Commission staff working document accompanying the Proposal for a Council Regulation on the Statute for a European Private Company (SPE) - Summary of the impact assessment {COM(2008) 396 final} {SEC(2008) 2098}
Date: 2008-06-25
Institutions: European Commission
Subjects: European company, impact study, legal status, private sector, small business

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 25.6.2008 
SEC(2008) 2099 

COMMISSION STAFF WORKING DOCUMENT 

accompanying the 

Proposal for a 

COUNCIL REGULATION 

on the Statute for a European Private Company (SPE) 

Summary of the Impact assessment 

{COM(2008) 396 final} 
{SEC(2008) 2098} 

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1. 

INTRODUCTION 

1.1. 

Procedural aspects 

The  European  Private  Company  Statute  (SPE)  was  a  medium  term  measure  (2005-2008)  of 
the  Commission's  Action  Plan  on  Modernising  Company  Law  and  Enhancing  Corporate 
Governance in the EU. It also forms part of the Single Market Review and is one of the key 
features  of  the  Commission's  Small  Business  Act  which  was  announced  in  November  2007 
and  seeks  to  make  the  Single  Market  accessible  to  small  and  medium-sized  enterprises 
(SMEs). 

A  feasibility  study  on  the  SPE  was  published  in  December  2005.  The  Legal  Affairs 
Committee  of  the  European  Parliament  held  a  public  hearing  on  the  SPE  in  June  2006.  It 
issued an own-initiative report, endorsed by the European Parliament in February 2007, which 
calls for a Commission proposal for an SPE.  

In  addition  to  two  public  consultations  which  were  conducted  between  July  and  November 
2007, DG Internal Market and Services organised a public conference in March 2008 which 
gathered experts from various Member States and addressed key options for an SPE. 

1.2. 

Low participation of SMEs in the Internal Market 

SMEs account for more than 99% of companies and for almost 70% of private employment in 
the  European  Union.  Despite  the  key  role  of  SMEs  in  the  European  economy,  only  8%  of 
SMEs  engage  in  cross-border  trade  and  only  about  5%  have  set  up  subsidiaries  or  joint 
ventures  abroad.  Recent  surveys  and  public  consultations  show  that  despite  their  strong 
potential  for  cross-border  expansion,  SMEs  face  legal  and  administrative  obstacles  which 
hinder their development in the Single Market.  

The  main  legal  and  administrative  obstacles  which  SMEs  face  in  their  cross-border 
development in the Single Market include: 

–  Compliance costs associated with the formation of a company. Compliance costs 
on  the  formation  of  a  company  include  essentially  the  costs  of  registration  and 
legal  advice,  notary  fees  and  the  minimum  start-up  capital.  While  minimum 
capital requirements and administrative costs are the same for national and foreign 
company  founders,  the  cost  of  legal  advice  falls  to  a  greater  extent  on  foreign 
founders who have to get acquainted with new company forms and regimes. 

–  Difficulties  and  compliance  costs  associated  with  the  operation  of  a  company 
generated  by  the  diversity  of  national  rules.  Different  legal  rules  on  the 
organisation  and  structure  of  companies,  company  organs,  shareholders'  rights, 
shares, etc., make the day-to-day operation of foreign subsidiaries more expensive 
compared  with  domestic  subsidiaries.  The  day-to-day  operation  of  foreign 
subsidiaries requires continuous legal advice. Even though the cost of such advice 
will  largely  depend  on  the  size  and  complexity  of  the  subsidiary,  a  third  of 
respondents to consultations consider it to be in excess of €10,000 per year. 

–  Lack  of  trust  in  foreign  legal  forms.  SMEs  find  it  often  difficult  to  operate  in 
another  Member  State  under  their  home  company  form,  and  as  a  result  often 
choose to set up subsidiaries instead. This is true, in particular, of SMEs from the 

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EU-12, which use company forms which are less known in other Member States 
than the company forms of the EU-15. In this respect, the ability to do business 
under a company form common to all Member States, which would confer an EU 
label, is considered a significant asset. 

