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Market State A to set up a branch Y in Common
Market State B. But, and this is the big
but:
there would then be two separate companies in
existence, firm X in State A and firm Y in State B
(its
affiliale),
with, needless to add, resulting tax
difficulties and two sets of company laws to deal
with (not to mention two sets of lawyers' fees!).
Or, secondly, firm J in State A could set up a
branch
(succursale]
called Y in State B, owned
entirely by the firm X owners.
In both cases, approval of the local government
authorities
to
the
setting up
of
a
foreign-
controlled company might have
to be sought.
Eventually, all such "approvals" will have to be
abolished under the law of the Common Market,
but this will take some time. So, for example, an
American company might not be able to buy its
way into a company in
the Common Market
without the approval of the State involved. And
the same applies even between some of the Com
mon Market member States themselves (at present).
Again, a company could
transfer
its head
quarters from one State to another State; but this
would not really work within the Common Mar
ket, as it is, without liquidating the original head
quarters and starting business afresh in the new
Common Market country of choice; which really
would
not make
sense
to
hard-headed
and
successful businessmen !
Now, the Treaty of Rome provides for the free
circulation of persons — including companies
(which the continentals quaintly call "moral per
sons"). This means that once full harmonisation
of company and tax laws has been achieved, many
of the matters which we have discussed will no
longer be very great problems. However, some will
remain, and herein lies the purpose of the Euro
pean company.
As mentioned, about three months ago,
the
Commission of the EEC approved the draft of a
European Common Market Law to establish such
companies. It is understood that, nine cases out of
ten of such approvals become law within the
Common Market.
The underlying idea is
to make available to
enterprises a legal form which will apply uni
formly throughout the Common Market Com
munity. This, it is hoped, will facilitate co-opera
tion, within a sound organisational framework,
between enterprises with headquarters in different
member States. In so doing, it would help inte
grate them in the Common Market.
From the legal point of view, the S.E. will be
interpreted uniformly by the Court of Justice of
the European Communities. It is not the aim of
the S.E.
to replace
the individual companies set
up under the law of each member State. It is only
designed
to facilitate certain operations
involving
companies from different member States, such as
mergers,
the establishment of a holding company,
or the founding of a joint subsidiary. It is an
addition
to the legal framework of the Common
Market economy. Co-ordination of national com
pany laws and creation of the S.E. necessarily
complement each other.
The essential obstacle to be jumped—and it is
far worse to negotiate without fault or penalty
than the "big double" bank permanent showjump
at the Royal Dublin Society, Ballsbridge—remains
the fact that the Common Market is divided into
areas governed by separate national laws. There
is, as we in Ireland know, also the closely related
psychological element. Enterprises do not want to
change their "nationality" and hesitate to become
"foreigners". In some cases it would make econo
mic sense to join forces with enterprises from other
member States, but this
is often not done for
reasons of national prestige.
The instrument to circumvent all these difficul
ties is the S.E. It is still only in draft form—and
the essence of the draft will be, if enacted, some
thing as follows:
1. There will be a common legal framework for
a company throughout the Common Market,
wherever
registered
(presumably within
the
Common Market).
2. In the beginning, three specific economic opera
tions will be served :
(a) Mergers between two companies which have
their headquarters
in different member
States.
(b) Establishment of holding companies under
Common Market law by companies having
their headquarters
in different member
States.
(c) Establishment of joint subsidiaries.
The rules (equivalent to the memorandum and
articles of association of a common law company)
of the draft S.E. law apply only to S.E. companies.
New such companies have
to be founded
(if,
when, and after the draft becomes
law). The
simple conversion of companies operating under
national law into companies under Common Mar
ket law (i.e. S.E.s) is
not
intended. The proposed
law will, therefore, not replace existing company
laws but will operate side by side with them.
The minimum capital
required for a Euro
pean Company
(S E.) will be 600,000 so-called
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