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3.4.2 European Cooperative Society

 

After ten years of negotiations, EU Member States adopted on 22 July 2003 the Statute for a European Co-operative Society (known by its Latin name of ‘societas cooperativa europaea’ or ‘SCE’). This Statute gives co-operative businesses operating in more than one Member State the option of being established as a single entity under EU law. Co-operatives will thus be able to operate throughout the internal market with a single legal identity, set of rules and structure. They will be able to expand and restructure their cross-border operations without the costly and time-consuming exercise of setting up of a network of subsidiaries.

But the statute will not only be of interest to co-operatives. It also provides a legal instrument for companies of all types wishing to group together for their common benefit, for example in order to access markets, achieve economies of scale or undertake research or development activities. It will even enable 5 or more European citizens from more than one Member State to create a European Co-operative Society.

The new Statute parallels the European Company Statute, adopted in 2001. Instead of “inventing” a completely harmonised European Cooperative which would look the same in all countries, the SCE statute only 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. It is, therefore, an optional instrument. Unlike with the European Company (SE) it will be possible to create an SCE from scratch (as well as by merger or conversion of an existing company) by individual citizens as well as by legal entities.

The minimum capital requirement of € 30,000, is one-quarter of the amount required to establish an SE, but this did not encouraged its wider use, as described bellow. As with the SE, workers’ acquired rights to information, consultation and participation are protected under the provisions of an attached Directive. 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

The Statute was operational in 2006. The Commission submitted similar proposals for a European Association and a European Mutual Society (insurance society).These draft Regulations were accompanied by similar Directives imposing the employees involvement in the decision making process of their European businesses. Both draft Regulations (and annexed Directives) were withdrawn in 2006 by the Commission due to lack of progress in the legislative process.

Limited Success

The 17 existing SCEs show that the SCE Regulation has had only limited success. This is also demonstrated by the fact that the harmonization (or rather, indirect approximation) effect on the national cooperative legislation has been rather limited.

The limited success of the SCE Regulation can be attributed not only to legal causes, but also to other factors, like the lack of cognitive awareness and the small scale of cooperative operations. Interestly, although Italy did not implement the SCE regulation, it has the highest number of SCEs.

The SCE Regulation is too complex, and, more specifically, the system of legal sources requires some changes in several respects:

  • The numerous references to national law produce negative effects;
  • The reference system is complex, both regarding the way references to national law are made (particularly in the case of the options category, which generates several interpretative problems), and with respect to the national source inasmuch as the SCE statute makes an inopportune distinction between references either to national cooperative law or to national public limited-liability company law, as well as to national law in general.

There is clearly a need for strengthening the SCE Regulation relative to national laws, and at the same time strengthening the freedom of self-regulation by statutes, proposing that the SCE Regulation should no longer perform a merely symbolic function.

Formation of SCE can take place:

  • by foundation of a new cooperative, 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.

An SCE – just like an SE – can relocate to another member state without having to be wound up and re-register.