Federal Labour Court Bolsters Employer's Power to Reserve Positions
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The European Company, or Societas Europaea (SE), has gained popularity not just among large corporations but also family businesses and mid-market players. One unique aspect of establishing an SE is the use of a "shelf SE," which essentially lays the groundwork for the company, yet it doesn't kick off business operations right away. This ambiguity has led to questions regarding employee involvement during this phase, particularly when a shelf SE merges into an SE & Co. KG. Two rulings by the Federal Labor Court (BAG) have shed some much-needed light on the matter.
The crux of the issue was whether negotiations on employee involvement were necessary for a shelf SE that merges into an SE & Co. KG. Here's where things got fuzzy, with varying views across case law and literature. However, recent BAG decisions, on dates like 26.11.2024 - 1 ABR 37/20, 1 ABR 3/23, and 1 ABR 6/23, have flipped the script.
These cases revolved around restructuring measures, where different methods led to a shelf SE becoming an SE & Co. KG that didn't require employee co-determination. As these companies employed more than 500 or 2,000 employees, works councils or group works councils argued that the employees were being deprived of co-determination rights.
In a departure from the previous stance, the BAG was emphatic: no catch-up of the involvement procedure was required. European and national laws didn't mandate it, and there was no legal basis for such a rule. This decision aligns with the Olympus ruling by the European Court of Justice (ECJ), where the EU regulations were found to apply from the point of establishment, with post-establishment participation procedures exceptions.
These decisions by the BAG offer clarity and boost confidence in practice. They shore up the SE & Co. KG, and the dormant SE without employees gains significance. These developments benefit every company aiming for a flexible, modern corporate structure. With the 21st legislative period's coalition agreement not addressing co-determination, a reform initiative in this area seems unlikely.
Dr. Matthias Heusel, lawyer and partner at Flick Gocke Schaumburg's Stuttgart office, is the author of this piece.
Customizable corporate governance structures
By Matthias Heusel *
[1] - In response to a question regarding the BAG decision dated 26 November 2024 (1 ABR 37/20), it appears that the decision revolved around the (non-)repeat of the negotiation procedure on employees' participation in the formation of an SE via a shelf company. However, specific details on the employee involvement in the case of a merger of a shelf SE into an SE & Co. KG are not provided in the enrichment data. For a comprehensive understanding of this scenario, consulting specific legal advice or thoroughly reviewing recent BAG decisions would be necessary.
- The Federal Labor Court (BAG) decisions on dates such as 26.11.2024 - 1 ABR 37/20, have determined that no catch-up of the negotiation procedure on employee involvement is required when a shelf SE merges into an SE & Co. KG, as per the latest rulings in business finance.
- These BAG decisions in the realm of business finance also contribute to the significance of a dormant SE without employees, offering clarity and enhancing the flexibility of corporate structures, particularly the SE & Co. KG.
