Government sets out European Company legislation

The British government has this month published proposals for legislation to implement the European Company Statute in the UK. It comes into effect in October 2004.

The legislation is potentially significant in terms of employment rights because, for the first time since the experiments with worker directors in the 1970s, it could lead to employee representatives sitting on the boards of major companies.

The proposals, which follow European legislation adopted by the European Union in October 2001, allow companies operating in more than one member state to form a European Company rather than say a British or French one.

This could have practical advantages in cross-border operations and might also have presentational advantages, for example, in the case of joint ventures or takeovers. However, European companies would in most cases have to have employee representatives at board level if this already existed in one of the member states involved

Setting up a European Company is entirely voluntary but a number of companies are likely to take advantages of the legislation and at least one, the Scandinavian Nordea Group, has already firmly stated it will do so.

Details of the European Company Statute Consultative Document are set out on page 19.