The Gazette 1967/71

federal incorporation differs from state incorpora tion in the United States. A company set up in this way would be able to operate freely in all member states and be ultimately responsible to the Community's Court of Justice in Luxembourg. A key aim is to encourage transnational mer gers that would produce world-stature companies. In fact, a requirement is that a European com pany ("Eurocompany") must be set up by at least two other existing companies headquartered in at least two different member states. This requirement is not as rigorous as it might seem. A Belgian subsidiary of a US company, for example, could merge with the parent's subsidiary in Germany. And any EEC firm could set up a holding in Luxembourg and merge with itself, though the Commission has said that the simple conversion of a company under national law into a company under European law is not envisaged. A Eurocompany could be formed only for these purposes: 9 to merge two companies headquartered in different member states; 0 to establish joint holding companies owned by firms headquartered in different member states; and • to establish joint subsidiaries by such firms. Although large firms have in the main been fol lowing the Commission's work with interest, the Commission believes medium-sized firms would benefit too, because most of them cannot afford the expensive legal help currently required to untangle the red tape of operating in more than one country. Differing national traditions posed several problems for the drafters of the Eurocompany statute. For example, there was the form of top management. Eventually, they chose the German model of a supervisory board for general policies and a management board for more day-to-day affairs. This led to the important question of worker representation on the supervisory board, which exists in Germany and is being planned in other member states. For, if workers were excluded from the board, Germans would not want to work for a Eurocompany. The Commission therefore suggests that workers receive one-third of the votes on a Eurocompany's supervisory board. Another problem was whether shares should be registered in the holder's name or simply be in "bearer" form, transferable like money. Many Europeans prefer bearer shares because it makes it more difficult for tax authorities to find out how much they receive in dividends. In Italy, only

bearer shares exist. The Commission's solution here was the simple one : either form is permitted. On taxes generally, the Commission is careful to point out that a Eurocompany would follow the same tax regime as the country in which it would be headquartered. But it could choose the country to pay taxes, as more than one head quarters is permitted. And it would have the right to deduct losses incurred abroad from profits at. home. The minimum capital level set is intended to allow medium-sized companies access but to ex clude small firms: $500.000 for mergers and hold ing companies, $250,000 for subsidiaries. By basing the law on the Rome Treaty rather than opting for a 1965 French proposal to enact identical statutes in the six national parliaments, the Commission has chosen the streamlined course. It has also taken a clear stand on four basically political issues that held up progress: whether Eurocompanies could issue bearer shares; whether workers should be represented on boards of management; what tax status Eurocompanies should have; and what companies (size and nationality) should have access. Little more than two years ago, work on the Eurocompany was stymied by the inability of the Six to agree on the question of access. This had followed a variety of Commission memorandums, reports by working groups and outside studies dating back to 1964. But eighteen months ago, under former Com missioner Hans von der Groeben, the Commission decided to publish a comprehensive plan even without a Council mandate. And last June, a few days before he resigned from the Gommission, Herr von der Groeben unveiled the result. Herr von der Groeben estimated that it would take at least two years for the plan to become reality, even if all went smoothly. Existing companies with merger plans cannot wait that long, and some have been studying the Agfa-Gevaert group's system of reciprocal investments. The Werner committee of experts studying economic and monetary union called for a Euro- company law in its interim report last May. The group, set up directly by the member states, said such a law would be "indispensable" for the proper functioning of such a union. Meanwhile, the Commission is proceeding on parallel work to harmonize existing national com pany law, work that can produce considerably quicker results. A third directive offered to the Council for approval would consolidate safe guards for minority shareholders, workers and 85