European company

What it means

A European company, Societas Europaea or SE, is a joint-stock company set up under an EU regulation and, in addition, under the law of the state where it has its seat. Its share capital must be at least 120,000 euros and its name must include the designation SE. Large German or French groups are typical examples.

Its main advantage is that it can move its seat to another EU state without being dissolved and re-founded. It also lets multinational groups unify their structure under one European brand and choose between a two-tier system with a board of directors and a supervisory board, or a one-tier system with an administrative board.

An SE cannot be founded from scratch like an ordinary s. r. o. It arises from a merger of joint-stock companies from different states, from companies in different states forming a holding or subsidiary SE, or from converting a joint-stock company that has had a subsidiary in another EU state for at least two years.

How it works in practice

SEs are rare in Slovakia, and Slovak companies use them mainly as part of international groups. An SE keeps its books and pays tax just like a Slovak joint-stock company: double-entry bookkeeping, annual financial statements, corporate income tax and usually an audit.

An SE has special rules on employee involvement: before formation, negotiations are held with employee representatives on information, consultation and possible participation in the company’s bodies. For groups with staff in several countries this is a time-consuming part of the process.

For smaller companies wanting to move their seat to another country, a cross-border conversion under the 2019 directive is often a simpler route today, requiring neither the 120,000 euro minimum capital nor a multinational structure.

What to watch out for

The most common mistake is choosing an SE for prestige without weighing the cost. Formation is complex and requires negotiations with employees, and running one is as demanding as a joint-stock company. For a smaller business the costs outweigh the benefits.

Moving an SE’s seat to another state has tax consequences similar to a cross-border conversion. Assets that leave the country may be subject to exit taxation, and the company must show that its real management is in the new state, or it may remain resident in the old one.