The European Cooperative Society (SCE) aims to reduce existing cross-border obstacles for cooperatives and to make it easier for them to operate across European borders. The SCE thereby complements the legislation on European Companies (SE) which has enabled companies to set up as a European public limited company. As in the case of the SE, the SCE legislation consists of a Regulation on the Statute for an SCE (1435/2003) and an accompanying Directive on worker involvement (2003/72/EC). The Regulation came into force from 18 August 2006, by which date the member states also had to transpose the Directive into national law.

EU CONSULTATION ON THE SCE

Jan Cremers, AIAS / SEEurope

The Regulation requires the Commission to present a report on its application five years after its entry into force. The Commission launched a study which was finalised in October 2010. The responsible Directorate General Enterprise (the SME section) launched mid April 2011 a web-based consultation on the functioning of the European Cooperative Society, to which the ETUC has contributed with a critical assessment. In November 2011 the European Commission summarised the contributions received in a synthesis document.

In the Single Market Act, the Commission announced its intention to examine whether the SCE Regulation needed revision or simplification in order to better serve the interests of cooperatives. The Commission stated that the slow take-up of the Statute for a European Cooperative Society must be looked into. Before taking its final decision the Commission would have to consult stakeholders. Directorate General Enterprise (the SME section) of the European Commission launched a web-based consultation in mid-April 2011 on the functioning of the European Cooperative Society. The purpose of the consultation was to allow stakeholders to give their views on the findings and recommendations of a commissioned external study drafted by the consortium of EURICSE from Italy. According to the Commission, the external study provided a comprehensive picture of the rules applied to the SCE in EU Member States and EEA countries, the Regulation’s impact on national legislation on cooperatives and its influence on the promotion of the cooperative movement. It identified only 17 existing SCEs. The authors concluded that the main reason for the limited success was the lack of awareness of the existence of the SCE, as well as the complexity of the text of the Regulation. They call the European image the most positive factor affecting the setting up of an SCE.

THE ETUC CONTRIBUTION TO THE CONSULTATION

The ETUC stated very clearly in its contribution to the consultation that the SCE should not be seen as an end in itself but rather as a means to achieve broader interests in the context of Social Europe. The fact that only 17 SCEs had been established by the time of the external study should therefore not be seen as a simple failure of the SCE legislation, but also possibly as clear evidence of the limited need for a European company form on the part of cooperatives. According to the ETUC, a thorough needs assessment with regard to the SCE is still lacking and the Commission has not touched upon the basic question of whether there is a real need to develop this kind of EU legislation. Given the small number of SCEs and the fact that the phenomenon is unknown to a broader audience this is a legitimate question.

The ETUC takes note of the fact that the related Directive has not been assessed. Although the exact aim of the call for tenders was to award a contract for a study on the implementation of Regulation 1435/2003 on the Statute for European Cooperative Society in the EU Member States and EEA countries (Norway, Iceland and Liechtenstein), the study contains some fairly strong statements about the negative effect of worker participation provisions on the use of the SCE in different countries without serious examination of the Directive. According to the ETUC, simplification in the interests of increasing the number of SCEs should not be seen as an end in itself. Rather, simplification should always be seen in the context of its impact on the goal of protecting stakeholders, including workers’ rights, and on national culture and traditions. Areas for possible reform and simplification have to be tackled without jeopardising essential guarantees of transparency.

RESULTS OF THE CONSULTATION

The European Commission summarised the contributions received in a synthesis document. The synthesis attempts to give an account of the responses as they were presented. The consultation document contained twelve questions related to the most positive and most negative factors affecting the setting up of an SCE, the amount of its capital, the requirement of having founders from at least two Member States, the system of reference to national legislation, the number of options offered to Member States and the autonomy of the Regulation with regard to national rules and asked for suggestions for ways forward for the SCE. The European Commission received 32 responses; only three contributions criticised employee involvement.

The text of the consultation synthesis was published by the European Commission on the EC website in November 2011. It is a summary of the contributions received and attempts to give an account of the responses. The outcome can be sketched out in a few lines:

  • The most important point is that there is a serious lack of awareness, combined with inadequate promotion by Member States;
  • respondents declare that the SCE has only a symbolic character;
  • implementation has been late in several countries and with a strong reference to national legislation; as a consequence, the SCE is or can become the ‘prisoner’ of national law;
  • the existing national cooperative form is mainly used by national entities that are well anchored in their local territory, largely with activities that have a domestic dimension;
  • most respondents question the added value; there are neither real legal nor fiscal advantages and national laws are seen as more flexible and simple.

The reference to national laws and the number of options based on a broad range of national legal forms and traditions can be seen as real obstacles to SCE creation. However, one must realise that the SCE cannot operate properly without the contribution of national law provisions. Taking into account other items that are popular in European debates on modernised company law it is remarkable to read that neither the possibility to proceed to a legal merger of national cooperatives in order to create an SCE nor the possibility to transfer the registered office to another Member State were mentioned as advantages offered by the Regulation by any of the contributing associations representing cooperatives at EU or national level. The conclusion is formulated that all cross-border activities may be performed nowadays by means of national cooperative forms.

