Facts & Figures
A set of slides providing up-to-date facts and figures on the SE. Click on pictures to enlarge.
Overview of current state of SE foundations in Europe
Since 2005 the European Trade Union Institute in Brussels has been regularly issuing information on registered European Companies (SE) through its European Company Database, available online at http://ecdb.worker-participation.eu. ECDB information is compiled by Anders Carlson, Melinda Kelemen and Michael Stollt with support from the SEEurope network. The network, under the leadership of the ETUI, involves legal, economic and industrial relations experts from basically all EU member states.
The SE legislation represents a milestone not only in the field of EU Company Law but also in the field of European industrial relations. The SE Directive contains provisions for a legally binding procedure of company-level negotiations on employee information, consultation and participation (at board level). The ECDB aims to provide information on the use of the SE statute and to monitor implementation of the SE Directive in the field of employee involvement.
Total number of registered European Companies (SEs)
Since the introduction of the European Company Statute in October 2004, the number of SEs has increased steadily year by year (at almost exponential growth rates). As of 21 March 2014 the ETUI‘s European Company Database (ECDB) provides information on a total of 2,125 SEs. However, this rather impressive total should not blind observers to the fact that many SEs do not conform to the standard definition, for they are partly SEs without or with very few employees (‘empty/micro SEs’) and/or partly even without a specific business purpose. Less than one-seventh of the SEs today have been identified by the ECDB as having more than five employees (‘normal SEs’). In practice, however, the number of ‘normal SEs’ is likely to be significantly higher as a consequence of the persisting gap in employment information caused by the insufficient publication rules in the SE legislation.
Geographical Distribution of European Companies
SEs can currently be found in 25 of the 30 countries of the European Economic Area (EEA). An important observation when looking at the SE and its impact is the very unbalanced distribution of SEs between the different countries. The Czech Republic (70 per cent) and Germany (14 per cent) host by far the highest share of the overall number of SEs. Besides these two countries, significant SE home countries are the United Kingdom, Slovakia, the Netherlands, Luxemburg, France, Austria, Cyprus and Ireland. The TOP-10 SE countries together are home to approximately 97 per cent of all SEs.
By 21 March 2014, only 289 SEs (14 per cent) had been identified by the ECDB as ‘normal SEs’ in the sense that they are known to have both business activities and more than 5 employees. Germany is home to almost half of the identified normal SEs (138), followed by the Czech Republic (66), France (13) and the Netherlands (13). But especially in the Czech Republic, the number of normal SEs is likely now to be significantly higher as a result of the evolution of originally employee-free SEs. Most Czech SEs are set up as employee-free shelf companies by specialised providers. Later on, the shelf SEs are sold to customers that wish to establish businesses quickly. As often little is known about the further development of the workforce after sale they have to be classified in the database as so-called ‘UFO SEs’.
Number of new SE registrations per year
The SE had a relatively slow take-off during the first years following the entry into force of the SE legislation in October 2004. There were two reasons at the beginning: there was a certain reluctance towards a completely new company form and implementation of the SE Directive in a number of Member States was delayed. In 2008, the number of new SE registrations doubled from 88 (2007) to 174 new SEs. In the following two years the acceleration halted again. However, in 2011 the number of SE registrations rose again sharply, with 362 newly set-up SEs (compared to 211 new SEs in 2010). In 2012, another peak was seen, with 569 SEs registered.
A large part of SE dynamics can in recent years be attributed to the Czech Republic. The country hosts 70 % of currently registered SEs set-up in the 30 countries of the European Economic Area (7 countries + Croatia host none). Between 2011 and 2014 four out of five SEs (78%) were set up in the Czech Republic.
Sectors in which (normal) SEs have been set-up
The fact that most SEs have been set up by way of a newly established subsidiary creates difficulties with regard to their grouping by sector of activity. Especially in the case of activated shelf SEs, the initial registrations in the commercial register often have little to do with what one can identify when the companies show up on the internet. Providing a reliable picture of all of the SEs is therefore not possible with the data available.
For this reason, the figure concentrates on the 289 normal SEs identified so far, in relation to which the data are more reliable and complete. It shows that more than half of them have been set up in the service sector, mostly within financial services and commercial services. A considerable number of normal SEs can also be found in the metal and the chemical sectors. In contrast, in some sectors – such as the transport and textile industries – very few SEs have been registered so far.
