PROPOSAL FOR A COUNCIL REGULATION ON THE STATUTE FOR A EUROPEAN COMPANY
Date: 1989-08-25
Institutions: European Commission
Subjects: European company, economic and social cohesion, economic cooperation, social status, wage earner

COMMISSION OF THE EUROPEAN  COMKONITIES 

C0M(89)  268  final  - SYN  218 and  219 

v. 

Brussels,  25 August  1989 

C0M(89)  268  final  - SYN  218 

Proposal  for a 

COUNCIL  REGULATION 

on  the  Statute  for  a European  company 

C0M(89) 268  final»- SYN  219 

Proposal  for a 

COUNCIL  DIRECTIVE 

complementing  the Statute  for  a European  company 

with  regard  to  the  involvement  of  employees 

In the  European  company 

(presented  by  the  Commission) 

IntroductIon 

The  European  company  (Latin  Socletas  Europaea,  "SE")  Is designed  to  enable 

companies  governed  by  the  laws  of  different  Member  States  to  choose  a 

structure  for  cooperation  and  restructuring  suited  to  the dimensions  of  the 

large  market  to  be  achieved  in  1992.  It  alms  to  free  companies  from  the 

legal  and  practical  constraints  arising  from  the  existence  of  twelve 

separate  legal  systems  by  offering  them  an  optional  structure  based  on 

Community  law  and  independent  o.f national  laws  In so  far  as  these  have  not 

been  harmonized.  As  long  ago  as  1970,  the Commission  put  forward  a  proposal 

based  on  Article  235  of  the  EEC  Treaty.  This  proposal  was  amended  in  1975. 

The  Council  suspended  work  on  It  In  1982.  It  was  suggested  that  this 

project  should  be  revived  as  part  of  the  drive  towards  completing  the 

internal  market.  In  June  1987  the  European  Council  In  Brussels  requested 

the  institutions  concerned  "to  make  swift  progress  with  regard  to  the 

company  law  adjustments  required  for  the  creation  of  a  European  company." 

On  15  July  1988  the  Commission  submitted  a  memorandum  describing  the  main 

difficulties  and  sketching  solutions1. 

The  text  now  proposed  is  in  two  parts.  It  brings  together  In  a  Regulation 

based  on  Article  100a  all  the  rules  necessary  for  the  creation  and 

operation  of  the  SE, except  those  dealing  with  the  involvement  of  employees 

in  the  SE. The  latter  rules  form  the  subject  of  a  complementary  Directive, 

in  view  of  the  diversity  of  national  rules  and  practices  on  that  subject. 

The  Regulation  and  the  Directive  form  a  composite  whole,  and  must  be 

applied  together. 

In  order  to  make  the  form  attractive  to  small  businesses,  the  minimum 

capital  requirement  has  been  lowered  from  ECU  250  000  to  ECU  100  000 

(Title  I). 

1 C0M(88)320,  15 July  1988 

- 1 a-

Tltle  II, on  methods  of  formation,  Is based  on  the  1975  proposal.  An  SE 

may  be  set  up  by merger, by  the  formation of  a  holding  company,  or  by  the 

formation of  a  Joint  subsidiary.  The procedure  for  formation  by merger  Is 

based  largely on the Third Company Law Directive  (78/855/EEC), supplemented 

to  take  account  of  the  cross border  aspect  of  the  proposal  for  a 

Tenth directive. 

Title  111, on capital, shares and debentures, has been revised  in the  light 

of the Second Directive  (77/91/EEC). 

- 2 -

The structure of the SE  Is dealt with  in Title  IV;  here the proposal  takes 

account  of  progress  In  the  Council's  discussion  of  the  proposal  for  a 

Fifth Directive, and  retains the  option of either  a one-tier  board  system 

or a two-tier system with a management board and a supervisory board. 

For  the  preparation,  publication  and  auditing  of  annual  accounts  and 

consolidated  accounts  (Title V),  the  Statute  refers  to  the  accounting 

directives,  namely  the  Fourth,  Seventh  and  Eighth  Company Law Directives 

(78/660/EEC, 83/349/EEC and 84/253/EEC). 

The options  left  to the Member  States  In the Fourth  and Seventh Directives 

have been given  to the SE.  This has been done  In order  to avoid  having to 

renegotiate those directives. 

The Statute no  longer contains any provisions concerning groups (Title VI), 

because there  is currently no need for specific rules for SEs  In this area. 

The SE will  be  treated  in the same way as other  companies governed  by  the 

legislation of the Member  State  In which they have their registered office. 

The  Commission  is studying  the  need  for  coordination  of  the  laws of  the 

Member States  in this respect. 

Winding up and  liquidation  (Title VII) are matters which have not  yet  been 

harmonized.  The  proposed  regulation  restricts the grounds on  which  an SE 

may be wound up, and settles only the questions which are essential  for the 

protection  of  the  shareholders  at  this delicate  stage  of  the  life of  the 

company. 

Given  the  complexity  of  the  question  of  the  insolvency  of  an  SE,  the 

proposal  contents  Itself with a reference to the  law of the Member  State In 

which the SE has  Its registered office. 

Title VI11  refers  to Title  II for cross border mergers and  to the  laws of 

the  Member  States,  as  harmonized  by  the  Third  Directive,  for  domestic 

mergers. 

-  3 

As  far  as  tax  arrangements  are  concerned  (Title  IX), the  SE will  be  subject 

to  the  tax  law  of  the  country  in  which  It  has  Its  registered  office. 

Losses  suffered  by  an  SE's  permanent  establishments  abroad  can  be  offset 

against  Its  profits.  This  provision  Is  Indispensable  In order  to  overcome 

the  obstacles  which  an  SE  would  otherwise  encounter  In  Its  business,  which 

by  its nature  is cross  border  business. 

To avoid  any  discrimination  against  other  firms  carrying  on  business  across 

borders,  the  same  rules  will  be  proposed  as  a  directive  for  other  legal 

forms of  undertaking. 

The  involvement  of  employees  in  the  SE  is  dealt  with  by  means  of  a 

Directive, which  is an  Indispensable  complement  to  the  regulation.  The  term 

"employees"  corresponds  to  the  "workers"  referred  to  in  Tltal  III  of  Part 

Two  of  the  EEC  Treaty.  It  comprises  persons  with  a  contract  of  service,  of 

whatever  kind,  to  an  employer.  It  covers  the  various  categories  of  staff 

employed  by  businesses  In  the  Community.  Employees  are  to  play  a  part  In 

supervision  and 

In  the  definition  of  strategy.  Three  models  of 

participation  are  provided  for:  participation  In determining  the  membership 

of  the  supervisory  board  (model  1 ),  participation  through  a  staff 

representative  body  distinct  from  the  governing  bodies  of  the  company 

(model  2 ),  and  a  form  of  participation  to  be  established  by  collective 

agreement  (model  3 ). A  Member  State  may  restrict  the  choice  of  models  open 

to  SEs  having  their  registered  office  In  its  territory.  The  management  or 

administrative  boards  as  the  case  of  the  founder  companies  may  be  and  the 

representatives  of  the  employees  of  those  companies  are  to  agree  on  the 

choice  of  a model.  If  they  fall  to  reach  the  management  Board  Is  to  choose 

a model, since  these  can  be  no  SE without  participation,  and  the models  all 

confer  equivalent  rights  on  the  employees.  If  model  3  Is  chosen  but  no 

agreement  is  reached  on  the  form,  a  standard  model  Is  to  be  applied,  to  be 

drawn  up  by  the  State  and  satisfying  the  information  and  consultation 

requirements  laid  down  In  the  Statute. 

- 4 -

COMMENTARY  ON THE ARTICLES OF THE  REGULATION 

Title I 

General  provisions 

Article  2 

The Statute provides three ways of  forming  an SE. 

1.  Only  public  limited  companies  can  set  up  an  SE  by  merger  (assets 

merger)  or  by  formation  of  a  holding  company.  This  Is  because  the 

necessary  exchange of  shares will  only  be possible  If both  the  founders  are 

pub lie  IimI ted  companIes. 

If  private  limited  companies  wish  to  form  an  SE  they  will  first  have  to 

become public  limited companies  In accordance with  their  domestic  law. 

2. 

The scope  for  setting  up an SE by  forming  a  Joint  subsidiary  is wider. 

Participation  Is  open  to  all  legal  bodies  governed  by  public  or  private 

law, whether  or  not  they  are  In company  form  and  Indeed whether  or  not  they 

have  legal  personality,  and  regardless  of  whether  they  carry  on  a 

commercial  activity  or  Just  an  activity  with  an  ultimate  economic  purpose. 

This very  broad  concept  Is based  on  that  adopted  for  the  European  Economic 
Interest  Grouping  (EEIG).1 

On  grounds  of  legal  certainty  and  for  technical  reasons  It  has  not  been 

possible  to  make  provision  for  the  conversion  Into  an  SE  of  a  company 

incorporated  under  national 

law  and  having  branches 

In  several 

The  form  created  by  Regulation  (EEC)  No 2137/85  of  25 July  1985: 

OJ  No L 199, 31.7.1989, p. 1. 

-  5 -

Member  States.  Such  a  company  could  set  up  an  SE  by  merging  at  least  two 

subsidiaries  in different  Member  States. 

Article  3 

1  and  2. An  existing  SE  may  be  party  to  the  formation  of  another  SE  by 

merger  or  formation of  a holding  company  or  Joint  subsidiary. 

3.  An  SE may  also  set  up one or  more  subsidiaries, but  In order  to  avoid 

the creation of  "cascades" of  SEs, an SE which  Is  Itself  a subsidiary  of  an 

SE cannot  create  further  subsidiary  SEs. 

Article  4 

1. 

The  amended  proposal  of  19752  would  have  required  a  minimum  capital 

of  ECU 250 000  where  an  SE  was  set  up  by  merger  or  formation  of  a  holding 

company  and  ECU  100 000  where  the  new  SE  was  a  Joint  subsidiary  or  a 

subsidiary  of  another  SE. 

This  distinction  has  been  dropped.  The  minimum  capital  for  an  SE  Is  now 

ECU  100 000  in  all  cases.  The  Intention  Is  to  make  It  easier  for  small 

businesses  to  take  advantage  of  the  Statute.  There  Is also  the  fact  that 

once  a  subsidiary  SE  has  been  set  up  It  will  have  Its  own  Independent 

existence;  It may  be  bought  or  may  Itself  set  up  subsidiaries.  There  will 

then be nothing  to distinguish  It from other  SEs set  up by merger  or  by  the 

formation of  a holding  company. 

The  figure  of  ECU  100 000  Is  close  to  that  laid  down  for  domestic  public 

limited  companies  In the  laws of most  of  the Member  States under  the  Second 
Company  Law  directive.3  The  capital  need  only  be  25%  paid  up 

(cf. Article  38(2)). 

2 

3 

Supplement  4/75  - Bulletin of  the European  Communities. 

Council  Directive  77/91/EEC  of  13 December  1976  on  the  formation  of 

pub Iic Iimlted  I lab 11l*y companies and the maintenance and alteration of 

their  capital: 0J  No L 26, 31.1.1977, p. 1. 

-  6  -

2  and  3. Where  an  SE  Is set  up  to  carry  on  a  regulated  activity,  It will  of 

course  be  subject  to  the  specific  requirements  governing  that  activity.  An 

SE  may  be  a  credit  institution.  In  that  case  the  minimum  capital  is  that 

required  by  Article  3 of  the  proposal  for  a  Second  Council  Directive  on  the 

taking  up  and  pursuit  of  the  business  of  credit  institutions,  submitted  on 

23  February  1988.4  The  figure  given  there  is  ECU  5 million,  which  may  be 

reduced  to  ECU  1 million  In certain  circumstances. 

In  the  case  of  insurance  undertakings,  the  text  makes  reference  only  to  the 

laws  of  the  Member  State  In  which  the  SE  has  Its  registered  office,  even 

though  there  has  already  been  Community-level  harmonization  In  this  field. 

The  capital  required  does  not  correspond  In  all  Member  States  to  the 

"solvency 
the 
(Directive  73/239/EEC5.  and  Directive  79/267/EEC6). 

referred 

margin" 

to 

in 

relevant 

Directives 

Article  5 

The  registered  office  of  the  SE  designated  in  the  statutes  must  be  the 

place  where  it  has  its  central  administration,  that  Is  to  say  its 

siège  réel  or  real  seat.  This  use  of  the  siège  réel  concept  is  Important 

in  several  respects.  Firstly,  It  reflects  the  dominant  thinking  In  the 

Member  States.  Secondly,  It  allows  the  law of  one  specific  Member  State  to 

be  applied  to  the  SE,  either  as  the  normal  rule  (where  an  express  reference 

is made  by  the  Statute  Itself,  for  example)  or  In  the  absence  of  any  other 

rule  (e.g.  Article  7 d ) ( b ) ). 

The  transfer  of  an  SE's  registered  office  may  be  decided  in  the  same  way  as 

an  amendment  of  Its  statutes  (Article  81(h)). 

4 

5 

0J  No  C 84,  31.3.1988,  p.  1 . 

First  Council  Directive  of  24  July  1973 on  the  taking  up  and  pursuit  of 

the  business  of  direct  insurance  other  than  life  assurance:  OJ  No  L 

228,  16.8.1973,  p.  3. 

6 

First  Council  Directive  of  5 March  1979 on  the  taking  up  and  pursuit  of 

the  business  of  direct  life  assurance:  OJ  No  L 63,  13.3.1979,  p.  1. 

-  7  -

Article  6 

This  Article  defines  what  "controlled  undertaking"  and  "controlling 

undertaking"  mean  In  the  Statute.  These  definitions  are  needed  despite  the 

fact  that  the  Statute  does  not  lay  down  any  rules  dealing  specifically  with 

the  management  of  a  group  headed  by  the  SE,  mainly  In  order  to  prevent  an 

SE  from  subscribing  for  or  acquiring  its own  shares  through  the  agency  of  a 

controlled  undertaking  (Article  48(1)  and  Article  49(1)  and  (9)).  They  are 

necessary 

also 

in  order 

to  determine 

the 

law  applicable 

under 

Article  114(1)  and (2). 

The  definition  is  based  on  Article  8  of  Directive  88/627/EEC.7  The  tests 

chosen  are  simple  and  easy  to  apply. 

Article  7 

This  Article  defines  the  scope  of  the  Statute  in  relation  to  the  laws  of 

the Member  States.  A  distinction  has  to  be  drawn  between  the  matters  which 

are  regulated  by  the  Statute  and  those  which  are  not. 

1. 

Where  a  matter  is  regulated  by  the  Statute,  the  Statute  should  be  as 

independent  as  possible  of  national  law  so  as  to  ensure  that  from  the 

firm's  point  of  view  It  does  represent  a  simplification  and  an  improvement 

over  the  existing  position.  The  amended  proposal  of  1975  excluded  the  law 

of  the  Member  States  entirely.  The  Statute  which  resulted  was  too 

extensive,  detailed  and  Inflexible.  The  new  draft  simplifies  matters  by 

Council  Directive of  12 December  1988 on  the  information  to be published 

when  a  major  holding  in  a  listed  company  is  acquired  or  disposed  of: 

OJ  No  L  348,  17.12.1988,  p. 62. 

-  8 -

referring  to  the  domestic  law of  the Member  State  In which  the  SE  has  Its 

registered  office  whenever  the  company  law  directives  have  harmonized  or 

are  In the process of  harmonizing  the national  rules  (disclosure, accounts, 

mergers,  etc.).  Reference  has  also  had  to  be  made  to  national  law  In 

fields where Community  rules  cannot  be expected  In the near  future  (groups 

of  companies, winding up and  liquidation, etc). 

If  a  question  of  law  arises  on  a  matter  covered  by  the  Statute' but  not 

expressly  determined  by  It, the  national  courts  will  have  to  fill  the  gap 

by  looking 
Statute  is  based.  If  the  question  cannot  be  settled  in  that  way  the 

place  at  the  general  principles  upon  which  the 

In  the 

first 

Statute  refers  to  the  law  applying  to  public  limited  companies  In  the 

Member  Stats  In which  the SE has  Its registered  office. 

Thus  the  demarcation  line  between  the  provisions  of  the  Statute  and  the 

ordinary  provisions of national  law  Is clearly marked out.  The adoption of 

the EEIG Regulation, which  takes  the same  approach,  shows  that  coexistence 

of  this kind  Is possible. 

2. 

Paragraph  2  makes  provision  for  the  special  situation  in  the 

United Kingdom,  where  Scottish  law  is  different  from  that  In  force 

elsewhere. 

3.  Provision  Is  then  made  for  matters  which  are  not  governed  by  the 

Statute.  They  are  excluded  from  Its scope, and  subject  to  the  law of  the 

Member  States.  The  law applicable  in a particular  case  Is to be  determined 

In accordance with  the private  International  law of  the  forum. 

4. 

The  Statute  requires  Member  States  to  treat  SEs  In  the  same  way  as 

public  limited  companies  incorporated  under  their  domestic  law.  This  will 

apply  for  example  with  regard  to  the  taking  up  of  various  kinds  of 

business, capacity  to borrow, the  Issuing of  securities, and  the  listing of 

such  securities  on  a  stock exchange.  The  only  privilege  that  the  Statute 

confer?  on  the  SE  Is  the  Community  character  of  Its  structure.  Companies 

In the  form  of  SEs  and  companies  incorporated  under  domestic  law  are  thus 

on an equal  footing  <~t terms of  competition. 

-  9  -

Article  8 

1. 

An  SE  Is set  up  by  being  entered  In a  register  designated  by  the  law 

of  the  Member  State  in  which  It  has  Its  registered  office  in  accordance 
with  Article 3 of  the  First  Company  Law  Directive.8  The  use  made  here  of 

a  system  which  exists  In  all  Member  States  makes  It  unnecessary  to 

establish  a  European  commercial  register  and  to confer  Jurisdiction  on  the 

Court  of  Justice  of  the  European  Communities  to hear  actions  In respect  of 

the  formation of  any  SE. 

2. 

Any  branch  opened  by  an  SE  In a Member  State  other  than  that  In which 

It  has  Its  registered  office  Is  to  be  registered  In  that  other 

Member  State,  in order  to ensure  that  shareholders  and  outsiders  are  fully 

Informed.  The  procedure  to  be  followed  Is  the  one  laid  down  for  branches 

by 

Articles  1 

to 

3 

of 

the 

amended 

proposal 

for 

an 

Eleventh  Company  Law Directive,®  which  Is  Itself  based  on  the  system 

established  for  companies  by  the First  Directive. 

Article  9 

Documents  concerning  the  SE  are  to  be  disclosed  by  the  means  laid  down  In 

the  laws  of  each  Member  State  In  accordance  with  Article  3  of  the  First 

Company  Law  Directive.  That  system  consists  of  entry  In  a  register  and 

publication  in a national  gazette.  Only  then may  those  documents  be  relied 

upon against  third  parties. 

8 

Council  Directive 68/151/EEC of 9 March  1969 on disclosure, validity of 

obligations  entered  Into,  and  nullity  of  companies:  OJ  No L 65, 

14.03.1968, p. 11. 

9 

Amended  proposal  of  5 April  1988  for  an  Eleventh  Council  Directive  on 

company  law  concerning  disclosure  requirements  In  respect  of  branches 

opened  In a Member  State  by  certain  types of  companies  governed  by  the 

law of  another  Member  State:  OJ  No C  105, 21.04.1988, p. t>. 

-  10 -

Article  10 

Notice  Is to  be  given  In  the  Official  Journal  of  the  European  Communities 

whenever  an  SE  Is  formed  or  the  liquidation  of  an  SE  Is  terminated.  This 

type  of  publicity  seems  Important  given  the  nature  of  an  SE's  business, 

which  Is by  definition  transnational.  But  publication of  this  notice  will 

have no  legal  Implications.  The  relevant  events  can be  relied  upon  against 

third parties  from  the date of  the notice  referred  to  In Article  9. 

Article  11 

This  Article  lists  the  details  which  must  be  supplied  on  an  SE's  business 

documents  and  those  of  any  branch  In  another  Member  State.  The  list  Is 

fuller  than  that  In Article  4 of  the First  Company  Law  Directive. 

-  11 -

Title II 

Formation 

Section I 

General 

Article 12 

This Article defines  the concept of  founder  companies for  the purposes of 

Title  II.  This  Is necessary  since public  limited companies are no  longer 

the only  legal bodies which may participate  In forming an SE. 

Articles 13 and 14 

These  two Articles  relating  to the  Instrument  of  Incorporation of  the SE 

and to the experts' report on non-cash consideration refer back, as far as 

the conditions to be fulfilled by  the  latter are concerned,  to provisions 

of national  law. 

Article 15 

The task of ensuring  that  the rules governing  the  formation of  the SE are 

complied with  is entrusted to the national authorities which carry out that 

task  for  all  other  public  limited  companies.  However,  the  Statute 

stipulates  that  Member  States  must  ensure  that  such  supervision  Is 

effective and  that  ft covers the conditions  laid down both by  the Statute 

and by national  law. 

Article 16 

This Article defines the date on which the SE begins to exist. 

- 12 -

SECTION 2 

Formation by merger 

Article 17 

The wording  of  this Article, which  describes  the merger  process,  is based 

on  the Third Company  Law Directive  (78/855/EEC) and on  the proposal  for a 

Tenth  Directive  on  cross-frontier  mergers.  The  formation  of  an  SE  by 

merger  Is based  on  an  identical  legal mechanism  to  that  laid  down  by  the 

proposal  for  a  Tenth  Directive,  since  It  Involves  the  merging  of  two 

companies from different Member States.  The rights of the employees of the 

merging  companies  are  protected  In each  Member  State  In  accordance  with 

Directive 77/189/EEC. 

Articles 18 and 19 

The  draft  terms of merger, which  are common  to all  the  founder  companies, 

set  out  certain  details,  an  exhaustive  list  of  which  Is  given  In  the 

interests of greater clarity. 

The  arrangements  for publishing  the draft  terms of merger  are  the same as 

those  laid down for domestic mergers. 

In view of the cross-frontier nature of the merger, however, more extensive 

publication of certain  information  Is required. 

Articles 20 and 21 

The  Board  of  each  of  the  merging  companies  Is  required  to  draw  up  a 

detailed  report  to  shareholders  Justifying  the  merger.  This  report  Is 

examined  by  experts  who  are  responsible  In  particular  for  checking,  on 

behalf  of  shareholders,  whether  the  share  exchange  ratio  Is  fair  and 

reasonable. 

Article 22 

A  merger  has  always  to  be  approved  by  a  general  meeting  of  each  of  the 

founder  companies.  The  resolution  approving  the merger  Is subject  to the 

same conditions as apply  In the case of domestic mergers. 

-  12 a -

Article 23 

Claims which  originated  prior  to publication of  the draft  terms of merger 

and  which  have  not  yet  reached  maturity  at  the  time  of  publication  are 

governed  by  those  provisions  of  the  national  law  governing  the  founder 

companies which  relate to the arrangements  for protecting  the  interests of 

creditors. 

Articles 24 and 25 

The provisions  relating  to the supervision  and  control  of  compliance with 

merger  requirements  lay  down  certain  rules  for  synchronizing  supervisory 

procedures so as to prevent  Irreversible situations.  The date on which the 

merger  takes effect  thus follows the completion  of  all  the  checks  carried 

out  on  the  founder  companies  and  Is determined  by  the  law of  the  Member 

State  In which  the SE  Is to have  Its registered office. 

-  13 -

Art le les  26  and  27 

The  merger  must  be  made  public  before  it  can  become  effective  against  third 

parties. 

The  merger  entails  the  transfer  of  all  the  assets  and  liabilities  of  the 

founder  companies  to  the  SE. 

Article  28 

The  liability  of  members  of  the  administrative  board  or  management  board 

and  of  the  experts  of  the  founder  companies  Is  governed  by  the  law  of  the 

Member  State  in  which  the  founder  company  concerned  has  Its  registered 

office,  subject  to  the  minimum  requirements  laid  down  In  the  Third 

Directive  being  observed. 

Article  29 

This  Article  limits  the  grounds  on  which  a  merger  may  be  declared  nui I and 

void  to  cases  where  one  or  other  of  the  supervisory  procedures  has  not  been 

carrled  out. 

It  also  seemed  desirable,  in  order  to  limit  the  danger  of  mergers  being 

declared  null  and  void,  to  protect  the  cross-frontier  merger  from  such  a 

declaration  where  it  Is  not  provided  for  in  the  law  of  the  State  In  which 

the  SE  has  its  registered  office,  since  that  company  only  comes  Into 

existence  when  the  merger  has  been  completed. 

Article  30 

This  Article  lays  down  the  rules  applicable  to  the  formation  of  an  SE  by 

merger  where  one  of  the  founder  merging  companies  holds  all  or  part  of  the 

capi tal  of  the  other. 

-  14 -

SECTION  3 

Formation of  an  SE  holding  company 

Article  31 

The economic  aim underlying  the  formation of  a holding  company  Is to  enable 

the  shareholders  of  the  founder  companies  to  participate  In  the  profits  of 

the  holding  company;  for  that  reason,  an  exchange  of  shares  has  to  take 

place.  As  a  result  of  that  exchange,  the  holding  company  becomes  the  sole 

holder  of  all  the  shares  In  the  founder  companies;  It  Is  therefore 

appropriate  that  the  application  of  national  provisions  providing  for  the 

founder  companies  to  be  wound  up  In  such  cases  should  be  expressly 

excluded. 

Article  32 

The  provisions  of  this  Article  relating  to  the  formation  of  an  SE  holding 

company  refer  to  the provisions  relating  to  formation  by  merger. 

Article  33 

This  Article  introduces  a  system  for  Informing  the  employees  of  founder 

companies  about  the  Implications of  the  formation  of  the  holding  company. 

-  15 -

SECTION 4 

Formation of a  Joint  subsidiary 

Articles 34 and  35 

The  provisions  relating  to  the  formation of  a  Joint  subsidiary  are  worded 

so that  the decision  to set  up an SE  Is not  a matter  for  the boards of  the 

founder  companies  but  for  their  general  meetings;  the  Statute  governs  the 

approval  of  the  formation  of  a  Joint  subsidiary  only  where  one  of  the 

parent  companies  Is an SE. 

-  16 -

SECTION 5 

Formation of a subsidiary by an SE 

Art le les 36 and 37 

This  is the only case where the formation of an SE does not  presuppose the 

existence of  two companies  from  different  Member  States; this  requirement 

of  a  foreign  element  Is  nevertheless  observed  In  the  formation  of  the 

parent SE. 

Unlike  national  public  limited  companies,  therefore,  an  SE,  acting  alone 

may set up a subsidiary having the same  legal  form as the parent  company. 

-  17 -

TITLE  Ml 

Article 38 

Paragraph 2 

The rule that shares must  be 25% paid up represents an average of the rates 

In the Member  States, and  has been  taken over  from  the Second  Company  Law 

Directive  (77/91/EEC). 

The obligation  to transfer  in full  any  consideration other  than cash  Is a 

protection  against  fictitious consideration, and one of  the  simplest  ways 

-f ensuring  that  a subscriber offering  consideration other  than  cash  does 

In fact transfer It. 

Paragraph 3 

Contributions  must  be  realizable.  In  order  to  provide  security  for 

creditors, promises  to perform work or  to supply  services which  cannot  be 

converted  Into money are not permitted. 

Article 39 

This  Article  provides  some  security  for  creditors.  It  accepts,  however, 

that professional  Intermediaries placing shares may buy them below par: the 

difference representing payment for their services. 

-  18 -

Article 41 

This  Article  states  a general  principle  deriving  from  the  dual  nature of 

share capital, which  is at the same time the sum of the contributions which 

allow  the  company  to  be  set  up  and  the  company's  fund  for  safeguarding 

creditors.  Shareholders cannot be dispensed  from the obligation  to furnish 

their  consideration, except  in the event  of  a reduction  In the  subscribed 

capital. 

