The Prague Post
October 6th, 2008
Endowment Fund     Business Listings ONLINE      Reservations      Classifieds    Subscriptions
Prague accommodation
Prague Real Estate

Home » Archives » Banking & Finance

Local businesses becoming more 'European'

Companies dreaming big adopt EU's Societas Europaea format

By Victor Velek
Staff Writer, The Prague Post
February 13th, 2008 issue

Despite some discontent and skepticism, the European Union is heading toward a supranational future. And, while a European identity to replace national identities is, if ever, yet to come, a European business identity is already available to companies throughout the EU.
EURO companies at a glance


Societas Europaea (SE) is a type of joint-stock firm based on European law, rather than national legislation
Established by the European Union to reduce cross-border bureaucracy, the SE format is favored by holding companies
Laws governing SEs are a hodgepodge of European and national legislation, leaving SE companies in some legal uncertainty

Since 2004, companies in EU member states have been able to opt for a distinctly European feel by transforming into a European Company, or Societas Europaea (SE), a joint-stock company type based on European law aimed at slashing cross-border bureaucracy.
Several high-profile companies, such as the insurer Allianz and the German automaker Porsche, have migrated to the SE format. Porsche opted to become an SE to ensure that after its planned takeover of Volkswagen, Porsche’s board seats will not be engulfed by Volkswagen workers’ representatives — a threat under German law, but not under the European umbrella.
Finep, a Prague-based real estate company, was among the Czech businesses that “turned European” last year. Unlike Porsche, though, Finep’s decision was not motivated by any looming threat.
The firm has been quickly developing over the past years, expanding to Slovakia and planning to enter other markets as well, said Finep General Manager Tomáš Pardubický. “In such circumstances, it is important to have a flexible and, at the same time, stable legal backing, which is provided by the European Company form.”
The SE label is an attractive option for bigger companies, long-term players on the European level and enterprises with pan-European ambitions, Pardubický added.
Today, there are no more than 150 SE-designated businesses Europe-wide. The Czech Republic only started seeing SEs established last year and now hosts some 20 firms, according to Petr Čech, a Charles University lecturer specializing in the legal aspects of SE firms.
“The real boom of the European Company form has not yet taken off, either in Europe and in the Czech Republic,” Čech said. This type of firm remains largely unknown and is only slowly entering public awareness, though it could play an influential role in European business in the future.
Free seat
A SE firm can move its seat freely within the EU, enabling Czech businesses to take advantage of lower tax systems and more robust legal environments in “old” EU countries, said Petr Mála, head of Společnosti Online, a provider of ready-made companies.
Besides, the European Company brings with it European goodwill, Mála added. “A [Czech] firm with a generally known European corporate identity is perceived by foreign businesses as a more trustworthy partner,” he added.
On the other hand, as Pardubický noted, setting up a SE is a complicated and time-consuming process. This is what makes it attractive for companies like Společnosti Online.
“This year, we plan to sell 30 or 40 European Companies,” Mála said. Currently, Společnosti Online has three SEs available, each for 199,000 Kč ($11,370).
Nevertheless, although the SE legal entity can be an effective means of tax optimization and is an ideal option for holding companies, its tax advantages are incomparable with the benefits of so-called tax paradises, according to the Union of Czech Offshore Advisors (UOP).
“It is not a direct competitor to off-shoring,” said UOP Chairman Michal Friedberger. Companies in tax paradises pay no taxes, are not required to keep financial records and can be owned anonymously. Those are benefits SEs can never enjoy, he added.
Legal hybrid
There remain many legal ambiguities surrounding SE firms.
“The complex legal foundations — the SE is partly based on common European law and partly on national legislation — are not fully developed and this results in many obscurities,” Čech said.
The same applies, he argued, to the two other entities recognized by EU corporate law: the European Economic Interest Grouping and the European Cooperative Society.
In the future, small and midsize businesses should also be able to turn European, as foundations have been laid for establishing a European Private Company, a kind of EU limited-liability company.
Čech supports the project. However, it must be based on clear legal grounds in order to be successful, he stressed. “If a legal hybrid combining European and national legislations is adopted like in the case of [SE firms], I wouldn’t put much hope in it.”

Victor Velek can be reached at vvelek@praguepost.com


Other articles in Banking & Finance (13/02/2008):

Browse the Current Issue

If you enjoyed this article, why don't you subscribe to the print version!
We accept secure online transactions provided by PayPal and Moneybookers

Be the first to add a comment!


Full Name: *
City: *
E-mail: **
This comment can be published in the print version of The Prague Post
Enter the text on the right:
 visual captcha
Comment: *
* Required field. In order to be approved for display, comments must have a first and last name and a city.
** E-mails are required and will only be used for internal purposes.

Most visited in Business Listings

Hotel booking
The Prague Post Online contains a selection of articles that have been printed in
The Prague Post, a weekly newspaper published in the Czech Republic.
To subscribe to the print paper, click here.
Unauthorized reproduction is strictly prohibited.