SMEs want a company statute, too

After the 30 years of haggling that it took to produce the European Company Statute (ECS), supporters of the European Private Company Statute (EPCS) hope that it will not be another 30 before a similar measure is extended to small- and medium-sized enterprises (SMEs).

The EPCS would allow smaller private companies to incorporate and set up subsidiaries in a form recognised throughout the EU.

Supporters of the idea say that it plugs a hole left after the passage of the ECS, which allowed large publicly traded companies to set up as Societas Europa (SE).

Last month the business lobby groups Eurochambres and BusinessEurope held a symposium urging the passage of a private company statute.

In February, the European Parliament endorsed a report by German centre-right MEP Klaus-Heiner Lehne asking the European Commission to propose legislation creating the EPCS, but the Commission’s internal market department said that it would need until next year to complete an impact assessment to determine the need for such legislation.

Private companies in the EU are already free to locate and conduct business anywhere in the EU with existing national company structures and there may be reluctance to introduce what might be seen as additional bureaucracy and a complication of company law. Even with a new company structure, companies would still have to follow local tax and labour codes, which would limit its benefits.

Vincent Tilman, an advisor to Eurochambres, says worries about increased bureaucracy are specious because the EPCS would be set up on a completely opt-in basis. "It is a voluntary process, you offer something more," he says.

Lehne argues that it is awkward for small companies to export their own national company structure when operating abroad. A European private company model would have the advantage that lawyers across the EU would know it, reducing consulting costs and increasing the mobility of SMEs. Lehne is keen on reducing reference to national law in whatever form the EPCS eventually takes and stresses that "the key aspect of liability of directors has to be decided by European lawmakers".

Frustrated that it looks as if no law will be proposed by the end of the year, Lehne is considering bringing the Commission’s internal market department to the Parliament for questioning as to why it is taking so long. "If they don’t explain," he says, "the Parliament can go to the European Court of Justice. We did that in another case related to the internal market."

Despite the frustration, Timlan is optimistic that a private company statute will be passed soon. "It looks like momentum is there," he says. Both Lehne and Tilman stress that the private company statute has been on the table for a long time. "This is not something new," says Lehne. The Commission has been talking about a private company act at least since the passage of the European Company statute in 2001. Tilman says the idea has been tossed around for about ten years and there aren’t as many kinks to work out as there were with public companies. That could mean that this time around, those waiting for new European company law will not have to count in decades.

After the 30 years of haggling that it took to produce the European Company Statute (ECS), supporters of the European Private Company Statute (EPCS) hope that it will not be another 30 before a similar measure is extended to small- and medium-sized enterprises (SMEs).