CONSULTATIVE DOCUMENT: PROPOSAL ON THE STATUTE FOR A EUROPEAN CO-OPERATIVE SOCIETY

Amended Proposal for A Regulation of the European Parliament and of the Council on the Statute for a European Co-operative Society  (Doc Ref. 7987/01)

Draft Council Directive supplementing the Statute for a European Co-operative Society with regard to the involvement of employees (Doc Ref.  10292/01)

Introduction

1.             The purpose of this document is to consult on the revised proposal for a European Co-operative Society (SCE) Statute.  The Statute consists of a Regulation setting out the framework for a new type of pan-European institution, which could operate across Member States on the basis of registration in one Member State, and a draft Directive requiring a particular level of employee involvement in each institution.  HM Treasury has policy responsibility for the Regulation and the Department of Trade and Industry has policy responsibility for the employee involvement Directive.     

2.              First formally proposed by the European Commission in 1986, negotiations in Brussels commenced in 1992 but came to a halt in 1995.  The Swedish Presidency issued revised proposals earlier this year and the Belgian Presidency has continued work on the proposals. Further details of the history of these proposals and their discussion in Brussels are set out in paragraphs 8 to 14. The texts of the Regulation and the Directive on employee participation are attached, labelled A and B respectively. The Economic and Social Committee appointed by the Council has adopted opinions on the three Regulations[1] and their accompanying Directives, which together form a package of measures encompassing the Social Economy (Economie Sociale).

3.               Formation of a European Co-operative Society will remain entirely optional, which means that compliance costs would only apply to those UK organisations that chose to form a European Co-operative Society.  However, the cost of establishing a registration and supervisory body would need to be borne by the entire UK co-operative movement, irrespective of whether or not they chose to use it.

4.             Please send your comments by 31 October 2001 to:

Michael Dynan-Oakley
HM Treasury
Allington Towers
19 Allington Street
London
SW1E 5EB
Telephone: 020 7270 4488
Fax:  020 7451 7544
E-mail:  michael.dynan-oakley@hm-treasury.gov.uk

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Further copies of this consultation document may be obtained from Michael Dynan-Oakley or from the following websites:

www.hm-treasury.gov.uk

www.dti.gov.uk   

Enquiries on the employee involvement  Directive only:

Steve O’Donnell
DTI,
RM UG 1291
Victoria Street
London
SW1H 0ET
Telephone: 020 7215 5950

Fax:  020 7215 5380
E-mail:  steve.odonnell@irdv.dti.gov.uk

 

Enquiries on the SCE Regulation only:
Ms Sallie Eden,
Registry of Friendly Societies
25 The North Colonnade
Canary Wharf
London E14 5HS
Telephone:  020 7676 4800
Fax:  020 7676 4801
E-mail:  sallie.eden@fsa.gov.uk

5.               You are invited to send in your views by [31 October 2001 – DN: see para 4].  All comments are welcome: you may wish to address some or all of the questions listed in paragraphs 37 and 38, which have been developed from those questions included in the previous consultation exercise carried out in 1992.  If you would like to contribute, but do not think you will be able to do so by the deadline, it would be helpful if you could let us know, before the closing date, when you expect to be able to respond, and we will try to ensure that your views are taken into account.

6.               As negotiations proceed we may wish to consult you on some of the more detailed aspects of the proposals and it would be helpful if you could let us have the name and contact details of the relevant person in your organisation.

7.               Responses to this consultation document may be disclosed, unless the information relates to a particular person or business. Therefore, you should identify any such information and tell us whether the person involved consents to it being made public in an anonymous form.

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Background

8.               The European Commission’s stated aim is to facilitate co-operatives and other organisations wishing to engage in cross border business, by making legislative provision that takes account of their specific features.

9.               In December 1989 the European Commission announced its objectives in relation to the mutual sector.  Those included the identification of options for broadening access to the Single Market for such enterprises and to draw up a framework for Community Action.

10.         In November 1990 organisations representing the sector asked the European Commission to prepare draft EC legislation covering mutual organisations. In a resolution adopted in January 1991, the European Parliament called on the European Commission to draft one or more Regulations establishing Statutes for co-operative societies, mutual societies and associations to come into force at the same time as the proposed Statute for a European Company.