2. 

THE EXPECTED DEVELOPMENT AND THE NEED FOR THE EU TO ACT 

The diversity of national company laws and forms, as business unfriendly as it may be, is long 
anchored in the legal traditions of the Member States. Nothing today gives grounds to expect 
this to change over the short term. Furthermore, only action undertaken at EU level can create 
a legal environment that is sufficiently uniform throughout the EU to serve the practical needs 
of SMEs wishing to take advantage of the Single Market. 

Should the EU legislator decide to adopt an SPE Statute, Article 308 of the EC Treaty would 
constitute the appropriate legal basis. 

3. 

OBJECTIVES 

The initiative seeks to enhance the competitiveness of SMEs by facilitating their operation in 
the  Single  Market.  In  particular,  the  initiative  aims  at  providing  a  flexible  corporate  law 
regime widely know across the EU and based on common principles, adapted to the specific 
needs of SMEs. It also aims at reducing the compliance costs which arise both on the creation 
and on the operation of companies in other Member States. 

4. 

POLICY OPTIONS 

The impact assessment presents three alternative high level policy options to the SPE.  

–  Taking  no  action  and  relying  on  existing  legislation  and  case  law.  The  existing 
legal framework, however, is ill-suited to the specific needs of SMEs and fails to 
reduce the legal and administrative obstacles which  SMEs face when seeking to 
expand in the Single Market.  

–  Harmonising the company laws of the Member States, so that the requirements on 
the  creation  and  the  operation  of  companies  are  uniform  in  all  Member  States. 
Even  though  the  scope  of  such  harmonisation  may  be  limited,  such  an  option 
would require Member States to amend rules which have formed part of the core 
provisions  of  their  national  company  laws  for  decades  and  with  which  they  are 
regarded as forming a whole. Such a major overhaul of national legislations does 
not appear politically feasible at present. 

–  Improving the SE and adapting it to the needs of SMEs, but achieving a 'one-size-
fits-all'  company  form  would  make  of  the  SE  Regulation  extremely  complex.  In 
addition, the SE is to be evaluated in 2009. 

By contrast with the above options, the SPE alone would give individuals and companies, no 
matter where they are based in the EU, access to the same company form. The SPE could be 
created from scratch by a legal or natural person or be established  by an existing company, 
either by transformation or by a merger with another company. The SPE could be established 

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in a Member State and provide services or operate via branches or subsidiaries in its own or 
another country. A group of companies could also be transformed into a group of SPEs (with 
a mother company being an SPE or another company form).  

In addition to the European label, which according to the respondents to consultations would 
make cross-border business easier, the SPE is expected to offer significant cost savings due to 
its uniformity throughout the EU. The mere use of the same company form in several Member 
States  would  limit  the  need  for  legal  advice  upon  the  creation  of  subsidiaries  and  reduce 
associated  costs.  The  legal  costs  associated  with  the  day-to-day  operation  of  subsidiaries  in 
several  Member  States  would  also  be  reduced.  Furthermore,  the  SPE  would  leave  company 
founders full flexibility to choose the internal organisation of the company best suited to their 
needs and activities and thus save costs. The SPE could offer a high level of legal certainty by 
avoiding  as  much  as  possible  references  to  national  law  as  far  as  the  company  form  is 
concerned.  Lastly,  the  SPE  would  exist  in  the  Member  States  alongside  national  company 
forms. The introduction of the SPE in the legal orders of the Member States would not entail 
any  harmonisation  of  core  aspects  of  national  company  legislations  and  therefore  it  seems 
politically feasible. 

5. 

SUB-OPTIONS FOR A SPE 

The impact assessment assesses a number of options for the key features of the SPE, which 
have a direct impact on the SPE's flexibility, accessibility, uniformity and legal certainty.  

5.1. 

