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European company in Latvia

As of 8 October 2004 it is possible to establish a new type of undertaking in Latvia – a European Company (Societas Europaea – SE), which can transfer its registered office from one EU Member State to another without winding-up of the company or creation of a new legal entity in another Member State. Furthermore, a SE may transfer its registered office not only within the EU, but also to Iceland, Norway and Liechtenstein, which are not EU Member States. In Latvia, registration of a SE is performed by the Register of Enterprises. SEs are treated like public limited companies (PLC) and are governed by the regulations of the respective Member State on operation of such companies.

Establishment of a SE is determined by the Council Regulation No. 2157/2001 on the Statute for a European Company (SE). The aim of this Regulation is to implement a mechanism that would allow various undertakings from different Member States to establish a single European company with a unified legal framework in all EU Member States. The Regulation offers several options to promote cross-border cooperation: 1) cross-border merger of public limited companies; 2) establishment of a holding company within the framework of which the merged companies continue to exist; 3) transfer of the registered office of a SE to another EU Member State without winding-up of the company. The Regulation also allows to transform an already existing public limited company to a SE and to establish a common subsidiary of the SE.

Until 2004, in order to transfer the registered office of a company to another EU Member State one had to wind-up the company in its country of origin and to establish a new company in the desired EU Member State or had to carry out merging or absorption procedures.

Transfer of SE

Operations of a SE are governed by the laws of the state where the registered office of the respective SE is located. Before the registered office can be transferred, a certificate confirming that all necessary actions and formalities are concluded and changes can be made must be obtained from the competent public authority. A SE cannot transfer its registered office in case of winding-up, liquidation, insolvency, cessation of payments or other similar processes.

A management or administration body must prepare a report explaining and justifying all legal and economic aspects of the transfer and also explaining how this transfer will affect shareholders, creditors and employees. Each Member State may adopt regulations regarding SEs registered in this state to ensure decent protection of rights of those minority shareholders, who are against the transfer of the registered office.

According to the Regulation, a 'SE which has transferred its registered office to another Member State shall be considered, in respect of any cause of action arising prior to the transfer as determined in paragraph 10, as having its registered office in the Member States where the SE was registered prior to the transfer, even if the SE is sued after the transfer'.

The name of SE

The abbreviation “SE” is preceding or following the name of the company. Only SEs may use this abbreviation; however, companies and other legal entities, which were registered before the Regulation came into force and have “SE” in their names, do not have to change the name of the company.

The equity capital of a SE is expressed in euro. The minimum amount of signed equity capital (assumed liabilities) for a SE must be no less than EUR 120,000 (approximately LVL 84,000), for a public limited company registered in Latvia – LVL 25,000 (except credit institutions and insurance companies), and for a limited liability company – LVL 2,000. The Regulation provides four options on how such companies may be established and who may do it. It can be done by merging public limited companies, merging a public limited company with a limited liability company, establishing a European company as a holding company, merging an undertaking with another legal entity, establishing a European company as a dependant company or by transforming an existing public limited company to a SE, if it has had a dependant company in another EU Member State.

Two layers on management and co-determination

The SE may have a two-tier or one-tier system. The two-tier system is comprised of a general meeting of shareholders, supervisory body and management body. In its turn, the one-tier system includes only a general meeting of shareholders and management body. The choice of the structure is provided for in the articles of association.

The Commission Regulation No. 2157/2001 allows Member States to limit certain rights of a company related to registration of a SE; however, such limitations can only be based on national interests, and a possibility to revise such cases in the court must be envisaged.

A merging procedure cannot be declared as invalid after completion of the SE registration procedure. Failure to carefully examine the legality of a merger may serve as grounds for winding-up of a SE.

Involvement of employees in a SE is governed by the provisions of the Directive 2001/86/EC. If management or administration bodies of the participating companies develop a plan for formation of a SE, in order to start negotiations with the representatives of employees about involvement in the SE, they must as soon as possible after the merger or the draft terms for formation of a holding company are made public, or after an agreement to create a common subsidiary or to transform it to a SE is made, carry out all necessary actions, which include providing information about the participating companies, their subsidiaries or branches, as well as their number of employees. For this purpose, a special negotiating body must be created representing employees of the participating companies, respective subsidiaries and branches. Member States may envisage that representatives of trade unions must be included in the above-mentioned body, irrespective of whether they are employees of one of the participating companies, a subsidiary or branch.

If different participating companies have implemented several types of involvement, the special negotiating body must agree which of them should be introduced in the SE. When a SE is established by transforming an existing company where involvement of employees is already being implemented, the agreement is not mandatory. If there have been no regulations regarding involvement before the registration of a SE, also implementation of such regulations is not mandatory. Member States shall carry out corresponding measures in accordance with the EU law to eliminate misuse of SEs, when their aim is to deprive employees of their involvement rights or to prevent them from acquiring such rights.

A representative body of employees shall consist of employees of the SE, its subsidiaries and branches, who are elected by other employees or appointed by representatives, or by the whole staff if there are no representatives. Members of the representative body are elected or appointed according to the national laws and regulations, and practice. Any member of the management body of a SE, or in this case, the supervisory body, who is elected, appointed or recommended by the representative body or employees, depending on circumstances, is a fully-fledged member with the same rights and obligations as the members representing shareholders, including voting rights.

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