Article 42 

Paragraph 1 

Article  38 has already  laid down a minimum  proportion  In which  the  shares 

must  be  paid  up  on  the  formation  of  the  company;  the  same  proportion 

applies to an  increase  in capital. 

Paragraph 2 

The "requirement  of  a  report  on  the  valuation  of  any  consideration  other 

than  cash  represents  a  safeguard  for  those  subscribing  cash  and  for 

creditors.  The  valuation  must  be  objective,  and  therefore  carried  out 

outside the company by  Independent valuers. 

Paragraph 4 

An  Increase  In the subscribed  capital  can  be  regarded  as an  amendment  of 

the  statutes.  The  requirement  of  a  resolution  of  the  general  meeting  Is 

therefore an  indispensable safeguard. 

Paragraph 5 

The  restriction  to available  reserves  Is  Intended  to ensure  that  reserves 

legally  required  cannot  be  capitalized,  while  anything  In excess  may  be. 

Proportionate  distribution  of  new  shares  protects  the  existing 

shareholders.  An exemption  has been provided  for to allow for distribution 

of the new shares to the employees. 

19 -

Article  43 

Paragraph 1 

Provision  Is made  for  authorizing  an  Increase  In  capital,  with  a  maximum 

set  by  the  statutes  or  the  general  meeting  In  the  Interests  of  the 

shareholders.  But  any  Increase  in the  subscribed  capital  's not  to  exceed 

one half of  the capital  already  subscribed. 

Paragraphs  2 to 4 

These  paragraphs  make  It  clear  that  the  powers  of  the  management  board  or 

.-,e  administrative  board  are  merely  delegated  powers  In  relation  to  the 

powers of  the general  meeting. 

Article  44 

The principle of  a preferential  right  of  subscription  Is  laid down  In order 

to provide  protection  for  the existing  shareholders  when  the  capItai  is to 

be  Increased  by  the  Issue  of  new  shares  for  cash.  The  shareholder  Is 

entitled not  to see his own participation  In the SE  reduced  by  the  issue of 

new  shares.  But  exceptions  have  to  be  made  In  order  to  prevent  this 

individual  safeguard  for  the shareholder  from  damaging  the  Interests of  the 

company  and  making  It more  difficult  to obtain  outside  finance.  Where  any 

such  exception  Is  to  be  made  the  shareholders  must  have  been  properly 

informed. 

Article  45 

Paragraph 1 

the  procedure  laid  down  for  reductions  of  capital  Is  Intended  to  ensure 

equal  treatment  of  shareholders. 

-  20  -

Paragraph  2 

This  paragraph  also  represents  an  application  of  the  principle  of  equal 

treatment  of  shareholders. 

Paragraph  3 

A  reduction  of  capital  may  not  bring  the  capital  below  the  prescribed 

minimum,  except  In  response  to  losses.  But  In  that  case  the  capital  must 

then be brought  back  to the  prescribed  minimum  or  above  It. 

Paragraph  4 

A  reduction  in  capital  In  response  to  losses  must  not  make  It  possible  to 

circumvent  safeguards  for  creditors.  The  economic  purpose  of  a  reduction 

Is to allow  the  capital  to be  Increased  at  the  same  time or  later, so  as  to 

obtain  fresh  resources  for  an  SE  in  difficulties.  An  Increase  will  be 

impossible  while  the balance  sheet  shows a  loss and  the accounting  value  of 

the old  shares  Is therefore  below  par. 

Article  46 

Creditors  who  dealt  with  the  SE  before  Its  capital  was  reduced  must  be 

protected.  They  are  generally  to  be  entitled  to  security;  the  manner  In 

which  this  right  Is  exercised  Is  to  be  governed  by  the  law  of  the 

Member  State where  the company  has  its registered  office. 

-  21  -

Article  48 

Paragraph 1 

An  SE  may  not  subscribe  for  its  own  shares.  This  ban  extends  to 

undertakings  It  controls,  as  otherwise  the  major  part  of  a  stake  held  by 

the  SE  In  a  controlled  undertaking  could  find  Its  way  back  Into  Its  own 

capital  via  a  stake  held  by  the  controlled  undertaking  In  the  parent  SE. 

This would  Indirectly  reduce  the SE's capital. 

Paragraph  2 

This  paragraph  extends  the  protection  of  the  capital  provided  by  paragraph 

1  where  the  company  subscribes  for  Its own  shares  through  a  person  acting 

on  Its behalf. 

Paragraph  3 

This  sanction  provides  greater  flexibility  than  would  nullity  of  the 

subscription, without  Introducing  Joint  and  several  liability. 

Article  49 

Acquisition  by  an  SE  of  its  own  shares  infringes  the  principle  that  the 

capital  must  be  kept  Intact,  and  Is  therefore  generally  prohibited. 

Paragraph  2  sets  out  certain  exceptions,  which  involve  no  appreciable 

danger  to third  parties or  shareholders.  It  Is enough  that  they  should  be 

regulated,  and  this  Is done  In paragraphs  3 and  4. 

Paragraph  S 

This ban  Is an extension of  the rule  In paragraph  1.  The  holder  of  a right 

of  usufruct  may  have  voting  rights  (Article  92(4)),  and  this  extension  is 

necessary  to  avoid  the  danger  of  abuse  which  would  arise  if  the  company 

could  exercise  voting  rights attached  to  Its own shares. 

-  22  -

Paragraph  9 

In  line with  paragraph  1, any  undertaking  coming  under  the  SE's  control  is 

also  required  to dispose  of  any  shares  It holds  In the SE. 

An  SE which  acquires  its own  shares  as  a  result  of  a universal  transfer  of 

assets  does  not  thereby  Infringe  the  ban  In  paragraph  1.  But  the  shares 

must  be disposed  of within  18 months. 

Paragraph  10 

This provision  covers  distribution  to  the  employees. 

Paragraph  11 

This  provision  prevents  any  abuse  of  the  SE's  own  shares,  and  ensures  that 

the  obligation  to  dispose  of  or  distribute  shares  will  be  complied  with. 

The acquisition by  a company  of  Its own  shares  can  be  regarded  as  repayment 

of  capital.  Such  a  share  therefore  has  no  Intrinsic  value  in  the  SE's 

capital.  It no  longer  forms  part  of  the net  assets;  the  holding  of  a  stake 

in  the  net  assets  Is  not  based  on  the  share,  except  In  a  purely  formal 

sense,  but  In  reality  on  the  contribution  made.  Consequently,  no  rights 

should  attach  to  a  share  In  the  company  which  Is  held  as  part  of  the 

company's  own  assets. 

Article  50 

This  provision  reflects  a  fundamental  concern  for  clarity  In  relations 

within  companies.  The  purpose  Is  to  Identify  any  shareholder  able  to 

exercise  influence  in the SE. 

- 23 -

Article 52 

Paragraph 1 

The ban on  fixed  interest  represents an application of  the principle  that 

there should be no distribution without profit. 

Paragraphs 2 and 3 

Non-voting shares are permitted under specified conditions. 

There  can  be  no  other  restriction  or  extension  of  voting  rights.  This 

would  in particular prohibit shares carrying a right to nominate members of 

the supervisory board. 

Paragraph 5 

This  represents  an  application  of  the  principle  of  equal  treatment  of 

shareholders. 

Article 58 

Paragraph 1 

It is right and proper  that the  Issue of debentures convertible  Into shares 

in conjunction with  an  increase  In capital  should be governed  by  the same 

rules with regard to the powers of the decision-making bodies  Involved and 

the same procedure followed as a straightforward  Increase  In capital. 

Paragraph 3 

This  provision  protects  the  holders  of  convertible  debentures.  The 

proportion  of  holders  whose  rights may  be  affected  Is  restricted  by  the 

second sentence. 

-  24 -

Article  59 

In the  Interests of  the  shareholders  It  Is appropriate  to require  that  any 

Issue of  debentures  carrying  the  right  to a share  in profits  be  decided  In 

the same way  as an amendment  to the statutes, and  that  the  shareholders  be 

given  a  right  of  subscription  similar  to  their  right  In  the  event  of  an 

Issue of convertible debentures. 

- 25 -

TITLE IV 

GOVERNING BODIES 

Article 61 

On  the  question  of  governing  bodies,  the  Statute  is  based  on  national 

company  law  and  on  the  amended  proposal  for  a  Fifth  Directive  on  the 
structure  of  public  limited  companies;1  It  makes  provision  for  a 

separation of powers between  the general meeting of  shareholders, which  is 

to  decide  certain  major  Items  of  business,  and  the  bodies  which  are  to 

manage and represent  the SE. 

7h3 management  and representation of the SE  Is to be the function either of 

a management  board, with a supervisory board monitoring  Its activities (the 

two-tier  board  system)»  or  of  a  administrative  board  (the  single-tier 

system).  The  SE s  founder  companies  are authorized  to choose  between  the 

two systems; detailed  rules for each system are spelt  out  In Section  1 and 

Section  2.  Section 3  sets  out  rules  common  to  both  systems,  while 

Section 4 contains detailed rules governing  the general  meeting. 

1 

OJ No C 240, 9 September  1983. 

- 26 -

SECTION 1 

Two-tier board system 

SUB-SECTION 1 

Management Board 

Article 62 

The  most  Important  characteristic  of  the  two-tier  system  Is  that  the 

members  of  the  management  board  are  always  to  be  appointed  by  the 

supervisory  board;  the  two bodies are  kept  separate  by  a  rule preventing 

the same person from serving on both at the same time. 

SUB-SECTION 2 

Supervisory board 

Article 63 

The  members  of  the  supervisory  board  are  to be  appointed  by  the  general 

meeting  and, where  the SE uses a model  of employee  participation which  so 

requires, by the employees too. 

Article 64 

To be able  to perform  Its function  the supervisory  board  is to receive a 

quarterly  report  on  the company's  affairs.  The supervisory  board  must  be 

able  to  require  the management  board  to provide  Information  or  a  special 

report  on any matter  concerning  the company  at  any  time, and must  be able 

to  carry  out  any  enquiries  necessary  for  the  performance  of  its  duties. 

Any  member  may  also  require  that  Information  be  given  to  the  supervisory 

board as a whole; but  In order  to avoid duplication such  requests must  be 

made through the chairman of the board. 

- 27 -

Article 65 

To  ensure  that  the  supervisory  board  functions  properly  It  Is  to  be 

Convened  noj* only  at  the  chairman's  Initiative or  at  the  request  of  the 

management  board  but  likewise at  the request  of any of  Its members.  Like 

the  preceding  article,  this provision  Is necessary  In order  to  avoid  any 

possibility of collusion between the management  board and a majority on the 

supervisory board. 

SECTION 2 

Single-tier system 

Article 66 

This  Article  defines  the  fundamental  characteristics  of  the  single-tier 

structure.  The  administrative  board  must  have  at  least  three  members, 

appointed  by  the general  meeting  and, where  the model  of  participation  In 

use  requires  It, by  the employees.  All  the members  are  to designate one 

or more executive members  from among  Its own members, and  to delegate  the 

management  and representation of  the company  to them; the main  function of 

the  other  members  Is  to  supervise  the  executive  members;  In  order  to 

strengthen  the position of  the non-executive members, they  are  to be more 

numerous than the executive members. 

Article 67 

The  board  Is to meet  at  least  once  every  quarter  to  allow  the  executive 

members  to report  to  the whole  board,  and  so  to enable  the non-executive 

members  to supervise  the management  and progress of  the company's affairs. 

All  members  of  the  administrative  board  have  the  same  rights  and 

obligations, apart  from  the actual  management  of  the company;  It does not 

appear  necessary  to make  provision  for  an  Individual  right  of  access  to 

Information or of enquiry as In Article 64(3) and (4). 

-  28 -

SECTION 3 

Rules common  to the single and two-tier board systems 

Article 68 

The better  to ensure  that  the members of  the governing  bodies can be held 

responsible  for  their  acts  It was  felt  useful  to state  the principle  that 

they can be appointed only  for a specific period of  time, which  is not  to 

exceed six years. 

Article 69 

The functions of the members of the governing bodies are such that  they can 

properly  be  carried  out  only  by  natural  persons.  The  admission  of  legal 

persons  to  any  of  these  bodies  has  therefore  to  be  subject  to  special 

rules,  first  and  foremost  the  requirement  that  such  a  legal  person  must 

appoint  a natural  person  to represent  It  In the performance of  Its duties 

on the relevant board. 

Paragraph 4  has  been  Included  to  allow  representation  of  a  minority  of 

shareholders  on  the  administrative  or  supervisory  board.  Particularly 

where an SE has been set up as a Joint subsidiary. It may be  Important  to a 

founder  company  with  a  minority  holding  In  the  capital  to  have  the 

assurance that  Its Interests will be represented on the board.  There would 

be  no  such  assurance  If the members  of  the  administrative  or  supervisory 

board were elected  under  the general  rules  In Article  94(2),  according  to 

which resolutions of the general meeting are to require a majority. 

Article 70 

The main purpose of this Article  Is to allow a list of alternate members to 

be  elected,  so  that  there will  be  no need  to  set  the  expensive  election 

procedure  In motion every time there  Is a vacancy on the board. 

Article 71 

This  provision  deals  with  the  representation  of  the  company  in  dealings 

with third parties, and  Is closely based on the rules  in the First  Company 

Law  Directive,  Directive  68/151/EEC,  both  as  regards  the  question  of 

whether  those  acting  for  the  company  are  to do  so  together  or  may  do  so 

alone and  as regards  the appointment  of persons with  general  authority  to 

represent  the company. 

-  29 -

Article  72 

The supervisory  board or non-executive members  are confined  to  supervising 

the management  of  the  company.  But  It  does  not  contradict  this  principle 

to require  that  development  programmes  and strategies  and other  measures of 

major  importance  to  the  company  be  decided  by  the  management  board  or  the 

executive directors only  with  the agreement  of  the  supervisory  board  or  of 

the  administrative  board  as  a  whole.  Even  though  authorization  for  a 

particular  operation  has  to be obtained,  It  is the Management  Board  or  the 

executive directors who will  take the decision  and  Implement  It. 

Article  73 

This  provision  Is  Intended  to prevent  members  of  the governing  bodies  from 

abusing  their  powers  in their  personal  Interest  and  to the detriment  of  the 

company.  It does not  prohibit  transactions of  the kind  at  Issue, but  seeks 

to  provide  an  effective  means  of  control  by  making  them  subject  to 

authorization. 

Article  74 

Every  member  of  a  board  Is  to  have  the  same  rights  and  obUgat Ions  even 

though certain  responsibilities of  the board may be entrusted  to particular 

members.  One of  the main obligations of board members  Is the obligation to 

protect  confidential  Information.  This  Article  also  makes  It  clear  that 

the  fundamental  duty  of  the members  of  the governing  bodies of  the  company 

is to act  In the  Interests of  the  company. 

Article 75 

The  general  rule  Is  that  the  power  to  appoint  the  members  of  the 
supervisory  board  or  the  administrative  board  Is accompanied  by  the  power 
to remove  them at will. 

-  30  -

This Article  also  lays  down  a  procedure  for  the  removal  of  members  by  the 

courts,  acting  on  the  application  of  bodies  or  persons  who  do  not  have 

power  to  appoint  the  members  concerned.  This  exception  Is  also  necessary 

where,  In accordance  with  the model  of  employee  Involvement,  members  of  the 

board  are  coopted. 

Article  76 

This  provision  lays  down  the  basic  rules  for  the  quorum  and  majority 

required  for  board  decisions. 

Article  77 

This  Article  and  those  following  It  deal  with  the  liability  of  the 

governing  bodies  of  the  SE  for  loss  wrongly  caused  to  the  company.  There 

is to be  liability only  if the  company  has suffered  damage.  Thus  there  has 

to be a causal  link between  the  act  done  and  the damage  Itself. 

Where  the  governing  body  has  more  than  one  member,  It  Is difficult  for  an 

outsider  to  know  which  member  may  have  caused  the  damage;  the  provision 

therefore  makes  all  the members  of  the  relevant  body  Jointly  and  severally 

liable, whatever  the nature of  the  act. 

Under  the ordinary  principles of  civil  law a person  who  has  suffered  damage 

Is required  to prove  that  the person  who caused  It was  at  fault.  This  rule 

here would  defeat  many  actions  for  liability, as  It would  be  very  difficult 

for  an outsider  to  verify  what  was  done  Inside  the  company.  The  burden  of 

proof  has  therefore  been  reversed,  and  the members  of  the board  required  to 

prove  that  no  fault  Is attributable  to them  personally. 

-  31 -

Article  78 

This provision  sets out  to clarify  the procedural  rules  governing  actions 

brought  on  the  company's  behalf  against  members  of  the  governing  bodies. 

An action may  be brought  by  the administrative board or  by  the  supervisory 

board; an action must be brought  If the general meeting so decides. 

The  provision  also gives minority  shareholders  and  creditors  the  right  to 

bring actions on behalf of the SE. 

-  32  -

Article  79 

This  provision  allows  the  SE  to  waive  Its  right  to  bring  an  action  for 

damages,  but  Imposes  certain  conditions  to ensure  that  the  rights  to  bring 

such actions conferred  by  the earlier  articles do not  become  Illusory. 

Article  80 

The  severity  of  the  rules on  liability  Is balanced  by  the  Imposition  of  a 

period of  limitation, which  In view of  the cross-border  character  of  the SE 

Is set  at  five years. 

- 33 -

SECTION 4: GENERAL MEETING 

Article 81 

A number  of  major  steps  require  a  resolution  of  the general  meeting:  the 

list given here  Is not an exhaustive one. 

The Statute draws no distinction between ordinary and extraordinary general 

meetings.  It  does  however  require  a  qualified  majority  rather  than  a 

simple majority  in certain cases. 

The provisions set out  In this Section are  Intended  to protect  the rights 

of  shareholders  at  general  meetings  and  to  provide  safeguards  against 

certain decisions which may be taken by such meetings. 

Article 82 

In  accordance  with  a  principle  common  to  all  Member  States,  a  general 

meeting must  be held  at  least once a year.  This  Is made necessary  by  the 

need to approve the annual accounts. 

But  given  the  long  list  of  matters  necessitating  a  resolution  of  the 

general  meeting,  It  must  be  possible  to  call  a  general  meeting  as  the 

conduct  of  the  company's  affairs  requires.  The  management  board  or  the 

administrative  board  must  therefore  be entitled  to call  a general  meeting 

at any time, and this power must not be restricted by the statutes. 

Article 83 

A minority of  shareholders  as defined  in Article 75 must  also  be  able  to 

require a general meeting. 

While shareholders must be prevented from abusing this power, the governing 

bodies  of  the  company  cannot  be  allowed  to  have  the  last  word,  so  the 

shareholders  should  be  authorized  to  refer  the  matter  to  the  courts  If 

their request  Is not complied with within one month. 

- 34 -

Article 84 

The method of calling  the general meeting must be such  that news of  It can 

reach all shareholders. 

The minimum  Information which must be provided by the notice of the meeting 

Is  laid down  in the Statute.  There  Is no need  to comment  on  the  details 

listed, although  It  Is  Important  that  the shareholder  should  know whether 

he  Is being called  to an ordinary, extraordinary or special  meeting, since 

the  rules  for  the  quorum  and majority  will  be different  depending  on  the 

nature of the meeting. 

The  laws of all Member States  lay down a minimum  period between notice and 

meeting, but  the periods set vary between five days and one month depending 

on the Member State. 

Shareholders  have  to be  allowed  sufficient  time  to prepare  to attend  the 

general meeting or  to arrange  to be represented  there;  It must  be borne In 

mind that a stead Ily growing number of shareholders may be resident outside 

the  country  where  the  company  has  Its  registered  office,  and  that  short 

deadlines  would  prevent  them  from  attending.  Nor  would  the  arrangements 

for  proxies and  for  the amendment  of  the agenda  by  a minority  be  able  to 

function  without  sufficiently  long  deadlines.  The  Statute  therefore  lays 

down a period of one month. 

Article 85 

A minority of shareholders equal  to that entitled  to call a general meeting 

should also be  In a position to have one or more additional  items  Included 

on the agenda of a general meeting already called.  It may be that  for one 

and the same meeting various minorities will cause various amendments to be 

made  to  the  agenda.  As  the  notice  of  the  meeting  Is  to  be  published 

one month  before  the meeting  takes  place»  requests  for  the  Inclusion  of 

additional  Items  are  to  be  put  forward  within  seven days  of  the  first 

notice;  this  will  enable  the  company  to  notify  all  shareholders  of  the 

amended  agenda,  through  the  same  channels  as  those  laid  down  for  the 

calling of  the meeting, not  less than seven days before  the meeting  takes 

place. 

-  35  -

Article 86 

The  Statute  prevents  attendance  at  the  general  meeting  being  made  subject 

to  conditions  other  than  procedural  formalities  such  as  the  deposit  of 

share  certificates  with  a  notary,  a  bank  or  the  company  itself, 

notification  by  the  shareholder  of  his  Intention  to attend  the meeting, or 

proper  recording  of  registered  shares  In  the  company  register.  The 

statutes  may  not,  for  example,  require  possession  of  a  stated  number  of 

shares as a qualification for  attendance. 

Article  87 

It often  happens  that  the shareholder  Is unable or  unwilling  to attend  the 

general  meeting, particularly  If he  Is not  resident  In the country  In which 

the company  has  Its registered office.  Representation by proxy  Is provided 

for  in all  Member  States.  The  Statute  recognizes  this  right  and  prohibits 

any provision  to the contrary  In the statutes. 

In certain companies  It may  be useful  to restrict  the categories of  persons 

who may be appointed  as proxies.  These  restrictions are to be  laid down by 

the  law of  the place where  the company  has  Its registered  office or  In the 

statutes;  a  shareholder  may  always  appoint  another  shareholder  as  his 

proxy. 

To make  It  easier  to verify  the  proxy's  credentials,  he must  be  nominated 

to  the  company  In writing;  the company  Is to  preserve  the  document  for  at 

least  three  years,  the  same  period  as  that  laid  down  for  the  other 

documents  relating  to  the  meeting  such  as  the  attendance  list  and  the 

minutes. 

Article  88 

Article 87  will  not  be  sufficient  where  bodies  such  as  associations  of 

shareholders  or  credit  Institutions  ask  the  shareholders  to  give  them 

proxies  and  themselves  designate  later  the  persons  who  are  to  exercise 

them.  Additional  guarantees are needed  here to ensure that  the proxy  votes 

In accordance with  the  Instructions given. 

-  36 -

By  way  of  exception  the  proxy  may  depart  from  the  shareholder's 

Instructions or  the statement  made  to the shareholder;  he must  then  inform 

the shareholder  accordingly  as  soon  as  possible  and  provide  all  necessary 

explanations. 

Article  89 

The notice  convening  the general  meeting  does not  provide  the  shareholders 

with  sufficient  Information  regarding  certain  particular  decisions  to  be 

taken^by  It. The  Statute  therefore  provides  that  certain  documents  are  to 

be available  to every  shareholder, at  the  latest  by  the date of  dispatch or 

publication of  the notice.  The main such documents are  the annual  accounts 

and the auditors' report;  the texts of  agreements requiring  approval  by  the 

general  meeting must  also be available. 

Article  90 

It  Is not enough  to give the shareholders  the right  to put  questions  to the 

management  at  the general  meeting;  the management  must  also be  required  to 

supply  the  Information  requested. 

The  Information  requested  may  be  refused  If  it  would  be  likely  to  cause 

harm to the company  or  If  Its disclosure would be  Incompatible with a  legal 

obligation of  confidentiality. 

Apart  from  these  restrictions  on  the  duty  to  supply  Information,  the 

statutes may not make provision for any other  grounds of  refusal. 

The  board  Is responsible  for  supplying  Information.  If  the  board  and  the 
shareholder  disagree  as  to  whether  Information  asked  for  should  be 

supplied,  the  power  to  settle  the  matter  cannot  be  left  with  the  general 

meeting,  where  an  objective  decision  cannot  be  guaranteed.  The  Regulation 

provides for  an appeal  to the court  to check  the validity of  the refusal. 

-  37  -

Article  91 

The  Statute  here  follows  a  principle  common  to  the  laws  of  ail 

Member  States  by  prohibiting  the  general  meeting  from  taking  decisions  on 

any  matters  not  on  the  agenda  communicated  or  published  in  accordance  with 

Art icles 84  and  85. 

But  this  principle  need  not  apply  where  all  shareholders  are  present  or 

represented  at  the  meeting  and  no  shareholder  objects. 

Article  92 

The  shareholder's  voting  rights  must  be  proportionate  to  his  stake  in  the 

capital  as  represented  by  his  shares.  Only  two  exceptions  are  permitted, 

and  only  if  they  are  provided  for  in  the  statutes. 

Thus  double  or  multiple  voting  rights  are  prohibited. 

The  Statute  itself  lays  down  two  cases  In which  the  right  to  vote  may  not 

be  exercised,  and  refers  to  the  law  of  the  State  in  which  the  SE  has  Its 

registered  office  for  certain  other  cases. 

Article  93 

In  the  case  of  certain  conflicts  of  Interest  between  the  company  and  the 

shareholder,  the  shareholder  must  be  prevented  from  exercising  his  voting 

rights.  The  Regulation  sets  out  the  circumstances  In which  this  is so. 

These  prohibitions  apply  not  only  to  shareholders  but  to  their  proxies  as 

well.  They  apply  to  shareholders  whether  or  not  they  own  the  shares 

carrying  the  voting  rights  in  question. 

Article  94 

This  Article  defines  the  majority  needed  for  resolutions  of  the  general 

meeting:  as  an  absolute  majority  of  the  votes  attached  to  the  capital 

represented. 

-  38  -

The  statutes  may  require  larger  majorities  for  all  or  for  certain 

resolutions.  An  exception  is  made  in  order  to  facilitate  the  appointment 

or  dismissal  of  board  members. 

The  Regulation 

itself  also  requires  higher  majorities 

for 

certain 

résolut ions. 

Art icle  95 

This  provision  gives  the  general  meeting  power  to  make  any  amendment  to  the 

statutes,  with  carefully  defIned'except ions. 

Where  the  general  meeting  empowers  the  Board  to  do  certain  things  which 

require  amendment  of  the  statutes,  it  must  be  possible  to  empower  the  Board 

to  amend  the  statutes  accordingly.  For  example,  an  authorization  to 

increase  the  subscribed  capital  up  to  a  fixed  maximum  may  include  an 

authorization  to  amend  the  issued  capital  in  the  statutes;  this  may  also  be 

the  case  where  convertible  debentures  are  to  be  converted. 

Article  96 

The  Information  which  under  Article  84(2)  must  be  included  In  the  notice 

convening  the  general  meeting  is  not  sufficient  where  shareholders  are 

required  to  decide  on  an  amendment  to  the  statutes.  In  that  case  the  full 

text  of  the  amendments  proposed  must  be  included  too. 

Art icle  97 

Following  the  example  of  the  laws  of  most  Member  States,  the  Statute 

requires  a  qualified  majority  for  a  resolution  of  the  general  meeting  to 

amend  the  statutes. 

- 39 -

In a  limited  liability company a shareholder's only obligation  is to pay up 

the amount he has agreed  to contribute.  It follows that an  increase  in the 

obligations of  the shareholders cannot  be decided simply  by  the majorities 

required  for  amendment  of  the  statutes.  All  the  shareholders  concerned 

must approve.  An amending resolution must be made public. 

Article 98 

Additional  rules are needed where the company has  issued different kinds of 

shares.  If  the  measures  envisaged  would  also  change  the  relationship 

between the classes of share, there must  in addition to a resolution of the 

general  meeting also be a separate vote of each class of shareholder  whose 

rights are affected by the resolution. 

