The legal language and nature of the process of establishing a business in Europe can be very confusing and intimidating.
While we are not going to cover every possible legal company formation in Europe, let’s take a look at 2 of the larger, well-known types of companies to see what makes them similar and different: the Aktiengesellschaft AG and the Societas Europaea SE.
First, is the Germanic AG, a shortened form of Aktiengesellschaft. Found in Germany, Austria, Switzerland, and South Tyrol (Italy), this intimidatingly named entity just implies a publicly-traded company with limited liability based in a single location, essentially, a corporation. Regardless of whether it’s a huge corporation or a business in a small town, all AGs have to abide by certain rules, such as having 5 or more initial members, €50,000 in initial share capital, regular general meetings, articles of association, and a 2-tiered management system. In addition to this, depending on the company’s size, there are requirements within the 2-tiered management system: for example, a certain threshold of share value requires a larger managing board, while more employees means greater employee representation on the supervisory board (500+ workers = ⅓ board representation, while 2,000+ workers = ½ board representation).
For many years, the AG was the status quo in Central Europe; however, with the last 15 years of European integration, we are seeing a new form of corporation, the SE. Latin for “European Company”, the Societas Europaea is, essentially, a European multi-national. With many of the same characteristics of the AG, it can be easy to simply say that this is a like a German company in European clothing, considering that national rules/regulations still apply and corporate rules/regulations are mostly standardised, but there are certain specific differences in this formation that are worth mentioning. First, its formation requires more share capital (€120,000), and is limited to multinationals, defined as companies that have a presence in at least 2 European countries through merger, holding company, subsidiary, or just the nature of business. Second – where the most noticeable divergence occurs – is a hybridised administration of common law and civil law countries: unlike the AG, the SE offers both a one-tier and a two-tier system, with one-tier being an overall administrative board and two-tier being the AG model, and, it’s worth noting that a SE may not be established without a model of employee involvement being selected by agreement between the management and the employees themselves, where Member States have different provisions applicable for the exact method and degree of worker involvement in corporate management. For example, the Member State with the highest number of SE registrations, or to be precise, of shell SE registrations – the Czech Republic – does not have strict requirements for the number of the members of the corporate organs and worker participation is not obligatory; in contrast to the local AGs with more than 50 employees where the workforce has to elect ⅓ of the members of the supervisory board. Whereas, in Germany, the Member State with the second highest number of registered SEs, the methods of participation of the employees at the level of the group are strictly defined by the SE–Beteiligungsgesetz (SEBG – German SE Employee Involvement Act) in accordance with the Betriebsverfassungsgesetz, where companies with 2 000+employees must allow worker representatives to have ½ of the seats in the supervisory board (which usually consists of 12 representatives.) On establishment level, worker representation is mainly ensured by the works council, which is the only representative workers body in German law and which exact size depends on the number of people employed by the company.
Deciding what formation is right for your business venture can be stressful, summarily, much of it comes down to location, vision, and views on employee participation. And any business can quickly become pan-European, requiring translation services for work councils, board meetings, audits, legal requirements, or even just day-to-day business functions.
EVS Translations has successfully assisted several companies in achieving SE status. Our knowledge of the European Union legislation, information on co-determination especially in Germany and our capability to provide skilled teams of interpreters are key elements here.
Read our article – > Language services for Societas Europaea – the European Company (SE)