EC: consultation on the Societas Europeas

Comments from ACCA to the European Commission, May 2010.

The Association of Chartered Certified Accountants (ACCA) is pleased to submit its feedback to the European Commission's consultation on the Societas Europeas (SE).

ACCA is a professional accountancy body which represents 140,000 qualified accountants throughout the world, of whom some 90,000 are based in Europe. Our members operate in public practice, in business, in the financial sector and the public sector. ACCA is a member body of FEE and endorses the submission that FEE is separately making to you on this issue. 

We have reviewed the consultation questions with the help of the study conducted by Ernst & Young. While we found the study to be very thorough and informative, it should be pointed out that it focused on the motives of the founders of SEs, and did not address the views and concerns of their various stakeholders: a fuller assessment of the success or otherwise of the SE needs to consider the extent to which the SE protects the interests of stakeholders. ACCA also considers that the Commission's initiative to review the SE legislation is particularly helpful since the findings are likely to prove instructive for the further development of the SPE project.

Our responses to the specific consultation questions are set out below:

Q1. Do you agree with the findings of the study about the positive and negative drivers for setting up a SE and their importance?

We suggest that the findings included in the study must be taken at face value since they are the summary of evidence provided by actual SEs. We find it predictable that cost and complexity are listed as being major negative drivers – some of the costs quoted in the study are considerable and amount to a significant disincentive to form SEs. We find it interesting to note that the 'European image' of the SE is concluded to be only a minor driver in the decision to form an SE (as opposed to corresponding national company corporate forms). This particular finding must be borne in mind in the course of the development of the SPE. We would, though, have expected the report to note that EU law already allows EU companies to trade in other member states - this in itself must cause companies to query whether they need to adopt SE status. 

Q2. Do you agree with the study's assessment of the attractiveness/non-attractiveness of national legislation for setting up a SE?

The report stresses that the decision to adopt SE status is always taken after a thorough review of all the relevant factors, including the relevant provisions of national law. These aspects will include tax and employment law, pension matters, social costs, pension matters, compliance obligations and liability issues. This suggests that the provisions of national law are just as important as the relevant EU legislation, if not more so, to the decision as to whether to adopt SE status. 

Q3. What are in your view the most important regulatory issues to consider for a company when assessing in which country to place its registered/head office?

These issues will be a mixture of company law and tax measures. This will remain so as long as national law plays so big a part in the rules which apply to the SE. 

Q4. Do you agree with the study that the main reasons for the current distribution of SEs across the EEA/EU member states are connected to the employee participation system and corporate governance system of the individual member state? 

Employee participation requirements are undoubtedly a major factor - these requirements can be very costly and time consuming. We would also suggest, however, that incorporation costs are just as significant. This is especially so given the need for companies, and their legal and accounting advisers, to consider the implications of national as well as EU law.  

Q5. Do you agree with the possible explanations for the current distribution of SEs in the EU/EEA presented in the study?


Q6. What are in your view the main advantages for a company to buy a ready made shelf SE compared to setting up a SE directly?

Buying a ready-made company reduces start up costs and enables the SE to continue the employee involvement structure already adopted (if any). 

Q7. Please provide examples of practical problems you have encountered in the course of setting up and running a SE?

There appears to be a continuing unresolved problem as to whether the Regulation allows the supervisory board total discretion as regards the removal of members of the management board. 

Q8. Do you agree with the study's recommendations for possible amendments of the SE Regulation? Do you have any other suggestions for amending the SE Regulation that would increase its attractiveness for businesses?

It is significant that of the 431 SEs that have been formed, 38 per cent are shelf companies. 81 per cent have no employees at formation. As stated above this does suggest that businesses find the employee participation rules problematic. 

As regards how the SE Regulation might be improved, we make the following points:

i) the SE legislation includes a substantial minimum capital requirement. For those states where the domestic requirement is much lower than that for the SE this must amount to a major disincentive. This matter could usefully be re-assessed.  

ii) the SE can only be formed in prescribed ways - it cannot be formed directly by individuals or companies. In the light of the findings, especially re the apparent lack of concern for companies to acquire a 'European image', this could be reviewed. 

iii) the original goal for the SE was to make the company primarily subject to EU law with comparatively little left to national law. This has not happened and has arguably led to a degree of regulatory arbitrage – the fact that a disproportionate number of SEs have been established in one small country, viz Luxembourg, appears to bear out this suspicion.  

As stated at the outset, we believe the findings of the study are potentially very useful for the process of developing the SPE.  While we accept that many of the perceived difficulties associated with the SE project have already been taken into account in framing the draft SPE legislation, the study provides additional evidence of elements of the SE legislation which are not attractive and which may be counter-productive – we suggest that the provisions intended to ensure a 'European character' for the SE are chief among these. 

Finally, we would encourage the Commission to proceed with its proposed measure to integrate the various national business registries throughout the EU. We consider that ease of access to published information about the financial position and performance of individual SEs is a material concern for actual and prospective investors and creditors, and the Commission should strive to ensure that this is brought about.