Article 99 

Minutes  are  to be  drawn  up  for  each  session of  the  general  meeting.  The 

Regulation  lays down the minimum  information which must be  included. 

The  minutes  are  addressed  primarily  to  the  shareholders.  It  does  not 

appear necessary  to require that they be registered and published. 

Article 100 

Actions  for  the  annulment  of  resolutions  of  the  general  meeting  are  of 

great  importance  to the shareholders and  to outsiders.  Both would wish  to 

see any such actions brought  quickly.  Paragraph 3 therefore  restricts  the 

period  In which  such  an  action  may  be  brought  to  three months  from  the 

closure of the general meeting. 

-  40 

The  grounds  for  annulment  are  fairly  broad:  any  Infringement  of  the 

Regulation  or  of  the  company's  statutes  is  sufficient.  This  would  Include 

an  infringement  of  the  shareholders'  entitlement  to  Information,  to  the 

extent  that  It  influenced  the  general  meeting.  The  ordinary  grounds  of 

annulment  under  general  principles  of  law,  such  as  abuse  of  a  majority 

position,  might  also  be  Invoked. 

Annulment  or  suspension  of  a  resolution  is valid  against  third  parties,  and 

the  court's  decision  is  to  be  disclosed  by  registration  and  publication  in 

the  ordinary  way. 

A  declaration  that  a  resolution  is  void  can  be  prevented  if,  on  the  order 

of  the  court  or  before  the  court  has  delivered  Judgement,  the  general 

meeting  amends  the  resolution  challenged.  The  court  retains  a  wide 

discretion  with  regard  to  the  resolutions  concerned  in  this  Article. 

-  41  -

TITLE V 

Annual account» and consolidated account» 

The  Council  has  adopted  three  Directives  relating  to  the  preparation, 

auditing  and  publication  of  annual  accounts  and  consolidated  accounts. 

These  are  the  Fourth Councl I  Directive  (78/660/EEC)  of  25 July  1978  on 

annual accounts, the Seventh Council  Directive (83/349/EEC) of  13 June  1983 

on  consolidated  accounts  and  the  Eighth Council  Directive  (84/253/EEC)  of 

10 April  1984 on  the  approval  of  persons  responsible  for  carrying  out  the 

statutory  audits of accounting  documents.  In addition, the Council  adopted 

on  8 December  1986  a  Directive  (86/635/EEC) which  specifically  relates  to 

the annual  accounts  and  consolidated  accounts of  banks  and other  financial 

Institutions.  The  annual  accounts  and  consolidated  accounts  of  Insurance 

companies  are  the  subject  of  a  further  proposal  for  a  Directive  which  Is 

currently  before  the Council.  The  provisions  of  Title V  refer  extensively 

to this Community  legislation. 

The  SE  must 

comply 

with 

the  provisions 

of 

the 

Fourth 

and 

Seventh Directives.  It will  be  able  to make  use of  the options  which  the 

above Directives grant Member  States. 

Those  European  companies  which  are  credit  Institutions  or  Insurance 

companies  have  to  apply  the  national  provisions  adopted  pursuant  to  the 

Directives on  those subjects. 

- 42 -

TITLE VI 

GROUPS OF COMPANIES 

Article 114 

1.  The  question  of  rule»  dealing  specifically  with  groups  arises  In 

connection  with  the  European  Company  Statute  because  two  of  the  ways  of 

setting up an SE  (creation of a holding  company  or of  a  Joint  subsidiary) 

automatically  entail  the  formation  of  a  group  of  companies.  What,  then, 

are  the  rules  which  will  govern  relations  between  the  SE  and  Its 

subsidiaries? 

The aim of the original  draft of the European Company Statute was to enable 

those  setting  up  an  SE  to  opt  for  a  special  group  status,  which  would 

facilitate management  of  the  company  as a  single  economic  unit, while at 

the  same  time  ensuring  appropriate  protection  for  the  Interests  of 

third parties (e.g. minority shareholders and creditors). 

The Memorandum  on the European Company  Statute asked, however, whether  the 

Statute  was  the  proper  place  to  create  a body  of  rules  governing  groups 

(Suppl. 3/88 - Bull. EC, p. 15). 

2.  At  present  the  laws of  Germany  and  Portugal  are  the only  ones  which 

recognize  the  right  of  a  parent  company  of  a  group  to  manage  its 

subsidiaries  In the  Interests of the group, and which consequently  lay down 

specific safeguards for minority shareholders and creditors. 

In the 1985 White Paper on  the  Internal  market  the Commission  stated  that 

It was considering a proposal  to coordinate the national  law on the subject 

In the light of comparative  law studies  In progress (point 144). 

- 43 -

3.  If specific  rules are  included  In the Statute  at  this stage  they will 

prejudge  the  outcome  of  those  studies,  and  will  Jeopardize  the  rapid 

adoption of the regulation establishing the Statute. 

Debate on the Commission's 1970/75 proposal  came to a halt  In 1982 because, 

before  stating  a view on  the  arrangements  for  groups where one member  of 

the group  Is an SE, delegations wanted to know what  the Commission would be 

proposing  for the harmonization of the Member  States' legislation on groups 

in general. 

Specific rules would certainly be useful  to facilitate the management  of a 

group  headed  by  an  SE.  But  they  are  not  Indispensable.  An  SE  can  be 

treated  as  a  public  limited  company  governed  by  the  legislation  of  the 

Member State  In  which  It  has  Its  registered  office,  and  Its  rights  and 

obligations  can  be  determined  by  reference  to  the  rules  governing  such a 

company, whether  It Is the parent company or the subsidiary  In a group. 

On  the  basis  of  the  rules  and  principles  of  private  International  law 

generally  accepted  In  the  Member  States  It  can  be  presumed  that  the  law 

applicable to a subsidiary  will  determine  the rights and obligations of a 

parent company which  Is Itself governed by a different  set of national  laws 

from that applying to the subsidiary. 

4.  If  we  follow  this  approach  It  should  be  stated  In  the  regulation 

establishing the European Company  Statute that where an SE  Is a subsidiary 

company or,  In the  language of  the Statute, a "controlled undertaking". It 

is to be treated  like any other public  limited company governed by the laws 

of the Member  State  In which  It has  Its registered office. 

On  the  other  hand,  If  It  Is  the  SE  which  Is  exercising  control,  the 

regulation  establishing  the  Statute  does  not  need  to  lay  down  specific 

rules, which will  be supplied  by  the  law governing  the company  controlled 

by the SE. 

-  44 -

The  rights  conferred  and  the obligations  Imposed  on  a  firm  as  a  result  of 

the  control  It  exercises  over  another  which  Is  governed  by  separate 

legislation do not  however  affect  any obligations which may be  Incumbent  on 

the  controlling  undertaking  under  Its  own  proper  law,  for  example  as 

regards the preparation of consolidated accounts. 

-  45 

TITLE  VI I 

Article  115 

This Article  sets  limits  to  the  procedures  for  the winding  up  of  an  SE.  In 

the  interests  of  legal  certainty  and  the  protection  of  shareholders  the 

grounds  for  automatic  winding  up  must  be  restricted.  The  Statute 

prescribes  only  the  case  where  the  duration  of  the  company  laid  down  In  the 

statutes 

expires;  this 

possibility 

exists 

In 

the 

laws 

of 

all 

Member  States.  As  the  documents  are  a  matter  of  public  record,  the 

duration  of  the  company  is  an  incontestable  fact  which  can  be  verified  by 

anybody. 

In  allowing  the  general  meeting  of  shareholders  to  decide  to  wind  up  the 

company  the  Statute  .is  likewise  accepting  a  rule  which  is  generally 

recognized;  the mechanisms  are  governed  by Article  116. 

Failing  a  decision  of  the  general  meeting,  winding  up  requires  a  court 

decision;  such  a  decision  may  be  granted  on  a  ground  contemplated  In  the 

law of  the  place  where  the  SE  has  its  registered  office  or  In  the  statutes, 

or  where  no  disclosure  of  annual  accounts  has  taken  place,  or  where  the 

issued  capital  has  been  reduced  below  the  legal  minimum. 

Article  116 

On  the  one  hand  the  Statute  limits  the  grounds  for  automatic  winding  up; 

but  on  the other  It seeks  to  facilitate  the  taking  of  a decision  to wind  up 

the  company  by  the  shareholders,  in order  as  far  as  possible  to  avoid  the 

need  for  court  proceedings. 

A  distinction  Is made  as  regards  the  majority 

needed  at  the  general  meeting.  Where  the  ground  of  winding  up  Is  one 

contemplated  by  law or  by  the  statutes,  a simple  majority  is sufficient. 

- 46 -

In  all  other  cases  a  decision  to  wind  up  the  company  represents  an 

amendment  to the statutes, for which  the  laws of all Member  States require 

a qualified majority.  It should be emphasized  that  this rule  represents a 

minimum requirement, and the statutes may  Impose stricter conditions. 

Article 117 

It  has  already  been  observed  that  the  power  conferred  on  the  courts  to 

decide  that  an SE  Is to be wound up can only be a residual  one; the power 

to decide  Is to  lie In the first place with the shareholders. 

As a matter  of principle  it will  be for  the Member  States  to regulate  the 

procedure to be followed before the court.  But  it does appear necessary to 

make  rules  on  who  is  entitled  to  Initiate  such  proceedings.  First  and 

foremost  there would  be  the governing  bodies of  the company.  The general 

meeting,  however,  would  be  entitled  to  decide  by  Itself  to  wind  up  the 

company.  However,  to  avoid  any  abuse  of  the  majority  requirements  In 

Article 116, any  shareholder  or  person  showing  a  legitimate  Interest  must 

also be  in a position to refer the matter  to the court. 

in a case where  the  Irregularity which  forms the ground  for winding up can 

be remedied, the court must be able to grant  the company sufficient  time to 

do so. 

Article 118 

To ensure that shareholders and third parties are properly protected, there 

must be proper disclosure of the decision to wind up the company. 

-  47 -

Article  119 

This  provision  Is  Intended  to  clear  up  the  uncertainty  as  to  whether  a 

decision  to allow  a  company  to continue  in business  Is possible  after  the 

decision  to  wind  It  up  has  been  taken  by  the  general  meeting  of 

shareholders.  Clearly  the  fresh  decision  must  require  at  least  the  same 

majority  as  that  required  for  the  Initial  decision  to wind  up  the  company. 

But  a decision  to continue must  be ruled out once any distribution has been 

made  In the course of  the  liquidation.  The general  meting may  also  review 

an  automatic  winding  up  which  takes  place  because  the  duration  of  the 

company  has expired.  The decision  to continue will  require a change  In the 

objects of  the company  and must  be  disclosed. 

The  Statute  does  not  deal  with  the  grounds  on  which  a winding-up  decision 

made by a court  may  be  reviewed. 

Article  120 

Any  winding  up  leads automatically  to  the  liquidation of  the  assets.  Once 

the decision  to wind up has been  taken, the company  continues to exist  only 

for purposes of  the  liquidation. 

Liquidation  Is everywhere  administered  either  by  one  or  more  liquidators. 

Clearly  the  appointment  of  liquidators  Is of  particular  Importance  to  the 

shareholders.  To  safeguard  their  role  In  the  choice  of  liquidators,  the 

Statute  lays down a set of  rules on  the shareholders' powers. 

Under  this  scheme  liquidators  may  be  appointed  In  the  first  place  by  the 

statutes  or  by  methods  set  out  therein.  Such  clauses  can  of  course  be 

amended,  even  after  a  decision  to  wind  up  the  company,  but  only  In  the 

manner  required  for  the  amendment  of  those  documents.  Secondly,  the 

general  meeting  of  shareholders  may  appoint  liquidators,  which  Is  a 

-  48 -

generally  accepted  rule.  To  facilitate  a  decision  the  Statute  requires  a 

simple  majority  of  the  votes  cast.  Individual  shareholders  are  protected 

against  any  abuse  on  the  part  of  the majority  by  Article  131, which  makes 

It possible  to  have  a  liquidator  removed  by  a  court  on  showing  cause.  In 

the  third  place.  In case  the general  meeting  falls  to  appoint  liquidators, 

a  power  of  appointment  must  be  conferred  on  a  court.  To  speed  up  the 

appointment  and  to give maximum  protection  to  those  concerned,  the  matter 

may  be  brought  before  the  court  not  only  by  the  governing  bodies  of  the 

company  but  also  by  any  shareholder,  whatever  his  stake  In  the  capital. 

But  this  power  In  any  event  remains  a  subsidiary  one,  to  be  exercised 

falling appointment  under  the statutes or  Instrument  of  Incorporation or  by 

the general  meeting. 

The  set  of  rules  on  the  appointment  of  liquidators  would  be  incomplete 

without  provision  for  the  case  where  the  statutes  are  silent  and  neither 

the  general  meeting  nor  the  court  has  made  an  appointment.  In  that  case 

the members of  the administrative or management  body  are  to be deemed  to be 

liquidators until  the powers already  referred  to have been  exercised. 

Finally,  the  general  meeting,  or  falling  that  the  court,  Is  to  set  the 

remuneration of  the  liquidators. 

-  49  -

Article  121 

The  rules  on  the  appointment  of  liquidators  in  Article  120  must  be 

supplemented  by  rules  on  their  removal.  The  fact  that  a  liquidator  has 

been  appointed  under  the  statutes  should  not  prevent  his  removal  by  the 

general  meeting  of  shareholders,  acting  by  a  majority  of  the  votes  cast. 

This  is  all  the  more  true  of  the  withdrawal  of  an  appointment  originally 

made  by  the  general  meeting.  However,  it  appears  appropriate  to  give  the 

court  a  general  power  of  removal,  alongside  that  of  the  general  meeting, 

not  only  in  the  interest  of  those  managing  the  company,  but  above  all  In 

order  to  protect  Individual  shareholders  against  any  negligence  on  the  part 

of  the  majority  of  shareholders  which  might  allow  a  liquidator  who  fails 

properly  to  perform  his  duties  to  continue  in  office.  Any  removal  of  a 

liquidator  is  to  be  disclosed. 

Article  122 

The  Regulation  adopts  the  quite  general  rule  that  the  liquidators  may  do 

anything,  even  undertaking  new  transactions,  to  the  extent  necessary  for 

the  purposes  of  the  liquidation,  which  has  become  the  new  object  of  the 

company. 

The  liquidators  are  to  have  power  to  bind  the  company  In  dealings  with 

third  parties  and  in  legal  proceedings.  To  ensure  protection  for  third 

parties  provision  is  made  here  for  disclosure  of  the  appointment  and 

termination  of  office  of  liquidators  and  the  extent  of  their  power  to 

represent  the  company. 

Article  123 

The  Regulation  requires  certain  safeguards  as  regards  the  civil  liability 

of  liquidators.  Firstly,  the  civil  liability  of  liquidators may  In no  case 

be  less  strict  than  that  of  the  members  of  the  single  board  or  management 

board.  Any  reduction  in  the  liability  of  liquidators  as  compared  with  the 

-  50  -

the  liability  of  the  members  of  the  relevant  board  Is  therefore  prohibited, 

and  thus may  not  be  provided  for  by  clauses  in  the  statutes. 

Article  124 

It  Is  normal  practice  to  draw  up  a  statement  of  assets  and  liabilities  at 

the  date  on  which  liquidation  begins.  The  Regulation  requires  that  such  a 

statement  be  drawn  up,  but  does  not  seek  to  regulate  its  contents  or  to 

require  disclosure.  The  document  must  be  supplied  on  request  to  any 

shareholder,  member  or  creditor. 

To  avoid  any  misunderstanding  in  this  matter,  the  Regulation  leaves  no 

doubt  that  the  winding  up  and  liquidation  of  a  company  in  no  way  affects 

its  obligations  under  the  rules  on  company  accounts,  which  are  to  apply 

subject  to  the  specific  requirements  of  the  liquidation. 

Article  125 

The  winding  up  of  any  company  must  be  disclosed  In  accordance  with 

Article  9. 

But  disclosure  of  this  kind  is  not  sufficient  to  ensure  equivalent 

protection  of  the  company's  creditors  throughout  the  Community.  The 

Statute  therefore  goes  on  to make  the  same  disclosure  requirements  apply  to 

the  invitation  to  creditors  to  lodge  their  claims  and  to  the  Indication  of 

the  date  after  which  distributions  may  be  made.  Any  known  creditor  of  the 

company  is  to  receive  a  similar  invitation  individually.  To  avoid  any 

misunderstanding  the  Regulation  makes  no  provision  for  a  cut  off  date  for 

creditors  who  do  not  come  forward  by  the  date  indicated.  The  date  to  be 

indicated  merely  represents  information  supplied  to  creditors,  and  In  no 

way  affects  their  claims  on  the  company  in  liquidation. 

-  51  -

Article  126 

According  to a general  principle  governing  liquidation  all  creditors  of  the 

company  must  be  paid  in  full  before  there  can  be  any  distribution  of  the 

net  assets  remaining.  The  statutes  may  determine  the  beneficiaries  of  any 

such  distribution.  In  the  absence  of  such  a  clause  the  net  assets  are  to 

be  distributed  among  the  shareholders.  That  distribution  is  to  be  in 

proportion  to  their  holdings  in  the  capital  of  the  company,  unless  the 

statutes  provide  otherwise.  There  is  a  particular  problem  where  the 

capital  has  not  been  paid  up  in equal  proportions.  In  that  case,  in  order 

to  ensure  that  the  shareholders  are  treated  equally,  all  considerations 

paid  up  are  to  be  repaid,  and  the  net  assets  remaining  are  to  be 

distributed  by  the  proportional  rule. 

Lastly,  no  distribution  may  be  made  until  adequate  security  has  been  set 

aside  for  claims  which  have  not  yet  fallen  due, or  which  are  In dispute,  or 

where  the  creditor  cannot  be  Identified. 

Article  127 

For  the  better  protection  of  the  shareholders  against  any  failure  to  comply 

with  the  principles  of  distribution  in  Article  126,  the  liquidators  must 

draw  up  a  distribution  pian  after  the  date  Indicated  in  the  invitation  to 

creditors  Issued  under  Article  125.  This  document  must  be  brought  to  the 

attention  of  the  general  meeting  and  of  any  beneficiary  designated  In  the 

statutes.  The  Regulation  requires  that  the  general  meeting  be  Informed, 

but  does  not  require  Its  approval. 

-  52  -

The  protection  provided  takes  the  form  of  a  right  to  challenge  the  plan 

before  a  court,  a  right  held  by  any  shareholder  and  any  beneficiary,  but 

not  by  a creditor,  who  at  this  stage  should  already  have  been  paid  In  full. 

In  the  event  of  any  such  challenge  it will  be  for  the  court  in  question  to 

decide  whether,  and  if  so  to  what  extent,  any  partial  distribution  may  be 

made  pending  the  final  decision. 

Article  128 

The  liquidation  is terminated  once  the  distribution  has  been  made. 

Where  after  the  liquidation  has  been  terminated  previously  unknown  assets 

or  liabilities  of  the  company  come  to  light,  the  liquidation  may  be 

reopened,  but  only  by  a  decision  of  the  court,  which  must  appoint  the 

liquidators. 

The  fact  that  a  liquidation  has  been  terminated  is subject  to  a  disclosure 

requirement. 

Articles  129  and  130 

In  all  Member  States  there  are  special  rules  governing  companies  which  are 

the  subject  of  proceedings  for  insolvency  or  suspension  of  payments,  and 

the  Regulation  does  not  affect  those  rules. 

A  draft  convention  aligning  these  Insolvency  procedures  has  been  drawn  up 

on  the  basis  of  Article  220  of  the  EEC  Treaty.  The  draft  is  before  the 

CouncII. 

Decisions  taken  in  the  course  of  proceedings  for  insolvency  or  suspension 

of  payments  are  subject  to a disclosure  requirement. 

-  53  -

Title  v in 

Articles  131  and  132 

Title  VIII  allows  an  SE  to  merge  with  other  SEs  and  with  public  limited 

companies  Incorporated  under  national  law, either  by  taking  them over  or  by 

forming  a  new  SE  Jointly  with  them.  The  reverse  procedure  Is  also 

authorized:  an  SE  may  be  taken  over  by  a  national  public  limited  company, 

and may  set  up  a new  national  public  limited  company  together  with  another 

such company or with another  SE or other  SE». 

- 54 -

Title ix 

Article 133 

It  Is In the nature of an SE that  It should operate across borders.  It Is 

primarily  a  new  tool  of  cross-border  cooperation,  facilitating  links 

between companies  In different Member States. 

It  Is essential,  therefore,  that  the  SE  should  be  able  to  overcome  the 

handicap which this would otherwise  Impose on  It In terms of taxation. 

Where  an  SE  conducts  taxable  business  through  permanent  establishments 

abroad,  losses suffered by  those establishments would, generally  speaking, 

not  be  taken  into account  for  tax purposes  In  Its country of  residence  If 

profits  from  foreign  business  are  exempt  from  tax  In  that  country  under 

national  tax  law or bilateral conventions.  This rule could result  In an SE 

being  more  heavily  taxed.  To  avoid  this,  paragraph 1 provides  that  such 

losses may be deducted  against an SE's  profits. 

To  safeguard  the  Interests  of  the  Member State  of  the  SE,  paragraph 2 

provides that  subsequent  profits made by such permanent  establishments are 

to be added  to the SE's profits, up to the amount of  the  losses previously 

deducted. 

Paragraph 4  takes  account  of  the  fact  that  in Member States  applying  the 

Imputation system a tax treatment  Identical  to that under paragraphs 1 to 3 

Is already applled. 

- 65 -

Titles X and XI 

To deal with  the  Involvement  of employees  In the SE, appropriate provisions 

should  be adopted  by means of  a Directive so as  to enable Member  States  to 

take  account  of  their  national  rules  and  practices  when  Implementing  the 

Directive  In their  national  law. 

Article  135  does  not  lay  down  a  rule  of  law.  It  merely  refers  to  the 

provisions  of  the  Directive  dealing  with  the  Involvement  of  employees  In 

the SE, which  Is complementary  to this Regulation. 

Article 136 provides  that  an SE may be formed  In any Member  State which  has 

implemented  In  Its  national  law  the  provision»  of  Directive  ...  dealing 

with  the  Involvement  of  employee»  In the  SE. By  so  doing  It prohibits  the 

creation of an SE  In a State which  has not  Incorporated  those provisions. 

Article 137 postpones  the applicability of  the Regulation  so as to make  Its 

entry  Into  force  coincide  with  the  date  by  which  Member  States  must 

Implement  the Directive. 

-  56 -

COMMENTARY  ON THE ARTICLES OF THE DIRECTIVE 

The  purpose  of  the  Directive  I» to  recognize  the  Involvement  of  employees 

in  the  company,  to make  them  feel  that  the  business  of  the  firm  Is  their 

business.  The  three models proposed each provide a structure  through which 

this  involvement  can operate. 

Article 2 clarifies  the  concept  of  employee  participation  as  being  not  in 

the  day-to-day  running  of  the  firm, which  Is  the  function  of  management, 

but  in supervision and strategic  development. 

Article 3 determines the mechanisms  for choosing between  the various models 

.f participation;  It  allows  a  Member  State  to  restrict  the  choice  to  two 

models or even a single model. 

-  57 -

There  are  different  possibilities.  If only  one  model  Is permitted  the  SE 

will  have  to adopt  that one.  Where  the choice  Is between  two or  three, the 

managements  of  each  of  the  founder  companies  are  to  choose  a  model,  If 

possible  with  the  agreement  of  the  representatives of  their  own  employees 

provided  for  by  the  law or  practice of  the  relevant  Member  State.  If  the 

management  and employee  representatives cannot  reach agreement  on  the model 

proposed  by  management,  management  may  decide  to  propose  another  model 

acceptable  to  the  employees;  but  It  must  not  be  forgotten  that  the  SE 

cannot  be  set  up  without  the  approval  of  the  general  meeting  of 

shareholders.  It  would  be  unrealistic  to  give  the  employees  a  right  of 

veto  which  might  prevent  formation  of  the  SE,  or  Induce  management  to 

locate  Its  registered  office  In another  Member  State.  If  no  agreement  Is 

reached, therefore,  the model  is to be chosen by  management. 

If the representatives of  the employees of  company  A and company  B  disagree 

between  themselves  on  the  choice  of  model  proposed  by  management,  the 

majority  will  prevail.  An  SE  may  never  be  set  up  until  a  model  of 

participation has been  chosen. 

After  the  SE  has  been  formed  It  may  prove  necessary  to  change  the  model 

chosen  at  the  time  of  formation.  Such  a  change  will  be  possible  if  there 

Is agreement  between  the  management  of  the  SE  and  the  representatives  of 

Its employees.  The agreement  is to be approved  by  the general  meeting. 

In view of  the great  flexibility of  the Statute, which will  allow models of 

participation  to be  adopted  which will  operate  In different  ways  according 

to national  traditions, paragraph  4 requires each Member  State  to  determine 

the  details of  the practical  application of  the participation models  which 

may be used by SEs having  their  registered offices  In  Its  territory. 

-  58  -

Art le le 4  makes  provision  for  a  model  of  employee  participation  either  on 

the  supervisory  board  (the  two-tier  system) or  on  the  administrative  board 

with  a  definition  of  management  and  supervisory  functions  (the  single-tier 

system). 

If  this  model  is  chosen  all  the  employees  of  the  SE  and  its  various 

establishments,  In  whatever  Member  State  they  are  employed  are  to  elect 

representatives  to  the  supervisory  board  (or  administrative  board)  of  the 

SE  itself;  these  board  members  (at  least  one-third  and  not  more  than 

one-half)  will  sit  alongside  the  shareholders'  representatives  (at  least 

one-half  and  not  more  than  two-thirds). 

Pursuant  to  Article 74  of  Council  Regulation 

all  board  members, 

whether  they  represent  employees  or  shareholders,  are  to  have  the  same 

rights  and  obligations.  However  the  power  to  authorize  certain  operations 

(listed  In Article  72  of  the  Regulation) will  rest  with  a  majority  of  the 

members.  A  minority  will  be  Informed  and  consulted;  It will  in  any  event 

be  able  to express  its view,  even  If  it  is not  in a  position  to  decide  on 

the  operation  itself.  In  one  Member  State  the  general  meeting  and  the 

employees  do  not  designate  their  representatives  directly.  Article  4  (II) 

takes  account  of  this original  system  of  appointing  the  Supervisory  board. 

If this system  were  adopted  by  an SE, the shareholders  and  the employees  or 

thier  representatives would  have  the same  rights  to recommend,  or  to object 

to,  the appointment  by  the supervisory  board  of  a new member  of  that  board. 

Article  5  makes  provision  for  a  model  of  employee  participation  through  a 

body  which  represents  the  employees  at  company  level  but  is  separate  from 

the  company  supervisory  or  management  structure.  If  this  model  is  chosen 

all  employees  of  the  company  and  Its  various  establishments.  In  whatever 

Member  State  they  may  be  employed,  are  to  elect  representatives  to  sit  on 

this  body,  where  they  will  enjoy  the  same  rights  of  Information  (cf. 

Article  64) of  the Regulation) and of  consultation  in the  implementation  of 

the same  decisions  (listed  in Article  72 of  the Regulation) as  those  In the 

model  defined  In Article  4. 

- 59 -

Article  10 makes  It clear  that  the  rights of  Information  and  consultation 

conferred  on  the separate  body  referred  to  In Article 5  In no way  diminish 

the  rights  enjoyed  under  the  laws  of  the  various  Member  State»  by  the 

representatives  of  the  employees  of  the  SE's  establishment»  there: 

Betrlebsrate. shop  stewards.  Conseils  d'entreprise  and  so on  are  to  retain 

the rights  they  exercise  on  behalf  of  the  employees  they  represent  In  the 

various establishments of  the SE. 

