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Free translation of the article "La société européenne : intérêts et opportunités en temps de crise" Catherine Cathiard, Avocat et David Zeitoun, directeur juridique groupe, Unibail-Rodamco, DECIDEURS Stratégie Finance Droit n°108, sept. 2009

By C. Cathiard, Avocat Of Counsel. JeantetAssociés and D. Zeitoun, Group Director of Legal. Unibail-Rodamco

At a time when companies focus on finding solutions allowing them to confront the crisis the SE undoubtedly presents a number of attractions. This is borne out by the nine new SE's registered in France since September 2008.

All recently published studies show that the improvement in competitiveness and the reduction of costs are the watchwords for a large number of companies: for most companies, the time for restructuring has come. The SE should not be absent from these concerns.

The SE is operational and responds to the expectations of companies

Determining factors may be to take the form of an SE to prepare an initial public offering on several exchanges, to affirm a European profile or to assure a positioning in a strategic geographical territory (Limagrain for its positioning in Central and Eastern Europe, UNIBAIL-RODAMCO for its presence in 12 countries of Continental Europe).

The SE has also shown itself to be an excellent means of benefiting from public subsidies (construction of the tunnel for the Berlin-Palermo railway). The SWORD Group, converted to an SE in January 2009, just announced the signature of a contract with the European Commission in an amount of €69 million for the delivery of computer services.

The SE, which allows the carrying out of cross border transactions on the basis of legal rules which are harmonised within the European space, is the favored structure for the bringing together of different groups. It was chosen for the purchase by SCOR of the German REVIOS, and the merger of the German insurer ALLIANZ with the Italian RAS and the French AGF.

The SE is useful for the creation of a jointly-held subsidiary, particularly between private or public legal entities. Thus in September 2008, EPEX SPOT SE was created through the coming together of the French POWERNEXT and the German European Energy Exchange with the aim of creating a European exchange for electricity spot contracts.

The SE can also be used by investment funds in industrial sectors, by permitting the simplification of the structures of the holding or operating companies in which such funds invest.

It is not without reason that the banking, insurance, reinsurance and investment advisory service sectors clearly predominate in the list of existing SEs and should be even more interested in the SE in the context of the legislative developments that have recently occurred or are forthcoming.

Financial businesses indeed have a common interest, linked to the management of capital based on a calculation of solvency ratios.

VIEL and Compagnie Finance, a listed company specialized in the intermediation between banks, chose the SE in order to take into account the coming into force of these new rules.

SCOR, the world's fifth largest reinsurer, created four SEs. By replacing subsidiaries with branches (a branch is not required to be capitalised at the same level as a subsidiary), the SE has allowed SCOR to improve its financial flexibility and the allocation of capital, to simplify its conditions for oversight (the single passport, allowing the group to be subject to only one regulatory authority, that of the country of the legal entity and not of the subsidiaries) and to join the CAC Next 20 index with the expectation of offering to its clients a rating of A+ between now and 2010.

The status of the SE permits the creation of a single-shareholder SE, wholly-owned by an already existing SE, or benefiting from a greater flexibility in the drafting of organic documents, particularly as regards to corporate governance, or, for non public SE's, in the structuring of relationships among shareholders.

The SE can transfer its registered office and headquarters from one Member State to another at any time, with no tax consequences subject to not transferring its assets. The French Group Foncière LFPI thus used the status of the SE for a one-time transaction involving the transfer to France in December 2008 of five Dutch companies, followed by the tax consolidation of the French companies.

While the labor law requirements for the constitution of the SE is often a psychological barrier in the minds of management, it has proven in fact to be a real opportunity for dialogue within the company and can be rapidly implemented thanks to the flexibility afforded by the rules.

The European Company: the choice of UNI BAIL-RODAMCO

Officially commenced in September 2008, the conversion of Unibail-Rodamco into a European Company was approved by its shareholders (by a majority of more than 99%) on May 14, 2009.