Board structure of normal SEs
The SE‘s General Meeting of Shareholders is free to decide on the board structure of the SE. It is free to choose between a monistic board (as is the case in, for example, the UK and Sweden) or a dualistic board structure with a management board and a separate supervisory board (as, for example, in Austria and Germany). This indeed represents a key innovation introduced by the SE since in many countries a certain board structure for national companies is prescribed by national company law.
Overall, the picture reveals a clear prevalence for SEs governed by a dualistic board structure. Of the 2, 125 SEs, 81 per cent have a supervisory board and a management board, compared to only 15 per cent with a monistic board structure. For 4 per cent of SEs the board structure is unknown. Of course, one has to take into consideration that four out of five SEs are registered in Germany and the Czech Republic, which belong to the group of countries in which national public limited companies must have a two-tier system of corporate governance.
Analysis points to path dependency with regard to the corporate governance system. In eight of the ‘Top10-SE countries’ the majority of SEs have opted for the ‘traditional’ national board system. This is especially the case for the Czech Republic where 98 per cent of SEs have stayed with the well-known two-tier system. In Austria, however, only four of the 19 Austrian SEs have opted for the traditional separation into a management and a supervisory board, whereas 15 SEs decided that an administrative board was more suitable for them. Also in Germany, almost 50 % have chosen a monistic instead of a dualistic board system.
Forms of foundation
The SE Regulation describes 4 different ways of setting up an SE (Merger/Holding/Subsidiary/Conversion). The SE regulation also allows the SE to set up further SEs as subsidiaries. In practice, often an SE (‘incubator SE’) serves as a vehicle to set up further SEs, which are afterwards sold as ‘ready-made companies’ to interested clients. The new owner subsequently activates the SE by transferring employees to it and/or by starting business activities.
Analysis of the form of foundation leaves no room for doubt about the preferred way of registering an SE: 78 per cent have been set up by way of subsidiary (mainly of another SE), 8 per cent by conversion, 4 per cent by merger and only 1 per cent by creating a new holding company. For 9 per cent of SEs the form of foundation is unknown. For the Czech Republic the picture is even clearer: basically all (98 per cent) SEs registered there have been set up by way of newly created subsidiaries.
The prevalence of subsidiary SEs represents a creeping threat to worker involvement rights in the SE. In this regard, it has to be borne in mind that mechanisms for securing employee rights to information, consultation and participation are guaranteed only at the moment of founding of SEs. It is accordingly difficult to negotiate workers’ rights at a later point in time, when the company has recruited its employees. Indeed, there have already been several cases of employees being deprived of their involvement rights through the activation of a formerly employee-free SE company.
Forms of Foundation (normal SEs)
If the analysis is limited to the 289 SEs identified as ‘normal’ (>5 employees) a different picture emerges. Here, conversion is the most frequent form of foundation (40 per cent), followed by subsidiary SEs (38 per cent), merger SEs (19 per cent) and holding SEs (2 per cent). A large proportion of normal subsidiary SEs, again, were originally created as inactive companies and subsequently activated by acquiring employees.
SE founding has so far been only rarely used as a tool for cross-border mergers within or between large companies with employees in many European countries. Basically, all larger SEs have preferred not to immediately merge (all) their national subsidiaries into the new SE parent company. Instead, usually only the parent company was converted into an SE and the national subsidiaries continued to exist as separate legal entities. However, later on, an SE can still merge its national subsidiaries into the SE parent company. The latest indications are that this merging practice of subsidiaries may increase in the future.
Transfer of seat – outward and inward
The idea of the SE is to provide the company with a large degree of flexibility and mobility within the European internal market. For this reason, the SE can transfer its registered seat to a different EEA member state. This transfer of seat results neither in the winding up of the SE nor in the creation of a new legal entity.
ECDB data reveals that SEs have started to use this specific flexibility with regard to cross-border mobility: between October 2004 and March 2014, less than 4 per cent (79) of the currently registered SEs migrated to another EEA country, sometimes immediately after their registration.
Hence, the highest net inflow (incoming SEs minus outgoing SEs) can currently be observed for the United Kingdom (+11 SEs), Austria (+5) and Cyprus (+6). However at least 22 SEs in the United Kingdom filed a transfer proposal at Companies House a while ago, although they are still located in the United Kingdom.