Article 6 

This article allows other  models of  participation  to be established  In the 

SE  by  means  of  a  collective  agreement,  to  be  negotiated  between  the 

managements  of  the  founder  companies  and  the  representatives  of  those 

companies' employees. 

The  Commission  takes  the  view,  for  example,  that  the  three-way  model 

proposed  by  Parliament  In  1974,  and  Incorporated  In  the  Commission's 

amended  proposal  of  1975, could  be established within  the SE  by  agreement. 

Other  models would  also be possible, as  long as  the agreement  ensured  that 

the  employees  or  their  representatives  had  the  same  rights  of  Information 

and consultation as  those provided  by  the other  two models provided  for  In 

Articles 4 and  5.  Paragraph  3  therefore empowers  a  "works committee"  type 

of  representation  to  ask  the  management  for  the  Information  It  needs  to 

perform  Its functions,  in the same way  as  the  "separate  body"  representing 

the 

workers 

may 

do 

under 

Article 5(2)(b).  Paragraph  4 

covers 

confidentiality  of  Information  along  the  lines  laid  down  In  the  laws of  a 

majority  of  Member  States.  Paragraph  5  nevertheless  allows  the  management 

to  withhold  certain  sensitive  Information  If  the  law  of  the  Member  State 

permits.  One  might  Imagine,  for  example,  that  the  agreement  concluded 

would  provide  for  Information and consultation of  a general  meeting of  the 

company's  employees,  as  Is done  In certain  companies.  In that  case, steps 

would  have  to  be  taken  to  prevent  Information  from  being  disclosed  which 

might  seriously  Jeopardize  the  Interests of  the SE or disrupt  Its projects. 

-  60 -

Paragraph 8  authorizes  a  Member  State  which  so  desires  to  make  provision 

for another model, known as a "standard model",  In conformity with  the most 

advanced practice  In the country.  The standard model  would apply  In the SE 

where  the  two  parties so  decided  or  where  no  agreement  was  reached.  This 

possibility  comes  close  to  merely  relying  on  national  practice;  the 

Commission  has  accepted  It  only  on  condition  that  the  SE's  employees  or 

their  representatives  are  guaranteed  the  rights  of  information  and 

consultation  referred  to  In  Article 6:  that  Is  to  say  the  quarterly 

Information referred  to  In paragraph  2(a), the  Information and  consultation 

referred  to  In paragraph  2(b) and, where the employees are represented  by a 

collegiate  body,  the  right  of  that  body  to  require  the  Information 

necessary  for  the performance of  Its duties under paragraph  3. 

Article 7 

All  employees  of  the  SE  are  automatically  entitled  to vote  to elect  their 

representatives under  any of  the three models of participation. 

Provision  must  be  made  to  ensure  that  representatives  represent  roughly 

equal  numbers of  employees, so  that  particular  groups of  employees  are not 

over-represented,  and. 

In  models 2  and  3,  that 

the  number  of 

representatives  Is not  too great. 

In  model  1  the  proportion  between  employees'  representatives  and 
shareholders' representatives will  determine the number  of seats available: 
either  It will  be  one-third  to one-half  of  the whole, or  the  whole  board 
wl II be co-opted. 

In all  other  respects  the  rules  governing  elections  will  have  to  be  laid 
down  In the Member  States,  If this has not already been done. 

Article 8 

The proportional  rule  Is to apply before the SE  Is formed, too.  In order  to 

prevent  all  the  representatives of  the employees of  the  founder  companies, 

who may  in some companies be very numerous and yet  represent  only a small 

- 61 -

proportion  of  employees,  from  all  having  an  equal  say,  together  with 

management  In the choice of the model of participation or the setting-up of 

the supervisory board where the number of places  is limited to between one-

third  and  one-half  vis-à-vis  the  shareholders'  representatives.  The 

separate body must  not comprise a very  large number of members either, even 

If Article 4 does not  stipulate  the number, which  Is therefore  to be  laid 

down  In  the  statutes  In  consultation  with  the  representatives  of  the 

employees.  The  representatives  designated  In  accordance  with  Article 8 

will continue  to perform  their duties until  the new members elected by the 

employees of the SE take up their duties. 

Article 9  provides  that  the employees' representatives are  to be  provided 

with premises  and other  financial  and material  resources enabling  them  to 

meet,  to  consult  their  voters  (telephone,  telex  etc.),  to  travel  and  to 

obtain  expert  assistance,  In  order  to  be  able  to  perform  their  duties 

properly.  Close  consultation  between  the  management  and  employees' 

representatives  Is the  best  way  of  making  a  reasonable  assessment  of  the 

real needs of the employees' representatives. 

Article 10 has been commented on  In connection with Article 5. 

Article 11  is  not  a  further  model  of  participation,  as  It  would  be 

difficult  to ensure  that  It was equivalent  to the other  three.  It  is not 

easy  to be certain that  the same  Information and consultation  is available 

here  as  with  the  other  three  models.  It  Is nevertheless  useful  to  make 

provision  for  agreements  providing  for  employee  participation  In the SE's 

profits or  losses. 

-  62  -

Proposal  for  a 

COUNCIL  REGULATION 

on  the Statute  for  a European  company 

THE  COUNCIL  OF  THE  EUROPEAN  COMMUNITIES, 

Having  regard  to  the  Treaty  establishing  the  European  Economic  Community, 

and  in particular  Article  100a  thereof, 

Having  regard  to  the. proposal  from  the  Commission, 

In cooperation  with  the  European  Parliament, 

Having  regard  to  the opinion  of  the  Economic  and  Social  Committee, 

Whereas  the  completion  of  the  internal  market  within  the  period  set  by 

Article  8a  of  the  Treaty,  and  the  improvement  it  must  bring  about  in  the 

economic  and  social  situation  throughout  the  Community,  mean  not  only  that 

barriers  to  trade  must  be  removed,  but  also  that  the  structures  of 

production  must  be  adapted  to  the  Community  dimension;  for  this  purpose  it 

is  essential  that  companies  whose  business  is  not  limited  to  satisfying 

purely  local  needs  should  be  able  to  plan  and  carry  out  the  reorganization 

of  their  business on  a Community  scale; 

Whereas  such  reorganization  presupposes  that  existing  companies  from 

different  Member  States  have  the  option  of  combining  their  potential  by 

means  of  mergers;  whereas  such  operations  can  be  carried  out  only  with  due 

regard  to  the  competition  rules of  the  Treaty; 

-  63  -

Whereas  restructuring  and  cooperation  operations  involving  companies  from 

different  Member  States  give  rise  to  legal  and  psychological  difficulties 

and  tax  problems;  whereas  the  approximation  of  Member  States'  company  law 

by  means  of  directives  based  on  Article  54 of  the  Treaty  can  overcome  some 

of  these  difficulties; whereas  such  approximation  does  not,  however,  remove 

the need  for  companies  governed  by  different  legal  systems  to choose  a  form 

of  company  governed  by  a particular  national  law; 

Whereas  the  legal  framework  in which  business  still  has  to be  carried  on  in 

Europe,  being  still  based  entirely  on  national  laws,  thus  no  longer 

corresponds  to  the  economic  framework  in  which  it  must  develop  if  the 

objectives  set  out  in Article  8a  of  the  Treaty  are  to  be  achieved;  whereas 

this  situation  forms  a  considerable  obstacle  to  the  creation  of  groups 

consisting  of  companies  from  different  Member  States. 

Whereas  it  is essential  to ensure  as  far  as possible  that  the economic  unit 

and  the  legal  unit  of  business  in Europe  coincide; whereas  for  this  purpose 

provision  should  be made  for  creating,  side  by  side with  companies  governed 

by  a  particular  national  law,  companies  formed  and  carrying  on  business 

under  the  law created  by  a  Community  regulation  directly  applicable  in all 

Member  States; 

Whereas  the  provisions  of  such  a  regulation  will  permit  the  creation  and 

management  of  companies  with  a  European  dimension,  free  from  the  obstacles 

arising  from  the  disparity  and  the  limited  territorial  application  of 

national  company  laws; 

Whereas  such  a  regulation  forms  part  of  the  national  legal  systems  and 

contributes  to  their  approximation,  thus constituting  a measure  relating  to 

the  approximation  of  the  laws  of  the  Member  States  with  a  view  to  the 

establishment  and  functioning  of  the  internal  market; 

-  64  -

Whereas  the  Statute  for  a European  company  (SE)  is among  the measures  to be 

adopted  by  the  Council  before  1992  listed  in  the  Commission's  White  Paper 

on  completing  the  internal  market,  approved  by  the  European  Council  of  June 

1985  in Milan;  whereas  the  European  Council  of  1987  in  Brussels  expressed 

the wish  to see  such  a Statute  created  swiftly; 

Whereas  since  the  presentation  by  the  Commission  in  1970 of  a  proposal  for 

a  Regulation  on  the  Statute  for  a  European  company,  amended  In  1975,  work 

on  the approximation of  national  company  law has made  substantial  progress, 

so  that  on  those  points  where  the  functioning  of  a  European  company  does 

not  need  uniform  Community  rules,  reference  may  be  made  to  the  law 

governing  public  companies  in  the  Member  State  where  it  has  its  registered 

off ice; 

Whereas,  without  prejudice  to  any  economic  needs  that  may  arise  in  the 

future,  if  the  essential  objective  of  the  legal  rules  governing  a  European 

company  is  to  be  attained,  it  must  be  possible  at  least  to  create  such  a 

company  as  a  means  of  enabling  companies  from  different  Member  States  to 

merge  or  to  create  a  holding  company,  and  of  enabling  companies  and  other 

legal  bodies  carrying  on  an  economic  activity,  and  governed  by  the  laws  of 

different  Member  States,  to  form  a  Joint  subsidiary; 

Whereas  the  European  company  itself  must  take  the  form  of  a  public  company 

limited  by  shares,  this  being  the  form  most  suited,  In  terms  of  both 

financing  and  management,  to  the needs of  a company  carrying  on  business  on 

a  European  scale-,  whereas  In  order  to  ensure  that  such  companies  are  of 

reasonable  size,  a  minimum  capital  should  be  set  which  will  provide  them 

with  sufficient  assets  without  making  It  difficult  for  small  and  medium-

sized  businesses  to  form  a European  company; 

-  65  -

Whereas  a  European  company  must  be  efficiently  managed  and  properly 

supervised;  whereas  it  must  be  borne  In mind  that  there  are  at  present  in 

the  Community  two  different  systems  of  administration  of  public  companies; 

whereas,  although  a  European  company  should  be  allowed  to  choose  between 

the  two  systems,  the  respective  responsibilities  of  those  répons lb le  for 

management  and  those  responsible  for  supervision  should  be  clearly  defined; 

Whereas,  having  regard  to  the  approximation  effected  by  the  Fourth  Council 
Directive  78/660/EEC1  and  the  Seventh  Council  Directive  83/349/EEC2,  as 

last  amended  in  both  cases  by  the  Act  of  Accession  of  Spain  and  Portugal, 

on  annual  accounts  and  consolidated  accounts,  the  provisions  of  those 

directives  can  be  made  applicable  to  European  companies  and  such  companies 

may  choose  between  the options offered  by  those  provisions; 

Whereas  under  the  rules  and  general  principles  of  private  International 

law,  where  one  undertaking  controls  another  governed  by  a  different  legal 

system,  its  ensuing  rights  and  obligations  as  regards  the  protection  of 

minority  shareholders  and  third  parties  are  governed  by  the  law  governing 

the controlled  undertaking,  without  prejudice  to  the obligations  Imposed  on 

the  controlling  undertaking  by  its own  law,  for  example  the  requirement  to 

draw up  consolidated  a counts-, 

1 OJ  No L 222, 14.8.1978, p. 11. 

2 OJ  No L  193, 18.7.1983, p.  1. 

-  66  -

Whereas, without  prejudice  to  the consequences  of  any  later  coordination  of 

the  law of  the  Member  States,  specific  rules  for  the  European  company  are 

not  at  present  required  In  this  field;  whereas  the  rules  and  general 

principles of  private  international  law should  therefore  be  applied  both  In 

cases where  the  European  company  exercises  control  and  in cases where  it  is 

the controlled  company; 

Whereas  the  rule  thus  applicable  in  the  case  where  the  European  company  Is 

controlled  by  another  undertaking  should  be  specified,  and  for  this  purpose 

reference  should  be made  to  the  law governing  public  companies  In the  State 

where  the  European  company  has  its registered  office; 

Whereas  for  purposes  of  taxation  the  SE  must  be  made  subject  to  the 

legislation  of  the  State  In which  it  is resident;  whereas  provision  should 

be  made  for  deduction  of  losses  incurred  by  the  SE's  permanent 

establishments  abroad;  whereas  in order  to avoid  any  discrimination  against 

other  firms  carrying  on  cross-border  business,  similar  provisions  will  be 

proposed  by means of  a directive  for  all  other  legal  forms of  business; 

Whereas  each  Member  State  must  be  required  to  apply  in  respect  of 

infringements of  the provisions of  this  Regulation  the  sanctIons  applIcable 

to public  limited  companies  governed  by  its  law; 

Whereas  the  rules  on  the  involvement  of  employees  in  the  European  company 

are  contained  in  Directive  ...  based  on  Article  54  of  the  Treaty,  and  its 

provisions  thus  form  an  Indissociable  complement  to  this  Regulation  and 

must  be applied  concomitantly. 

-  67  -

Whereas,  on  matters  not  covered  by  this  Regulation,  the  provisions  of  the 

law  of  the  Member  States  and  of  Community  law  are  applicable,  for  example 

on: 

(I) 

social  security  and  employment  law, 

(II)  taxation  and  competition  law, 

(ill)  intellectual  property  law, 

(Iv)  Insolvency  law; 

Whereas  the application of  this Regulation  must  be  deferred  so  as  to  enable 

each  Member  State  to  incorporate  into  its  national  law  the  provisions  of 

the  above-mentioned  Directive  and  to  set  up  In  advance  the  necessary 

machinery  for  the  formation  and  operation  of  European  companies  having 

their  registered  office  In  Its  territory,  so  that  the  Regulation  and  the 

Directive may  be  applied  concomitantly, 

HAS ADOPTED  THIS  REGULATION: 

-  68 -

Title I 
General  provisions 

Article 1 
(Form of  the European  company  (SE)) 

Companies  may  be  formed  throughout  the  Community  In  the  form  of  a 
1. 
European  public  limited company  (Socletas Europaea,  'SE') on  the  conditions 
and  in the manner  set out  In this Regulation. 

2. 
The  capital  of  the SE  shall  be  divided  into shares. The  liability  of 
the  shareholders  for  the  debts  and  obligations  of  the  company  shall  be 
limited  to the amount  subscribed  by  them. 

The  SE  shall  be  a  commercial  company  whatever  the  object  of  its 

3. 
undertaking. 

4. 

The SE shall  have  legal  personality. 

Article  2 
(Formation) 

Public  limited  companies  formed  under  the  law of  a  Member  State  and 
1. 
having  their  registered  office  and  central  administration  within  the 
Community  may  form  an  SE  by  merging  or  by  forming  a  holding  company, 
provided  at  least  two  of  them  have  their  central  administration  In 
different  Member  States. 

2. 
Companies  or  firms  within  the  meaning  of  the  second  paragraph  of 
Article  58  of  the  Treaty  and  other  legal  bodies  governed  by  public  or 
private  law  which  have  been  formed  In  accordance  with  the  law  of  a 
Member  State and  have  their  registered office and  central  administration  In 
the Community  may  set  up an SE by  forming  a  joint  subsidiary,  provided  that 
at  least  two  of  them  have  their  central  administration  in  different 
Member  States. 

-  69  -

Article  3 

(Formation  with  participation  of  an  SE) 

1. 

An  SE  together  with  one  or  more  other  SEs  or  together  with  one  or 

more  limited  companies  incorporated  under  the  laws  of  a  Member  State  and 

having  their  registered  office  and  central  administration  within  the 

Community  may  form  an  SE  by merging  or  by  forming  a  holding  company. 

2. 

An  SE  together  with  one  or  more  other  SEs,  or  together  with  one  or 

more  companies  or  legal  bodies  within  the  meaning  of  Article  2(2), may  set 

up  an  SE  by  forming  a  Joint  subsidiary. 

3. 

An  SE  may  itself  form  one  or  more  subsidiaries  in  the  form  of  an  SE. 

Such  a  subsidiary  may  not,  however,  itself  establish  a  subsidiary  in  the 

form  of  an  SE. 

Article  4 

(Minimum  capital) 

1. 

Subject  to  paragraphs  2  and  3,  the  capital  of  an  SE  shall  amount  to 

not  less  than  ECU  100 000. 

2. 

Where  an  SE  carries  on  the  business  of  a  credit  Institution  It  shall 

be subject  to  the minimum  capital  requirements  laid  down  by  the  laws of  the 

Member  State  in  which  it  has  its  registered  office  in  accordance  with 
Article  ...  of  Council  Directive  ...1 

3. 

Where  an  SE  carries  on  the  business  of  an  Insurance  undertaking  It 

shall  be  subject  to  the minimum  capital  requirements  laid  down  by  the  laws 

of  the Member  State  In which  it has  its registered  office. 

Second  Council  Directive  on  the  taking  up  and  pursuit  of  the  business 

of  credit  institutions. 

-  70  -

Article  5 

(Registered  office of  SE) 

The  registered  office  of  an  SE  shall  be  situated  at  the  place  specified  in 

its  statutes.  Such  place  shall  be  within  the  Community.  It  shall  be  the 

same  as  the place  where  the  SE  has  its central  administration. 

Article  6 

(Controlled  and  controlling  undertakings) 

1. 

A  "controlled  undertaking"  means  any  undertaking  in which  a  natural 

or  legal  person: 

(a) 

has a majority  of  the  shareholders' or members'  voting  rights; 

or 

(b) 

has  the  right  to  appoint  or  remove  a  majority  of  the  members  of  the 

administrative,  management  or  supervisory  board,  and  Is at  the  same 

time  a shareholder  In, or  member  of,  that  undertaking; 

or 

(c) 

is  a  shareholder  or  member  and  alone  controls,  pursuant  to  an 

agreement  entered  Into  with  other  shareholders  or  members  of  the 

undertaking,  a  majority  of  the  shareholders'  or  members'  voting 

r Ights. 

2. 

For  the purposes  of  paragraph  1,  the controlling  undertaking's  rights 

as  regards  voting,  appointment  and  removal  shall  include  the  rights  of  any 

other  controlled  undertaking  and  those  of  any  person  or  body  acting  In  his 

or  Its  own  name  but  on  behalf  of  the  controlling  undertaking  or  of  any 

other  controlled  undertaking. 

-  71  -

Article  7 

(Scope  of  the  Regulation) 

1. 

Matters  covered  by  this  Regulation,  but  not  expressly  mentioned 

herein,  shall  be  governed: 

(a) 

by  the  general  principles  upon which  this  Regulation  is  based; 

(b) 

if those  general  principles  do not  provide  a solution  to  the  problem, 

by  the  law applying  to public  limited  companies  In the  State  in which 

the  SE  has  its registered  office. 

2. 

Where  a  State  comprises  several  territorial  units,  each  of  which  has 

its own  rules  of  law  applicable  to  the  matters  referred  to  in  paragraph  1, 

each  territorial  unit  shall  be  considered  a  State  for  the  purposes  of 

identifying  the  law applicable  under  paragraph  K b ). 

3. 

In  matters  which  are  not  covered  by  this  Regulation,  Community  law 

and  the  law of  the Member  States  shall  apply  to  the  SE. 

4. 

In  each  Member  State  and  subject  to  the  express  provisions  of  this 

Regulation,  an  SE  shall  have  the  same  rights,  powers  and  obligations  as  a 

public  limited  company  Incorporated  under  national  law. 

Article  8 

(Registration) 

1. 

Every  SE  shall  be  registered  in  the  State  In  which  it  has  Its 

registered  office  in  a  register  designated  by  the  law  of  that  State  In 
accordance  with  Article  3 of  Directive  68/151/EEC1. 

OJ  No L 65,  14.3.1968, p. 8;  English  Special  Edition  1968(1),  p. 41. 

-  72  -

2. 

Where  an  SE  has  a  branch  in  a  Member  State  other  than  that  In  which 

it  has  Its  registered  office,  the  branch  shall  be  registered  In  that  other 

Member  State  under  the  procedures  laid  down  in  the  laws  of  that 

Member  State  In accordance  with  Article 

of  Council  Directive 

1 

Article  9 

(Publication  of  documents) 

Publication  of  the  documents  and  particulars  concerning  the  SE  which  must 

be  published  under  this  Regulation  shall  be  effected  in  the  manner  laid 

down  in  the  laws  of  each  Member  State  in  accordance  with  Article  3  of 

Directive  68/151/EEC. 

Article  10 

(Notice  In the  OJ) 

1. 

Notice  that  an  SE  has  been  formed,  stating  the  number,  date  and  place 

of  registration  and  the  date  and  place  of  publication  and  the  title  of  the 

publication  shall  be  published  for  information  purposes  in  the  Official 

Journal  of  the  European  Communities  after  the  publication  referred  to  In 

Article  9.  The  same  shall  be  done where  a  liquidation  is  terminated. 

2. 

The  Member  States  shall  ensure  that  the  particulars  referred  to  in 

paragraph  1  are  forwarded  to  the  Official  Publications  Office  of  the 

European  Communities  within  one  month  of  the  disclosure  referred  to  in 

Article  9. 

Eleventh  Council  Directive  on  company  law  concerning  disclosure 

requirements  in  respect  of  branches  opened  in  a  Member  State  by 

certain  types  of  companies  governed  by  the  law  of  another  State. 

-  73  -

Article  11 

(Documents of  SE) 

Letters, order  forms  and  similar  documents  shall  state  legibly: 

(a) 

the  name  of  the  SE,  preceded  or  followed  by  the  Initiais  "SE"  unless 

those  In I ta Is already  form  part  of  the  name; 

(b) 

the  place  of  the  register  in which  the  SE  is registered  In  accordance 

with  Article  8(1), and  the  number  of  the  SE's entry  In that  register; 

(c) 

the  address of  the SE's  registered  office-, 

(d) 

the amount  of  capital  Issued  and  paid  up; 

(e) 

the SE's VAT  number; 

(f) 

the  fact  that  the  SE  Is  in  liquidation  if that  Is so. 

Any  branch  of  the  SE, when  registered  in accordance  with  Article  8(2), must 

give  the  above  particulars,  together  with  those  relating  to  its  own 

registration, on  the  documents  referred  to  in the  first  paragraph  emanating 

from  that  branch. 

-  74  -

Title  II 

Formation 

SECTION 1 

General 

Article  12 

(Founder  companies) 

The  founder  companies  of  an  SE  for  the  purposes  of  this  Title  are  the 

companies,  firms  and  other  legal  bodies  which  may  form  an  SE  by  the  means 

of  formation  provided  for  in Articles  2 and  3. 

(Instrument  of  incorporation and  statutes of  the  SE) 

Article  13 

The  founder  companies  shall  draw up  the  instrument  of  Incorporation  and  the 

statutes,  if  the  statutes  are  a  separate  instrument,  in  the  forms  required 

for  the  formation  of  public  limited  companies  by  the  law  of  the  State  In 

which  the SE  is to have  its registered  office. 

Article  14 

(Experts;  verification) 

The  provisions  of  national  law concerning  the  examination  of  consideration 

other  than  cash,  adopted  in  the  State  In  which  the  SE  is  to  have  Its 
registered  office,  pursuant  to  Article  10  of  Directive  77/91/EEC1,  shall 

apply. 

Article  15 

(Supervision  of  formation) 

The  procedures  for  ensuring  that  the  requirements  of  this  Regulation  and, 

where  appropriate,  of  applicable  national  law,  are  complied  with  in  regard 

to  the  formation  of  an  SE  and  its  statutes  shall  be  those  provided  in 

respect  of  public  limited  companies  under  the  law of  the  State  In which  the 

SE  is to  have  its  registered  office. Member  States  shall  take  the  measures 

necessary  to ensure  that  such  procedures  are  effective. 

0J  No L 26, 31.1.1977, p.  1. 

- 74  a -

Article 16 

(Legal personality) 

The SE shall  have  legal  personality as from the date set  by  the  law of the 

State  in which  it is to have  Its registered office. 

-  75  -

SECTION  2 

Formation  by  merger 

Article  17 

(Definition) 

1. 

In  the  formation  of  an  SE  by  merger,  the  merging  companies  shall 

be wound  up without  going  into  liquidation  and  transfer  to  the SE  all  their 

assets  and  liabilities  in exchange  for  the  Issue  to  their  shareholders  of 

shares  in  the  SE  and  a  cash  payment,  If  any  not,  exceeding  10%  of  the 

nominal  value of  the  shares  so  issued  or, where  there  is no  nominal  value, 

of  their  accounting  par  value. 

2. 

A  company  may  participate  in the  formation of  an  SE  by merger  even 

if  it  Is  in  liquidation,  provided  It  has  not  yet  begun  to  distribute  its 

assets  to  the  shareholders. 

3. 

The  rights of  the employees  of  each of  the merging  companies  shall 

be  protected  In  accordance  with  the  provisions  of  national  law  giving 
effect  to Directive  77/187/EEC.1 

Article  18 

(Draft  terms of  merger) 

1. 

The  administrative  or  management  board  of  the  founder  companies 

shall  draw  up  draft  terms  of  merger.  The  draft  terms  of  merger  shall 

Include  the  following  particulars: 

(a)  the  type,  name  and  registered  office  of  each  of  the  founder  companies 

and of  the SE; 

(b) the share  exchange  ratio  and, where  appropriate,  the  amount  of  any  cash 

payment ; 

(c) the  terms  relating  to  the allotment  of  shares of  the SE; 

(d)  the  date  from  which  the  holding  of  shares  of  the  SE  entitles  their 

holders  to participate  in profits  and  any  special  conditions  affecting  that 

ent itlement; 

1 

OJ  No L 61, 5.3.1977, p. 26. 

-  75  a -

(e)  the  date  from  which  transactions  by  the  founder  companies  will  be 

treated  for  accounting  purposes  as being  those of  the  SE; 

(f)  the  rights  conferred  by  the  SE  on  the  holders  of  shares  to  which 

special  rights  are  attached  and  on  the  holders  of  securities  other  than 

shares, or  the measures  proposed  concerning  them; 

(g) any  special  advantage  granted  to  the experts  appointed  under 

Article  21(1) or  to members  of  the  administrative,  management,  supervisory 

or  controlling  bodies of  the  founder  companies. 

2.  The  draft  terms  of  merger  shall  be  drawn  up  and  certified  in  due  legal 

form  if  the  law  of  the  Member  State  in which  any  of  the  founder  companies 

has  its registered  office  so  requires. 

-  76  -

3. The  law of  the  Member  State  requiring  that  the  draft  terms  of  merger  be 

drawn  up  and  certified  in  due  legal  form  shall  determine  the  person  or 

authority  competent  to  do  so.  Where  the  laws  of  several  Member  States  in 

which  the  founder  companies  have  their  registered  offices  require  the  draft 

terms of  merger  to  be  drawn  up  and  certified  in due  legal  form,  this may  be 

done  by  any  person  or  authority  competent  under  the  law  of  one  of  those 

Member  States. 

Article  19 

(Publication  of  the  draft  terms of  merger) 

1.  For  each  of  the  founder  companies,  the  draft  terms  of  merger  shall  be 

made  public  in  the  manner  prescribed  by  the  laws  of  each  Member  State  in 

accordance  with  Article  3 of  Directive  68/151/EEC  at  least  one  month  before 

the date  of  the  general  meeting  called  to decide  thereon. 

