Survey reveals doubts over launch of European Company

Just 12 per cent of UK companies would even consider adopting the European Company format, which comes into existence on Friday 8 October 2004, despite two thirds believing it to be a positive step for business, a survey has revealed.

CMS Cameron McKenna surveyed CEOs, FDs, in-house counsel, company secretaries and directors to ascertain their awareness and attitudes to the new cross-border vehicle, masterminded by the European Commission.

The results indicate that only half of all respondents were aware the programme launches on 8 October while 87 per cent of those that expressed an opinion thought that the European Company structure would be of benefit to European business. Yet despite respondents' enthusiasm for the idea of the European Company, 83 per cent of those expressing an opinion said that they would not convert their company.

Martin Mendelssohn, a partner at CMS Cameron McKenna, said that the results suggested a lack of understanding of the circumstances in which the new format would be appropriate: 'The European Company will only be of benefit in certain business situations. Companies with more than one territorial base generally welcome the idea of a Europe-wide company. However, the respondents to our survey identified key areas where either lack of incentives or lack of clarity means the European Company is jot for them'.

Executive summary of results

- 60 per cent think that the European Company is a good idea for European businesses yet almost a third (31 per cent) of respondents were not sure if it's a good idea or not. Of those who were aware of the European Company, a higher figure of 67 per cent thought it was a good idea.

- 55 per cent of respondents said that their company wouldn't consider converting to a European Company and 11 per cent said they would. Those who thought the European Company was a good idea were more likely to convert to a European Company – with 16 per cent of businesses stating they would consider converting and 47 per cent saying they wouldn't.

- Principal concerns about the European Company are perceived as follows:

· Tax uncertainty and no tax incentives were the principal concern with 70 per cent of respondents stating this as their primary concern followed by 67 per cent of respondents who viewed the European Company as having an inadequate legislative framework

· The cost – a minimum of €120,000 – was too high for companies considering giving the vehicle a try

· Only 19 per cent of respondents were concerned about greater employee participation.

- 57 per cent of respondents are aware that the European Company can be used a vehicle for cross-border JVs. This represents an endorsement of the European Company although the JV would have to be significant to merit use of the European Company.

For more information, please contact Martin Mendelssohn, Partner on +44 (0)20 7367 2872 or at [email protected]