Companies falling within the scope of the SPE Statute 

Any restriction of the SPE to businesses of a certain size would oblige businesses to switch 
company  forms  at  some  point,  which  is  both  cumbersome  and  costly.  To  avoid  exposing 
SMEs to undue administrative burdens and costs, the SPE, therefore, should be available to 
businesses upon formation and remain available to them as they develop and grow. However, 
like national private limited company forms, the SPE should not be allowed to offer its shares 
to the public or access the stock markets, as this would entail detailed rules, especially with 
regard to the internal organisation of the SPE, to protect shareholders. 

5.2. 

Degree of autonomy vis-a-vis national legislation 

The first option is that of an SPE, which would be totally autonomous and would not rely in 
any way on national legislation. This option, which would require the full harmonisation of 
tax and labour laws and therefore it is unrealistic.  

The second option is that of an SPE, which would be autonomous from the national company 
law regimes. Such an option would achieve a satisfactory degree of uniformity in the EU as 
company law aspects would be covered in the Statute and would therefore be the same across 
the  EU.  This  would  also  ensure  legal  certainty  while  making  it  possible  to  offer  to 
shareholders a high degree of flexibility in determining the internal organisation of the SPE. 

The third option is that if an SPE, which would heavily rely on national company legislations. 
While  such  option  may  offer  a  high  degree  of  political  acceptability,  it  would  result  in  a 
different  SPE  in  every  Member  State  and  would  deprive  individuals  and  companies  of  the 
specific benefits of a uniform company form throughout the EU, in particular cost savings and 
increased efficiency. It would, therefore, fail to fulfil the policy objectives. 

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5.3. 

Degree of uniformity of the Statute 

The first option would be one of a comprehensive Statute which would seek to regulate both 
the external and the internal affairs of the SPE. Even though this would ensure full uniformity 
of the SPE in the EU and a very high degree of legal certainty, it would deprive shareholders 
of any of the much needed flexibility, notably in determining the internal organisation of the 
SPE. The pursuit of such a 'one-size-fits-all' company statute would most likely make the SPE 
statute unattractive to businesses. 

The second option envisaged is the exact opposite to the first option, i.e., a SPE Statute which 
would  leave  full  flexibility  to  the  shareholders  of  the  SPE  to  regulate  in  the  articles  of 
association  all  company  matters,  including  capital,  creditor  protection  or  employee 
participation.  Such  an  option,  which  is  likely  to  result  in  insufficient  third  party  protection, 
would certainly meet strong opposition from the Member States.  

The third and chosen option consists in regulating in the SPE Statute the main characteristics 
of the SPE (limited liability, share capital, contributions, name) and matters relevant to third 
parties (creditor protection, disclosure, employee participation), while leaving internal matters 
(general meetings, management structure) to the free determination of the shareholders in the 
articles of association. This balanced option would entail limited references to national law, 
thus ensure a significant degree of uniformity of the SPE in the EU and legal certainty, while 
offering much needed flexibility as regards internal organisation. 

5.4. 

Cross-border dimension 

The first, chosen, option would be to make the SPE accessible to all founders, irrespective of 
any  cross-border  dimension.  In  other  words,  the  SPE  would  come  in  competition  with 
national company law forms. This is the chosen option because it offers a high degree of legal 
certainty and offers founders a free choice between the SPE and national company law forms, 
even  though  it  could  prove  politically  less  acceptable  than  the  second,  more  restrictive, 
option. 

The  second  option  would  consist  in  making  access  to  the  SPE  subject  to  a  cross-border 
requirement  (e.g.  shareholders  from  different  Member  States  or  evidence  of  cross-border 
activity).  Such  a  SPE  may  be  politically  more  acceptable  because  it  would  appear  more 
focused  on  making  the  Internal  Market  more  accessible.  However,  it  would  offer  less  legal 
certainty  because  of  the  need  to  control  the  existence  of  the  cross-border  dimension  on  a 
continuous basis. It would also limit the choice of company forms for entrepreneurs.  

5.5. 

The company seat and its transfer 

The first option which could be envisaged is to provide that the registered office and the head 
office of the SPE must be in the same Member State. The transfer of the registered office of a 
SPE to another Member State, as a result, would entail the transfer of the head office. This 
option is contrary to the ruling of the European Court of Justice in the Centros case. 

