Saturday, 24 March 2007

The European Company

I was recently asked about the structure of the oil company Shell. For those who don't know, Shell is a company that is incorporated in the UK, which has its primary listing in the UK, but which has its head office in the Netherlands. It is increasingly difficult to think of a European company as a 'British' company or a 'Dutch' company. It is increasingly the case that we are thinking in terms of a 'European' company.

This is not entirely unexpected. The primary source of company law in Europe, irrespective of the place of incorporation, derives from the EU. Nations interpret the EU directives to suit local conditions - which is why it is much more dfficult to form a company in Belgium than the UK - and may subject the companies to a local Corporation Tax regime. However, the main trend is towards a corporate harmonisation across Europe.

Another example of this trend came to light this week. Barclays, a UK bank, announced that they were in talks to take over ABN Amro, a Dutch bank. Like Shell, the resulting company would be incorporated in the UK, with a primary listing on the London Stock Exchange, but with its headquarters in Amsterdam and a secondary listing on Euronext. This is a clever move, as it would give the bank a presence in the Eurozone without leaving the Sterling zone. (See article).

In many ways, this provides further evidence that the European Project is becoming less and less reversible. As we are now thinking in terms of European companies, national distinctions within Europe becime less relevant. I suspect that the next contentious issue will be the European taxation of European companies - possibly in the name of the harmonisation of EU-wide corporate tax rates. There is something like that already in place for VAT (an EU-wide Sales Tax), all it needs is to be extended to EU-wide profits as well as EU-wide sales.

In the coming months, we shall be scanning for progress in the field of tax harmonisation - it is the next milestone in European integration.

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