2.  For  each  of  the  founder  companies,  the  publication  of  the  draft  terms  of 

merger  referred  to  in paragraph  1, effected  In accordance  with  Article  3(4) 

of  Directive  68/151/EEC  shall  contain  at  least  the  following  particulars: 

(a) the  type, name  and  registered  office  of  the  founder  companies; 

(b)  the  register  in  which  the  documents  and  particulars  referred  to  in 

Article  3(2)  of  Directive  68/151/EEC  are  filed  In  respect  of  each  founder 

company,  and  the  number  of  the  entry  In that  register. 

(c) the conditions  which  determine,  in accordance  with  Article  25,  the  date 

on  which  the merger  and  formation  shall  take  effect. 

3.  The  publication  shall  also  specify  the  arrangements  made  in  accordance 

with  the  provisions  of  national  law  giving  effect  to  Articles  13,  14,  and 
15 of  Directive  78/855/EEC1  and  with  Article  23  of  this  Regulation  for  the 

exercise  of  the  rights  of  the  creditors  of  the  founder  companies. 

OJ  No  L  295,  20.10.1978,  p.  36. 

- 76  a  -

Article  20 

(Board's  report) 

The  administrative  or  management  board  of  each  of  the  merging  companies 

shall  draw  up  a detailed  written  report  explaining  and  justifying  the  draft 

terms  of  merger  from  the  legal  and  economic  point  of  view  and,  In 

particular,  the  share  exchange  ratio. 

The  report  shall  also  indicate  any  special  valuation  difficulties  which 

have  ar isen. 

Article  21 

(Supervision  of  the  conduct  of  the  merger) 

1.  One  or  more  experts,  acting  on  behalf  of  each  founder  company  but 

independent  of  them,  appointed  or  approved  by  a  judicial  or  administrative 

authority  In  the  Member  State  in  which  the  company  concerned  has  Its 

registered  office,  shall  examine  the draft  terms of  merger  and  to draw up a 

written  report  for  the  shareholders. 

-  77  -

2. 

In  the  report  referred  to  in  paragraph  1  the  experts  must  state 

whether,  in  the  their  opinion,  the  share  exchange  ratio  is  fair  and 

reasonable. The  statement  must  at  least: 

(a) 

indicate  the  method(s)  used  In  arriving  at  the  proposed  share 

exchange  ratio; 

(b) 

.state 

whether 

the  method(s)  used 

are 

adequate 

in 

the 

circumstances,  the  values  arrived  at  using  each  method  and  an 

opinion  on  the  relative  Importance  attributed  to  such  methods  in 

arriving  at  the value  decided  on. 

The  report  shall  also  indicate  any  special  valuation  difficulties  which 

have arisen. 

3. 

Each  expert  shall  be entitled  to obtain  from  the merging  companies 

all  relevant  Information  and  documents  and  to  carry  out  all  necessary 

investigations. 

4. 

Where  the  laws  of  all  the  Member  States  in  which  the  founder 

companies  have  their  registered  office  make  provision  for  one  or  more 

independent  experts  to  be  appointed  for  all  the  founder  companies  such 

appointment  may  be  made,  at  the  joint  request  of  those  companies,  by  a 

judicial  or  administrative  authority  in any  of  the  Member  States.  In  such 

cases  the  law  of  the  Member  State  of  the  appointing  authority  shall 

determine  the  content  of  the expert's  report. 

Article  22 

(Approval  of  the merger  by  general  meetings) 

1. 

The  draft  terms  of  merger  and  the  Instrument  of  incorporation  of 

the  SE  and,  If  the  statutes  are  a  separate  Instrument,  Its  statutes  shall 

be  approved  by  the  general  meeting  of  each  of  the  founder  companies.  The 

resolution  of  the  general  meeting  approving  the merger  shall  be  subject  to 

the  provisions  giving  effect  to  Article  7  of  Directive  78/855/EEC  in  the 

case of  domestic mergers. 

2. 

For  each  of  the  founder  companies,  the  provisions  of  national  law 

adopted  in  accordance  with  Article  11  of  Directive  78/855/EEC  shall  apply 

to  the  information  to  be  provided  to  shareholders  before  the  date  of  the 

general  meeting  called  to approve  the merger. 

-  77 a  -

Article  23 

(Protection  of  creditors) 

The  following  provisions  of  the  national  law  to which  the  founder  companies 

are  subject  shall  apply: 

(a) 

the  provisions  relating  to  the  protection  of  the  interests  of 

creditors  and  debenture  holders  of  the  companies  In  the  case  of  a 

domestIc merger ; 

(b) 

the  provisions  relating  to  the  protection  of  the  interests  of 

holders  of  securities,  other  than  shares,  which  carry  special 

rights,  provided  that  where  the  SE  Is being  formed  by  the  merger 

of  public  limited  companies 

-  78  -

the  law  of  the  State  in  which  each  of  the  companies  has  Its 

registered  office  shall  determine whether  a meeting  of  the  holders 

of  such  securities may  approve  a change  In their  rights; 

the  law  of  the  State  in  which  the  SE  Is  to  have  its  registered 

office  shall  determine  whether  the holders of  such  securities  are 

entitled  to  require  the SE  to  redeem  their  securities. 

Article  24 

(Supervision  of  the  legality  of  mergers) 

1. 

Where  the  laws  of  a  Member  State  governing  one  or  more  founder 

companies  provide  for  judicial  or  administrative  preventative  supervision 

of  the  legality  of mergers  those  laws shall  apply  to  those  companies. 

2. 

Where  the  laws  of  a  Member  State  governing  one  or  more  founder 

companies  do  not  provide  for  Judicial  or  administrative  preventative 

supervision  of  the  legality  of  mergers, or  where  such  supervision  does  not 

extend  to all  the  legal  acts  required  for  a merger,  the national  provisions 

giving  effect  to  Article  16  of  Directive  78/855/EEC  shall  apply  to  the 

company  or  companies  concerned.  Where  those  laws  provide  for  a  merger 

contract  to  be  concluded  following  the  decisions  of  the  general  meeting 

held  concerning  the  merger,  that  contract  shall  be  concluded  by  all  the 

companies  involved  In the operation.  Article  18(3) shall  apply. 

3. 

Where  the  laws  of  the  State  In  which  the  SE  Is  to  have  its 

registered  office  and  the  laws  governing  one  or  more  of  the  founder 

companies  provide  for  judicial  or  administrative  preventative  supervision 

ofthe  legality  of  mergers,  such  supervision  shall  be  carried  out  first  in 

resepct  of  the  SE.  The  supervision  may  be  carried  out  In  respect  of  the 

founder  companies  only  when  it can  be  shown  that  such  supervision  has  been 

carried  out  in respect  of  the SE  In accordance with  Article  15. 

4. 

Where  the  laws  governing  one  or  more  of  the  founder  companies 

taking  part 

in  the  merger  provide  for  judicial  or  administrative 

preventative  supervision  of  the  legality  of  mergers  whereas  the  laws 

governing  one or  more of  the other  founder  companies  taking  part  In the 

-  78 a -

merger  do  not,  such  supervision  shall  be  carried  out  on  the  basis  of  the 

documents  drawn  up  and  certified  in due  legal  form  referred  to  In Article 

16 of  Directive  78/855/EEC. 

Article  25 

(Effective  date) 

The date on which  the merger  and  the simultaneous  formation  of  the  SE  takes 

effect  shall  be  determined  by  the  law of  the  State  In which  the  SE  has  Its 

registered  office.  That  date  must  be  after  all  necessary  supervision  has 

been  carried  out  and,  where  appropriate,  the  certified  documents  referred 

to  in Article  24 have been  drawn  up  for  each of  the  founder  companies. 

-  79  -

Article  26 

(Publicity) 

For  each  of  the  founder  companies,  the  merger  must  be  publicized  In  the 

manner  prescribed  by  national  law,  In  accordance  with  Article  3  of 

Directive  68/151/EEC. 

Article  27 

(Effects of  the  merger) 

A  merger  shall  have  the  following  consequences  Ipso  Jure  and 

simultaneously: 

(a) 

the  transfer,  both  as between  the  founder  companies  and  the  SE  and 

as  regards  third  parties, of  all  the  assets  and  liabilities of  the 

founder  companies  to  the SE; 

(b) 

the  shareholders  of  the  founder  companies  become  shareholders  of 

the SE: 

(c) 

the  founder  companies  cease  to exist. 

Article  28 

(Liability of  board  members) 

The  liability  of  members  of  the  administrative  or  the  management  board  of 

founder  companies  and  of  such  companies'  experts  shall  be  governed  by  the 

provisions of  national  law giving  effect  to Articles  20 and  21 of  Directive 

78/855/EEC  In  the  State  in  which  the  founder  company  concerned  has  Its 

registered  office or, where  appropriate, by  this  Regulation. 

However,  in  the  case  of  an  appointment  under  Article  21(4),  the  liability 

of  the  expert  or  experts  shall  be  governed  by  the  law of  the  Member  State 

of  the  judicial  or  administrative  authority  which  appointed  them. 

-  79  a  -

Article  29 

(Nullity) 

The  question  of  the  nullity  of  a merger  that  has  taken  effect  pursuant  to 

Article  25  shall  be  governed  by  the  national  law  of  the  company  concerned 

but  a  merger  may  be  declared  null  and  void  only  where  there  has  been  no 

Judicial  or  administrative  preventative  supervision  of  Its  legality  or 

where  there  is  no  certified  documentation  where  such  supervision  or  the 

drawing  up  of  such  documentation  Is  laid  down  by  the  laws  of  the  Member 

State  governing  the  relevant  company. 

However,  where  the  laws  of  the 

State  in which  the SE  has  its registered  office  do not  provide  for  a  merger 

to  be  declared  null  and  void  on  such  grounds,  no  such  nullity  may  be 

declared. 

-80  -

Article  30 

(Merger:  Shareholdings  between  fellow  founder  companies) 

Articles  17-29  shall  also  apply  where  one  of  the  founder  companies  holds 

all  or  part  of  the  shares  of  another  founder  company.  In  such  a  case, 

shares  in  founder  companies  which  come  Into  the  possession  of  the  SE  as 

part  of  the  assets  of  a  founder  company  shall  be  cancelled. 

SECTION  3 

Formation of  an  SE  holding  company 

Article  31 

(Definition) 

1. 

If  an  SE  is  formed  as  a  holding  company,  all  the  shares  of  the 

founder  companies  shall  be  transferred  to  the  SE  in exchange  for  shares  of 

the SE. 

2. 

The  founder  companies  shall  continue  to  exist.  Any  provisions  of 

the  laws of  the  States  in which  the  founder  companies  have  their  registered 

office,  requiring  that  a  company  be  wound  up  if  all  its  shares  come  to  be 

held  by one  person  shall  not  apply. 

Article  32 

(Draft  terms of  formation) 

1. 

The  administrative  or  management  board  of  the  founder  companies 

shall  draw  up  draft  terms  for  the  formation  of  an  SE  holding  company 

containing  the particulars  referred  to  in Article  18(1)(a),  (b) and  (c) and 

Article  21  and  shall  prepare  the  report  provided  for  in Article  20. 

2. 

The  provisions  of  Article  21  shall  apply  to  the  supervision  of 

the  formation  of  the  holding  company  in respect  of  each  founder  company. 

3. 

The  provisions  of  Article  22  shall  apply  to  the  approval  of  the 

formation  of  the  holding  company  by  the  general  meeting  of  each  of  the 

founder  companies. 

-  80 a  -

4. 

The  provisions  of  Article  28  on  the  liability  of  board  members 

shalI  apply. 

5. 

The  formation  of  an  SE  holding  company  may  be  declared  null  and 

void  only  for  failure  to  supervise  the  formation  of  the  holding  company  in 

accordance  with  Article  29. 

6. 

For  the  purposes  of  applying  the  provisions  of  Section  2  on 

formation  by  merger,  merger  shall  be  read  as  formation  of  an  SE  holding 

company. 

Article  33 

(Matters  affecting  employees) 

The  administrative  or  management  board  of  each  of  the  founder  companies 

shall  discuss with  the  representatives of  Its employees  the  legal, economic 

and  employment  Implications  of  the  formation  of  an  SE  holding  company  for 

the employees  and  any measures  proposed  to deal  with  them. 

-  81  -

SECTION  4 

Formation  of  a  joint  subsidiary 

Article  34 

(Draft  terms of  formation) 

If a  joint  subsidiary  Is formed  In the  form of  an SE, the administrative  or 

the  management  board  of  each  of  the  founder  companies  shall  draw  up  draft 

terms  for  the  formation  of  the  subsidiary  Including  the  following 

part iculars: 

(a) 

the  type,  name  and  registered  office  of  the  founder  companies  and 

of  the proposed  SE; 

(b) 

(c) 

the size of  the shareholdings of  the  founder  companies  in the SE; 

the economic  reasons  for  the  formation. 

Article  35 

(Approval  of  the  formation) 

1. 

The  draft  terms  of  formation  and  the  instrument  of  incorporation 

of  the  SE  and  its  statutes,  if  the  statutes  are  a  separate  instrument,  its 

statutes  shall  be  approved  by  each  of  the  founder  companies  in  accordance 

with  the  law which  governs  it. 

2. 

Founder  companies  incorporated  under  national  law shall  be  subject 

to  all  the  provisions  governing  their  participation  in  the  formation  of  a 

subsidiary  in the  form of  a public  limited  company  under  national  law. 

3. 

Where  a  founder  company  Itself  has  the  form  of  an  SE,  the 

following  provisions  shall  apply: 

(a) 

the  instrument  of  Incorporation  and  the  statutes  shall  be 

authorized  in accordance  with  Article  72 of  this  Regulation; 

(b) 

if  the decision  on  the participation of  the SE  in the  formation  of 

the  subsidiary  falls  within  the  matters  to  be  decided  by  the 

general  meeting,  the  instrument  of  incorporation  and  the  statutes 

must  also be  approved  by  the general  meeting. 

- 81 a -

SECTION 5 

Formation of a subsidiary by an SE 

Article 36 

(Draft  terms of  formation) 

If an  SE  forms  a subsidiary  in the  form  of  an  SE,  the  administrative or 

management  board  shall  draw  up  draft  terms  for  the  formation  of  the 

subsidiary. Those draft  terms shall  include the following particulars: 

- 82 -

(a) 

the  name  and  registered  office  of  the  founder  company  and  the 

instrument  of  Incorporation of  the subsidary  or  its statutes, If 

the statutes are a separate  instrument; 

(b) 

the economic reasons for the formation. 

Article 37 

(Approval  of the formation) 

The  instrument  of  incorporation of  the subsidiary or  Its statutes,  If the 

statutes  are  a  separate  instrument,  shall  be  approved  In  accordance  with 

Article 35 (3). 

-  83  -

Title  I 11 

Capital  - Shares -  Debentures 

Article  38 

(Capital  of  the  SE) 

1. 

The capital  of  the SE  shall  be denominated  in ecu. 

2. 

The capital  of  the SE  shall  be divided  into shares  denominated  In ecu. 

Shares  Issued  for  a  consideration  must  be  paid  up  at  the  time  the  company 

is registered  in the  Register  referred  to  in Article  8(1)  to  the  extent  of 

not  less than 25% of  their  nominal  value.  However, where  shares  are  Issued 

for  a consideration other  than  cash  at  the  time  the  company  Is  registered, 

that  consideration  must  be  transferred  to  the  company  In  full  within  five 

years  of  the  date  on  which  the  company  was  incorporated  or  acquired  legal 

personality. 

3. 

The  subscribed  capital  may  be  formed  only  of  assets  capable  of 

economic  assessment.  However,  an  undertaking  to perform  work  or  to  supply 

services may  not  form  part  of  these  assets. 

Article  39 

1. 

Shares may  not  be  issued  at  a price  lower  than  their  nominal  value. 

2. 

Professional  intermediaries  who  undertake  to  place  shares  may  be 

charged  less  than  the  total  price of  the shares  for which  they  subscribe  in 

the course of  such  a  transaction. 

Article  40 

All  shareholders  in  like circumstances  shall  be  treated  In a  like manner. 

-  84  -

Article  41 

Subject  to  the  provisions  relating  to  the  reduction  of  subscribed  capital, 

the  shareholders  not  may  be  released  from  the  obligation  to  pay  up  their 

contrI but ions. 

Article  42 

(Increase  in cap!tal) 

1. 

The  capital  of  the  SE  may  be  increased  by  the  subscription  of  new 

capital.  An  increase  in  capital  shall  require  amendment  of  the  statutes. 

Shares  issued  for  a  consideration  in  the  course  of  an  Increase  In 

subscribed  capital  must  be  paid  up  to  not  less  than  25%  of  their  nominal 

value.  Where  provision  is made  for  an  issue  premium,  it  must  be  paid  In 

full. 

2. 

Where  all  or  part  of  the  consideration  for  the  Increase  in capital  is 

In a  form  other  than  cash,  a  report  on  the  valuation  of  the  consideration 

shall  be  submitted  to  the  general  meeting.  The  report  shall  be  prepared 

and  signed  by  one  or  more  experts  Independent  of  the  SE  and  appointed  or 

approved  by  the  court  within  whose  Jurisdiction  the  registered  office  of 

the SE  is  situated. 

3. 

The  expert's  report  shall  be  published  in accordance  with  Article  9. 

4. 

Any  increase  in subscribed  capital  must  be  decided  upon  by  the  general 

meeting.  Both  this  decision  and  the  increase  In  the  subscribed  capital 

shall  be published  In accordance  with  Article  9. 

5. 

Where  the  capital  is  Increased  by  the  capitalization  of  available 

reserves,  the  new  shares  shall  be  distributed  amongst  the  shareholders  In 

proportion  to  their  existing  shareholdings. 

However,  in  Its  decision  on  the  increase  In  capital,  the  general  meeting 

may  decide  that  some  or  all  of  the  new  shares  shall  be  distributed  amongst 

the employees  of  the  SE. 

-  85  -

Article  43 

(Authorization  of  future  increase  In  capital) 

1. 

The  statutes  or  instrument  of  Incorporation  or  the  general  meeting, 

the  decision  of  which  must  be  published  in accordance  with  Article  9,  may 

authorize  an  increase  in  the  subscribed  capital,  provided  that  such 

increase  shall  not  exceed  one-half  of  the  capital  already  subscribed. 

2. 

Where  appropriate,  the  increase  In  the  subscribed  capital  up  to  the 

maximum  authorized  under  paragraph  1 shall  be  decided  by  the  administrative 

or  the  management  board.  The  power  of  such  body  In  this  respect  shall  be 

for  a maximum  period  of  five  years, and may  be  renewed  one  or  more  times  by 

the general  meeting,  each  time  for  a  period  not  exceeding  five  years. 

3. 

The  administrative  or  the  management  board  must  register  decisions 

authorizing  a  future  increase  in capital. 

The  administrative  or  the  management  board  must  register,  and  publicize  In 

accordance  with  Article  9,  all  issues  of  shares  up  to  the  maximum 

authorised  capital  limits  and  the  consideration  furnished  for  those  shares. 

In addition,  the  board  shall  report  each  year  in  the  notes  on  the  accounts 

on  the use  it has made  of  the  authorization. 

4. 

Where  the  authorized  capital  has  been  fully  subscribed  or  where  the 

period  referred  to  In  paragraph  2  has  elapsed  with  only  part  of  the 

authorized  capital  having  been  subscribed,  the  administrative  or  the 

management  board  shall  amend  the  statutes  to  indicate  the  new  total 

capital. 

Where  the  authorization  to  increase  capital  has  not  been  used,  the 

administrative  or  the  management  board  shall  decide  to  delete  the 

authorization  clause  referred  to  in paragraph  1.  The  board  shall  register 

such  decisions. 

-  86  -

5. 

Where  an  increase  in  capital  Is  not  fully  subscribed,  the  capital 

shall  be  increased  by  the  amount  of  the  subscriptions  received  only  If  the 

conditions of  the  Issue  so  provide. 

Article  44 

(Subscription  rights of  shareholders) 

1. 

Whenever  capital  Is  increased  by  consideration  In  cash,  the  shares 

must  be offered  on  a pre-emptive  basis  to shareholders  In proportion  to  the 

capital  represented  by  their  shares. 

2. 

Any  offer  of  subscription  on  a pre-emptive  basis  and  the  period  within 

which  this  right  must  be  exercised  shall  be  published  in  accordance  with 

Article  9.  However,  it  may  be  provided  that  such  publication  is  not 

required  where  all  the  shares  of  the  SE  are  registered.  In  such  case,  all 

the shareholders  must  be  informed  in writing.  The  right  of  pre-emption  must 

be  exercised  within  a  period  which  shall  not  be  less  than  14  days  from  the 

date  of  publication  of  the  offer  or  from  the  date  of  dispatch  of  the 

letters  to  the  shareholders. 

3. 

The  right  of  pre-emption  may  not  be  restricted  or  withdrawn  by  the 

statutes  or  the  instrument  of  incorporation.  This may,  however,  be  done  by 

decision  of  the  general  meeting. The  administrative  or  the management  board 

shall  be  required  to  present  to  such  a meeting  a written  report  indicating 

the  reasons  for  restriction  or  withdrawal  of  the  right  of  pre-emption  and 

justifying  the  proposed  Issue price.  The  decision  shall  require  at  least  a 

two-thirds  majority  of  the  votes  attaching  to  the  securitlesrepresented  or 

to  the  subscribed  capital  represented.  The  decision  shall  be  published  In 

accordance  with  Article  9. 

4. 

The  statutes,  the  instrument  of  incorporation, or  the  general  meeting, 

acting  In  accordance  with  the  rules  for  a  quorum,  a  majority  and 

publication  set  out  in  paragraph  3,  may  give  the  power  to  restrict  or 

withdraw  the  right  of  pre-emption  to  the  administrative  or  the  management 

board  which  is  empowered  to  decide  on  an  increase  In  subscribed  capital 

within  the  limits  of  the  authorised  capital.  This  power  may  not  be  granted 

for  a  longer  period  than  the  power  for  which  provision  is made  In  Article 

43 (2). 

-  87  -

5. 

Shareholders  may  obtain  copies  of  the  reports  referred  to  In 

paragraph  3  free  of  charge  from  the  day  on  which  notice  of  the  general 

meeting  is given.  A  statement  to  that  effect  shall  be  made  In  the  notice 

convening  the general  meeting. 

Article  45 

(Reduction  of  capital) 

1. 

Any  reduction  in  the  subscribed  capital, except  under  a  court  order, 

must  be  subject  at  least  to  a  decision  of  the  general  meeting  acting  in 

accordance  with  the  rules  for  a  quorum  and  a majority  laid  down  In  Article 

44  (3).  Such  decision  shall  be published  in accordance  with  Article  9. 

The  notice  convening  the  general  meeting  must  specify  at  least  the  purpose 

of  the  reduction  and  the way  In which  it  Is to be  carried  out. 

2. 

Where  there  are  several  classes  of  shares,  the  decision  of  the 

general  meeting  concerning  a  reduction  in  the  subscribed  capital  shall  be 

subject  to  a  separate  vote,  at  least  for  each  class  of  shareholders  whose 

rights are  affected  by  the  transaction. 

3. 

A  reduction of  capital  shall  be effected  by  reducing  the nominal  value 

of  the  shares.  However,  the  nominal  subscribed  capital  may  not  be  reduced 

to  an  amount  less  than  the  minimum  capital.  Only  where  losses  have  been 

incurred  may  the  general  meeting  decide  to  reduce  the  capital  below  the 

minimum  capital,  and  in  that  case  it  shall  at  the  same  time  decide  to 

Increase  the  capital  to  an  amount  equal  to  or  higher  than  the  minimum 

capital. 

4. 

Where  the  subscribed  capital  is  reduced  in order  to  adjust  It  to  the 

diminished  value  of  the  company  following  losses,  and,  as  a  result  of  the 

reduction,  assets  exceed  liabilities,  the  difference  shall  be  entered  in a 

reserve.  This  reserve may  not  be used  for  the distribution  of  dividends or 

for  the granting  of  other  benefits  to  shareholders. 

- 88 -

Article 46 

(Protection of creditors  In the event of reduction of capital) 

1. 

In the event  of a reduction  in the subscribed  capital, the creditors 

whose claims antedate the publication of the decision to make the reduction 

shall  be entitled  at  least to have the right  to obtain security  for claims 

which have not fallen due by the date  of that publication. 

The conditions  for  the exercise of  this right shall  be governed  by  the law 

of the State where the company has  its registered office. 

2.  The reduction shall be void or no payment may be made  for  the benefit 

of  the shareholders  until  the creditors  have obtained  satisfaction  or  the 

court  within  whose  Jurisdiction  the  registered  office  of  the  SE  is 

situated, has decided that their application should not be acceded to. 

3.  Paragraphs  1 and  2 shall  apply where  the reduction  in the subscribed 

capital  is brought  about by the total or partial  waiving of  the payment of 

the balance of the shareholders' contributions. 

They  shall  not  apply  to reductions  in the subscribed  capital  for  the 

purpose of adjusting  It to the real value of the company  following losses. 

Article 47 

The  subscribed  capital  may  not  be  reduced  to  an  amount  less  than  the 

minimum  capital  laid  down  In accordance  with  Article 4.  However, such  a 

reduction may  be made  If  it  Is also provided  that  the decision  to reduce 

the subscribed  capital  may  take effect only when the subscribed  capital  Is 

increased to an amount at  least equal  to the prescribed minimum. 

Article 48 

(Own shares) 

1.  The subscription for shares of  the SE by the SE  Itself, third  parties 

acting on  its behalf or undertakings controlled by  it within the meaning of 

Article 6 or  in which  it holds a majority of the shares  Is prohibited. 

-  89  -

2. 

If shares  of  the  SE  have  been  subscribed  for  by  a person  acting  In  his 

own  name,  but  on  behalf  of  the  SE,  the  subscriber  shall  be  deemed  to  have 

subscribed  for  them  for  his own  account. 

3. 

The  founder  companies  of  the  SE  by  which  or  In  name  of  which  the 

statutes  or  the  instrument  of  Incorporation  of  the  SE were  signed  or  in  the 

case  of  an  increase  in  the  subscribed  capital,  the  members  of  the 

administrative  or  the  management  board,  shall  be  liable  to  pay  for  shares 

subscribed  in contravention  of  this  Article. 

Article  49 

1. 

The  acquisition  of  shares  of  the  SE  by  the  SE  Itself,  third  parties 

acting  on  its behalf  or  undertakings  controlled  by  It within  the meaning  of 

Article  6 or  in which  It holds  a majority  of  the  shares  Is  prohibited. 

2. 

Paragraph  1 shall  not  apply  to 

(a)  the  acquisition  by  the  SE  or  third  parties  acting  on  its  behalf  of 

shares  of  the  SE  for  the  purpose  of  distributing  them  to  the  employees 

of  the  SE; 

(b)  shares  acquired  in carrying  out  a decision  to  reduce  capital; 

(c)  shares  acquired  as  a  result  of  a universal  transfer  of  assets; 

(d)  fully  paid-up  shares  acquired  free  of  charge  or  by  banks  and  other 

financial  institutions as  purchasing  commission; 

(e)  shares  acquired  by  virtue  of  a  legal  obligation  or  resulting  from  a 

court  ruling  for  the  protection  of  minority  shareholders,  in  the 

event,  particularly,  of  a  merger,  a  change  in  the  company's  object  or 

form,  transfer  abroad  of  the  registered  office, or  the  introduction  of 

restrictions  on  the  transfer  of  shares; 

(f)  shares  acquired  from  a  shareholder  in  the  event  of  failure  to  pay  them 

UP; 

(g)  shares  acquired  in  order  to  indemnity  minority  shareholders  in 

controlled  companies; 

(h)  fully  paid-up  shares  acquired  under  a  sale  enforced  by  a  court  order 

for  the  payment  of  a  debt  owed  to  the  company  by  the  owner  of  the 

shares. 

