The reason behind the European company was to create a European company with its own legislative framework, which would allow companies incorporated in different member states to merge or form a holding company or joint subsidiary, while avoiding the legal and practical constraints arising from the existence of different legal systems.
Introduced in Cyprus by Law 98(I)/2006 and secondary legislation.
The formation of a European company is either:
- A merging of two or more public or European companies from at least two different member states;
- A creation of a holding European company by two or more public or private limited liability companies, including European companies, from at least two different member states or if it had for at least two years a subsidiary or branch in another member state;
- A result of a set up of a subsidiary by two or more companies, including European companies, from at least two different member states or an existing for at least two years subsidiary or branch in another member state; or
- A conversion of a Cyprus public company, having for at least two years a subsidiary in another member state.
- The minimum required share capital must be at least €120,000 ($164,000);
- The registered and head office can be situated in Cyprus, but this is not mandatory, it can be different addresses;
- It must be registered in the local Commercial Registry and the registration is published in the European Companies' Official Journal;
- The statutes of a Cyprus European company must include its name, registered office and objects of the company. They must also state whether there is a one-tier or two-tier board structure and the number of the members;
- Accounting and audit is obligatory; and
- SE to be included on the name of the European Company.
Transfer of seat:
- There is no restriction on the move of the seat from one member state to the other. In Cyprus the concept of continuation is more important rather than winding up during the re-domiciliation process a long as this is allowable under the national legislation of the new jurisdiction.
- A special resolution of the shareholders is mandatory and must be filed at the Registrar of Companies. No decision for the transfer can be taken two months after publication of the transfer proposal.
- The legislation protects the Creditors' rights in case of company's relocation.
- The company is recorded always in one national register.
- Transfer is effective on the date when the company is registered under the commercial registry of the new member state.
- If an SE wishes to transfer its seat from Cyprus to a jurisdiction outside the European community then the company must follow the procedure of winding up and publish it in the European Official Journal.
The key aspect one would look for before choosing a location for an SE is the tax system of the host country. The tax system of Cyprus makes it an exceptionally smart and striking location for an SE, as it comprises low tax rates, which is most favourable, as well as a vast network of double tax treaties and a straight-forward, easy, and most importantly up to date tax legislation. Nonetheless, following the complete implementation of the EU Merger Directive by Cyprus, companies that pre-existed in other member states can, by way of a merger, transform into a Cypriot SE devoid of any tax charge.
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