européenne: une société de partenaires", September 1998).

1.2.7. It has therefore become necessary to think about a European company statute that is accessible to SMEs, with a view to facilitating their trading within the single market, enabling firms from different countries to pool their resources and giving a European scale from the outset to the creation of a new company or changes in company statutes. Such a single statute appears all the more necessary since enlargement will further increase the differences between national laws.

1.2.8. With this in mind, the European Economic and Social Committee held a public hearing on 22 October 2001, in which more than 20 European organisations concerned with the subject as well as experts and lawyers took part. The feeling emerged from this hearing that there was a real need for a statute for SMEs, in particular to encourage cross-border co-operation, but also to avoid any new discrimination against SMEs, which could not benefit from a European statute designed more for big companies. Participants expressed ideas about the methods of such a project, particularly urging simplicity and stressing the need to make the statute attractive by providing access to real facilities and opening it up to all forms of businesses. They emphasised the advantages of this as follows:

1.2.8.1. political advantage: the development of transnational and cross-border economic co-operation would encourage European integration;

1.2.8.2. advantage, through simplification: among other things, the very existence of a single European statute, easier administrative formalities, option of a single tax return;

1.2.8.3. economic advantage: SMEs who opted for the statute would be more competitive and better known, by having a European "label". Moreover such a statute could attract foreign investment to Europe.

2. For a European SME statute

2.1. SMEs are discriminated against today because - unlike large companies - they will generally be unable to benefit from a European statute. Moreover, it would be unrealistic to hope for a rapid harmonisation of national laws, particularly in view of the very great differences between them and the impending enlargement of the EU. The setting-up of a single simplified instrument as a complement to the SE therefore seems to be the most effective way of removing the obstacles to the development of transnational activity by SMEs.

2.2. It seems appropriate that the European Economic and Social Committee (EESC), as the spokesman of the economic and social players concerned, should open the debate at institutional level. This own-initiative opinion proposes some ideas on the development of a European statute adapted to SMEs, and indicates guidelines which the EESC feels should govern the detailed work that will have to be undertaken at a later date.

3. Basic aims

3.1. A European statute for SMEs should promote entrepreneurship and the creation of new activities, and be an incentive to cross-border partnership within the single market. The system that should be set up to achieve this must satisfy the following basic aims:

3.1.1. It should be open and easily accessible to both natural and legal persons.

3.1.2. It should be simple, flexible and able to be tailored to the various wishes of the partners.

3.1.3. It should be capable of evolving to adapt to changes in the company's structure and in its environment.

3.1.4. It should be a really European business structure, i.e. it should not be linked to national company law. However, it should not claim any privileges or preferential treatment.

3.2. The European small business project would represent a complementary approach to the SE.

3.2.1. By its European dimension: the statute would be intended for activities which had a European aspect in the broad sense, i.e. either involving two partners from at least two Member States or simply an existing or planned economic activity at European level, i.e. involving more than just one Member State. In both cases, and unlike mergers between large companies, co-operation between SMEs is almost always in response to a project for some sort of extension or development, or even creation of new activities.

3.2.2. By its very nature: it would not be a quoted company that could not make public calls for funds.

3.2.3. By its conception: the new company would be based on contractual freedom; it would be a company with a strong affectio societatis. The partners would be allowed maximum flexibility in organising their relations and, more generally, the running of the company. Model statutes could be usefully proposed by way of an example and guide.

3.2.4. By its legal status: this would be a genuine company under European law and references to national laws would be limited and specific.

3.2.5. By its users: in the interests of flexibility, it seems inadvisable to fix a maximum number of employees for firms wishing to benefit from a European SME statute. Obviously the companies targeted would be small and medium-sized businesses, within the meaning of the Commission recommendation of 1996, which is currently being revised. The statute would be adapted to very small companies or one-man companies.

3.2.6. By the social dimension: the regulation would in general refer to the principles of the law of the place where employees carried out their work. In addition, in order to involve employees, the following guidelines would have to be established:

3.2.6.1. As regards informing and consulting across borders, the statute should be based on the European directive currently being adopted(4) and so provide for an arrangement above the threshold of 50 employees.

3.2.6.2. As regards cross-border participation in the management of the company, the EESC suggests adopting a realistic and pragmatic approach which, while taking into consideration the rules drawn up in this area for the European Company, aims at maintaining acquired rights while avoiding an excessively cumbersome system.

3.2.6.3. Such a step will come under continuing the dynamics generated by the Green Paper entitled Promoting a European framework for Corporate Social Responsibility adopted on 18 July 2001(5). Moreover, the arrangements for involving employees will be perceived as a positive result of European integration, which can only enhance the European label provided by the new statute.

3.2.7. By its tax status: no permanent advantages can be envisaged a priori. On the other hand, under the strategy proposed by the European Commission in its communication Towards an Internal Market without tax obstacles(6), companies opting for the European statute could be the first beneficiaries of the machinery for a single consolidated basis for tax assessment, which would be a simplification tool for avoiding multiple taxation. In fact the European Commission is envisaging a pilot phase for the benefit of SMEs and/or firms that have opted for European Company status. The EESC will shortly be issuing an opinion on this communication.

