Establishment of a Subsidiary European Company

One of the four exhaustively formulated legal means for the emergence of a European company, Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (Societies Europaea –SE) is the constitution of a Subsidiary European company. Compared to the other legal models for establishing this new organizational form for business association in the company typology within the European Union, the establishment of this particular entity possesses its own specific characteristics. The regulatory framework for the establishment of a Subsidiary European company is of a hybrid legal type. On the one hand, it takes account of the Community Act Regulation. However, in a number of cases the Community Act refers to the national law of the Member State where the company has its registered office under its constitution within the Union, and where its head office is located. The article discusses the legal prerequisites and the individual components of the procedure for the establishment of a Subsidiary European company.


Introduction
Council Regulation (EC) № 2157/2001 of 8 October 2001 on the Statute for a European company (Societies European -SE) 1 [hereinafter Regulation (EC) № 2157/2001] establishes the legal mechanism for the creation of a European company [hereinafter SE] in a special Part Three entitled "Formation" comprising Articles 15-38 each with a number of paragraphs. The structural relation of the Regulation compared to the legal framework of the other components of the SE legal status is much more detailed and exhaustive.
The Community act imperatively establishes the rules for the establishment of the European Company (hereinafter referred to as the "ES"). It expressly states that 'subject to this Regulation the formation of an SE shall be governed by the law applicable to public limited-liability companies in the Member State in which the ES has its registered office. The Regulation thus establishes the primacy of its provisions over the national shareholder legislation of the individual countries. This is a new form of manifestation of the hierarchical structure of the sources of the legal framework of SE enshrined in Art. 9, para. 1 1 . The defined regulatory framework is in line with the characteristics of the Regulation as a legal act of the Union that has general application. It is binding in its entirety and is also directly applicable in all Member States (Article 288 TFEU (former Article 249 TEC)). The Community imperative provision in question eliminates the possibility for national legislation to derogate from some of the established ways for creating an SE and to formulate new ones, taking into account the economic, demographic, historical, geopolitical and other specific characteristics of the respective country.

Methodology
In this research general and specific methods are used. The logical method of comparison and juxtaposition of the legal provisions concerning the matter in view are applied involving both induction and deduction. A historical and a systematic approach to the studied fragments of the establishment process and the functioning of the European subsidiary are combined. The comparative legal method is particularly extensively used in outlining the regulatory framework in the Member states of the European Union. This allows for further harmonization of the existing regulatory packages in these countries and raising the role of European subsidiaries in the sustainable competitive and intellectual development of the Community economic environment.
On the basis of the documentary method an analysis of the relevant provisions contained in the Regulations and Directives of the European Union, the national legislation and the jurisprudence of the European Union in the considered field that are related to the objectives of the research is conducted

