European companies - Involvement of workers

This page was last modified on 02-11-2017

A European company (société européenne – SE), often referred to by its Latin name "Societas Europaea", is a company governed by Community law. It allows mergers between companies established in different European Union Member States.

As soon as a plan for the formation of an SE is drawn up, management must organise the creation of a special negotiating body (groupe spécial de négociation – GSN) to represent the employees of the companies involved.

Once created, the GSN must negotiate with the management on how employees will be involved in the SE.

Employees are not involved in the day-to-day management of the company but do participate in monitoring and strategic development.

In the absence of an agreement stating otherwise, the SE must apply the standard rules established by law.

Who is concerned

The following parties are affected by these rules regarding the involvement of employees:

  • the employees of the future European company;
  • the shareholders/partners wishing to create a European company.

How to proceed

Creating a special negotiating body (GSN)

As soon as a plan for the formation of an SE is drawn up, management must create a GSN.

The number of members on a GSN varies according to the number of employees working for the companies participating in the creation of an SE.

Number of seats

Each Member State in which employees from the businesses in question are located must have at least one seat and therefore one representative on the GSN.

Seats are allocated according to the number of employees in each Member State at the time the GSN is created: each country receives one seat for every 10% of the total number of employees.

Example: Luxembourg, Germany and Belgium each have two companies with the following number of employees:

Country

Employees company A

Employees company B

Total number of employees

Proportion

Number of seats

Luxembourg

400

1000

1400

70 %
(7 blocks of 10 %)

7 seats

Germany

200

300

500

25 %
(2 blocks of 10 % + 1 fraction of a block)

3 seats

Belgium

50

50

100

5 %
(1 fraction of a block)

1 seat

TOTAL

650

1350

2000

100 %

11 seats

The number of seats on the GSN will therefore be seven for Luxembourg, three for Germany and one for Belgium.

Specific provisions regarding mergers

If when the national rules on allocating members of the GSN have been applied there is no representative for the employees of the companies absorbed by the SE and that will cease to exist as separate legal entities once the SE has been formed, additional members must be added to the GSN to represent the employees of these companies, subject to the following two conditions:

  • the number of such additional members does not exceed 20% of the total number of members of the GSN;
  • any company that already has at least one representative on the GSN cannot be granted an additional representative.

If the number of companies that will cease to exist as separate legal entities exceeds the number of additional seats available pursuant to the 20% rule, these additional seats shall be allocated to companies in different Member States by decreasing order of the number of employees working for them.

Example: using the example above, we will assume that companies A and B are to create an SE by way of a merger.

It must be ensured that each company is represented on the GSN.

Luxembourg and Germany have seven and three seats respectively, so will have no difficulty in assigning a seat to each of their companies. Belgium, however, only has a single seat; if Belgian company B is absorbed by the future SE, it will no longer have a representative on the GSN. Belgian companies A and B will therefore be entitled to an additional seat on the GSN, allowing both companies to have a representative.

Country

Employees company A

Employees company B

Total number of employees

Proportion

Number of seats

Additional seats

Luxembourg

400

1000

1400

70 %

7 seats

None

Germany

200

300

500

25 %

3 seats

None

Belgium

50

50

100

5 %

1 seat

1 seat

TOTAL

650

1350

2000

100 %

11 seats

1 seat

Appointing members

GSN members are elected or appointed according to applicable national rules in each country.

In Luxembourg, GSN members are elected or appointed by employee representatives. They can either be chosen:

  • from among the employees of the company;
  • or from among representatives of the most nationally representative unions, provided that they have signed the participating company's collective agreement.

They are elected by simple majority:

  • by central representatives (délégations centrales);
  • by principal representatives (délégations principales);
  • or, in the absence of a staff delegation, by all employees.

Each seat must have a current member and an alternate member.

Negotiating an agreement

The GSN and the competent bodies of the participating companies are responsible for negotiating arrangements for the involvement of employees within the SE.

Negotiations shall commence as soon as the GSN is established and may continue for 6 months thereafter.

The parties may decide, by mutual agreement, to extend negotiations up to a total of one year from the establishment of the GSN.

