New company structure is needed for innovation to flourish

Internal Market and Services Commissioner Charlie McCreevy

The new statute for a European Private Company will allow a “Société privée européenne” (SPE) to be created and operate according to the same uniform principles in all Member States and is an integral part of the Small Business Act that we are announcing today.

If SMEs want to do business in several Member States, they have to set up subsidiaries using different company forms. Setting up and running subsidiaries, for example, as an SARL in France, a limited company in the UK and a GmbH in Germany requires knowledge of three different legal systems. This is time-consuming. It is also very expensive. The only way out of the legal labyrinth for entrepreneurs is through costly legal advice.

The European Private Company, or as we call it, the SPE, is a new European company form specially designed for SMEs. It will mean that entrepreneurs will no longer need to go through a legal labyrinth if they want to do business in the Single Market.

The potential savings on legal costs of the SPE could be between Euro 2,000 and Euro 10,000 for setting-up companies and between Euro 750 and Euro 8,000 for day-to-day operating costs.

The SPE is a private limited-liability company form that may be set up in the same way in every Member State. It is a light and flexible company form that will gives shareholders broad freedom in shaping their company, including how decisions are taken. Rather than spending time and money on mastering 27 different sets of rules, entrepreneurs will be able to focus on what they do best, namely running their businesses.

In addition to its uniformity and flexibility, the SPE will have three advantages.

First, anyone in any Member State can create an SPE instead of an SARL, a Ltd or a GmbH. The SPE does not need to have shareholders from different Member States. It could even have just one shareholder. This approach will allow small local businesses to grow and extend to foreign markets when they are strong enough to do so.

Second, the SPE may be set up with a legal capital of only Euro 1. This could result in cost savings of up to Euro 35,000 in some Member States. In many Member States, a high legal capital requirement has traditionally been considered as a means to protect creditors.

In some Member States this concept still exists even when practical experience shows that creditors rather rely on other, less formal and more effective ways of protecting the company's assets.

Thirdly, the SPE would be free to have its headquarters or principal place of business in a country that is different from its place of registration. The European Court of Justice has made it very clear that companies cannot be forced to have their main activities in the country where they are registered. Such requirements infringe their right to freedom of establishment as ensured by the Treaty. The proposal for an SPE is in line with the ECJ’s approach.

As you can see, the proposal is very business-friendly. In fact, it is probably more business-friendly than the law of most Member States today. Therefore, I expect lively discussions in the Council and in the European Parliament. And I am looking forward to them. The ball is now in the Council and European Parliament’s court.

Time is of the essence if the EU is to deliver a result on this before the end of the current legislature next May. All those involved should focus on providing SMEs with the instrument that they are calling for – one that reduces costs and really helps them to do business in the single market.