Greek Law no. 4072/2012 – “Improvement of the entrepreneurial environment – New business entity – Trade Marks – Real estate agents – Regulation of shipping, ports and fishery issues and other provisions” (articles 43 – 120). It constitutes rather a form of a flexible S.A. (A.E.) than an L.L.C. (E.P.E), as it was believed initially. But what are the aspects that make it attractive during the initial planning of a business move? When is opting for this legal form advantageous?
- When the main priority of the partners is to assume entrepreneurial risk without endangering their personal property, though one could argue that this aspect exists in the other two main types of capital companies, S.A. (A.E.) and L.L.C. (E.P.E), as well.
- There is a simplified establishment procedure, with a private document, that does not require the presence of a lawyer and notary, with a few exceptions (if imposed by a special provision of law or if there is a contribution of assets and their transfer requires an agreement before a notary or if the parties chose this option, article 49 of Law no. 4072/2012, paragraph 2).
- When, for different reasons, the partners do not wish to allocate funds at the start time of the assumption of entrepreneurial activity. According to the provisions of article 43 paragraph 3 of Law no. 4072/2012 “The capital of the private company is determined by the partners without limitation and can also be zero. The partners are involved in the company with capital, non-capital and guarantee contributions, according to articles 77 to 79.”. The types of contributions are specified in articles 76-79 of the same law. The separation of the functions of the partners within the company is facilitated.
- When the partners want a clear framework with an absolute distinction between the concepts of ownership and administration. There is the option of appointing one or more natural persons as administrators, who do not need to be partners at the same time. At this level, the legal form of the Private Company (I.K.E.), due to its modern operating framework and corporate governance, is more attractive compared to the existing legal framework that applies to public limited companies (Law no. 2190/1920) and limited liability companies (Law no. 3190/1955).
- According to the applicable provisions, only the administrator and the single firm member have insurability status. There are no insurance contributions in shares (except in the case of a single firm member administrator – document of the Greek Ministry of Labour no.: D.15/D/619/15/13-4-2018).
- In comparison with the partnerships and the strict regulatory framework of public limited companies, the decision on the disposal of profits is at the full discretion of the partners. This way, an important tax advantage is provided.
- As opposed to an L.L.C. (E.P.E.) (article 13 Law no. 3190/1955), a majority of shares and not persons is required.
- The legal framework for Private Companies (4072/2012) introduces novel rules of corporate governance, resulting in a reduction of administrative costs of operating the company and a faster decision-making mechanism. For example, according to Law no. 4072/2012, if the decisions of the partners are unanimous, the option is given to make these decisions in writing without a meeting.
- According to the provisions of article 43 of Law no. 4072/2012, paragraph 5, there is an option to compose the statute and its amendments, as well as the decisions of the partners and the minutes in one of the official languages of the European Union, provided that they are private documents. In these cases, article 14 of Law no. 3419/2005 (Α 297) applies. For the relationships of the company and its partners with third parties, the text in Greek language prevails. This option is especially important when foreign members take part in the company.
It is worth noting that for the corporate forms S.A. and L.L.C., there is of course also a new modern legal framework (Law no. 4548/2018 and 4541/2018 respectively).
Finally, the following should be noted: the choice of the legal form is a main parameter for the conduct of entrepreneurial activity, but it is not the only one. It is recognized that after the adoption of the new insurance law no. 4387/2016, the conversion of existing companies to Private Companies (Ι.Κ.Ε.), but also the new establishments under this corporate form, have increased rapidly. Does Greece however provide the accounting culture to support the operation of these businesses? We believe that, to a large extent, the answer is negative. This however shall be analyzed in one of our next articles.