-  90  -

3. 

Shares  acquired  in  the  cases  listed  in  paragraph  2(c)  to  (h)  above 

must,  however,  be  disposed  of  within  not  more  than  three  years  of  their 

acquisition  unless  the  nominal  value  of  the  shares  acquired,  including 

shares  the  SE may  have  acquired  directly  or  indirectly,  does  not  exceed  10% 

of  the  subscribed  capital. 

4. 

If  the  shares  are  not  disposed  of  within  the  period  laid  down  in 

paragraph  3  they  must  be  cancelled. 

5. 

The  SE may  not  accept  its own  shares  as  security  or  acquire  any  rights 

of  usufruct  or  other  beneficial  rights over  them. 

6. 

An  SE  may  not  advance  funds,  nor  make  loans,  nor  provide  security, 

with  a view  to  the  acquisition  of  Its shares  by  a  third  party. 

7. 

Paragraph  6  shall  not  apply  to  transactions  concluded  by  banks  and 

other  financial  institutions  In  the  normal  course  of  business,  nor  to 

transactions  effected  with  a  view  to  the  acquisition  of  shares  by  or  for 

the  employees  of  the  SE  or  a  controlled  company.  However,  these 

transactions  may  not  have  the  effect  of  reducing  the  net  assets  of  the  SE 

below  the  amount  of  its  subscribed  capital  plus  the  reserves  which  by  law 

or  under  the  statutes  may  not  be  distributed. 

8. 

Shares  acquired  in  contravention  of  paragraph  1  shall  be  disposed  of 

within  six  months  of  their  acquisition. 

9. 

If  an  undertaking  comes  under  the  control  of  the  SE  or  if  a  majority 

of  Its  shares  are  acquired  by  such  an  SE,  and  it  holds  shares  in  the  SE, 

the undertaking  shall  dispose  of  the  shares  in  the  SE  within  18 months  from 

the  date  of  its  coming  under  the  control  of  the  SE  or  from  the  date  when 

the  SE  acquired  a majority  of  its shares. 

If an  SE  acquires  its own  shares  by  way  of  universal  transfer  of  assets  or 

If  an  undertaking  which  is  controlled  by  the  SE  or  the  majority  of  those 

shares  are  held  by  the  SE  acquires  shares  of  the  SE  In  this  manner,  such 

shares  shall  be  disposed  of  within  the  same  period. 

10.  Shares  acquired  by  the  SE  pursuant  to  paragraph  2(a)  shall,  if  they 

have  not  been  distributed  to  the  employees  within  12 months  of  being 

acquired,  be  disposed  of  within  the  following  six  months. 

-  91  -

11.  No  rights  may  be  exercised  in  respect  of  the  shares  referred  to  In 

paragraphs  8,  9 and  10  until  they  have  been  disposed  of  or  distributed  to 

the  employees. 

Article  50 

(Disclosure  of  holdings) 

Holdings of  the SE  in other  companies  shall  be disclosed  in accordance  with 

the provisions  of  national  law giving  effect  to Directive  88/627/EEC.1 

Article  51 

(Indivisibility  of  shares) 

The  rights  attached  to  a  share  shall  be  Indivisible.  Where  a  share  Is 

owned  jointly  by  more  than  one  person,  the  rights  attached  to  it  may  be 

exercised  only  through  a common  representative. 

Article  52 

(Rights conferred  by  shares) 

1. 

Shares  may  carry  different  rights  in  respect  of  the  distribution  of 

the  profits  and  assets  of  the  company.  Payment  of  fixed  Interest  may  be 

neither  made  nor  promised  to shareholders. 

2. 

Non-voting  shares  shall  may  be  Issued  subject  to  the  following 

condit ions: 

(a)  their  total  nominal  value  shall  not  exceed  one  half  of  the  capital; 

(b)  they  must  carry  all  the  rights  of  a  shareholder  other  than  the  right 

to  vote,  except  that  the  right  to  subscribe  for  new  shares  may  be 

limited  by  the  statutes  or  by  resolution  of  the  general  meeting  to 

non-voting  shares.  In addition  they must  confer  special  advantages; 

(c)  they  shall  not  be  Included  In computing  a  quorum  or  majority  required 

by  this Regulation or  the statutes of  the  company. 

The above  shall  be without  prejudice  to paragraph  5. 

1  OJ No L  348, 17.12.1988, p. 62. 

-  92  -

3. 

Any  other  restriction  or  extension  of  voting  rights,  such  as  shares 

carrying  multiple  voting  rights,  Is  prohibited. 

4. 

Shares  carrying  the  same  rights  shall  form  a class. 

5. 

Where  there  are  several  classes of  shares, any  decision  of  the  general 

meeting  which  adversely  affects  the  rights  of  a  particular  class  of 

shareholders  shall  be  subject  to  a  separate  vote  at  least  for  each  class 

of  shareholder  whose  rights  are  affected  by  the  transaction.  The  provisions 

governing  an  amendment  of  the statutes  shall  apply  as  regards  the  convening 

of  meetings  and  the  required  quorum  and  majority  to  the  holders  of  the 

shares of  the class  concerned. 

Article  53 

(Issue of  bearer  and  registered  shares) 

1. 

Shares  shall  be  in either  bearer  or  registered  form.  The  statutes  may 

entitle  shareholders  to  request  conversion  of  their  bearer  shares  into 

registered  shares or  vice  versa. 

2. 

An  SE  which  issues  registered  shares  shall  keep  an  alphabetical 

register  of  all  shareholders,  together  with  their  addresses  and  the  number 

and  class  of  shares  they  hold.  The  register  shall  be  open  for  public 

Inspection  on  request  at  the  registered  office  of  the SE. 

Article  54 

(Issue  and  transfer  of  shares) 

The  laws  of  the  State  In  which  the  SE  has  its  registered  office  shall 

govern  the  issue,  replacement  and  cancellation  of  share  certificates, 

and  the  transfer  of  shares. 

- 93 -

Article 55 

(Publication  requirements  for obtaining  stock 

exchange  listing and for offering  securities 

to the pub Iic) 

1.  The 

provisions 

of 

national 

law 

giving 

effect 

to 

Directive  80/390/EEC,1  shall  apply  to  the  listing  particulars  to  be 

published  for  the  admission  of  securities  of  the  SE  to  official  stock 

exchange  11stIng. 

2.  The  provisions  of  national 
effect  to  Directive 
89/298/EEC2  shall  apply  to  the  prospectus  to  be  published  where 

law  giving 

securities are offered  to the public. 

Article 56 

(Issue of  debentures) 

The SE may  issue  debentures. 

Article 57 

(Body of debenture  holders) 

The  laws  of  the  State  in  which  the SE  has  Its  registered  office  shall 

apply  to the body of debenture  holders. 

Article 58 

(Debentures  convertible  into  shares) 

1. 

Articles  43,  and  44  shall  apply  to  the  Issue  of  debentures 

convertible  Into shares. 

2.  The  laws of the State  In which  the SE has Its registered  office  shall 

apply  to  the  conditions  and  procedure  for  the exercise  of  conversion  or 

subscription  rights. 

1  OJNOL 100, 17.4.1980, p. 1. 
2  QJNoL 124, 5.5.1989, p. 8. 

- 94 -

3.  As  long  as  convertible  debentures  are  outstanding,  the  SE  may  not 

decide on any amendment of the statutes affecting the rights of the holders 

of  such  debentures  except  where  less  Kece  than 5%  of  the  convertible  4, 

debentures  is still  outstanding  and  their  holders  have  the opportunity  to 

exercise  their  conversion  or  subscription  rights  In good  time  before  the 

amendment  takes effect or  if the body of convertible debenture  holders has 

approved  the  proposed  amendment.  In the  latter  case, a  higher  percentage 

may be stipulated  in thé  loan conditions. 

4.  Where  conversion  or  subscription  rights  attached  to  convertible 

debentures  have  been  fully  exercised  or  have  been  exercised  only  in part 

but the period  in which they may be exercised has expired  the management or 

the administrative board shall alter  the statutes to show the new amount of 

capital.  Where subscription or  conversion  rights are not exercised  within 

the prescribed  period  , the management  or  the  administrative board, shall 

delete  from  the  statutes  the  clause  concerning  the  issue  of  convertible 

debentures. 

Such  amendments  to  the  statutes  shall  be  published  in  accordance  with 

Article 9. 

Article 59 

(Participating debentures) 

1.  The general meeting may,  by a resolution which meets the requirements 

for altering the statutes, decide to issue debentures carrying the right to 

share  in profits.  Such debentures shall be  issued for cash and shall carry 

rights determined wholly or partly by reference to the profits of the SE. 

2.  Article 58(3)  shall  apply,  mutatis  mutandis,  to  participating 

debentures. 

Article 60 

(Other securities) 

The SE shall  not  issue to persons who are not shareholders of  the SE other 

securities carrying a right  to participate  in the profits or assets of the 

SE. 

- 95 -

Title IV 

Governing bodies 

Article 61 

The  statutes  of  the  SE  shall  provide  for  the  company  to  have  as  its 

governing  bodies  the  general  meeting  of  shareholders  and  either  a 

management  board  and  a  supervisory board  (two-tier  system)  or  an 

administrative board  (one-tier  system). 

SECTION 1 

Two-tier system 

SUB-SECTION 1 

Management board 

Article 62 

(Functions of the management  board; Appointment  of members) 

1.  The  SE  shall  be managed  and  represented  by  a management  board  under 

the supervision of a supervisory  board. 

2.  The  members  of  the  management  board  shall  be  appointed  by  the 

supervisory board, which may remove them at any time. 

3.  No person may at the same time be a member of the management  board and 

the supervisory board of the same SE. 

4.  The  number  of  members  of  the management  board  shall  be  laid  down  In 

the statutes of the SE. 

5.  The rules of procedure of the management  board shall be adopted by the 

supervisory board, after obtaining  the views of the management  board. 

-  96  -

SUB-SECTION  2 

Supervisory  board 

Article  63 

(Functions of  the supervisory  board; Appointment  of  members) 

1. 

The  supervisory  board  may  not  participate  In  the  management  of  the 

company  nor  represent  it  In dealings with  third  parties.  However,  it shall 

represent 

the 

company 

In 

its 

relations 

with 

members 

of 

the 

management  board. 

2. 

Subject  to  the  measures  adopted  to  give  effect  to  Article  4  of  the 

Council  Directive 

[completing  the  Statute  In  respect  of  the 

involvement  of  employees  In SEs] members  of  the  supervisory  board  shall  be 

appointed  by  the general  meeting. 

Article  64 

(Right  to  Information) 

1. 

At  least  once  every  three  months  , the  management  board  shall  report 

to  the  supervisory  board  on  the  management  and  progress  of  the  company's 

affairs,  including  undertakings  controlled  by  It,  and  on  the  company's 

situation  and  prospects. 

2. 

The 

management  board 

shall 

inform 

the 

chairman 

of 

the 

supervisory  board  without  delay  of  all  matters of  importance,  including  any 

event  occurlng  In the company  or  In undertakings  controlled  by  It which  may 

have an appreciable  effect  on  the SE. 

-  97  -

3. 

The  supervisory  board  may  at  any  time require  the  management  board  to 

provide  Information  or  a  special  report  on  any  matter  concerning  the 

company  or  undertakings  controlled  by  It. 

4. 

The 

supervisory  board 

shall 

be 

entitled 

to 

undertake 

all 

Investigations necessary  for  the  performance  of  Its duties.  It may  appoint 

one  or  more  of  its members  to  pursue  such  investigations on  its behalf  and 

may  call  In the  help  of  experts. 

5. 

Any  member  of  the  supervisory  board  may,  through  the  chairman  of  that 

board,  require  the  management  board  to  provide  the  supervisory  board  with 

any  information  necessary  for  the  performance  of  Its duties. 

6. 

Each  member  of  the  supervisory  board  shall  be  entitled  to  examine  all 

reports,  documents  and  information  and  the  results  of  enquiries  and 

inspections  obtained  under  the  preceding  paragraphs. 

Article  65 

(Rules of  procedure,  calling  of  meetings) 

1. 

The  supervisory  board  shall  adopt  its  rules  of  procedure  and  shall 

elect  a chairman  and  one  or  more  vice-chairmen  from  among  Its members. 

2. 

The  chairman  may  call  a  meeting  of  the  supervisory  board  on  his  own 

initiative  and  shall  do  so  at  the  request  of  a  member  of  the 

supervisory  board  or  of  a member  of  the management  board. 

SECTION  2 

The one-tier  system 

-  98  -

Article  66 

(The  administrative  board; Appointment  of  members) 

1. 

The  SE  shall  be  managed  and  represented  by  an  administrative  board. 

The  board  shall  be  composed  of  at  least  three  members.  It  shall  adopt  its 

rules of  procedure  and  shall  elect  a chairman  and  one or  more  vice-chairmen 

from  among  Its members. 

2. 

The  management  of  the  SE  shall  be  delegated  by  the  administrative 

board  to one  or  more  of  it members.  The  executive  members  shall  be  fewer 

In  number  than  the  other  members  of  the  board.  The  delegation  of 

management  responsibilities  to  an  executive  member  of  the  administrative 

board may  be  revoked  by  the board  at  any  time. 

3. 

Subject  to the measures  adopted  to give  effect  to Article  4 of  Council 

Directive  ...[completing  the  Statute  in  respect  of  the  involvement  of 

employees  in SEs] members  of  the administrative  board  shall  be  appointed  by 

the general  meeting. 

Article  67 

(Right  to  information) 

1. 

The  administrative  board  shall  meet  at  least  once  every  three  months 

to  discuss  the  management  and  progress  of  the  company's  affairs,  including 

undertakings  controlled  by  It and  the company's  situation  and  prospects. 

2. 

Each  member  shall  inform  the  chairman  of  the  administrative  board 

without  delay  of  all  matters of  importance,  Including  any  event  occurlng  In 

the  company  or  in  undertakings  controlled  by  it  which  may  have  an 

appreciable  effect  on  the SE. 

- 99 -

3.  Any  member  of  the  administrative  board  may  request  the  chairman  to 

call a meeting of  that board  to discuss particular aspects of  the company, 

if the request  has not been complied with within 15 days, a meeting of the 

administrative board may be called by one third of  Its members. 

4.  Each member of  the  administrative board shall  be entitled  to examine 

all reports, documents and  information supplied to the board concerning the 

matters referred to  in paragraphs 1 and 3. 

SECTION 3 

Rules common to the one-tier and two-tier board systems 

Article 68 

(Term of office) 

1.  Members of  the governing  bodies shall  be appointed  for  a period  laid 

down  In tha  statutes not  AYCAAdlnn  « IY  vsars. 
down In the statutes not exceeding six years. 

However,  the  first  members  of  the  supervisory board  or  of  the 

administrative board, who are to be appointed by  the shareholders  shall  be 

appointed  by  the  Instrument  of  incorporation of  the  SE  for  a  period  not 

exceeding  three years. 

2.  Board members may be reappointed. 

Article 69 

(Conditions of membership) 

1.  Where  the statutes of  the SE allow a  legal  person or  company  to be a 

member  of  a board, that  legal  person or  company  shall  designate  a natural 

person to represent  It  In the performance of  Its duties on  the board.  The 

representative shall  be subject  to the same conditions  and obligations as 

if  he were  personally  a member.  Publication under  Article 9  shall  refer 

both to the representative and to the  legal  person or  company  represented. 

The  legal  person or company  shall  be  jointly  and  severally  liable without 

limitation for obligations arising from the acts of  its representative. 

-  100 -

2.  No person may be a board member who 

under the  law applicable to him, or 

as  a  result  of  a  judicial  or  administrative  decision  delivered  or 

recognized  In a Member State, 

is  disqualified  from  serving  on  an  administrative,  supervisory  or 

management board. 

3.  The  statutes  may  lay  down  special  conditions  of  eligibility  for 

members representing  the shareholders. 

4.  Notwithstanding  the  rule  laid down  in Article 94(2),  the  statutes of 

the SE may provide voting procedures for  the appointment  of members of the 

administrative  or  the  supervisory board  by  the  general  meeting  such  that 

one or more members and their alternates may be appointed  by a minority of 

the shareholders. 

Article 70 

(Vacancies) 

The statutes of the SE may provide for the appointment of alternate members 

to  vacancies.  Such  appointments  may  be  terminated  at  any  time  by  the 

appointment of a full member. 

-  101 -

Article 71 

(Power of representation) 

1.  Where  the management board,  Is composed  of  more  than  one  member, or 

where the management of the company  is delegated  to more than one member of 

the  administrative  board  those  members  have  authority  to  represent  the 

company  collectively  only  in  dealings  with  third  parties.  However,  the 

statutes of  the SE may  provide  that  a member  of  the  relevant  board  shall 

have authority to represent  the SE alone or together with one or more other 

members of  the board  or  together with a person who has been given general 

authority  to represent  the company under paragraph 2. 

2.  The administrative board  or, as the case may be, the management  board 

with  the approval  of  the supervisory board, may confer  a general  authority 

to  represent  the  company  on  one  or  more  persons.  Such  authority  may  be 

revoked at any time, in the same way, by the board which granted  It. 

3.  Acts  performed  by  those  having  authority  to  represent  the  company 

under  paragraphs 1 and  2 shall  bind  the  company  vis-à-vis  third  parties, 

even where  the acts  in question are not  in accordance with  the objects of 

the  company,  providing  they  do  not  exceed  the  powers  conferred  by  this 

Régulât Ion. 

-  102 -

Article 72 

(Operations requiring prior authorization) 

1.  The  Implementation of decisions on 

(a)  the  closure  or  transfer  of  establishments  or  of  substantial  parts 

thereof, 

(b)  substantial  reduction, extension  or  alteration  of  the  activities  of 

the SE, 

(c)  substantial organizational changes within the SE, 

(d)  the establishment of cooperation with other undertakings which  Is both 

long-term  and  of  importance  to  the  activities  of  the  SE,  or  the 

termination thereof. 

(e)  the setting up of a subsidiary or of a holding company. 

may be effected by the management  board only  following prior authorization 

of the supervisory board or by the administrative board as a whole. 

Implementation  may  not  be  delegated  to  the  executive  members  of  the 

administrative board. 

Acts done  In breach of the above provisions may not be relied upon against 

third  parties, unless  the SE  can prove  that  the  third  party  was  aware of 

the breach. 

2.  The statutes of  the SE may provide that  paragraph  1 shall  also apply 

to other  types of decisions. 

Article 73 

(Conflicts of  interest) 

1.  Any  transaction  in which  a board  member  has  an  Interest  conflicting 

with  the  Interests of  the SE shall  require  the prior  authorization of  the 

supervisory board or the administrative board. 

-  103 -

2.  The statutes of the SE may provide that paragraph  1 shall  not apply to 

routine transactions concluded on normal  terms and conditions. 

3.  A  member  to whom  paragraph  1 applies  shall  be  entitled  to  be  heard 

before a decision on the authorization  is made but may not take part  In the 

deliberations of the relevant board when  it makes  its decision. 

4.  Authorizations given under paragraph 1 during any financial  year shall 

be  communicated  to  the  shareholders  not  later  than  at  the  first  general 

meeting following the end of the financial  year  In question. 

5.  Failure  to obtain  authorization may  not  be  relied  upon  against  third 

parties, unless the SE can prove that the third party was aware of the need 

for, and  lack of, such authorization. 

Art le le 74 

(Rights and obligations) 

1.  Each  member  of  a  board  of  the  SE  shall  have  the  same  rights  and 

obligations, without prejudice to 

(a)  any  internal  allocation of responsibilities between the members of the 

board, and  the provisions of  the board's rules of  procedure  governing 

the taking of decisions  in the event of a tied vote; 

(b)  the provisions concerning  the delegation of management  responslblIt les 

to executive members. 

2.  All  board members shall  carry out  their  functions  in the  Interests of 

the  SE, having  regard  in particular  to  the  interests of  the  shareholders 

and the employees. 

3.  All  board  members  shall  exercise  a  proper  discretion  In  respect  of 

information  of  a  confidential  nature  concerning  the  SE. This  duty  shall 

continue to apply even after  they have ceased to hold office. 

-  104  -

Article  75 

(Removal  of  members) 

1. 

Members  of  the  supervisory  board  or  the  administrative  board  may  be 

dismissed  at  any  time  by  the  same  body,  persons  or  groups  of  persons  who 

under  this  Regulation  or  the  statutes  of  the  SE  have  the  power  to  appoint 

them. 

2. 

In  addition,  members  of  the  supervisory  board  or  the  administrative 

board  may  be  dismissed  on  proper  grounds  by  the  court  within  whose 

juridiction  the  registered  office  of  the  SE  Is  situated  in  proceedings 

brought  by  the  general  meeting  of  the  shareholders,  the  representatives  of 

the  employees,  the  supervisory  board  or  the  administrative  board.  Such 

proceedings  may  also  be  brought  by  one  or  more  shareholders  who  together 

hold  10% of  the  capital  of  the  SE. 

Article  76 

(Quorum,  majority) 

1. 

Unless  the  statutes  of  the  SE  require  a  higher  quorum,  a  board  shall 

not  conduct  business  validly  unless  at  least  half  of  its members  take  part 

In the  deliberat ions. 

2. 

Members  who  are  absent  may  take  part  in  decisions  by  authorizing  a 

member  who  is present  to  represent  them.  No member  may  represent  more  than 

one  absent  member. 

3. 

Unless  the  statutes  of  the  SE  provide  for  a  larger  majority,  decisions 

shall  be  taken  by  a majority  of  the members  present  or  represented. 

-  105  -

4. 

Under  terms  laid  down  In  the  statutes  of  the  SE  a  board  may  also  take 

decisions  by  procedures  under  which  the members  vote  In writing,  by  telex, 

telegram  or  telephone  or  by  any  other  means  of  telecommunication,  provided 

that  all  members  are  Informed  of  the  proposed  voting  procedure  and  no 

member  objects  to  the use of  that  procedure. 

Article  77 

(Civil  liability) 

1. 

Members  of  the  administrative  board,  the  management  board  or  the 

supervisory  board,  shall  be  liable  to  the  SE  for  any  damage  sustained  by 

the  company  as  a  result  of  wrongful  acts  committed  In  carrying  out  their 

dut les. 

2. 

Where  the board  concerned  is composed  of more  than one member, all  the 

members  shall  be  jointly  and  severally  liable  without  limit.  However,  a 

member  may  be  relieved  of  liability  If  he  can  prove  that  no  fault  is 

attributable  to him  personally.  Such  relief may  not  be  claimed  by  a  member 

on  the  sole  ground  that  the  act  giving  rise  to  liability  did  not  come 

within  the sphere of  responsibilities delegated  to him. 

Article  78 

(Proceedings  on  behalf  of  the  company) 

1. 

The  administrative  board  or  the  supervisory  board,  may  Institute 

proceedings  on  the company's  behalf  to establish  liability. 

2. 

Such  proceedings  must  be  brought  if  the  general  meeting  so  decides. 

The  general  meeting  may  appoint  a  special  representative  for  this  purpose. 

For  such  a  decision  the  statutes  may  not  prescribe  a majority  greater  than 

an absolute majority  of  the  votes  attached  to  the capital  represented. 

A 
SucW 
r 

-  106  -

3. 

Proceedings  on  behalf  of  the  company  may  also  be  brought  by  one  or 

more  shareholders  who  together  hold  10% of  the  capital  of  the  SE. 

^ 

^ 

4. 

Such  proceedings  may  be  brought  by  any  creditor  of  the  SE  who  can  show 

that  he  cannot  obtain  satisfaction  of  his  claim  on  the  company. 

(Waiver  of  proceedings  on  behalf  of  the  company) 

Article  79 

1. 

The  SE  may  waive  its  right  to  institute  proceedings  on  the  company's 

behalf  to  establish  liability.  Such  a  waiver  shall  require  an  express 

resolution  of  the  general  meeting  taken  In  the  knowledge  of  the  wrongful 

act  giving  rise  to  damage  for  the  company.  However,  such  a  resolution  may 

not  be  passed  if  it  Is opposed  by  shareholders  whose  holdings  amount  to  the 

figure  referred  to  in Article  75. 

2. 

Paragraph  1  shall  also  apply  to  any  compromise  relating  to  such 

proceedings  agreed  between  the  company  and  a board  member. 

Article  80 

(Limitation  of  actions) 

No  proceedings  on  the  company's  behalf  to  establish  liability  may  be 

instituted  more  than  five  years  after  the  act  giving  rise  to  damage. 

- 107 -

Section 4 

General meeting 

Article 81 

(Competence) 

The following matters shall be resolved by the general  meeting: 

a) 

increases or reductions In subscribed or authorized capital; 

b) 

issues of debentures convertible  Into shares or carrying subscription 

rights and of debentures carrying the right  to share  In the profits; 

c) 

the appointment  or  removal of members of  the administrative board or 

of the supervisory board, who represent  the shareholders; 

d) 

the  Institution of proceedings on the company's behalf  for negligence 

or misconduct  by board members; 

e) 

the appointment or dismissal of auditors; 

f) 

approval of the annual accounts; 

g) 

appropriation of the profit or  loss for the year-, 

h) 

amendment of the statutes; 

i) 

winding up and appointment of  liquidators; 

j) 

transformation'; 

k) 

merger of the SE with another  company; 

-  108  -

I) 

transfers of  assets. 

Article  82 

(Holding  of  general  meeting) 

1. 

A  general  meeting  shall  be  held  at  least  once  a  year.  However,  the 

first  general  meeting  may  be  held  at  any  time  In  the  18  months 

following  the  Incorporation of  the  SE. 

2. 

A  general  meeting  may  be  called  at  any  time  by  the  management  board 

or  the administrative  board. 

Article  83 

(Meeting  called  by minority  shareholders) 

1. 

It  shall  be  provided  that  one  or  more  shareholders  who  satisfy  the 

conditions  set  out  In  Article  75  may  request  the  SE  to  call  the 

general  meeting  and  to settle  the  agenda  therefor. 

2. 

If,  following  a  request  made  under  paragraph  1,  no  action  has  been 

taken  within  a  month,  the  court  within  whose  juridiction  the 

registered  office  of  the  SE  is  situated  may  order  the  calling  of  a 

general  meeting  or  authorize  either  the  shareholders  who  have 

requested  It or  their  representative  to call  the  meeting. 

Article  84 

(Methods of  calling  meetings) 

1. a) The  general  meeting  shall  be  called  by  a  notice  published  either  in 

the national  gazette  specified  in the  legislation  of  the  State  of  the 

registered  office  In  accordance  with  Article  3  (4)  of  Directive 

68/151/EEC or  In one or  more  large-circulation  newspapers. 

-  109  -

b) However,  where  all  the  shares  in  an  SE  are  registered  or  where  all 

its  shareholders  are  known,  the  general  meeting  may  be  called  by  any 

means of  communication  addressed  to all  the  shareholders. 

2. 

The  notice  calling  the  general  meeting  shall  contain  the  following 

particulars,  at  least: 

a) 

b) 

c) 

d) 

the  name  and  the  registered  office  of  the  SE; 

the  place  and  date of  the  meeting; 

the  type of  general  meeting  (ordinary,  extraordinary  or  special); 

a  statement  of  the  formalities,  if  any,  prescribed  by  the  statutes 

for  attendance  at  the  general  meeting  and  for  the  exercise  of  the 

r ight  to vote-, 

e) 

any  provisions  of  the  statutes  which  require  the  shareholder,  where 

he  appoints  an  agent,  to  appoint  a  person  who  falls  within  certain 

specified  categories of  persons. 

f) 

the  agenda  showing  the  subjects  to be  discussed  and  the  proposals  for 

résolut ions. 

3. 