As already mentioned, the workers’ participation element was not a big issue: 3 respondents declared that employee participation ‘may be an obstacle’ to SCE creation. One respondent considered negotiations as cumbersome and board-level representation as ‘an impediment’ to the smooth management of the company.

FOLLOW-UP

The text of the consultation synthesis was published by the European Commission on the EC website in November 2011. It is a summary of the contributions received and attempts to give an account of the responses. So far, Commission Services has not taken a position on the comments expressed and summarised in the synthesis. The results serve, together with the findings of the study, ‘as a basis for a Commission report to the European Parliament and Council’ on SCE application. In the near future the European Commission plans to organise activities that might help to further clarify whether the regulation needs a certain revision or simplification in order to better serve the interests of cooperatives.

Two conferences will be held on cooperatives in 2012: in April 2012 in Brussels and in September 2012 in Cyprus during the latter’s EU Presidency.

RELATED DOCUMENTS

BACKGROUND: "THE SCE – THE SMALL SISTER OF THE SE"

The European Cooperative Society (SCE) constitutes another step in the completion of the EU’s internal market. It aims to reduce existing cross-border obstacles and to make it easier for companies to operate across European borders, thereby enhancing their competitiveness. In this sense, the SCE complements the legislation on European Companies (SE) which has enabled companies to set up as a European public limited company. The SCE fills the gap regarding the transnational activities of cooperatives. As in the case of the SE, the SCE legislation consists of a Regulation on the Statute for an SCE and an accompanying Directive on worker involvement. The Regulation came into force from 18 August 2006, by which date the member states also had to transpose the SCE directive into national law.

According to the wording of the SCE regulation the completion of the internal market not only means that barriers to trade should be removed, but also that the structures of production should be adapted to the Community dimension. For that purpose it is essential that companies of all types the business of which is not limited to satisfying purely local needs should be able to plan and carry out the reorganisation of their business on a Community scale.

According to the EU Commission there are around 300,000 cooperatives in Europe, employing 2.3 million people and providing services to 83.5 million members. Although cooperatives exist in all member states their significance and the rules governing them vary substantially from country to country. The enormous differences proved a major obstacle to the Commission’s aim of harmonisation and caused a long delay (more than 30 years). Significant differences between member state regulations include the possibility of investment by non-members, voting rights (“one-member, one vote” versus “weighted voting”) and the minimum number of members required to found a cooperative.

The approach used in the SE legislation paved the way for the SCE. Instead of “inventing” a completely harmonised European Cooperative which would look the same in all countries the SCE statute establishes a European framework. On many questions, the SCE statute leaves a degree of discretion to the member states. Moreover, on all issues not regulated by the SCE statute national law will apply. For tax purposes, for example, an SCE is treated like any other multinational company according to national fiscal legislation.

An SCE can be established by natural or legal persons living or having their seat in different member states. This differs from the SE in that natural persons can also be actors. The minimum capital of an SCE is EUR 30,000.

Formation can take place:

  • by foundation of a new cooperative ('ex novo'), by five or more natural persons, by two or more legal entities or by a combination of five or more natural persons and legal entities;

  • by a merger of two or more existing “national Cooperatives”; or

  • by a conversion of an existing “national Cooperative”.

As is the case for the SE, there must always be a cross-border element. For example, an existing cooperative can only transform itself into an SCE if it has an establishment or subsidiary in another member state. In the other listed cases natural persons or legal entities must always come from at least two member states. This requirement shows the rationale behind the SCE statute which is to promote and facilitate the cross-border activities of cooperatives operating in different member states. It is not meant to be an alternative form for cooperatives which operate (almost) entirely in a single member state.

An SCE – just like an SE – can relocate to another member state without having to be wound up and re-register. Moreover, its founders can also choose whether the SCE shall be governed by a monistic board structure (administrative board) or a dualistic one (management board plus supervisory board). This freedom of choice exists irrespective of the country in which the SCE is seated.

Concerning the important topic of worker involvement (information, consultation and board-level representation rights) the SCE follows almost exactly the procedures and standards set by the SE. This means that – prior to its registration – an agreement shall be negotiated between the employer and a special negotiating body (SNB), the latter being composed of representatives from all member states in which the future SCE has employees. The “Directive on employee involvement in the SCE” lays down standard rules which shall apply if the social partners do not reach an agreement. These minimum rights include the setting up of an “SCE works council” with transnational information and consultation rights. Whether the SNB has the legal right to ask for representatives on the supervisory or administrative board depends on whether such rights existed before in at least one of the participating cooperatives (before/after principle). If certain thresholds are met the standard rules on participation apply automatically (for example, in the case of a merger if at least 25% of the employees previously had participation rights; in the other cases the threshold is 50%).
A special procedure applies to SCEs established by natural persons or by a single legal entity and natural persons, which employ less than 50 employees or employ 50 or more employees in only one member state. Worker involvement in these SCEs is governed by the national provisions for cooperatives of the country in which the SCE has its registered office. For its subsidiaries and establishments, the provisions of the member state where these are situated shall apply. This return to national regulations in the field of worker involvement is one of the few special features of the SCE statute where the mechanisms differ from SE legislation.

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