ECONOMY

EU company scheme

LUXEMBOURG – After more than three decades of negotiations between the governments of European Union member states, the Employment and Social Affairs Ministers’ Council on Monday approved the scheme for the formation of European companies as legal entities. The new legal form, perhaps one of the most useful tools in the integration of the single internal market, opens the way for the appearance, as of 2004, of companies that will be rid of the costly legal complexities of creating subsidiaries in each member state in which they are active. The new regime will allow the formation of a single company scheme which will be directly subject to European legislation, without need of subsidiaries conforming to national law. The European company, which will be commonly referred to by its Latin equivalent Societas Europae (SE), may be formed in four different ways: the merger of at least two companies based in at least two member states, the creation of a holding company comprising companies from at least two member states, the setting-up of a joint subsidiary based in at least two member states, and the transformation into an SE of a company that has maintained a subsidiary in another member state for at least two years. SEs must have a minimum paid-up capital of 120,000 euros. Indispensable to SEs will be a directive, which was also approved on Monday on the recommendation of the competent Commissioner Anna Diamantopoulou, regarding the participation of workers in decision-making and their advance briefing on entrepreneurial plans, particularly those concerning mass layoffs. In short, as of 2004, European companies will be able to proceed to carry out mergers and other joint activities under a single legislation, single administration, single bookkeeping system and, to a degree, a single framework of labor relations, which will significantly simplify their operations within the Union. The question is: Will they opt for it? The regulation, whose approval took 30 years, still lacks a very useful and most crucial element: a single taxation regime. As tax harmonization has to date been rejected by governments, SEs will be taxed separately in each member state. This is a factor reducing the attractiveness of the scheme. Commenting, Diamantopoulou described the glass as half-full, not half-empty. However, UNICE, the European Federation of Employers’ Associations, expressed reservations as to how many companies will opt for a transformation to an SE without a prior solution of the taxation issue. Characteristically, many multinationals, such as Anglo-Dutch Shell, which could be considered excellent candidates for a transformation to an SE, have not given any indication of such an intention. Albanian subsidiary AMC notched up a 52.5-percent gain in customers to 204,326 in the third quarter of the year, with net additions amounting to 70,346. An overwhelming majority (89 percent) were prepaid subscribers.