On the other hand, the highest net outflows have occurred in the Netherlands (–15) and Denmark (-7). Luxembourg is the most dynamic place with a total of 25 SE transfers of seat, of which 14 were outbound and 11 inbound. Surprisingly, the Czech Republic with its total of 1495 SEs only accounts for ten transfers of seat (–4).
The motives usually remain unknown as they are in general not published by the companies (and even if they were, there would be no certainty that the company publicly declares the real drivers). Whereas employee participation apparently seems not to have constituted an important driver for SE mobility, at least in some cases tax reasons are likely to have played an important role.
Employee involvement in SEs
Art. 12 (2) SE Regulation conditions the SE’s registration to the prior existence of an arrangement on employee involvement (agreement or standard rules) or a decision of the special negotiating body (SNB) not to open or to abort negotiations. In contrast, ECDB data show that an SNB has not been set up in the overwhelming majority of the currently 2,052 SEs. The key reason for this low number lies in the high share of SEs set up by way of a subsidiary SE which, by definition, has no employees at the moment of founding and where it is technically not possible to form an SNB.
By 21 March 2014 an arrangement on worker involvement had been concluded in only 105 of the currently established (2,125) SEs. In 51 SEs, (transnational) information and consultation rights – usually a so-called ‘SE Works Council’ or similar body – have been negotiated. In 55 SEs the workforce not only has the right to transnational information and consultation but also to participation in the SE’s supervisory or administrative board.
Worker involvement in the "normal SEs"
In 55 SEs the involvement rights include board-level participation, thereby adding an important dimension for workers’ voice in company decision-making. The geographical distribution reveals that 45 of them have their registered seat in Germany, 6 in France, 2 in Austria and 1 in Hungary and Cyprus (originally registered in Norway).
The SE regulation ensures that the employee board-level representatives will have the same rights and obligations as the members representing the shareholders. Today, around 163 employee board members represent the interests of the workforce on SE supervisory or administrative boards. A fundamental innovation introduced by the SE legislation is the transnational component of participation at board level. In a number of SEs, employee representatives from several countries sit on the board and represent the interests of the European workforce as a whole. SE employee board-level representatives today come from 16 different countries (AT, BE, CH, CZ, DK, FR, DE, HU, IE, IT, NL, NO, PL, RO, UK, US).
Nationality of workers’ representatives in SE boards
The EWPCC has identified at least 156 worker representatives on the supervisory and administrative boards of SEs. Their share ranges from a single member to up to half of the board seats.
The selection procedure of the board members differs from one SE to another. In most cases, the SE agreements on worker involvement provide the SE Works Council with the decisive role in determining the employee representatives to the board.
The most fundamental innovation brought about by the SE legislation was the possibility to internationalise the composition of employee representation on company boards. In general, employee mandates on the board are allocated in proportion to the geographical distribution of the workforce across countries. The employee board-level representatives come from 16 different countries. A total of 77 per cent of them come from Germany, which can be explained by the high number of SEs with board-level employee representation rights headquartered in Germany, and the commonly found concentration of the workforce in the home country.
In many cases, the SE has thus led to an internationalisation of the boardroom; experience with board-level employee representation has in this way been indirectly spread to countries in which such representation does not exist in the domestic corporate governance system.
‘Planned SE’s - This category includes companies in which the official transformation process has already started; for example, the annual meeting of shareholders has approved the transformation plan and/or an SNB has been established and the company’s intention has been made public. Some of the companies have been on the list for a long time. In these cases, the intention is still alive and thus the companies are still listed as ‘planned’.
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What are the sources for the SE data?
In the absence of a central European registry, the main sources for the ETUI's European Company Database (ECDB) are the national registries, the Supplement to the Official Journal of the European Union (TED) and further research of our own. According to Art. 14 I of the SE Regulation, the information provided on TED is fairly limited and includes, for example, no information at all about employee involvement. There can be a considerable delay between an SE’s registration and its appearance on TED. Moreover, while all SEs registered should appear on TED, this is not always the case. The ECDB therefore contains a higher number of SEs than TED.
For these reasons, the ECDB team researches additional information via national registries, (internet) enquiries and through the ETUI SEEurope network which consists of researchers in, basically, all EU member states. The specific sources are always indicated in the last column of each company factsheet (field ‘References’).