European Company (societas Europaea – SE) is an innovative public Pan European company. The rationale behind the European company was to create a company having its own legislative framework, which would allow companies incorporated in different member states to merge or form a holding company or joint subsidiary, without facing the legal and practical constraints arising from the existence of different legal systems. A European Company would therefore provide greater mobility for businesses in the integrated EU market and a simpler way for running businesses under a single European label.
Law 98(I)/2006 introduced the European Company in Cyprus.
The formation of a European can be achieved by either:
– A merging of two or more public or European companies from at least two different member states;
– A creation of a holding European company by two or more public or private limited liability companies, including European companies, from at least two different member states or if it had for at least two years a subsidiary or branch in another member state;
– A set up of a subsidiary by two or more companies, including European companies, from at least two different member states or an existing for at least two years subsidiary or branch in another member state; or
– A conversion of a Cyprus public company, having a subsidiary for at least two years in another member state.
The requirements for the creation of the European company are the following:
– The Minimum required share capital must be at least EUR 120,000.00 (or equivalent in any other currency);
– The registered and head office can be situated in Cyprus, but this is not mandatory, it can be different addresses;
– It must be registered in the local Commercial Registry and the registration is published in the European Companies’ Official Journal;
– The statutes of a Cyprus European company must include its name, registered office and objects of the company. They must also state whether there is a one-tier or two-tier board structure and the number of the members;
– Accounting and audit is obligatory; and
– SE to be included on the name of the European Company.
In relation to the transfer of seat it is important to note that there is no restriction on moving the seat from one member state to the other. In Cyprus the concept of continuation is more important than winding up during the re-domiciliation process as long as this is permissible under the domestic legislation of the new jurisdiction.
A special resolution of the shareholders (taking the decision) is mandatory and must be filed at the Cyprus Registrar of Companies.. In addition the following shall apply:
– The legislation protects Creditors’ rights in case of the company’s relocation.
– The company is entered into in a single national register.
– The effective date is when the company is registered under the commercial registry of the new member state.
– If an SE wishes to transfer its seat from Cyprus to a jurisdiction outside the European community then the company must follow the procedure of winding up and publish it in the European Official Journal.
A determining factor for establishing an SE is the tax system of the host country.
It follows from the above that the tax system of Cyprus makes it an exceptionally ideal and striking location for an SE, as it is a combination of favourable tax rates , a vast network of double tax treaties and a straight-forward tax legislation. Following the complete implementation of the EU Merger Directive by Cyprus pre-existed companies in other Member States can now transform into a Cypriot SE devoid of any tax charge.
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