Societas Europaea (SE)

An SE (abbreviation for Societas Europaea) is a European stock corporation. This is created, for example, by the merger of two public limited companies from two European member states. This legal form, introduced in 2004, is intended to simplify economic activity in the European area. The SE enables companies to be founded according to largely uniform legal principles.

Founding an SE

There are four different options for founding an SE.

1) Merger

In a merger, two existing public limited companies merge to form an SE. It is important to note that the two companies must come from different EU member states.

2) Holding SE

Both stock corporations and limited liability companies are entitled to establish a holding SE. There are also two options for founding a holding SE. Either the two companies that merge are from different member states or from the same member state. However, this is only possible if at least one company has had a subsidiary or branch in another EU member state for at least two years, which is also subject to the law of that member state.

3) Subsidiary SE

The so-called subsidiary SE is created under the same conditions as a holding SE, but with the additional possibility that companies without limited liability can also establish a subsidiary SE. 4) Conversion SE

A public limited company that has been founded under the law of a member state can be converted into a Societas Europaea if it has had a subsidiary governed by the law of another member state for at least two years. In general, only companies from EU and EEA member states (Iceland, Liechtenstein, Norway) are entitled to form an SE. The legal entities that may form an SE depend on the respective form of formation. Only public limited companies are entitled to merge and convert SEs. Both stock corporations and limited liability companies may be authorized to establish a holding SE, and all companies or legal entities may participate in the establishment of a subsidiary SE, provided they meet the formation requirements.

Share capital

The minimum share capital of an SE is € 120,000

Liability

As with all other corporations, the liability of an SE is limited to the company's assets. The shareholders are therefore not liable with their private assets, but only with their share capital contribution.

Management of an SE

There are two different options for the management of an SE. On the one hand, the two-tier system can be used, consisting of a management board and a supervisory board, and on the other hand, a one-tier system can be used. In this case, only the Administrative Board is responsible for managing the SE.

Dualistic system

The dualistic management system of an SE largely corresponds to that of a German stock corporation. There is therefore a Management Board, which represents the company to the outside world

and manages the company. In addition, this is set up and monitored by a Supervisory Board.

Monistic system

The monistic management model, on the other hand, is strongly based on the American board system. Here, the so-called Administrative Board is responsible for both company management and supervision and control. The Board of Directors is appointed by the Annual General Meeting and in turn appoints managing directors who are responsible for representing the company and its operational business activities. The Board of Directors, on the other hand, is responsible for strategic decisions and supervises the Managing Directors. The Board of Directors is also entitled to dismiss the Managing Directors at any time - even without good cause.

Societas Europaea (SE)- an increasingly popular legal form

The Societas Europaea has become increasingly popular since it was founded in 2004. Around 3,400 SEs were active in Europe in 2020 (source: Hans Böckler Foundation). In Germany, there were around 413 operational SEs that year. Why the legal form is becoming increasingly popular could be due to numerous advantages, such as the simple relocation of the registered office or the choice of different management models.

Advantages and disadvantages of an SE

Advantages:

• Easier opening of new branches in other EU countries
• Free choice of registered office within the European Economic Area
• Simple relocation of the registered office within the EU
• Choice between different management models (dualistic & monistic) possible
• Good image - underlines European & international orientation of the company

Disadvantages:

• High formation costs (share capital: € 120,000)
• High start-up costs
• Higher costs for different regulations in the various countries.

Who is the SE suitable for?

The legal form of an SE is particularly suitable for medium-sized to large companies that would like to establish an international or European focus. If expansion into other EU countries is planned in the near future, this legal form is ideal. The SE is usually unsuitable for smaller companies or start-ups, as the enormously high start-up capital of €120,000 and the complex formation formalities often represent a major hurdle here.