Paolo Santella, Bank of Italy.06 July 2016Dias 1 Seminar Company Law and SMEs Aarhus School of Business – 10 November 2008 The Case in Favour of the European Private Company A Competitive Alternative for SMEs? Paolo Santella Bank of Italy

06 July 2016Dias 2 The SPE statute: negotiations under way The Commission adopted in June (2008) a proposal for Regulation introducing the European private company (SPE, Societas Privata Europaea). Negotiations currently at the Council at expert group level. Unanimity from the Council is required to adopt the proposed regulation (Codecision does not apply, the EU Parliament should adopt an orientation document in December).

06 July 2016Dias 3 The Commission proposal Commission proposal aimed at: (i) Address SMEs specifities; (ii) Avoiding the rigidities that have (at least so far) prevented the success of the SE and SCE statutes.

06 July 2016Dias 4 - subjects covered directly by the proposed regulation (formation, capital regime, director liability, employee participation regime, rights of minority shareholders) - subjects left to the statutes of each SPE without reference to national legislation (internal orgainsation) - subjects left to national and currently applicable EU legislation (taxation, insolvency, accounting…) The building blocks of the Commission proposal: (i) a uniform statute…

06 July 2016Dias 5 - Internal organisation: almost complete freedom (for instance no obligation to have a company board). However, the Commission proposal contains a number of items that have to be covered by every Spe statute. - capital regime: the only obligation set by the proposal is pure balance-sheet test (assets=liabilities) as a precondition for dividend distribution. no minimum legal capital; no mandatory reserves, no mandatory solvency test (such items may be added in by company statutes only, not by national legislation): close to the Delaware capital regime. The building blocks of the Commission proposal: …(ii) but also a flexible statute

06 July 2016Dias 6 - internal organisation largely left to SPE statutes: no uniformity in the literal sense: SPEs would not have the same statute around the EU: rather, the same shareholders will be able to establish several SPEs around the EU with the same statutes. - If an SPE statute does not provide all the items required by the regulation, national legislation does not apply - Possible outcome (at the Council): national legislation should be applied in case nothing is provided by the SPE statute Uniformity vs flexibility

06 July 2016Dias 7 The Case in favour of the SPE (according to the Commission) Uniformity + Flexibility - shareholders able to set up the same internal organisation provisions - capital regime more flexible than in many Member States

06 July 2016Dias 8 -COM proposal allows any existing company (including partnerships) to adopt the SPE statute without the need to wind the company up -COM proposal allows all SPEs to move their legal seat without moving their real seat -No link with cross-border activities required Result: All SMEs across the EU would be able to (re)incorporate in a more efficient legal system The Case in favour of the SPE (looking also at other aspects of the Commission proposal)

06 July 2016Dias 9 Reincorporating in another legal system: does it matter? The Delaware case -many companies from all over the US (re)incorporate in Delaware -The Literature (Roberta Romano) tells us that the main drive is better quality of Delaware courts and lawyers (race to the top: other US States encouraged to improve their legal system) -According to the available indicators differences on both such counts are much wider in the EU than in the US.

06 July 2016Dias 10 SMEs already established in more than one EU Member State or planning to do so in the near future (a minority): -possibility to have the same organizational structure in any MS they are established. -An interest to move/establish the legal seat of all the SPEs controlled by the same shareholders in the same EU Member State so as to apply the same baseline legislation. Conclusion: likely impact of the SPE Commission proposal: SMEs with a cross-border dimension

06 July 2016Dias 11 Conclusion: likely impact of the SPE Commission proposal: SMEs without a cross-border dimension SMEs established in just one MS (the majority): possibility to adopt the SPE statute to take advantage of: - a more flexible capital and internal organisation regime; - the possibility to move their legal seat to a MS characterised by higher efficiency of the legal system (where? Probably a small EU Member State, for which the reincorporation industry would have a higher incidence on total GDP)