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Copyright 2007. All rights Reserved
Most of the nations in the world use a legal system that is based on either the civil law tradition or the common law tradition. The civil law tradition evolved from the given law of antiquity through Roman Law, the Codes of Theodosius and Justinian, the Salic Code and the Code of Napoleon. That tradition is the foundation of the legal systems of continental Europe, Francophone Africa, Central and South America and Middle Eastern countries that were under French dominion such as Egypt, Lebanon and Syria. While the legal systems of China and Japan did not evolve from the same given law as did the civil law, they developed legal systems that are functionally similar to the civil law tradition. In the civil law tradition, all law flows from a coherent and comprehensive set of legal principles contained in a written code provided or enacted by the sovereign. The civil law tradition has been described as “anything that is not permitted is prohibited.”
While scholars have found traces of the common law tradition in ancient Roman law, the common law tradition essentially derives from the merging of the Saxon and Norman legal systems after William I conquered England in 1066. The common law tradition is the foundation of the legal systems of Great Britain (but not Scotland), the United States (except Louisiana and Puerto Rico), Canada (except Quebec), Australia, Cyprus, India, Pakistan and Anglophone Africa. In the common law tradition, principles of law are developed through the decisions that judges make in resolving actual cases. The common law tradition has been described as “anything that is not prohibited is permitted.”
While there are many differences between civil law systems and common law systems that vary from country to country, the fundamental differences between the two systems are as follows:
At the beginning of the 21st century, each legal system is increasingly adopting essential features of the other legal system. The law of the common law systems is becoming more statutory. The law of the civil law systems is being made increasingly in judicial decisions and interpretations of civil code provisions and statutes.
Greek law is divided between public and private law. Public law governs the structure, authority and operation of each level of government and the legal relations between the citizen and the government. Private law governs the legal relations between and among persons. Private law is further divided into civil law and commercial law. The civil law is comprehensively codified in the Greek Civil Code and governs contracts, property, inheritance and family law.
The basic principles of commercial law are codified in the Commercial Code. The Commercial Code governs relations between and among persons whose primary occupation is commerce and who are engaged in commercial transactions, (referred to as the law of merchants). Other areas of commercial law such as company law, intellectual property, bankruptcy, commercial paper, antitrust, insurance and banking law are governed by statute.
The basic statutes governing Greek company law were enacted by the Parliament in the 1920s and were heavily influenced by French company law. A legal entity under Greek law can be formed and operate only under the authority of and as provided in an enabling statute. In contrast to the United States where company law is made at the state level, Greek company law is fundamentally national legislation. The basic statutes have amended, revised and supplemented over the years by subsequent legislation, ministerial decrees, presidential decrees and ministerial regulations. Also, since 1980, when Greece became a Member State of the European Union (EU), Greek company law has conformed to various EU company law directives.
The basic legal entity under Greek company law is the anonymous etairia (referred to as AE). which translates as corporation. The shares of an AE can be publicly traded on an exchange or held privately. The AE has the basic attributes of a C Corporation which are limited liability, capacity to hold property in its own name, capacity to sue or be sued in its own name and shares(metohes)/dividends. However, in contrast to a C Corporation, the formation, management and governance of an AE is highly regulated by statute. The law of AEs was fundamentally amended and replaced by Law 3604/2007 which took effect on August 8, 2007. The new law removes some of the restrictions in the prior law and gathers various existing amendments and supplements to the prior law in one comprehensive statute.
Requirements to Form an AE
The requirements to form an AE are as follows:
The Articles of Association serve the functions of articles of incorporation, by-laws and shareholder agreements.
Management and Governance
Management and governance are vested in the shareholders. The shareholders appoint a board of directors. The board must consist of at least 3 directors. The directors need not be shareholders and can be other legal entities. The AE can have 1 board with both executive authority and supervisory authority or effectively 2 separate boards, one of which has executive authority and one of which has supervisory authority. The 2-board system is used by larger AEs.
The shareholders must meet at least once in each fiscal year. The shareholders have ultimate authority over fundamental items of governance such as amendment of the Articles of Association, election of directors and appointment of auditors. An AE can merge, acquire or be acquired.
The new Law 3604/2007 enhances the rights of minority shareholders, allows the board to declare dividends if it is so authorized by the shareholders, allows the board to set the share price for capital increases with the approval of the shareholders and allows for remote voting and teleconferencing of shareholder meetings.
The most common legal entity under Greek company law is the etairia periorismenis euthinis which translates as limited liability company (referred to as EPE). The EPE is the functional equivalent of a closely held corporation in the U.S. Although the EPE is also functionally similar to an LLC in the U.S., the EPE is a corporate body and not an unincorporated association as is an LLC in the U.S. The EPE is taxed as a corporation. The EPE is used for small to medium size businesses and is traditionally used by a family or retail business.
The EPE has the basic attributes of a close corporation/LLC which are limited liability, capacity to hold property in its own name, capacity to sue and be sued in its own name, management /governance vested in the members and percentage interest as the unit of ownership referred to as a part(meridia). The management and governance are less regulated by statute than are the management and governance of an AE but more regulated than a close corporation/LLC in the U.S.
