At the beginning of 2012, the European Commission presented a proposal for a European Foundation (FE) statute to facilitate the cross-border activities of public benefit purpose entities within the European Union. The proposal, which is currently still at an initial stage of development, follows other European initiatives since 2000 that have allowed the creation of legal entities with a European character, like the European Company (SE), the European Cooperative (SCE) and the unsuccessful attempt to create a European Private Company (SPE).
Notaries will be asked to play an important role in the life of FEs, since, among the different methods of formation, the proposal expressly mentions the possibility of creating these entities by means of a notarial instrument. However, the importance of the role of notaries will not be limited only to the creation of these entities. In fact, the proposal requires FEs to have a cross-border component, and notaries will probably be required to become gatekeepers of some relevant cross-border transactions, like, for example, cross-border transfers of seats, cross-border mergers between existing FEs and cross-border mergers resulting in the creation of FEs.
The proposal provides that FEs can be established either by (a) a testamentary disposition, (b) a notarial instrument or a written declaration according to the national law, (c) a merger of public purpose benefit entities, or (d) a conversion of national foundations. While the first two methods of formation fall within the traditional domain of notarial activities, the last two do not belong to the usual activities of all notariats participating in the CNUE. In addition, for these last two transactions, the proposal does not make an explicit reference to the need for notarial intervention.
The proposal also mentions some other important transactions that may take place during the life of FEs, like cross-border transfers of seat, or conversions of FEs into national foundations. These types of transactions are probably not carried out routinely in all notariats either and, once again, there is no explicit reference to the need for notarial intervention.
However, the experience with the SE and the SCE, on which the proposal heavily relies, demonstrates that many Member States decided to give notaries an important role as gatekeepers of these transactions, recognizing their essential function as public office holders. This will arguably also happen with FEs, once the regulation has been adopted. This role is certainly delicate, but also particularly well suited to the nature of notarial activity, which combines the guarantee of legal certainty, closely related to the authentic instrument, and the ability to respond promptly to clients’ needs, a typical feature of the liberal professions.
In this context, the CNUE working groups have already discussed on various occasions the problems raised by the proposal, along with the difficulties notaries will face in each legal system to put the regulation into practice.
One issue highlighted by these analyses relates to the differences between the Member States’ existing rules on national foundations. Harmonisation in this field by means of directives has never taken place, whereas the SE proposal in particular benefited from the level playing field created by the many directives that harmonised company law.
A second problem in respect of this initiative derives from its lack of clarity regarding how transactions carried out by FEs will be controlled. It is true that the proposal makes extensive reference to supervisory authorities and other controls. However, there is room to improve the articulation of these controls. For cross-border transactions in particular, the protection of third parties and stakeholders is assured also by verifying the legality of each transaction. This activity should be kept separate from any discretionary control performed by administrative authorities.
Another troubling point in the proposal is the lack of coordination with the previous regulations on the SE and the SCE. For example, a lack of coherence with the acquis communautaire is evident in Art. 35 of the proposal, dealing with the seat of FEs. By requiring that the “FE shall have its registered office and its central administration or principal place of activities in the European Union”, this provision is arguably not consistent with the solution to this problem adopted for both the SE and the SCE, which requires the registered office and the head office to be located in the same Member State. Similarly, the rules on employee participation do not follow exactly the solutions currently in force for the SE and the SCE.
Even if it is evident that foundations are not companies, it seems unwise and unpractical to apply different philosophies to the different European legal entities. In addition, the importance of FEs should not be discounted, nor should these entities be considered an oddity of European law freely allowed to depart from the principles established for the other European legal structures. The coherence of European law should be maintained at all levels, since this is the only way that legal certainty and the protection of creditors and stakeholders will not be jeopardized.
With these goals in mind, the CNUE is, among other things, also active in external working groups that are discussing amendments and refinements to the wording of the FE proposal. Only if these and other improvements are finally implemented will FEs, together with SEs and SCEs, become another important tool for integrating the European market, ensuring the cross-border mobility of legal entities. Obviously, these goals cannot be achieved by putting at risk – to any extent – legal certainty, the interests of creditors or those of other stakeholders, or by undermining the coherence of the framework governing European legal entities. However, in the end, once the regulation has been enacted, it will be, as usual, up to the notaries of each Member State, acting as gatekeepers of both European and national law, to give substance to the provisions of the regulation and to ensure the legality of transactions involving FEs.
Proposal for a Council Regulation on the Statute for a European Foundation (FE): http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2012:0035:FIN:EN:PDF