Legal identity of the subsidiary European company (results of the analysis)
The Regulation exhaustively specifies the ways in which ES emerges: a) merger of joint stock companies into ES; b) establishment of a European parent company; 1  By defining these four ways the possibility of the emergence of a new SE in a different way is excluded. Each of these methods has its own legal identity.
It is noteworthy that the Bulgarian lawmaker has excluded from the catalogue three of the imperatively regulated methods in the Regulation of the ways to establish an SE based in our country. These are: the establishment of a European parent company; the formation of a European subsidiary, and the transformation of an existing joint stock company into an ES.
I believe that this is a significant lapse in our legislation. However, this shortcoming has no serious legal consequences and does not hinder the establishment and functioning of SE in our country. Regulation (EC) (2157/2001 exhaustively regulates the nomenclature of methods for the emergence of SE in the Member States. It is an act of general application which is binding and directly applicable in all Member States (Article 288 TFEU 1 , ex Article 249 TEC 2 ). Therefore, regardless of the absence of the other three ways of establishing an SE in the Bulgarian legal system, they can be used to create ES. Along with this, it should be pointed out that according to Art. 5, para. 4 of the Constitution, the international treaties ratified in accordance with the constitutional order that promulgated and entered into force for the Republic of Bulgaria, are part of the country's domestic law. They have an advantage over those norms of domestic law that contradict them. The Treaty of Accession of the Republic of Bulgaria and Romania to the European Union 3 meets all constitutionally established requirements. As a result, the Regulation as an Act of the Union takes precedence over the Commerce Act. Therefore, all the ways formulated by the Community act for the establishment of SE in Bulgaria will have legal effect on the territory of our country. for the circumstances subject to entry at the establishment of an SE by merger/ acquisition; para. 2 -upon the establishment of a European parent company; para. 3upon the establishment of a European subsidiary, and para. 4 -upon the transformation of a joint-stock company into an ES. This approach is even more clearly expressed in the template of the Application for the entry circumstances concerning a European company in form A 12 attached to the Ordinance. In item 70 it requires the applicant to indicate the manner of creation of the SE according to the relevant provisions of the Regulation: the Treaty establishing the European Community. After the Lisbon Treaty this provision takes a new numbering in the TFEU. It therefore refers to "companies established in accordance with Civil or Commercial law, including cooperatives and other legal entities governed by Public or Private law, with the exception of non-profit institutions". This wide range of possible founders covers practically all corporate entities, except the non-profit legal entities. These should be established under the right of a Member State and under their Constitutional Act shall have their registered office 1 and headquarters in the territory of the European Union. This is a significant difference compared to the other ways of establishing a SE. A European company can be created by a merger through the acquisition or creation of a new company from existing joint stock companies only. The legal situation is different when establishing a parent SE, which can be created only by functioning joint stock companies and limited liability companies 2 .
It is necessary that either each of at least two of the companies be governed by the law of a different Member State, or, have had a subsidiary governed by the law of another Member State, or a branch located in another country of the European Union for at least two years 3 .
The European subsidiary is one of the effective legal instruments for exercising the right of association 4 . The Regulation does not provide a legal definition of a "European subsidiary" (Subsidiary SE, SE filial, Gründung einer Tochter -SE). The establishment procedure is simplified and facilitated for its implementation. Compared to other ways of creating European companies is less formal.
The Community act states that companies and other legal entities participating in the establishment of a subsidiary operation are subject to the provisions governing their participation in the formation of a subsidiary under their national law (Article 36) 1 . In this connection, the Commercial Law stipulates that a subsidiary should operate in another Member State and its legal status will be regulated by the legislation of that country (Article 273, para. 3). In this respect, the "Rule of law" principle should be strictly observed 2 .
Based on these regulations, the regime for a subsidiary SE with its registered office in Bulgaria is determined by the Commerce Act 3 . It indicates that a subsidiary is one in which the parent company directly or indirectly owns or indirectly controls at least 25 per cent of the shares or units or may appoint directly or indirectly more than half of the members of the management board (Art. 277, para. 3 of the Commerce Act). This percentage is not large and therefore cannot have a decisive influence on the decisions of the General Meeting. Through it, however, the parent company can influence to some extent its sustainable development in a competitive business environment and receive comprehensive information about its activities 4 .
Council Directive 2011/96 / EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries in different Member States 5 defines "parent company" stating that it is a company from a Member State with a minimum of 10% of the capital of a company from another Member State where the latter meets the same conditions as the company from the Member State which participates with a minimum of 10% in the capital of a company from the same Member State. Such participation shall be wholly or partly held by the place of business of the first company situated in another Member State. A "subsidiary" is defined as a company whose capital includes the above-mentioned participation. A subsidiary shall operate in another Member State and its legal status shall be regulated by the legislation of that country (Article 273, para. 3 of the CL).
A necessary precondition for the emergence of a subsidiary SE is that the founders subscribe for its shares. This is a mandatory condition, which means that if the subsidiary is by form a joint stock company, it is inadmissible for the entities participating in its establishment not to have the status of its shareholders.
The group of possible founders of a subsidiary includes mutatis mutandis the existing European companies. That is why they can set up a European subsidiary themselves. This hypothesis is explicitly regulated in Art. 31 para. 2, stating that the SE itself may establish one or more subsidiaries in the form of European companies. As the owner of the capital is the parent SE company, then the established subsidiary will be a sole European joint stock company. In this way, the founding SE becomes a parent SE. In all cases, the latter is imperatively obliged to have a legal organizational form of a capital trading company in the form of a joint stock company, a limited partnership with shares, or a limited liability company. Under this hypothesis, the parent European structure is created vertically from top to bottom. Initially, an SE is established, later a subsidiary (s) is established and this eventually leads to the establishment of a parent SE company.
When establishing a subsidiary SE from an already existing SE, there will be no requirement for the former to have shareholders from at least two Member States. This is especially evident in the case of a sole proprietorship subsidiary SE, whose capital belongs entirely to the already established SE.
It is particularly important that the provisions of the national law of the Member State in which the subsidiary is established set out in its Constituent Act, which require public limited-liability companies to have more than one shareholder, do not apply in the case of a SE subsidiary. with limited liability (86/667 / EEC) 1 , which was in force at the time of its adoption 2 . It has been substantially changed many times. In the interests of clarity and rationality, it has been codified by the said Directive.
The entity of a subsidiary is established in the regulatory area and the business practice in our country. A number of provisions regulate its legal position in various spheres of public life. The detailed regulatory framework of European subsidiaries is available in the Law on Information and Consultation of Employees in multinational enterprises, groups of enterprises and European companies 3 . Thirty-four provisions regulate the status of a European subsidiary with a view to the participation of employees in its management. It is stated that when the management bodies of the participating companies draw up a plan for the establishment of a European company and its European subsidiaries, immediately after the announcement of the merger, the acquisition plan, the creation of a holding company, or after the coordination of a plan for setting up a subsidiary or for a transformation of a company into a European one, the management body of the company or the companies operating in the territory of the Republic of Bulgaria and participating in the establishment of a European company shall provide to the managements of the trade unions in the enterprise and to the representatives of the employees information according to Art. 7, para. 2 of the Labor Code about the participating companies, the subsidiaries or branches and the number of the employees in them in order to establish a special body for negotiations.
Where the outcome of the negotiations results in a reduction of the rights to participate, the required majority shall be two-thirds of the members of the special negotiating body, representing at least two-thirds of the employees, including the votes of the members representing the employees in at least two Member States, where the European company is established by setting up a parent company or a subsidiary, if the participation covers at least 50 per cent of the total number of employees in the participating companies. There are a number of other provisions in the field of the regulated matter.
The entity of the subsidiary is subject to legal regulation in a number of laws and regulations, such as the Public Offering of Securities Act 4 ; The Law on the Activity of Collective Investment Schemes and Other Collective Investment Enterprises 5 ; The Civil Aviation Act 6 ; The Markets in Financial Instruments Act 7 ; Law on Rehabilitation and Restructuring of Credit Institutions and Investment Intermediaries 1 , etc. They are also applicable to European subsidiaries registered in the Republic of Bulgaria.

Conclusion
The subsidiary European company has taken its significant place in the process of expanding and enriching the institutionalized European business partnership. It contributes to the sustainable and intelligent economic development of the European Union's economic segment, to enriching the diversity of its organizational structures, and to speeding up the integration processes between the Member States and the full completion of the internal Community market. They contribute to achieving optimal economic, technological, social and organizational outcomes. The rationalization of the legal regulatory framework for the formation of European subsidiaries is an effective legal instrument for their expansion on a Community and a national level.