The  period  between  the  date  of  first  publication  of  the  notice  in 

accordance  with  paragraph  1  (a), or  the  date  of  dispatch  of  the  first 

communication  as  mentioned  in  paragraph  K b ),  and  the  date  of  the 

opening  of  the general  meeting  shall  be  not  less  than  30 days. 

Article  85 

1. 

One  or  more  shareholders  who  satisfy  the  requirements  laid  down  In 

Article  75  may  request  that  one  or  more  additional  items  be  included 

on  the  agenda  of  a general  meeting  of  which  notice  has  already  been 

given. 

- 110 -

2. 

Requests  for  Inclusion  of  additional  agenda  Items  shall  be  sent  to 

the  SE  within  seven  days  of  the  first  publication  of  the  notice 

calling  the  general  meeting  in  accordance  with  Article  84  (1)(a)  or 

the  dispatch  of  the  first  communication  calling  the  general  meeting 

by  the means mentioned  in Article  84  (1)(b). 

3. 

Items  whose  inclusion  in  the  agenda  has  been  requested  under 

paragraph  2,  shall  be  communicated  or  published  In  the  same  way  as 

the  notice  of  meeting,  not  less  than  seven  days  before  the  meeting. 

Article  86 

(Attendance  at  general  meeting) 

Every  shareholder  who  has  complied  with  the  formalities  prescribed  by  the 

statutes  shall  be  entitled  to  attend  the  general  meeting.  However,  the 

statutes  may  prohibit  shareholders  having  no  voting  rights  from  attending 

the meetIng. 

Article  87 

(Proxies) 

1. 

Every  shareholder  shall  be  entitled  to  appoint  a  person  to  represent 

him  at  the general  meeting. 

2. 

The  law of  the Member  State  where  the  registered  office  of  the  SE  is 

situated  or  the  statutes  may  restrict  the  choice  of  representative  to 

one  or  more  specified  categories  of  persons,  but  a  shareholder  may 

not  be  prevented  from  appointing  another  shareholder  to  represent 

him. 

3. 

The  appointment  shall  be  made  in  writing  and  shall  be  retained  for 

the  period  mentioned  in Article  99 (4). 

-  111  -

Article  88 

1. 

Where  the  proxies  appointed  are  persons  acting  In  a  professional 

capacity,  the  provisions  of  Article  87  and  the  following  provisions 

shalI  apply: 

a) 

the  appointment  shall  relate  to  only  one  meeting,  but  It  shall  be 

valid  for  successive meetings with  the  same  agenda, without  prejudice 

to paragraph  2; 

b) 

c) 

the  appointment  shall  be  revocable; 

all  the  shareholders  whose  names  and  addresses  are  known  shall  be 

Invited,  either  In  writing  or  by  publication  in  one  or  more  large-

circulation  newspapers,  to  appoint  the  person  in  question  as  their 

proxy; 

d) 

the  invitation  to  appoint  the  person  in  question  as  a  proxy  shall 

contain  at  least  the  following  information: 

the  agenda  showing  the  subjects  for  discussion  and  the  proposals  for 

résolut Ions-, 

an  indication  that  the  documents  mentioned  in  Article  89  are 

available  to shareholders who  ask  for  them; 

a  request  for  instructions  concerning  the  exercise  of  the  right  to 

vote  in respect  of  each  item on  the  agenda; 

a  statement  of  the way  in which  the  proxy  will  exercise  the  right  to 

vote  In the absence of  any  Instructions  from  the  shareholder; 

e) 

the  right  to  vote  shall  be  exercised  in  accordance  with  the 

shareholders'  instructions, or  in the absence of  such  Instructions  in 

accordance  with  the  statement  made  to  the  shareholder.  However,  the 

proxy may  depart  from  the shareholders'  Instructions or  the  statement 

made  to  the  shareholder  by  reason  of  circumstances  unknown  when  the 

instructions  were  given  or  the  invitation  to  appoint  a  proxy  issued, 

where  voting  In  accordance  with  instructions  or  the  statement  would 

be  liable  to  prejudice  the  shareholder's  Interests.  The  proxy  shall 

forthwith  inform  the  shareholder  and  explain  the  reasons  for  his 

act ion. 

-  112  -

2. 

Notwithstanding  paragraph  1(a),  a  proxy  may  be  appointed  for  a 

specified  period  not  exceeding  15  months.  In  this  case  the  Information 

indicated  in  paragraph  1  (d)  shall  be  given  to  all  the  shareholders 

referred  to  In paragraph  1(c) before  any  general  meeting. 

Article  89 

(Avallablity  of  accounts) 

The  annual  accounts  and,  where  appropriate,  the  consolidated  accounts,  the 

proposed  appropriation  of  profits  or  treatment  of  loss  where  It  does  not 

appear  in  the  annual  accounts,  the  annual  report  and  the  opinion  of  the 

persons  responsible  for  auditing  the  accounts  shall  be  available  to  every 

shareholder  at  the  latest  from  the  date  of  dispatch  or  publication  of  the 

notice of  general  meeting  called  to adopt  the  annual  accounts  and  to  decide 

on  the  appropriât Ion. of  profits  or  treatment  of  loss.  Every  shareholder 

shall  be  able  to  obtain  a  copy  of  these  documents  free  of  charge  upon 

request.  From  the  same  date,  the  report  of  the  persons  responsible  for 

auditing  the  accounts  shall  be  available  to  any  shareholder  wishing  to 

consult  It at  the  registered  office  of  the  SE. 

Article  90 

(Right  to  Information) 

1. 

Every  shareholder  who  so  requests  at  a  general  meeting  shall  be 

entitled  to  obtain  Information  on  the  affairs  of  the  company  arising  from 

Items on  the  agenda  or  concerning  matters  on  which  the  general  meeting  may 

take  a decision  in accordance  with  Article  91(2). 

-  113  -

2. 

The  management  board  or  the  executive  members  of  the  administrative 

board  shall  supply  this  information. 

3. 

The  communication  of  Information  may  be  refused  only  where: 

(a) 

It would  be  likely  to be  seriously  prejudicial  to  the  company 

or  a controlled  company,  or 

(b) 

Its  disclosure  would  be  incompatible  with  a  legal  obligation 

of  confident la IIty. 

4. 

A  shareholder  to  whom  Information  is  refused  may  require  that  his 

question  and  the grounds  for  refusal  shall  be  entered  in  the minutes  of  the 

general  meeting. 

5. 

A  shareholder  to  whom  information  is  refused  may  challenge  the 

validity  of  the  refusal  In  the  court  within  whose  Jurisdiction  the 

registered  of'fice of  the  SE  Is situated.  Application  to  the  court  shall  be 

made within  two weeks of  the  closure  of  the  general  meeting. 

Article  91 

(Decisions-,  Agenda) 

1. 

The  general  meeting  shall  not  pass  any  resolution  concerning  Items 

which  have  not  been  communicated  or  published  in  accordance  with  Article 

84(2)(f) or  Article  85(3). 

2. 

Paragraph  1 shall  not  apply  when  all  the  shareholders  are  present  in 

person  or  by  proxy  at  the general  meeting  and  no  shareholder  objects  to  the 

matter  in question  being  discussed. 

A r t i c le  92 

(Voting  rights) 

1. 

A  shareholder's  voting  rights  shall  be  proportionate  to  the  fraction 

of  the  subscribed  capital  which  his  shares  represent. 

-  114  -

2. 

The  statutes  may  authorize: 

a)  restriction  or  exclusion  of  voting  rights  In  respect  of  shares 

which  carry  special  advantages; 

b) restriction  of  votes  In  respect  of  shares  allotted  to  the  same 

shareholder,  provided  the  restriction  applies  at  least  to  all 

shareholders  of  the  same  class. 

3. 

The  right  to vote may  not  be  exercised: 

a) where  a  call  made  by  the  company  has  not  been  paid; 

b) on  shares  held  by  the  SE  Itself  or  by  one  of  its  subsidiaries. 

4. 

The  law  of  the  State  where  the  registered  office  of  the  SE  Is 

situated  shall  govern  the  exercise  of  voting  rights  In cases  of  succession, 

usufruct,  pledge  of  shares, or  failure  to notify  substantial  holdings. 

Article  93 

(Conflict  of  interest) 

Neither  a  shareholder  nor  his  representative  shall  exercise  the  right  to 

vote  attached  to  his  shares  or  to  shares  belonging  to  third  persons  where 

the  subject  matter  of  the  resolution  relates  to: 

a)  the  assertion  of  claims  by  the  SE  against  that  shareholder; 

b)  the  commencement  of  legal  proceedings  to  establish  the  liability 

of  that  shareholder  to  the  company  in accordance  with  Article  78; 

c) waiver  of  the  right  to  bring  proceedings  to  establish  the 

liability  of  that  shareholder  to  the  company  in  accordance  with 

Article  79. 

-  115 -

Article  94 

(Required  majority) 

1. 

Resolutions  of  the general  meeting  shall  require  at  least  an  absolute 

majority  of  the  votes  attached  to  the  subscribed  capital  present  or 

represented  unless  a greater  majority  Is prescribed  by  this  Regulation. 

2. 

However,  as  regards  the  appointment  or  dismissal  of  members  of  the 

administrative  board,  the  management  board  or  the  supervisory  board  the 

statutes  may  not  require  a  majority  greater  than  that  mentioned  in 

paragraph  1. 

Article  95 

(Amendment  of  statutes) 

1. 

A  resolution  of  the  general  meeting  shall  be  required  for  any 

amendment  of  the statutes of  the  instrument  of  incorporation. 

2. 

However,  the  statutes  may  provide  that  the  administrative  board  or 

the  management  board  may  amend  the  statutes  or  the  instrument  of 

incorporation  where  the  amendment  merely  Implements  a  resolution  already 

passed  by  the  general  meeting,  or  by  the  board  itself  by  virtue  of  an 

authorization  given  by  the  general  meeting,  by  the  statutes,  or  by  the 

instrument  of  Incorporation. 

Article 96 

1. 

The  complete  text  of  the  amendment  of  the  statutes  or  of  the 

Instrument  of  Incorporation  which  Is  to  be  put  before  the  general  meeting 

shall  be set out  In the notice of  meeting. 

2. 

However,  the  statutes  may  provide  that  the  complete  text  of  the 

amendment  mentioned  In paragraph  1 may  be obtained  by  any  shareholder  free 

of  charge upon  request. 

-  116  -

Article  97 

1. 

A  majority  of  not  less  than  two  thirds  of  votes  attached  to 

subscribed  capital  represented  at  the  meeting  shall  be  required  for  the 

passing  by  the  general  meeting  of  resolutions  amending  the  statutes  or  the 

instrument  of  Incorporation. 

2. 

However,  the  statutes  may  provide  that  where  at  least  one-half  of  the 

subscribed  capital  is  represented,  a  simple  majority  of  the  votes  in 

paragraph  1 shall  suffice. 

3. 

Resolutions  of  the  general  meeting  which  would  have  the  effect  of 

Increasing  the  liabilities  of  the  shareholders  shall  require  in  any  event 

the approval  of  all  the  shareholders  involved. 

4. 

A  resolution  amending  the  statutes  or  the  Instrument  of  incorporation 

shall  be made  public  accordance  with  Article  9. 

Article  98 

(Separate  vote of  each  class  of  shareholder) 

1. 

Where  there  are  several  classes  of  shares,  any  resolution  of  the 

general  meeting  shall  require  a  separate  vote  at  least  for  each  class  of 

shareholders  whose  rights  are  affected  by  the  resolution. 

2. 

Where  a  resolution  of  the  general  meeting  requires  the  majority  of 

votes  specified  In  Article  97  (1)  and  (2),  that  majority  shall  also  be 

required  for  the  separate  vote  of  each  class  of  shareholders  whose  rights 

are  affected  by  the  resolution. 

-  117  -

Article  99 

(Minutes) 

1. 

Minutes  shall  be  drawn  up  for  every  meeting  of  the  general  meeting. 

2. 

The  minutes  shall  contain  the  following  particulars,  at  least: 

a)  the  place  and  date of  the meeting; 

b) the  resolutions  passed; 

c) the  result  of  the  voting. 

3. 

There  shall  be  annexed  to  the  minutes: 

a) the  attendance  list; 

b)  the  documents  relating  to  the  calling  of  the  general  meeting. 

4. 

The  minutes  and  the  documents  annexed  thereto  shall  be  retained  for 

at  least  three  years.  A  copy  of  the  minutes  and  the  documents  annexed 

thereto may  be obtained  by  any  shareholder,  free  of  charge,  upon  request. 

Article  100 

(Appeal  against  resolutions  of  general  meeting) 

1. 

Resolutions  of  the  general  meeting  may  be  declared  Invalid  as 

Infringing  the  provisions  of  this  Regulation  or  of  the  company's  statutes, 

in the  following  manner. 

2. 

An  action  for  such  a declaration  may  be  brought  by  any  shareholder  or 

any  person'having  a  legitimate  interest,  provided  he  can  show  that  he  has 

an  interest  In  having  the  Infringed  provision  observed  and  that  the 

resolution  of  the  general  meeting  may  have  been  altered  or  influenced  by 

the  Infringement. 

- 118 -

3. 

The  action  for  such  a  declaration  shall  be  brought  within  three 

months  of  the  closure  of  the  general  meeting,  before  the  court  within  whose 

jurisdiction  the  registered  office  of  the  SE  is  situated  .  It  shall  be 

taken  against  the  SE. 

4. 

The  procedure  In  the  action  for  such  a  declaration  shall  be  governed 

by  the  law of  the  place  where  the  SE  has  its  registered  office. 

5. 

The  decision  declaring  the  resolution  void  shall  be  published  in 

accordance  with  Article  9. 

6. 

The  declaration  that  a  resolution  is  void  may  no  longer  be  made  by 

the  court  if  that  resolution  has  been  replaced  by  another  taken  in 

conformity  with  this  Regulation  and  the  statutes  of  the  SE.  The  court  may, 

on  Its  own  Initiative,  grant  the  time  necessary  to  enable  the  general 

meeting  to  pass  such  a  new  resolution. 

-  119 -

Title V 

Annual  accounts  and  consolidated  accounts 

SECTION 1 

Annual  accounts 

SUB-SECTION 1 

Preparation of  annual  accounts 

Article  101 

1. 

The  SE  shall  draw  up  annual  accounts  comprising  the  balance  sheet, 

the profit  and  loss account  and  the  notes on  the  accounts. These  documents 

shall  constitute a composite  whole. 

2. 

The  annual  accounts  of  the  SE  shall  be  drawn  up  in accordance  with 

the  provisions  of  Directive  78/660/EEC  subject  to  paragraph  3  of  this 

Article. 

3.(a) 

Articles  1,  2(5),  final  sentence,  2(6),  4(1),  final  sentence, 

4(2),  final  sentence,4  (3)(b),  final  sentence,  4(4),  final  sentence,  5, 

43(2),  45(1)(b),  final  sentence,  54,  55  and  62  of  Directive  78/660/EEC 

shalI  not  apply. 

(b) 

For  the  purpose  of  drawing  up  the  annual  accounts,  the  provisions 

of  Articles  2,  3,  4,  6  and  7  of  Directive  78/660/EEC  shall  apply.  The  SE 

may  avail  Itself of  the option  provided  for  in Article  6 of  that  Directive. 

-120-

(c)  For  the  presentation  of  the  balance  sheet,  the  SE  may  choose  between 

the  layouts  prescribed  by Articles  9  and  10 of  Directive  78/660/EEC.  It may 

avail  Itself  of  the  options  provided  for  in  Articles  9,  10,  11,  18,  final 

sentence,  20(2) and  21, final  sentence, of  that  Directive. 

(d) 

For  the  presentation  of  the  profit  and  loss  account,  the  SE  may 

choose  between  the  layouts  prescribed  by  Articles  23  to  26  of  Directive 

78/660/EEC.  It may  avail  Itself  of  the  options  provided  for  In Articles  27 

and  30 of  that  Directive. 

(e) 

The  Items  shown  In  the  annual  accounts  shall  be  valued  in 

accordance  with  the  principles  laid  down  in  Article  31  of  Directive 

78/660/EEC.  They  shall  be  valued  on  the  basis  of  the  principle  of  purchase 

price  or  production  cost  according  to  the  provisions  of  Articles  34  to  42 

of  that  Directive. 

However,  the  SE  may  choose  to  apply  one  of  the  three  alternative  valuation 

methods  provided  for  In  Article  33  of  that  Directive.  If  the  SE  avails 

itself  of  that  possibility,  it  shall  ensure  that  the  method  applied  is 

consistent  with  the  principles  laid  down  in  that  Article.  Details  of  the 

method  applied  shall  be given  In the  annex  thereto. 

The  SE may  avail  itself  of  the options  provided  for  in Articles  34(1),  36, 

37(1) and  (2), 39(1)(c) and  (2) and  40(1) of  that  Directive. 

(f) 

In  addition  to  the  Information  required  under  other  provisions  of 

Directive  78/660/EEC,  the  notes  on  the  accounts  must 

include  the 

information  provided  for  in Article  43  of  that  Directive  at  least.  The  SE 

may  avail  Itself  of  the  options  provided  for  in Articles  44  and  45(1)  and 

(2) of  that  Directive. 

-  121  -

SUB-SECTION  2 

Preparation of  the annual  rapport 

Article  102 

1. 

The  SE  shall  draw up  an  annual  report  which  must  include  at  least  a 

fair  review  of  the  development  of  the  company's  business  and  of  its 

posit ion. 

2. 

The  annual  report  shall  also  include  the  Information  provided  for 

In Article  46 of  Directive  78/660/EEC. 

SUB-SECTION  3 

AudItIng 

Article  103 

1. 

The  annual  accounts  of  the  SE  shall  be  audited  by  one  or  more 

persons  authorized  to  do  so  In  a  Member  State  in  accordance  with  the 
provisions  of  Directive  84/253/EEC1.  Those  persons  shall  also  verify  that 

the  annual  report  is  consistent  with  the  annual  accounts  for  the  same 

financial  year. 

2. 

If  the  SE  meets  the  criteria  laid  down  In  Article  11  of 

Directive  78/660/EEC,  it  shall  not  be  required  to  have  Its  accounts 

audited.  In  such  cases,  members  of  administrative  board  or  the  management 

board  shall  be  subject  to  the  sanctions  applicable  to  public  limited 

liability  companies  In  the  State  In which  the  SE  has  Its  registered  office 

where  the  annual  accounts  or  annual  reports  are  not  drawn  up  in  accordance 

with  the  provisions  of  this  section. 

OJ  No L  126,  12.5.1984, p. 20. 

-  122  -

SUB-SECTION  4 

Pub 11 cat ion 

Article  104 

1. 

The  annual  accounts,  duly  approved,  and  the  annual  report  and  audit 

report  shall  be  published  as  laid  down  in  accordance  with  Article  3  of 

Directive  68/151/EEC  by  the  laws  of  the  Member  State  in  which  the  SE  has 

Its  registered  office. 

2. 

The  SE  may  avail  itself  of  the  options  provided  for  in  Article  47 

of  Directive  78/660/EEC. 

Articles  48,  49  and  50  of  Directive  78/660/EEC  shall  apply  to  the 

3. 

SE. 

SUB-SECTION  5 

Final  provisions 

Article  105 

Articles  56  to  61  of  Directive  78/660/EEC  shall  apply  to  the  SE.  The  SE 

may  avail  itself  of  the options  provided  for  in  those  Articles. 

-  123 -

SECTION  2 

Consolidated  accounts 

SUB-SECTION 1 

Conditions  for  the preparation  of  consolidated  accounts 

Article  106 

1. 

Where  the  SE  is  a  parent  undertaking  within  the  meaning  of 

Article  1(1)  and  (2) of  Directive  83/349/EEC,  It  shall  be  required  to  draw 

up  consolidated  accounts  and  a  consolidated  annual  report  in  accordance 

with  the provisions  of  that  Directive. 

2. 

Articles  1(1)(c)  last  sentence,  K d ) ( b b ),  last  sentence,  1(d), 

second  and  third  subparagraphs,  4  and  5 of  Directive  83/349/EEC  shall  not 

apply. 

3. 

The  SE  may  avail  Itself  of  the options  provided  for  in Articles  1, 

6,  12 and  15 of  Directive  83/349/EEC. 

Article  107 

1. 

Where  the  SE  Is a parent  undertaking  within  the meaning  of  Article 

1(1) and  (2) of  Directive  83/349/EEC  and  Is at  the  same  time  a  subsidiary 

undertaking  of  a parent  undertaking  governed  by  the  law of  a Member  State, 

It  shall  be  exempt  from  the  obligation  to  draw  up  consolidated  accounts 

subject  to  the  conditions  laid  down  in Articles  7  and  8 of  that  Directive. 

Article  10 of  that  Directive  shall  apply. 

2. 

Articles  7(1)(b),  second  subparagraph,  8(1),  last  sentence,  8(2) 

and  (3), and  9 of  that  Directive  shall  not  apply. 

3. 

The  exemption  provided  for  In paragraph  1 shall  not  apply  where  the 

securities  of  the  SE  have  been  admitted  to  official  listing  on  a  stock 

exchange  established  In a Member  State. 

-  124  -

Article  108 

1. 

Where  the  SE  is a  parent  undertaking  within  the  meaning  of  Article 

1(1)  and  (2) of  Directive  83/349/EEC  and  is  at  the  same  time  a  subsidiary 

undertaking  of  a  parent  undertaking  which  is not  governed  by  the  law  of  a 

Member  state,  It  shall  be  exempt  from  the  obligation  to  draw  up 

consolidated  accounts  subject  to  the  conditions  laid  down  In Article  11  of 

that  Directive. 

2. 

Articles  8  (1),  second  sentence,  8(2)  and  (3),  and  10  of  that 

Directive shall  not  apply. 

3. 

The  exemption  provided  for  in paragraph  1 shall  not  apply  where  the 

securities  of  the  SE  have  been  admitted  to  official  listing  on  a  stock 

exchange  established  in a Member  State. 

SUB-SECTION  2 

The  preparation of  consolidated  accounts 

Article  109 

1. 

The  consolidated  accounts  shall  comprise  the  consolidated  balance 

sheet,  the  consolidated  profit  and  loss  account  and  the  notes  on  the 

accounts. These  documents  shall  constitute  a composite  whole. 

2. 

The  consolidated  accounts  shall  be  drawn  up  in  accordance  with  the 

provisions  of  Directive  83/349/EEC  subject  to paragraph  3 of  this  Article. 

3.  (a)  Articles  16(5),  final  sentence,  16(6),  33(2)(c),  first  sentence, 

33(3),  final  sentence,  34,  point  12,  final  sentence,  and  point  13,  final 

sentence,  35(1)(b),  second  sentence,  40,  41(5)  and  48  of  Directive 

83/349/EEC  shall  not  apply. 

(b) 

The  SE  may  avail  Itself  of  the  options  provided  for  in  Articles 

17(2),  19(1)(b),  20,  26(1)(c),  final  sentence,  26(2),  27(2),  28,  second 

sentence,  29(2)(a),  second  sentence,  29(5),  final  sentence,  30(2),  32, 

33(2)  (d) and  35(1) of  Directive  83/349/EEC. 

-  125 -

SUB-SECTION  3 

Preparation  of  the  consolidated  annual  report 

Article  110 

1. 

The  consolidated  annual  report  shall  include  at  least  a  fair  review 

of  the  development  of  the  company's  business  and  the  position  of  the 

undertakings  included  in the  consolidation  taken  as  a whole. 

2. 

The  consolidated  annual  report  shall  also  include  the  Information 

provided  for  In Article  36 of  Directive  83/349/EEC. The  SE may  avail  Itself 

of  the option  provided  for  in  the  final  sentence  of  paragraph  2(d) of  that 

Article. 

SUB-SECTION  4 

Auditing  of  the consolidated  accounts 

Article  111 

The  consolidated  accounts  shall  be  audited  by  one  or  more  persons 

authorized  to  do  so  in a Member  State  in accordance  with  the  provisions  of 

Directive  84/253/EEC. Those  persons  shall  also  verify  that  the  consolidated 

annual  report  is  consistent  with  the  consolidated  accounts  for  the 

financial  year  in question. 

SUB-SECTION  5 

Pub 11 cat ion 

Article  112 

1. 

The  consolidated  accounts,  duly  approved,  and  the  consolidated 

annual  report,  together  with  the  audit  report,  shall  be  published  as  laid 

down  In  accordance  with  Article  3  of  Directive  68/151/EEC  by  the  laws  of 

the Member  State  in which  the SE  has  its  registered  office. 

2. 

Article  38  (3),  (4)  and  (6)  of  Directive  83/349/EEC  shall  not 

apply. 

3. 

The 

management 

board 

and 

the 

executive 

members 

of 

the 

administrative  board  shall  be  liable  to  the  sanctions  provided  for  [...]  if 

the consolidated  accounts  and  consolidated  annual  report  are  not  published. 

-  126  -

SECTION  3 

Banks  and  Insurance  companies 

Article  113 

1. 

SEs  which  are  credit  or  financial  Institutions  shall  comply,  as 

regards  the  drawing  up,  auditing  and  publication  of  annual  accounts  and 

consolidated  accounts,  with  the  rules  laid  down  pursuant  to  Directive 
86/635/EEC1  by  the  national  law  of  the  State  In  which  the  SE  has  Its 

registered  off Ice. 

2. 

SEs  which  are  insurance  companies  shall  comply,  as  regards  the 

drawing  up,  auditing  and  publication  of  annual  accounts  and  consolidated 

accounts,  with  the  rules  laid  down,  pursuant  to  Directive  [...  which, 

supplementing  Directive  78/660/EEC,  harmonizes  the  provisions  governing  the 

annual  accounts  and  the  consolidated  accounts  of  insurance  companies,  by 

the  national  law  of  the  State  in  which  the  company  has  its  registered 

office]. 

OJ NO L 372, 31.A2.1986, p.  1. 

-  127 -

Title VI 

Groups of  companies 

Article  114 

1. 

Where  an  undertaking  controls  an  SE, that undertaking's  consequent 

rights and  obligations  relating  to the  protection of minority  shareholders 

and  third  parties  shall  be  those  defined  by  tee  law  governing  public 

limited companies  In the State where  the SE has  Its registered  office. 

2. 

Paragraph  1  shall  not  affect  the  obligations  Imposed  on  the 

controlling  undertaking  by the  legal  system which governs  It. 

-  128  -

Title  viI 

Winding  up,  liquidation,  insolvency  and  suspension  of  payments 

SECTION 1 

Winding  up 

Article  115 

An  SE may  be wound  up: 

1.  upon  the expiry  of  the  duration  laid  down  for  It  in  the  statutes  or  the 

instrument  of  Incorporation, 

2.  by  resolution of  the general  meeting  of  shareholders,  or 

3.  by  decision  of  the  court  of  the  place  where  the  SE  has  Its  registered 

office  : 

(a) where  the  subscribed  capital  of  the  company  has  been  reduced  below  the 

minimum  capital  provided  for  in Article  4; 

(b) where  the  disclosure  of  annual  accounts  has  not  taken  place  in  the 

SE's  last  three  financial  years; 

(c) on  any  ground  laid  down  in  the  law  of  the  place  where  the  SE  has  its 

registered  office  or  provided  for  In  the  statutes  or  the  Instrument  of 

Incorporation. 

-  129  -

Article  116 

(Winding  up  by  resolution  of  the  general  meeting) 

1.  A  resolution  of  the  general  meeting  of  shareholders  to  wind  up  the  SE 

on  any  ground  laid  down  by  the  statutes  or  instrument  of  incorporation 

shall  require  at  least  a  simple  majority  of  the  votes  attached  to  the 

subscribed  capital  represented. 