Paradoxically, the acknowledged flexibility of the legal form of the SE was not the determining factor, such flexibility being of interest in the context of specific transaction and requiring to be perfected in terms of its legal reality. In this case, the decision responded to three requirements:

● Reflect in a legal form a European reality:

The result of the merger in June 2007 of Unibail SA and Rodamco Europe NV, and the leading operator, investor and developer in the area of commercial real estate in Europe, Unibail-Rodamco has a European dimension both in terms of its asset portfolio (22.8 billion euros spread over 12 countries of continental Europe) and its clients, partners, employees, shareholders, and governance structure. Although the organisation already reflected this positioning and ambition, the adoption of the SE form rapidly became obvious as a natural extension of a process that was already long underway.

● Put in place a flexible and European-wide means for management labor communication

Far from being a brake or restraint, the labor relations aspect of the process was immediately integrated as a real opportunity for Unibail-Rodamco to put into place a European-wide, innovative and unified method for communication with all employees, whatever their nationality or the country in which they work.

Led by the Human Resources Department, in close cooperation with the Legal Department, the putting into place of the Special Negotiating Body (SNB) and then the European Employees Committee foreseen by the negotiated agreement provided the basis for a common feeling of belonging to a group which transcends national boundaries.

Nonetheless, the legal obstacles should not be under-estimated: diversity of national rules applicable in each of the concerned countries, the conditions of the transposition of the European Directive varying widely from one country to another, absence of transformation precedents in numerous countries...

From the outset the choice was made to give priority to providing information and prior training to the employees who were members of the SNB, emphasizing the legal rules applicable to the SE and their impact on the employees, as well as the nature and objectives of the negotiations to take place. This approach allowed the speedy conclusion of an agreement on the participation of the employees which permitted the holding of the shareholders meeting five months later.

Not neglected, well thought out and implemented, the labor relations aspect of the conversion to an SE became a real and efficient tool in the labor relations policy of Unibail-Rodamco.

● Emphasizing the importance for Unibail-Rodamco of European ideas and values

Because of its significant European presence, Unibail-Rodamco could not ignore the debates in Europe as to the harmonisation of legal rules and the convergence of its economy (member countries, candidates for membership and associated countries). To meet future challenges and anchor its attachment to Europe's founding values and principles, Unibail-Rodamco, through its conversion to an SE, made the choice to affirm an optimistic and dynamic European positioning.

The results of the experience of Unibail-Rodamco S.E.

As for any high level project involving numbers of parties, in order to achieve a successful result, such a project required:

- a phase of detailed study and preparation: while the legal process for the conversion occurred from September 2008 to May 2009, the analyses and feasibility studies were commenced at the end of 2007;

- the assistance of well-informed and proactive advisors, having experience with other conversions, in order to reduce the risks in implementation arising from the interaction between the legal rules of the SE and national law;

- to anticipate and/or deal with all the potential legal, labor relation and financial difficulties and side effects;

- to bring in and involve openly and at the earliest stages all participants, both internal and external.

But above all the most important factor for success remains that the conversion into an SE should reflect a rational, strong and dynamic vision on the part of all the constituents of the company or the group which commences such an adventure.

KEY POINTS:

■ The SE is an instrument for restructuring in the European space

■ The SE offers more flexibility than a société anonyme

■ Labor relations aspects of the SE: a real and efficient instrument for labor relations policy

■ The SE: affirming the European positioning of a group in an optimistic and dynamic manner

ON THE AUTHORS:

Catherine Cathiard, one of the few leading specialists in the SE, admitted at the Paris Bar since 1989, has joined the corporate/M&A team of JeantetAssocies to develop an offer of services covering the European structures (SE, private European company, European cooperative society, EEIG) and cross-border operations (mergers, transfers of registered offices). David Zeitoun, Group Director of Legal, co-leaded, in 2009, the operations of conversion into SE of the holding company, listed on the CAC 40, member of Euronext 100 and Amsterdam AEX index.