The Gazette 1967/71

Market State A to set up a branch Y in Common Market State B. But, and this is the big but: there would then be two separate companies in existence, firm X in State A and firm Y in State B (its affiliale), with, needless to add, resulting tax difficulties and two sets of company laws to deal with (not to mention two sets of lawyers' fees!). Or, secondly, firm J in State A could set up a branch (succursale] called Y in State B, owned entirely by the firm X owners. In both cases, approval of the local government authorities to the setting up of a foreign- controlled company might have to be sought. Eventually, all such "approvals" will have to be abolished under the law of the Common Market, but this will take some time. So, for example, an American company might not be able to buy its way into a company in the Common Market without the approval of the State involved. And the same applies even between some of the Com mon Market member States themselves (at present). Again, a company could transfer its head quarters from one State to another State; but this would not really work within the Common Mar ket, as it is, without liquidating the original head quarters and starting business afresh in the new Common Market country of choice; which really would not make sense to hard-headed and successful businessmen ! Now, the Treaty of Rome provides for the free circulation of persons — including companies (which the continentals quaintly call "moral per sons"). This means that once full harmonisation of company and tax laws has been achieved, many of the matters which we have discussed will no longer be very great problems. However, some will remain, and herein lies the purpose of the Euro pean company. As mentioned, about three months ago, the Commission of the EEC approved the draft of a European Common Market Law to establish such companies. It is understood that, nine cases out of ten of such approvals become law within the Common Market. The underlying idea is to make available to enterprises a legal form which will apply uni formly throughout the Common Market Com munity. This, it is hoped, will facilitate co-opera tion, within a sound organisational framework, between enterprises with headquarters in different member States. In so doing, it would help inte grate them in the Common Market. From the legal point of view, the S.E. will be interpreted uniformly by the Court of Justice of

the European Communities. It is not the aim of the S.E. to replace the individual companies set up under the law of each member State. It is only designed to facilitate certain operations involving companies from different member States, such as mergers, the establishment of a holding company, or the founding of a joint subsidiary. It is an addition to the legal framework of the Common Market economy. Co-ordination of national com pany laws and creation of the S.E. necessarily complement each other. The essential obstacle to be jumped—and it is far worse to negotiate without fault or penalty than the "big double" bank permanent showjump at the Royal Dublin Society, Ballsbridge—remains the fact that the Common Market is divided into areas governed by separate national laws. There is, as we in Ireland know, also the closely related psychological element. Enterprises do not want to change their "nationality" and hesitate to become "foreigners". In some cases it would make econo mic sense to join forces with enterprises from other member States, but this is often not done for reasons of national prestige. The instrument to circumvent all these difficul ties is the S.E. It is still only in draft form—and the essence of the draft will be, if enacted, some thing as follows: 1. There will be a common legal framework for a company throughout the Common Market, wherever registered (presumably within the Common Market). 2. In the beginning, three specific economic opera tions will be served : (a) Mergers between two companies which have their headquarters in different member States. (b) Establishment of holding companies under Common Market law by companies having their headquarters in different member States. (c) Establishment of joint subsidiaries. The rules (equivalent to the memorandum and articles of association of a common law company) of the draft S.E. law apply only to S.E. companies. New such companies have to be founded (if, when, and after the draft becomes law). The simple conversion of companies operating under national law into companies under Common Mar ket law (i.e. S.E.s) is not intended. The proposed law will, therefore, not replace existing company laws but will operate side by side with them. The minimum capital required for a Euro pean Company (S E.) will be 600,000 so-called 87