Requirements to Form an EPE
The requirements to form an EPE are as follows:
The Articles of Association serve the functions of articles of incorporation, by-laws and shareholder agreements.
Management and Governance
The EPE is managed by the members. The management and governance are conducted in a manner similar to a partnership without many of the formalities and restrictions to which AEs are subject. The EPE can hire an administrator to manage the business and the administrator need not be a member. Subject to a reserve requirement, net profits of an EPE are fully distributed in each fiscal year. An EPE may merge, acquire or be acquired.
The members must meet at least once in every fiscal year. Each one percentage part has one vote. Management and governance decisions are made by a vote margin of a simple majority. However, any amendment to the Articles of Association must be made by a vote margin of 3/4 of the members.
Greek company law recognizes general partnerships (omorrythmi etairia, O.E.) and limited partnerships (eterorrythmi etairia, E.E.). The OE and the EE are similar in concept and operation to partnerships in the U.S. under the Revised Uniform Partnership Act (RUPA) and the Revised Uniform Limited Partnership Act (RULPA). The partners of a general partnership are not afforded limited liability and are jointly and severally liable for the debts and obligations of the partnership. A limited partnership must have a general partner and the limited partners are afforded limited liability. The concepts of a limited liability partnership (LLP) and a limited liability limited partnership (LLLP) are not recognized under Greek partnership law.
A partnership is a distinct legal entity and separate from its partners so that it can own property and use or be sued in its own name. Because there is essentially no entity level taxation of dividends or distributions under Greek law, there is no difference in the manner in which an AE, EPE or a partnership is taxed.
A corporation or limited liability company that is validly organized and existing under the laws of a nation other than Greece is a foreign legal entity. A foreign partnership generally cannot establish a branch. To operate a business in or from Greece, a foreign legal entity must establish a branch of the foreign legal entity in Greece. The manner in which a foreign legal entity operates in Greece depends on the nature of its business activities. If the foreign legal entity desires to do business in Greece, then by establishing the branch in Greece, the foreign legal entity essentially subjects itself to Greek company law to the extent of its operations in Greece though not to the internal governance laws of Greek company law. If the foreign legal entity desires to do business from Greece, then it can choose to establish the branch under a special law (Law 3427/2005). Note that foreign persons and foreign legal entities can always establish an AE, EPE or a partnership without establishing a branch.
Branch for Doing Business In Greece
A foreign legal entity which does not desire to form an AE, EPE or partnership but desires to do business in Greece must establish a branch in Greece. The branch itself is not a legal entity but merely an extension of the foreign legal entity. The internal governance of the foreign legal entity is governed by the laws under which the foreign legal entity is organized. The foreign legal entity may perform any legal purpose in Greece which it is empowered to perform under its constitutive document i.e. articles of incorporation or articles of organization. With respect to taxation, labor and commercial relations with third parties, the legal entity is treated the same as an entity under Greek company law.
The requirements for establishing a branch are as follows:
Each of the foregoing documents must be original, notarized, apostilled according to the Hague Convention and translated into Greek.
Once established, the foreign legal entity must inform the appropriate authority as to any changes in any of the information in the foregoing documents, submit a balance sheet of the foreign legal entity for each fiscal year and a record of operations in Greece for each fiscal year.
Branch for Doing Business From Greece
A foreign legal entity which desires to do business from Greece but not in Greece may choose to establish a branch under a special law euphemistically called an “off-shore” law . Traditionally, such branches were referred to as “Law 89 companies” after the original Law 89/1967. Law 89/1967 has been fundamentally amended by Law 3427/2005. To be eligible under the new law, the branch must provide services exclusively to either the head office of the foreign legal entity located outside of Greece or to an affiliate of the foreign legal entity located outside of Greece. The services that the branch must provide are any of the following: consulting, centralized accounting, quality control of goods and services, preparation of studies, designs or contracts, advertising/marketing, data and information processing and dissemination and research/development.
The non-EU citizen foreign personnel of the branch are granted work and residence permits. The profits from the operations of the branch are calculated by adding on a profit margin to operating expenses and depreciation minus the income tax. The profit margin is determined by the Ministry of National Economy based on the type of services rendered, the category of business activity and applicable OECD Guidelines on intragroup charges. The profit margin must equal at least 5%.
The requirements for establishing this kind of branch are as follows:
The tax and customs exemptions under the prior Law 89/1967 are essentially abolished.
The Societas Europaea or European Company (SE) is a new legal entity which was enabled under the laws of the European Union (EU) on October 1, 2001. An SE may operate and conduct business activities in any EU Member State without having to establish subsidiaries or re-registering in each EU Member State in which it does business, (See EE 2001 L.294 p.1; Council Regulation (EC) No. 2157/2001).
An SE can be formed in any one of the following ways:
The SE will be required to satisfy certain worker involvement provisions. The SE will be taxed by each EU Member State in the same way that a multi-national company is currently taxed under the national legislation of each of the EU Member States. The minimum subscribed (but not paid in) capital is Euro 120,000. Greece and Cyprus have enacted implementing legislation which allows for the creation and operation of SEs.
Greek Commercial and Company Law