4. Possible procedures for a European statute for SMEs

The project could operate along the following lines, which will have to be the subject of a detailed examination in co-operation with the circles concerned:

4.1. Applicable law

The project would clearly delimit the terms of reference of the various sources of law: the regulation, statutes and national law.

4.1.1. In the areas that it would regulate (such as methods of formation, capital, registered office, registration, directors' responsibility), the regulation should be complete and remain independent of national laws, which could not be invoked even on a subsidiary basis. This is very important in order to ensure the unitary - and therefore European - character of the text, clarity and the security that the company model should provide for partners and third parties.

4.1.2. The regulation should also preserve the contractual freedom of the partners, and explicitly define its scope (in particular, organisation and operation of the company and the rules governing securities). Certain matters should really be covered by the statutes. To avoid the risks of omissions, the authority in charge of registration would check that all the specifications that should be in the statutes appear in them.

4.1.3. Of course, the European company for SMEs - like national companies - would remain subject to the general rules of the Member States: accountancy law, tax law, penal law and the procedures governing insolvency and suspension of payments.

4.2. General provisions

Simplicity and great operational flexibility would be the two watchwords of the draft.

4.2.1. The company could be formed by one or more natural or legal persons, who may or may not be nationals of a Member State. The minimum capital could be set at 15000 EUR. and be divided into shares, though other possibilities would not be excluded. Each partner would be committed only up to the amount of his or her capital contribution.

4.2.2. The area covered by contractual freedom would be large, although the rights of minority stakeholders and third parties would be protected in the regulation. The statutes would lay down partners' rights, the organisation and operation of the company, the powers of its internal bodies and the conditions for transferring securities. However, there would be some minimum obligations laid down by the regulation, such as the list of matters subject to a collective decision of the partners.

4.2.3. The rules on representation of the company in dealings with third parties would be based on those in the First European Company Law Directive.

4.2.4. The registered office would be located inside the European Union and would be in the same place as the central administration of the company. It could be transferred to another Member State without the need for winding-up or the creation of a new legal entity.

4.2.5. Forced divestiture and the removal of a partner would be possible and should be regulated by the statutes, as should the repurchase or transfer price of securities. The statutes could also lay down that partners' cash and non-cash entitlements need not be proportional to the amount of capital subscribed, or that securities should be temporarily inalienable. The social pact could, in these areas, be modified only by a unanimous vote.

5. Flanking arrangements to be provided for

While it is inconceivable to envisage privileges in relation to national statutes, because of the risk of distorting competition, it could be interesting to make provision for the following, in order to make the formula more attractive:

5.1. setting-up formalities that were simplified, standardised, fast and cheap (perhaps even free registration);

5.2. special information and technical and financial support arrangements (e.g. with the help of Euro Info Centres, European venture capital networks, "business angels"...);

5.3. access, in the event of new jobs being created, to various European or national support machinery (such as the JEV procedure, which can grant aid for a feasibility study and for investment, or the European Social Fund).

6. Looking at other business set-ups

6.1. It is worth looking at other business set-ups, particularly co-operatives and associations.

6.2. The EESC is in favour of the quickest possible adoption of the European co-operative society (SCE) project, which was the subject in 1993 of an amended proposal for a Regulation of the Council and European Parliament and which to a large extent addresses the concerns of the various sectors concerned.

6.3. However, like the European Company (SE), the draft statute for a European co-operative society (SCE) may prove less attractive for small firms, especially as regards the minimum capital required, or for new forms of socially-oriented businesses wishing to develop their activities at EU level.

6.4. So, in parallel with the advisability of having a European statute for SMEs, the EESC also supports the idea of thinking about European legal instruments likely to fulfil the needs associated with the emergence of these forms of "entrepreneurship".

7. Conclusions

7.1. An analysis of needs confirms the necessity for a European company project for SMEs, above all so that they can be treated on an equal footing with bigger companies - which are more concerned by the European Company statute - and to offer them a European label to facilitate their activities in the internal market.

7.2. To make it attractive, the new statute will have to remove the risk of multiple taxation and provide considerable legal flexibility, as well as facilities regarding setting-up formalities, advice and support for enterprise partnerships.

7.3. The EESC would set this project in the context of the conclusions of the European Council in Lisbon, i.e. improving European competitiveness and entrepreneurship and creating new activities and jobs. It must also promote employee participation at European level, a factor on which the success of integration depends.

7.4. The EESC therefore calls for the rapid setting-up of a simplified European statute for SMEs, as a complement to the European Company Statute.

Brussels, 21 March 2002.

The President

of the Economic and Social Committee

Göke Frerichs

(1) OJ L 294, 10.11.2001.

(2) OJ C 117, 26.4.2000.

(3) OJ C 48, 21.2.2002.

(4) Proposal for a Directive establishing a general framework for informing and consulting employees in the European Community (common position adopted by the Council on 23 July 2001, OJ C 307, 31.10.2001)

(5) COM(2001) 366 final.

(6) COM(2001) 582 final.