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federal incorporation differs from state incorpora
tion in the United States. A company set up in
this way would be able to operate freely in all
member states and be ultimately responsible to
the Community's Court of Justice in Luxembourg.
A key aim is to encourage transnational mer
gers that would produce world-stature companies.
In fact, a requirement is that a European com
pany ("Eurocompany") must be set up by at least
two other existing companies headquartered in at
least two different member states.
This requirement is not as rigorous as it might
seem. A Belgian subsidiary of a US company, for
example, could merge with the parent's subsidiary
in Germany. And any EEC firm could set up a
holding in Luxembourg and merge with itself,
though the Commission has said that the simple
conversion of a company under national law into
a company under European law is not envisaged.
A Eurocompany could be formed only for these
purposes:
9
to merge
two
companies headquartered
in
different member states;
0 to establish joint holding companies owned by
firms headquartered in different member states;
and
• to establish joint subsidiaries by such firms.
Although large firms have in the main been fol
lowing the Commission's work with interest, the
Commission believes medium-sized firms would
benefit too, because most of them cannot afford
the expensive
legal help currently required
to
untangle the red tape of operating in more than
one country.
Differing
national
traditions
posed
several
problems for the drafters of the Eurocompany
statute. For example, there was the form of top
management. Eventually, they chose the German
model of a supervisory board for general policies
and a management board for more day-to-day
affairs. This led to
the important question of
worker representation on the supervisory board,
which exists in Germany and is being planned in
other member states. For, if workers were excluded
from the board, Germans would not want to work
for a Eurocompany. The Commission therefore
suggests that workers receive one-third of
the
votes on a Eurocompany's supervisory board.
Another problem was whether shares should be
registered in the holder's name or simply be in
"bearer" form,
transferable
like money. Many
Europeans prefer bearer shares because it makes it
more difficult for tax authorities to find out how
much they receive in dividends. In Italy, only
bearer shares exist. The Commission's solution
here was the simple one : either form is permitted.
On taxes generally, the Commission is careful
to point out that a Eurocompany would follow
the same tax regime as the country in which it
would be headquartered. But it could choose the
country to pay taxes, as more than one head
quarters is permitted. And it would have the right to
deduct losses incurred abroad from profits at. home.
The minimum capital level set is intended to
allow medium-sized companies access but to ex
clude small firms: $500.000 for mergers and hold
ing companies, $250,000 for subsidiaries.
By basing the law on the Rome Treaty rather
than opting for a 1965 French proposal to enact
identical statutes in the six national parliaments,
the Commission has chosen the streamlined course.
It has also taken a clear stand on four basically
political issues that held up progress: whether
Eurocompanies could issue bearer shares; whether
workers
should be
represented on boards of
management; what
tax
status Eurocompanies
should have; and what companies
(size
and
nationality) should have access.
Little more than two years ago, work on the
Eurocompany was stymied by the inability of the
Six to agree on the question of access. This had
followed a variety of Commission memorandums,
reports by working groups and outside studies
dating back to 1964.
But eighteen months ago, under former Com
missioner Hans von der Groeben, the Commission
decided to publish a comprehensive plan even
without a Council mandate. And last June, a few
days before he resigned from the Gommission,
Herr von der Groeben unveiled the result. Herr
von der Groeben estimated that it would take at
least two years for the plan to become reality,
even
if all went smoothly. Existing companies
with merger plans cannot wait that long, and
some
have
been
studying
the Agfa-Gevaert
group's system of reciprocal investments.
The Werner committee of experts studying
economic and monetary union called for a Euro-
company law in its interim report last May. The
group, set up directly by the member states, said
such a
law would be "indispensable" for
the
proper functioning of such a union.
Meanwhile, the Commission is proceeding on
parallel work to harmonize existing national com
pany law, work that can produce considerably
quicker results. A third directive offered to the
Council
for approval would consolidate
safe
guards for minority shareholders, workers and
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