2.  In all  other  cases  a  resolution  of  the  general  meeting  of  shareholders 

to wind  up  the  SE  shall  require  at  least  a  two-thirds  majority  of  the  votes 

attached  to  the  subscribed  capital  represented.  The  statutes  may,  however, 

lay  down  that,  when  at  least  half  the  subscribed  capital  is  represented, 

the  simple  majority  referred  to  In paragraph  1  is  sufficient. 

Article  117 

(Winding  up  by  the  court) 

1.  Winding-up  proceedings  may  be  brought  in  the  court  of  the  place  where 

the  SE  has  its  registered  office  by  the  administrative  board,  the 

management  board  or  the  supervisory  board  of  the  SE,  by  any  shareholder,  or 

by  any  person  with  a  legitimate  Interest. 

2.  Where  the  SE  Is able  to  remove  the ground  for  winding  up,  the  court  may 

grant  it a period  of  time  sufficient  to allow  it  to  do  so. 

Article  118 

(Publication  of  winding  up) 

The winding  up  shall  be  published  In  the manner  referred  to  In Article  9. 

-  130  -

Article  119 

(Wound-up  SE  to  continue  in existence) 

1.  Where  an  SE  is  to  be  wound  up  as  a  result  of  a  resolution  to  that 

effect  of  the  general  meeting  of  shareholders  or  upon  the  expiry  of  Its 

prescribed  duration,  the  general  meeting  of  shareholders  may  resolve  that 

it  is to continue  In existence  as  long  as  there  has  been  no  distribution  on 

the  basis of  liquidation  in accordance  with  Article  126. 

2.  The  resolution  that  the  company  is  to  continue  in  existence  shall  be 

passed  In  accordance  with  Article  116(2),  and  published  in  the  manner 

referred  to  In Article  9. 

SECTION  2 

Liquidât Ion 

Article  120 

(Appointment  of  liquidators) 

1.  The  winding  up  of  an  SE  shall  entail  the  liquidation  of  its  assets. 

The  liquidation  shall  be  carried  out  by  one  or  more  liquidators. 

2.  Liquidators  shall  be  appointed  : 

(a) by  the  statutes  or  Instrument  of  incorporation,  or  In  the  manner  laid 

down  therein;  or 

(b) by  a  resolution  of  the  general  meeting  of  shareholders  acting  by  the 

simple  majority  of  the  votes  specified  In Article  116(1);  or 

(c) failing  an  appointment  pursuant  to  (a)  or  (b), by  the  court  In  whose 

Jurisdiction  the  registered  office  of  the  SE  is  situated  on  the 

application  of  any  shareholder  or  of  the  administrative  board,  the 

management  board  or  the  supervisory  board. 

3.  In the  absence  of  an  appointment  pursuant  to paragraph  2,  the  duties  of 

liquidator  shall  be  performed  by  the  administrative  board  or  the  management 

board. 

-  131  -

4.  The  general 

meeting 

shall 

determine 

the  remuneration 

of 

the 

liquidators.  Where  the  liquidators  are  appointed  by  a  court  in  whose 

juridiction  the  registered  office  of  the  SE  is  situated,  the  court  shall 

determine  their  remuneration. 

Article  121 

(Removal  of  liquidators) 

The  liquidators may  be  removed  before  the  termination  of  the  liquidation: 

(a) where  they  were  appointed  in  accordance  with  Article  120(2),  (a)  and 

(b)  or  where  Article  120(3)  applies,  by  a  decision  of  the  general 

meeting  acting  by  the  simple  majority  of  the  votes  specified  In Article 

116(1), 

(b)  Irrespective  of  the  manner  of  appointment,  by  a  court  In  whose 

jurisdiction  the  registered  office  of  the  SE  is  situated,  on  petition 

of  any  person  having  a  legitimate  interest  in  the  matter  and  showing  a 

proper  ground. 

Article  122 

(Powers of  liquidators) 

1.  The  liquidators may  take  all  appropriate  steps  to  liquidate  the  SE  and, 

In particular,  shall  terminate  transactions  pending,  collect  debts,  convert 

remaining  assets  Into  cash  where  this  is  necessary  for  their  realisation 

and  to  pay  the  sums  owing  to  creditors.  The  liquidators  may  undertake  new 

transactions  to  the extent  necessary  for  the  purposes  of  the  liquidation. 

2.  The  liquidators  shall  have  the  power  to  bind  the  SE  In  dealings  with 

third  parties  and  to  take  legal  proceedings  on  Its  behalf. 

The  appointment,  termination  of  office  and  Identity  of  liquidators shall  be 

published  in  the  manner  referred  to  in ArtIcle  9.  It must  appear  from  the 

disclosure  whether  the  liquidators  may  represent  the  company  alone  or  must 

act  Jointly. 

- 

'22  -

Article  123 

(LlablIity  of  IIquldators) 

The  rules  on  the  civil  liability  of  members  of  the  administrative  board  or 

of  the  management  board  of  an  SE  shall  also  apply  to  the  civil  liability  of 

liquidators  for  wrongful  acts  committed  in  carrying  out  their  duties. 

Article  124 

(Accounting  documents) 

1.  The  liquidators  shall  draw  up  a  statement  of  the  assets  and  liabilities 

of  the  SE  on  the  date  the  winding  up  commenced.  Any  shareholder  or 

creditor  of  the  SE  shall  be  entitled  to  obtain  a  copy  of  this  statement 

free  of  charge,  upon  request. 

2.  The  liquidators  shall  report  on  their  activities  to  the  general  meeting 

each  year. 

3.  The  rules  concerning  the  drawing  up,  auditing  and  publication  of  annual 

accounts  or  consolidated  accounts  and  the  approval  of  persons  responsible 

for  carrying  out  the  statutory  audits  of  those  accounts  shall  apply 

mutat is mutandis. 

Article  125 

(Information  supplied  to  creditors) 

The  notice  of  the  winding  up  of  the  company  provided  for  In  Article  118 

shall  Invite  creditors  to  lodge  their  claims,  and  shall  Indicate  the  date 

after  which  dlstrIbutIons  on  the  basis  of  liquidation  will  be  made. 

An  invitation  to  lodge  claims  shall  also  be  sent  In writing  to  any  creditor 

known  to  the  company. 

-  133  -

Article  126 

(Distribution) 

1.  No  distribution  on  the  basis  of  liquidation  may  be  made  to  the 

beneficiaries 

designated 

In 

the 

statutes 

or 

the 

Instrument 

of 

Incorporation,  or  falling  any  such  designation  to  the  shareholders,  until 

all  creditors  of  the  company  have  been  paid  in  full  and  the  tlme-llmlts 

indicated  In Articles  125  and  127(2)  have  expired. 

2.  After  the  creditors  have  been  paid  in  full,  and  anything  due  to  the 

beneficiaries  referred  to  In  paragraph  1  has  been  distributed,  the  net 

assets  of  the  SE  shall,  except  where  otherwise  stated  In  the  statutes  or 

the  instrument  of  incorporation,  be  distributed  among  the  shareholders  In 

proportion  to  the  nomlnai  value  of  their  shares. 

3.  Where  the  shares  Issued  by  the  SE  have  not  all  been  paid  up  in  the  same 

proportion,  the  amounts  paid  up  shall  be  repaid.  In  that  case  only  the 

remaining  net  assets  shall  be  distributed  In  accordance  with  paragraph  2. 

If  the  net  assets  are  not  sufficient  to  repay  the  amounts  paid  up,  the 

shareholders  shall  bear  the  loss  in  proportion  to  the  nominal  value  of 

their  shares. 

4.  Where  a  claim  on  an  SE  has  not  yet  fallen  due  or  Is  in  dispute  or  where 

the  creditor  is  not  known,  the  net  assets  may  be  distributed  only  If 

adequate  security  Is  set  aside  for  the  creditor  or  If  the  assets  remaining, 

after  a  partial  distribution  represent  sufficient  security. 

-  134  -

Article  127 

(Dlstr ibut ion  plan) 

1.  The  liquidator  or  liquidators  shall  draw  up  a  plan  for  the  distribution 

of  the  net  assets  of  the  company  pursuant  to  Article  126  after  the  date 

indicated  In  Article  125. 

2.  This  plan  shall  be  brought  to  the  attention  of  the  general  meeting  and 

of 

any 

beneficiary 

designated 

in 

the 

statutes 

or 

instrument 

of 

Incorporation.  Any  shareholder  and  any  beneficiary  may  challenge  the  plan 

In  the  court  of  the  place  where  the  SE  has  Its  registered  office  within 

three  months  of  the  date  on  which  it  was  brought  to  the  attention  of  the 

general  meeting  or  of  that  beneficiary.  No  distribution  may  be  made  until 

that  period  has  expired. 

3.  Where  there  is  a  challenge  it  shall  be  for  the  court  to  decide  whether 

and  to  what  extent  any  partial  distributions  may  be  made  in  the  course  of 

the  proceedings  before  the  court  takes  its  decision. 

Article  128 

(Termination  of  liquidation) 

1.  The  liquidation  shall  be  terminated  when  the  distribution  Is  complete. 

2.  Where,  after 

the 

liquidation 

is  terminated, 

further 

assets 

or 

liabilities  of  the  SE  come  to  light  which  were  previously  unknown,  or 

further  liquidation  measures  prove  necessary,  a  court  in  whose  jurisdiction 

the  registered  office  of  the  SE  Is  situated  shall,  on  the  application  of 

any  shareholder  or  creditor,  renew  the  mandate  of  the  former  liquidators  or 

appoint  other  liquidators. 

3.  Termination  of  liquidation  and  removal  of  the  SE  from  the  register 

referred  to  In Article  8(1)  shall  be  published  in  the  manner  referred  to  In 

Article  9. 

4.  Following  the  liquidation,  the  books  and  records  relating  to  the 

liquidation  shall  be  lodged  at  the  register  referred  to  in  paragraph  3. 

Any  Interested  party  may  examine  such  books  and  records. 

-  135 -

SECTION  3 

Insolvency  and  suspension  of  payments 

Article  129 

In respect  of  Insolvency  and  suspension  of  payments  the  SE  shall  be  subject 

to  the  law of  the  place where  It has  its registered  office. 

Article  130 

1.  The  opening  of  insolvency  or  suspension  of  payments  proceedings  shall 

be  notified  for  entry  In  the  register  by  the  person  appointed  to  conduct 

the proceedings.  The entry  In the  register  shall  show  the  following: 

(a) the  nature  of  the  proceedings,  the  date  of  the  order,  and  the  court 

making  It; 

(b) the  date  on  which  payments  were  suspended,  if  the  court  order  provides 

for  this; 

(c) the  name  and  address  of  the  administrator,  trustee,  receiver, 

liquidator  or  any other  person  having  power  to conduct  the proceedings, 

or  of each  of  them where  there  are more  than one; 

^d) any other  information  considered  necessary. 

2 

Where  a  court  finally  dismisses  an  application, for  the  opening  of  the 

proceedings  referred  to  In paragraph  1 owing  to want  of  sufficient  assets, 

it  shall,  either  of  its  own  motion  or  on  application  by  any  Interested 

party, order  its decision  to be noted  in the  register. 

3.  Particulars  registered  pursuant  to  paragraphs  1  and  2  shall  be 

published  In the manner  referred  to  in Article  9. 

-  136 -

Title VI I I 

Mergers 

Article  131 

(Types of  merger) 

An  SE  may  merge  with  other  SEs  or  with  other  public  limited  companies 

incorporated  under  the  law  of  one  of  the  Member  States  in  the  following 

ways: 

(a) 

(b) 

(c) 

(d) 

by  forming  a new SE; 

by  the  SE  taking  over  one  or  more  public  limited  companies; 

by  a public  limited  company  taking  over  the SE; 

by  forming  a new  public  limited  company. 

Article  132 

(Applicable  law) 

1. 

Where  the  companies  participating  in  the  merger  have  their 

registered  offices  in the  same Member  State,  the  provisions  of  national  law 

giving  effect  to Directive  78/855/EEC  shall  apply. 

2. 

Where  the  companies  participating  in  the  merger  have  their 

registered  offices  in  different  Member  States,  the  provisions  of  Title  M 

shall  apply  mutat is mutandis. 

-  137  -

Title  IX 

Permanent  establishments 

Article  133 

1. 

Where  an  SE  has  one  or  more  permanent  establishments  In  a 

Member  State  or  a  non-member  State,  and  the  aggregation  of  the  profits  and 

losses  for  tax  purposes  of  all  such  permanent  establishments  results  In  a 

net  loss,  that  loss  may  be  set  against  the  profits  of  the  SE  in  the  State 

where  it  Is  resident  for  tax  purposes. 

2. 

Subsequent  profits  of  the  permanent  establishments  of  the  SE  in 

another  State  shall  constitute  taxable  income  of  the  SE  in  the  State  In 

which  it  Is  resident  for  tax  purposes,  up  to  the  amount  of  the  losses 

imputed  in accordance  with  paragraph  1. 

3. 

Where  a  permanent  establishment  is  situated  in  a  Member  State,  the 

imputable  losses  under  paragraph  1  and  the  taxable  profits  under  paragraph 

2  shall  be  determined  by  the  laws of  that  Member  State. 

4.  Member  States  shall  be  free  not  to  apply  the  provisions  of  this  Article 

If  they  avoid  double  taxation  by  allowing  the  SE  to  set  the  tax  already 

paid  by  its  permanent  establishments  against  the  tax  due  from  It  In  respect 

of  the  profits  realised  by  those  permanent  establishments. 

-  138  -

Title  X 

SanctIons 

Article  134 

The  provisions  of  national  law  applicable  to  the  infringement  of  the  rules 

relating  to  public  limited  companies  shall  apply  to  the  infringement  of  any 

of  the  provisions  of  this  Regulation. 

-  139  -

Title  XI 

Final  provisions 

Article  135 

The  involvement  of  employees  in  the  SE  shall  be  defined  In  accordance  with 

the  provisions  adopted  to  give  effect  to  Directive  ....  by  the  Member 

State  where  the  SE  has  Its  registered  office. 

Article  136 

An  SE  may  be  formed  In  any  Member  State  which  has  implemented  In  national 

law  the  provisions  of  Directive  [....  on  the  involvement  of  employees  in 

the S E ]. 

Art icle  137 

This  regulation  shall  enter  into  force  on  1  January  1992. 

This  regulation  shall  be  binding  in  its  entirety  and  directly  applicable  In 

a I I Member  States. 

Done  at  Brussels, 

For  the  Commission 

-  140 -

Proposal  for a 

COUNCIL  DIRECTIVE 

complementing  the Statute  for  a European  company  with 

regard  to  the  involvement  of  employees  In the 

European  company 

THE COUNCIL  OF  THE  EUROPEAN  COMMUNITIES, 

Having  regard  to  the  Treaty  establishing  the  European  Economic  Community, 

and  In particular  Article  54  thereof, 

Having  regard  to  the proposal  from  the  Commission, 

In cooperation with  the  European  Parliament, 

Having  regard  to  the opinion  of  the  Economic  and  Social  Committee, 

Whereas,  in  order  to  attain  the  objectives  set  out  in  Article  8a  of  the 

Treaty,  Council  Regulation  No 

establishes  a  Statute  for  a  European 

company (SE); 

Whereas,  In  order  to  promote  the  economic  and  social  objectives  of  the 

Community,  arrangements  should  be made  for  employees  to  participate  in  the 

supervision  and  strategic  development  of  the SE; 

Whereas  the  great  diversity  of  rules  and  practices  existing  In  the  Member 

States  as  regards  the  manner 

In  which  employees'  representatives 

participate  in  supervision  of  the  decisions  of  the  governing  bodies  of 

public  limited  companies  makes  it  Impossible  to  lay  down  uniform  rules  on 

the  involvement  of  employees  in the SE; 

-  141  -

Whereas  the  laws of  the  Member  States  should  therefore  be  coordinated  with 

a  view  to  making  equivalent  the  safeguards  required  for  the  protection  of 

the  Interests  of  members  and  third  persons,  of  public  limited  companies  In 

each  Member  State,  with  due  regard  to  the  specific  characteristics  of  the 

operation  of  such  companies  having  their  registered  office  In  its 

territory;  whereas  such  coordination  must  take  account  of  the  fact  that  an 

SE  Is  created  by  a  restructuring  or  cooperation  operation  Involving 

companies  governed  by  the  law of  at  least  two Member  States; 

Whereas  account  should  be  taken  of  the  specific  characteristics of  the  laws 

of  the  Member  States  by  establishing  for  the  SE  a  framework  comprising 

several  models  of  participation,  and  authorizing,  first,  Member  States  to 

choose  the model  or  models  best  corresponding  to  their  national  traditions, 

and,  secondly,  the  management  or  the  administrative  board,  as  the  case  may 

be,  and  the  representatives  of  the  employees  of  the  SE  or  of  Its  founder 

companies  to  choose  the model  most  suited  to  their  social  environment; 

Whereas  the  provisions  of  this  Directive  form  an  indissociable  complement 

to  the  provisions  of  Regulation  ...  and  it  Is therefore  necessary  to  ensure 

that  the  two  sets of  provisions  are  applied  concomitantly, 

HAS ADOPTED  THIS  DIRECTIVE: 

-  142 

Article 1 

The  coord InatIon  measures  prescribed  by  this  Directive  shall  apply  to  the 

laws,  regulations  and  administrative  provisions  in  the  Member  States 

concerning  the  Involvement  of  employees  in the  SE. 

These  measures  are  an  essential  supplement  to Regulation  ...  on  the  Statute 

for  a European  company. 

Title  1: Models of  participation 

Article  2 

Member  States  shall  take  the  necessary  measures  to  enable  employees  of  the 

SE  to participate  in the  supervision  and  strategic  development  of  the  SE  In 

accordance  with  the  provisions  of  this  Directive. 

Article  3 

1. 

Subject  to  the  application  of  paragraph  5,  the  participation  of  SE 

employees  prescribed  by  Article  2  shall  be  determined  In  accordance  with 

one  of  the  models  set  out  in Articles  4,  5  and  6  by  means  of  an  agreement 

concluded  between  the  management  boards  and  the  administrative  boards  of 

the  founder  companies  and  the  representatives  of  the  employees  of  those 

companies  provided  for  by  the  laws  and  practices  of  the  Member  States. 

Where  no  agreement  can  be  reached  the  management  and  administrative  boards 

shall  choose  the model  applicable  to  the  SE. 

-  143  -

2. 

An  SE  may  not  be  formed  unless  one  of  the  models  referred  to  In 

Articles  4, 5 and  6 has been  chosen. 

3. 

Subject  to  the  application  of  paragraph  5,  the  chosen  model  may  be 

replaced  by  another  model  In Articles  4, 5  and  6  by  an  agreement  concluded 

between  the  management  or  the  administrative  board  and  the  representatives 

of  the  employees  of  the  SE.  This  agreement  must  be  submitted  for  the 

approval  of  the general  meeting. 

4. 

Each  Member  State  shall  determine  the  manner 

in  which  the 

participation  models  shall  be  applied  for  SEs  having  their  registered 

office  In  Its  territory. 

5. 

A  Member  State  may  restrict  the  choice  of  the  models  referred  to  in 

Articles  4,  5  and  6  or  make  only  one  of  these  models  compulsory  for  SEs 

having  their  registered  office  In Its  territory. 

Section  1: Supervisory  Board  or  Administrative  Board 

Article  4 

The  appointment  of  members  of  the  supervisory  board  or  the  administrative 

board,  as  the case may  be, shall  be governed  by  the  following  rules: 

(I) 

at  least  one-third  and  not  more  than  one-half  of  them  shall 

be  appointed  by  the  employees  of  the  SE  or  their 

representatives  in that  company,  or 

(II) 

they  shall  be  co-opted  by  the  board.  However,  the  general 

meeting  of  shareholders  or  the  representatives  of  the 

employees  may, on  specific  grounds, object  to  the  appointment 

of  a  particular  candidate.  In such  cases  the  appointment  may 

not  be  made  until  an  independent  body  established  under 

public  law has declared  the objection  Inadmissible. 

-  144 -

Section  2: Separate  body 

Article  5 

1. 

A  separate  body  shall  represent  the  employees  of  the  SE.  The  number 

of  members  of  that  body  and  the  detailed  rules  governing  their  election  or 

appointment  shall  be  laid  down  in  the  statutes  in  consultation  with  the 

representatives  of  the  employees  of  the  founder  companies  In  accordance 

with  the  laws or  practices of  the Member  States. 

2. 

The  body  representing  the employees  shall  have  the  right: 

(a) 

at  least  once  every  three  months,  to  be  Informed  by  the 

management  board  or  the  administrative  board  of  the  progress 

of  the  company's  business,  including  that  of  undertakings 

controlled  by  It, and  of  Its prospects; 

(b) 

where  it  is necessary  for  the  performance  of  its  duties,  to 

require  from  the management  board  or  the administrative  board 

a  report  concerning  certain  of  the  company's  business  or  any 

information or  documents; 

(c) 

to  be  Informed  and  consulted  by  the  management  board  or  the 

administrative  board  before  any  decision  referred  to  in 

Article 72 of  Regulation 

Is  implemented. 

3. 

Article  74(3)  of  that  Regulation  shall  apply  to  members  of  the 

separate  body. 

-  145  -

Section  3: Other  models 

Article  6 

1. 

Models  other  than  those  referred  to  In  Articles  4  and  5  may  be 

established  by  means  of  an  agreement  concluded  between  the  management 

boards  and  the  administrative  boards  of  the  founder  companies  and  the 

employees  or  their  representatives  in those  companies. 

2. 

The  agreement  reached  shall  provide  at  least  for  the employees  of  the 

SE or  their  representatives: 

(a)  once  every  three  months,  to  be  Informed  of  the  progress  of  the 

company's  business,  Including  that  of  undertakings  controlled  by  It, 

and  of  Its prospects; 

(b) 

to  be  Informed  and  consulted  before  any  decision  referred  to  In 

Article  72 of  Regulation 

is  implemented. 

3. 

Where  the  agreement  provides  for  a  collegiate  body  representing  the 

employees,  that  body  may  require  the management  board  or  the  administrative 

board  to  provide  the  Information  necessary  for  the  performance  of  Its 

dut les. 

4. 

The  agreement  sha11  provide  that  the  employee's  representatives  must 

observe  the  necessary  discretion 

in  relation  to  any  confidential 

information  they  hold  on  the  SE.  They  shall  be  bound  by  this  obligation 

even  after  their  duties  have  ceased. 

5. 

If  the  law  of  the  State  where  the  SE  has  Its  registered  office  so 

permits,  the  agreement 

may  permit 

the  management 

board  or 

the 

administrative  board  of  the  SE  to  withhold  from  the  employees  or  their 

representatives  any  Information  the  disclosure  of  which  might  seriously 

Jeopardize  the  interests of  the SE or  disrupt  its projects. 

6. 

The  parties  to  the  negotiations  may  be  assisted  by  experts  of  their 

choice  at  the expense of  the  founder  companies. 

-  146  -

7. 

The  agreement  may  be  concluded  for  a  fixed  period  and  re-negotlated 

upon  expiry  of  that  period.  However,  the  agreement  concluded  shall  remain 

in force until  the entry  Into  force of  the new  agreement. 

8. 

Where  the  two  parties  to  the  negotiations  so  decide,  or  where  no 

agreement  such  as  is mentioned  in  paragraph  1  can  be  reached,  a  standard 

model,  provided  by  the  law  of  the  State  where  the  SE  has  Its  registered 

office,  shall  apply  to  the  SE.  This  model  shall  be  In conformity  with  the 

most  advanced  national  practices  and  shall  ensure  for  the  employees  at 

least  the  rights  of  Information  and  consultation  provided  for  by  this 

article. 

Election of  the  representatives of  the employees  of  the  SE 

Sect Ion 4: 

Article  7 

The  representatives  of  the  employees  of  the  SE  shall  be  elected  In 

accordance  with  systems  which  take  into account,  in an  appropriate  manner, 

the number  of  staff  they  represent. 

All  employees  must  be able  to participate  In the vote. 

The election  shall  be conducted  in accordance with  the  laws or  practices  of 

the Member  States. 

Article  8 

The  first  members  of  the  supervisory  board  or  the  administrative  board  to 

be  appointed  by  the  employees  and  the  first  members  of  the  separate  body 

representing  the employees  shall  be appointed  by  the  representatives of  the 

employees of  the  founder  companies  in proportion  to  the number  of. employees 

they  represent  and  in  accordance  with  the  laws  or  practices  of  the 

Member  States.  Those  first  members  shall  remain  in office  until  such  time 

as  the  requirements  for  electing  the  representatives  of  the  employees  of 

the SE are  satIsfled. 

-  147  -

Section  5 

Article  9 

1. 

The  management  board  or  the  administrative  board  of  the  SE  shall 

provide  the  representatives  of  the  employees  with  such  financial  and 

material  resources  as  enable  them  to  meet  and  perform  their  duties  in  an 

approprI ate  manner. 

2. 

The  practical  arrangements  for  making  available  such  financial  and 

material 

resources 

shall 

be 

settled 

in 

consultation 

with 

the 

representatives of  the employees  of  the  SE. 

Representation of  employees  In the establishments of  the  SE 

Sect Ion  6: 

Article  10 

Save  as otherwise  provided  in  this  Directive,  the  status  and  duties  of  the 

representatives  of  the  employees  or  of  the  body  which  represents  them,  for 

which  provision  Is  made  in  the  establishments  of  the  SE,  shall  be 

determined  by  the  laws or  practices  of  the Member  States. 

Title  2: Employee  participation  In the 

capital  or  In the  profit  or  loss of  the  SE 

Section 1 

Article  11 

Employee  participation  in the capital  or  in the profits  or  losses of  the  SE 

may  be  organised  by  means  of  a  collective  agreement  negotiated  and 

concluded  by  the  management  boards  and  the  administrative  boards  of  the 

founder  companies,  or  of  the  SE  when  constituted,  and  the  employees  or 

their  representatives  who  are  duly  authorised  to  negotiate  In  those 

compan i es. 

-  148  -

Final  provisions 

Article  12 

1. 

Member  States  shall  bring  into  force  the  laws,  regulations  and 

administrative  provisions  necessary  to  comply  with  this  Directive  by  1 

January  1992.  They  shall  Immediately  communicate  the  measures  taken  to  the 

Commission. 

The  provisions  adopted  pursuant  to  the  first  sub-paragraph  shall  make 

express  reference  to  this  Directive. 

2. 

Member  States  shall  communicate  to  the  Commission  the  main  provisions 

of  domestic  law which  they  adopt  in  the  field  covered  by  this  Directive. 

Article  13 

This  Directive  is addressed  to  the Member  States. 

Done  at  Brussels, 

For  the  Council 

ANNEX - CALENDAR  FOR THE REGULATION AND THE DIRECTIVE 

TRANSMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT 
AND THE ECONOMIC AND SOCIAL COMMITTEE 

AUGUST 1989 

OPINION OF THE EUROPEAN PARLIAMENT ON FIRST 
READING AND OF THE ECONOMIC AND SOCIAL COMMITTEE 

COMMON POSITION OF THE COUNCIL 

OPINION OF PARLIAMENT ON SECOND READING 

ADOPTION BY COUNCIL 

APPLICATION OF THE REGULATION 

NOTIFICATION OF THE DIRECTIVE TO THE 
TO THE MEMBER  STATES 

IMPLEMENTATION OF THE DIRECTIVE 
IN NATIONAL LAW 

DECEMBER  1989 

MARCH  1990 

JULY 1990 

OCTOBER  1990 

1 JANUARY  1992 

NOVEMBER  1990 

1 JANUARY  1992 

ISSN 0254-1475 

COM<89) 268 final 

DOCUMENTS 

05  06 

25.8.1989 

EN 

Catalogue number : CB-CO-89-367-EN-C 

ISBN 92-77-52575-4 

Office  for Official  Publications of the European Communities 
L-2985 Luxembourg