5European Public Limited-Liability Company (S.E.)

Regulation (EC) no. 2157/2001, of October 8, 2001, approving the bylaws for a European Company (S.E.), regulates the legal framework currently in force within the EU for this type of European corporate entity. Law 19/2005, of November 14, 2005⁸, which regulates S.E.s domiciled in Spain, adopted the necessary measures to guarantee the effectiveness of the directly applicable rules included in the Regulation, amending the repealed Corporations Law and including a new chapter. Moreover, this Regulation has been supplemented in Spain by Law 31/2006, of October 18, 2006 regulating the involvement of employees of European corporations and cooperatives, transposing Council Directive 2001/86/EC, of October 8, 2001.

• Concept: An S.E. offers companies carrying on business in various Member States the possibility of setting up as a single company under EU regulations and operating in the EU under a single legislation and a unified administrative and declaration system. For companies acting in different Member Estates, an S.E. offers the possibility of reducing administrative costs with a legal framework adapted to EU regulations.
• Main characteristics:
  • An S.E. will always be considered a derivative company since it can only be founded by other pre-existing companies. In other words, individuals are not allowed to create this type of company.
  • Need for the existence of a European multinational nature in the process of association giving rise to the formation of an S.E. In this regard, although there are different procedures for forming an S.E., there are two unavoidable requirements common to all with a view to preserving this European multinational nature:
    • That only entities formed pursuant to the legislation of a specific member state be involved in the formation of an S.E., and their registered office and central management must also be located in the EU.
    • At least two of the entities involved must be subject to the legislation of different member states.
  • The subscribed capital may not be less than €120,000, although the minimum required capital can be higher in specific cases contemplated under Spanish legislation for companies pursuing certain activities (i.e. lending institutions). The Spanish legislation governing corporations will also apply to share subscription, payment, ownership and transfers.
  • S.E.s can only be formed as follows:
    • Merger: The merged companies must be subject to the legislation of different member states.
    • Formation of a holding S.E.: Provided that at least two of the companies are governed by the law of a different Member State, or for at least two years have had a subsidiary company governed by the law of another Member State or a branch located in another Member State.
    • Formation of a subsidiary S.E.: Provided that at least two of the companies are governed by the law of a different Member State, or for at least two years have had a subsidiary company governed by the law of another Member State or a branch located in another Member State.
    • Re-registration of an existing S.A.: Provided that for at least two years it has had a subsidiary company governed by the law of another Member State.
  • S.E.s must be registered at the Commercial Registry of their registered office. Their registered office is situated in the place where their central management is established.
  • The governing bodies are:
    • A shareholders’ meeting.
    • A managing body (one-tier system) or a managing body and an over-sight body (dual system), per the option adopted in the bylaws.
  • Shareholder’s liability is, in principle, limited to the subscribed capital.
  • The name of an S.E. must be preceded or followed by the abbreviation S.E.
  • From a labor standpoint, Law 31/2006 regulates the application of certain rights of information, consultation and participation of the workers in the corporate bodies of an S.E. where such participation already existed within the founding companies at the time of the formation of the S.E. This is to ensure the participation of the workers in the S.E. for the purposes of allowing them to have an influence on any decisions adopted at the company which directly affect them.

    Furthermore, Law 10/2011 attempts to reinforce the influence employees have on a company’s intentions, emphasizing the need for employees to exercise their rights of information and consultation before decisions are effectively made.

In general terms, an S.E. is an effective investment vehicle for companies that already have a business presence in the EU and wish to invest in Spain.

While an S.E. has the disadvantage of being a new legal vehicle which, in certain cases, may allow greater employee participation in the management decisions of the company, it has the advantage that its legal framework is known in all EU countries.