11.         In 1992 the European Commission put forward proposals that would establish the various societies as new types of supranational legal entities within a European framework that allowed them to develop their cross-border activities while at the same time preserving their distinctive features.  Thus the Statutes provided for details including formation, registration, meetings, finance, winding up and so on. In areas not covered by the Statutes, national law and the rules of the body itself would apply.  

12.         Previous negotiations in Brussels on the Statute for a European Co-operative Society came to a halt at the end of 1995 whilst negotiations continued on the Statute setting up the European Company.                

13.         The proposal for a European Company Statute (ECS) was first and formally proposed by the European Commission in 1970.  The European Company Statute, which was agreed by Member States at the end of the French Presidency in 2000, will create the legal framework for a new supranational corporate entity: the European Company.  That proposal takes the form of a Regulation covering the core company law issues, and a draft Directive specifying the employee involvement requirements that would apply to a European Company.   The proposal was stalled in Council for several years, largely owing to differences over employee involvement in the European Company Statute.

14.         Following agreement on the European Company Statute in late 2000 the Swedish Presidency brought forward revised proposals for the European Co-operative Society Statute.  In particular the revised draft of the employee involvement Directive aims to, as far as possible, reproduce the rules agreed for employee involvement in the European Company.

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The Proposal

15.         The European Commission proposes the creation of a new entity with legal personality - a European Co-operative Society - which will be able to operate throughout the European Community.  The proposed Statute consists of two documents:

16.         The European Commission has stated that it intends that the Regulation and its accompanying Directive should be considered as a whole.

17.         The proposed Statute covers the following matters in relation to European Co-operative Societies:

18.         In areas where the Regulations do not contain specific provisions, national and community law and the rules or other governing instrument of the organisation concerned will apply.

19.         Where they meet the other prescribed conditions, the Statute would allow a European Co-operative Society to be formed under the law of a member state by:

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20.         The new entity will have the power to conclude contracts, acquire property, etc., and is to have the purpose of satisfying its members’ needs and developing their economic and / or social activities.  The capital of a European Co-operative Society will be made up of shares.

21.         The list of United Kingdom legal entities which may form an European Co-operative Society, provided that the conditions in paragraph 19 above are met, is:  co-operatives governed by the Industrial and Provident Societies Acts; all other forms of company or partnership recognised under the co-operative principles laid down by the International Co-operative Alliance; and societies within the scope of the Friendly Societies or Building Societies Acts, and the Credit Unions Act 1979 and Credit Unions (NI) Order 1985.

22.         The minimum capital of a European Co-operative Society has been set at €60,000 or the equivalent in national currency.

Management

23.         The Statute for a European Co-operative Society makes provision for two-tier management and supervisory boards or one-tier administrative boards and sets out their powers and procedures.

Registration

24.         A European Co-operative Society’s registered office, which must be in the same place as its head office, must be in one of the Member States.  Provision is made for the transfer of the registered office to another Member State, subject to certain voting thresholds and a two-month delay before the transfer takes effect.  The European Co-operative Society must also follow a specified procedure in these circumstances (particularly as regards to disclosure) to protect the interests of third parties.

25.         Member States will have to provide for the registration of European Co-operative Societies and appropriate registration authorities will accordingly need to be designated or established.

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Employee Involvement

26.         The draft Directive (attached) on employee involvement, which forms an integral part of the Statute, would require that a European Co-operative Society may not be registered unless a system for employee involvement is in place which is in accordance with the provisions of the Directive.

27.         The Directive provides the arrangements that govern employee involvement in a European Co-operative Society, and cover information, consultation and, where appropriate, participation (i.e., the representation of employees in the management or supervisory body of the Society).  In the first instance these arrangements are to be freely negotiated between the management and the employees, acting through a Special Negotiating Body.   If a negotiated agreement   is not reached, then the standard rules set out in the Annex to the Directive would apply, provided management wants to carry on with the registration of the European Co-operative Society.  On information and consultation, the standard rules are based on the provisions outlined in the Directive, which are based on the European Company employee involvement Directive, based in turn on the provisions set out in the European Works Council Directive (already implemented in the UK). In essence these provide for a representative body of employees having the right to meet management once a year to be informed and consulted on questions which concern the European Co-operative Society itself and any of its subsidiaries or establishments situated in another Member State or which exceed the powers of the decision-making organs in a single Member State.