The  second  option  is  to  allow  the  SPE  to  have  its  registered  office  and  its  head  office  in 
different  Member  States  and  therefore,  to  transfer  its  registered  office  without  having  to 
transfer  its  head  office  at  the  same  time.  The  express  provision  for  this  freedom  would  be 
enshrined  in  the  Regulation  would  ensure  uniformity  across  the  EU  and  offer  a  very  high 
degree  of  flexibility  in  the  organisation  of  businesses.  It  would  also  achieve  a  satisfactory 

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degree of legal certainty, though the regulation would have to state clearly which national law 
is applicable to the SPE. 

The  third  option  under  consideration  would  consist  in  leaving  this  matter  to  the  national 
legislation of the Member State of registration of the SPE. Such an option would not offer any 
uniformity since there would be a different regime in every Member State. Nor would it offer 
much legal certainty. In addition, it would not bring any improvement to the current situation 
and the impossibility of companies to transfer their registered office from one Member State 
to the other. 

5.6. 

Capital regime 

Mandatory  minimum  capital  requirements  account  for  a  large  part  of  company  formation 
costs and are no longer considered as appropriate creditors' protection. Also, care should be 
taken to make the SPE accessible to entrepreneurs of all EU-27 Member States. A minimum 
capital of €1, as exists in the UK 'limited' or 
the French SARL, therefore, appears to be the 
better  option.  In  light  of  the  differences  in  standards  of  living,  opting  for  a  mandatory 
minimum capital requirement, whether based on the average in the EU-15 (€10,000-12,000) 
or in the EU-12 (€4,000) would make the SPE  less accessible to entrepreneurs of the EU-12. 

5.7. 

Distributions to shareholders 

The first envisaged option consists in building the capital regime of the SPE on a simplified 
second Company Law Directive. Even though such an option would ensure a high degree of 
legal  certainty  and  uniformity  across  the  EU,  it  would,  however,  deprive  SMEs  of  any 
flexibility and prove exceedingly burdensome.  

The  second  option  would  make  distributions  to  shareholders  subject  to  a  balance  sheet  test 
that  is  well  known  across  the  Member  States.  This  option  would  entail  less  uniformity  as 
more freedom would be left to the shareholders in the articles of association, but a satisfactory 
degree  of  flexibility  would  be  left  to  shareholders  regarding  e.g.  capital  increase  or  share 
redemption.  

The third option, i.e. the combination of a balance sheet test with a mandatory liquidity test, 
though  ensuring  a  higher  degree  of  protection  for  creditors,  would  expose  SPEs  to 
disproportionate costs.  

5.8. 

Employee participation 

The first option envisaged is to create an ad-hoc employee participation regime for the SPE. 
In light of the fact that solutions on employee participation already exist in the SE Statute and 
in  the  Directive  on  cross-border  mergers  and  of  the  high  political  sensitivity  of  employee 
participation questions, this option should be discarded. 

The second option would consist in leaving employee participation entirely to the legislation 
of the Member State in which the SPE has its registered office. While this option would offer 
SPE a high degree of flexibility, it would not address the question of employee participation 
in case of cross-border seat transfer. The fact that the SPE could be used to escape national 
employee participation regimes, could make the SPE unacceptable.  

The third option would consist in subjecting the SPE to the employee participation regime of 
the Member State in which it has its registered office while inserting in the SPE statute rules 

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governing  employee  participation  in  the  case  of  the  cross-border  transfer  of  the  SPE's 
registered office. While giving SPEs the needed flexibility, this option would ensure that the 
SPE cannot be used as a vehicle to escape employee participation regimes. 

6. 

EVALUATION AND MONITORING 

The Commission will conduct a yearly review of the take up of the SPE in the Member States. 
In addition, the Commission will conduct an assessment of the effectiveness and relevance of 
the SPE Statute to be published five years after the entry into force of the Statute. 

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