Management must inform the GSN of:

  • the names of the participating companies;
  • the number of workers concerned;
  • the number of employees covered by an employee-participation scheme.

The GSN shall make decisions by an absolute majority of its members. Each member has a single vote. For negotiation purposes, the GSN may request experts of its choice to assist it with its work. Such experts may be present at negotiation meetings at the request of the GSN.

Content of the agreement

The GSN and management must conclude a written agreement.

As a minimum, the agreement must specify:

  • its scope;
  • the composition, number of members and allocation of seats on the representative body;

The representative body (organe de représentation – OR) will be the discussion partner of the management bodies of the SE in connection with informing and consulting employees.

  • the functions and procedure for informing and consulting the OR;
  • the financial and material resources to be allocated to the OR and the frequency of its meetings;
  • where applicable, the arrangements for implementing an information and consultation procedure in lieu of a representative body;
  • where applicable, arrangements for participation including the number of members on the SE's management and supervisory body which the employees will be entitled to elect, appoint, recommend or oppose;
  • the date of entry into force of the agreement, its duration, cases where the agreement should be renegotiated and the renegotiation procedure.

The participating companies, their subsidiaries and establishments, and the employees and organisations involved must respect this agreement.

Specific provisions in the event of establishment by transformation: employee involvement must be kept at an equivalent level to the existing involvement in the company to be transformed. The level of participation is considered to be equivalent when the management (one-tier system) or supervisory (two-tier system) bodies include a proportion of members appointed or elected by employees equal to that of the company to be transformed.

Standard rules applicable in the absence of an agreement

The standard rules below apply:

  • if the parties (the management bodies and the GSN) so decide;
  • or in the absence of an agreement between the parties at the end of negotiations;
  • or in the event that the agreement is rendered invalid.

If the GSN has decided not to open negotiations or to close negotiations, the standard rules shall not apply and employees shall be represented in accordance with relevant national rules.

Composition of the employee representative body (OR)

The standard rules state that:

  • employee representatives or, in the absence thereof, the employees themselves shall elect or appoint the members of the representative body (OR) from among employees of the SE, its subsidiaries and establishments in accordance with national rules;
  • each Member State is entitled to one OR member for every 10% block of the total number of employees of the SE (see rules for appointing GSN members);
  • if the registered office of the SE is located in Luxembourg, OR members are elected for 5-year terms.

Consulting and providing information to the OR

The standard rules state that management bodies must consult and provide information to the OR as follows:

  • by providing regular reports on the commercial progress of the SE, the agenda of management body meetings as well as copies of any documents submitted to the general meeting of shareholders;
  • by convening an obligatory annual meeting to discuss the company's structure, the economic and financial situation, the probable trend of employment, investments, transfers and mergers, etc.;
  • by informing and requesting its opinion where exceptional circumstances affect employees' interests to a considerable extent;

The OR shall inform the employee representatives of the SE and of its subsidiaries and establishments of the content and outcome of the information and consultation procedures.

The operating costs of the OR and any expenses incurred in consulting an expert shall be borne by the SE.

Employee participation in management bodies

The standard rules state that, where applicable, employees may participate in the management bodies of the SE:

  • in the case of an SE established by transformation, in accordance with existing participation rules present before registration;
  • in other cases of the establishment of an SE, employees may elect, appoint, recommend or oppose the appointment of a number of members of the management bodies equal to the highest proportion in force in the participating companies before registration of the SE.

If there were no participation rules in the management bodies of the participating companies, the SE shall not be required to establish such rules.

If there were several methods of participation in place, the GSN shall decide which to implement in the SE. If the GSN does not reach a decision within a month of being asked to comment by the competent organs of the participating companies, the latter shall take the decision.

According to the proportion of employees in each country, the OR shall decide on:

  • the allocation of employee representative seats on the management body;
  • appointment/recommendation procedures.

In Luxembourg, employee members of the management body are elected by employee representatives from among company employees, by secret ballot using the list system and adhering to the rules of proportional representation.

Employee representative members of the management body shall have the same voting rights as other members of this body.

Who to contact

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Luxembourg
Phone: (+352) 42 39 39 - 330
Email info@houseofentrepreneurship.lu

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Luxembourg

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