28.         On worker participation, the basic principle set out in the standard rules is that if there is no negotiated agreement, and management wishes to proceed, participation in the European Co-operative Society should be established at the highest level at which it existed in any of the participating legal entities before registration as a European Co-operative Society.  Therefore, where participation has not previously existed, there would be no entitlement to it in the European Co-operative Society.

29.         The Directive differs from the model for employee involvement set out in the European Company Statute in one main respect.  Article 7a sets out special rules applicable to European Co-operative Societies established exclusively by natural persons or by a single legal entity and natural persons.   Here it is envisaged that the standard rules set out in the Annex will apply from the date of registration of the European Co-operative Society.    

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Timetable

30.         There are three Social Economy (Economie Sociale) Statutes; each is being negotiated in turn.  The Statute for the European Co-operative Society Statute is being taken first. However, a date for the implementation of this Statute has not yet been agreed, nor has a timetable for progressing the other two Statutes, although it is unlikely that any work will be done on the other two Statutes until the European Co-operative Society Statute is in place, or the text has been agreed.

31.         Originally, the three Social Economy Statutes were to be taken forward contemporaneously, but the plans have changed.  Consultees may wish to consider whether there are any special difficulties that might arise where just one of these Statutes is brought into force: particularly as the interval between the implementation of the European Co-operative Society Statute and the next Statute – whichever that might be – could be substantial.

The Government’s Views

32.         The Government agrees that organisations in the social economy sector should be free to take advantage of the Single Market, it is not clear that the relevant national bodies are experiencing difficulties in operating in more than one Member State.  One purpose of this consultation exercise is to discover whether, and to what extent, such difficulties do exist and to ask those affected whether they believe that the Statute could provide a way of overcoming them.

33.         The creation of European Co-operative Societies would necessitate UK legislation covering the registration and Regulation of such entities.  Other Member States would also have to legislate on these and / or other aspects of the Statutes depending on the current provisions of their national law.  A significant body of Law already exists governing the activities of analogous organisations in the United Kingdom; it will be essential to ensure that any new legislation does not undermine the present regulatory framework, provide loopholes for the unscrupulous, nor result in any detrimental effects on UK mutual or co-operative institutions that do not choose to operate as European Co-operative Societies.

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34.         An important factor to consider with the Statute lies in the combination of the heavy reliance on national law and the diversity of bodies operating under the national law of the various Member States.  There will therefore be significant differences between the laws governing European Co-operative Societies formed in different Member States.  There may also be significant overlaps between the types of body that can form a European Co-operative Society.  These complexities are compounded by the use of terminology (such as ‘Association’ and ‘Mutual Society’), which does not represent any defined concepts in UK law.

35.         The Government supports the principle of employee involvement, provided the arrangements can be made in a flexible manner.  The proposal allows for flexibility, in that it gives priority to freely negotiated arrangements, while the fallback model is based on the notion of acquired rights, rather than a right per se to participation.  However the employee involvement provisions as proposed are quite complex.  They are based on the European Company Statute, which was designed with large companies in mind. The Government would welcome views on whether the European Company employee involvement model is the right one for the Social Economy sector.

36.         The Government is not fully convinced of the need for the Statute.  While it would not oppose its introduction in principle, it will endeavour to ensure that the proposals are improved so as to preclude any unnecessary Regulation and facilitate adequate protection for those involved in, or dealing with, the proposed new entity.  The Government will also try to ensure that the Statute meets the needs of the sectors affected, particularly the members of co-operatives and other mutual organisations.

Comments Sought (to be sent to the address in paragraph 4)

37.         We would be interested in any comments on the proposals; in particular we would welcome views on some or all of the following points:

 

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38.         Comments are also sought on the accompanying Directive on employee involvement.

 

 

The Consultation Process

39.         This document seeks comments on these or any other aspects of the draft proposals for a European Co-operative Society.  While the Government will take into account the views expressed by interested parties, it will not be bound by the results of the consultation exercise, the purpose of which is to inform the policymaking process.  However, the movement is known for its diversity, so it is hoped that as many consultees as possible will respond, to enable Government to take account of all the different perspectives and needs before it makes any final decisions.