ANDREAS NEOCLEOUS & CO Assists The Republic of Cyprus in the Implementation of Council Regulation No 2157/2001 on the Statute for a European Company.

The concept of the "Societas Europea", a European corporate form transcending national boundaries and common to all member states, was first proposed in the late 1960s. More than 30 years later, on 8 October 2001 the Council of the European Communities adopted Council Regulation No 2157/2001 on the statute for a European company and the supplementary Council Directive 2001/86/EC with regard to employee involvement. The European Public Limited Company, otherwise known as Societas Europea ("SE") will be subject to Community law directly applicable in all EU Member States with effect from 8 October 2004. The Council Directive was implemented in Cyprus law by the provisions of the Supplementation of the Statute for a European Company with regard to the Involvement of Employees Law 277(I)/2004. Under Article 249 of the Treaty establishing the European Union, EU regulations have direct effect and therefore do not need a separate local implementation Act. However, a number of aspects of the SE regulation require implementation with local legislation. For this reason the Republic of Cyprus began a tender process for the implementation of the regulation. ANDREAS NEOCLEOUS & CO won the tender and has already delivered the statutory instrument and the necessary forms to the Registrar of Companies waiting the final approval by the Council of Ministers and the House of Representatives.

Agreement on the SE was one of the priorities identified by the EU Financial Services Action Plan (FSAP). Under the Regulation, an SE may be formed by creating a holding company or joint subsidiary or by merging companies located in at least two Member States or by converting an existing company incorporated under national law. The main defining feature of the SE is its ability to transfer its place of registration between different member states within the European Union without liquidating in one state and reincorporating in another. An SE can operate on a Europe-wide basis and is governed by Community law directly applicable in all Member States; for matters not regulated by the Regulation the provisions of Member States' laws which would apply to a public limited liability company in that state apply to an SE with a registered office in that state in relation Note (20) of the Preamble to the Regulation clarifies that the Regulation does not cover, inter alia, taxation matters. A business in the form of an SE can restructure quickly and easily to take advantage of the trading opportunities offered by the Internal Market.

Special mention needs to be made of employee involvement and taxation. Under the accompanying Directive on employee involvement, the creation of an SE requires negotiations on the involvement of employees with a body representing all employees of the legacy companies. If it proves impossible to negotiate a mutually satisfactory arrangement then a set of standard principles applies. On the other hand, the Regulation does not provide a comprehensive corporate law or tax code for the SE. The SE has been created to further the development of the internal market and to facilitate the carrying on of business on a Community scale. It is supposed to be a tax neutral vehicle and neither privileged nor disadvantaged in comparison with other Member States' public limited companies. The various E.U. Directives have been amended to take account of the SE and to achieve the above goals.

Through the efforts made prior to its E.U. accession, Cyprus has already put in place a tax regime that allows companies and businesses to carry out trading and investment activities on a European scale. Due to its fully E.U. compliant tax regime and a simple and flexible definition of the term "company" in the CITL, Cyprus should be able to further establish itself as a prime location within the European Union for holding companies in general and as a home state for SEs in particular.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mr Alexandros Sinka

Andreas Neocleous & Co

Neocleous House

199 Arch. MakariosIII Avenue

P.O. Box 50613

Limassol

CY-3608

CYPRUS

Tel: [phone]

Fax: [phone]

E-mail: [e-mail]

URL: www.neocleous.com.cy

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