Greek Company Law has been recently modernized to meet the needs of contemporary businesses by providing a clear and complete regulatory framework, which works more as an enabler and a safeguard rather than a brake on economic growth. Indeed, from 2012 onwards, a grid of new corporate law legislation regulated a set of issues that caused problems in the day-to-day operation of companies and introduced new types of companies in the Greek legal system.
As a preliminary note, it needs to be said that the Greek commercial law system lays its foundation on the principle of publicity which is implemented through the registration of legal entities in public registries and the keeping of nominal lists of shareholders and/or partners. The main purpose served by the abovementioned principle is transparency and rigorous protection of traders within the Greek market and business community. This prioritization is a long-standing choice of the Greek legislator who strictly implements it already from the first commercial laws enacted in the Greek state in 1835 and 1920.
Types of companies under Greek Company Law
Under Greek law, there are various types of companies (SA, LLC, Private Company etc.), all of which are subject to the approval of the Business Registry, which is the competent authority to run all the checks and finally approve the formation. Every type has variations in the procedure and costs for the setup.
As a starting point, company types fall into two broad categories depending on their organizational structure but mainly on whether they are established in order to formalize a previously informal personal cooperation between different persons or for the purpose of raising capital for investment purposes. In the first category are included private partnerships and sole proprietorships, which are the main choice for SMEs and family businesses. In the second category are included capital companies and private limited companies.
Regarding the first category, Law 4072/2012, which was the first attempt of the Greek legislator to improve the operation of personal companies, codified the legal framework for General Partnerships and Limited Partnerships. In these types of companies, partners are directly involved in the management of the company and are liable with their personal property for the company debts. Their liability varies depending on the corporate form to be chosen, and may be full or limited. The company’s articles of association define the relations among the partners and the limits of their action in the context of the company’s object(s). Management is usually assigned to one of the partners who is liable to the other partners but all partners are liable to bona fide third parties, proportionally to their corporate share.
Regarding capital companies, it should be noted that as a corporate type it presents more formalities but this enables the shareholders to closely monitor its actions and investors to feel more at ease to put their money in. The main legal type of this category is the Societe Anonyme. For its establishment, a minimum capital of €25,000 is required. This amount can be either capital or in-kind contribution. The management of the company is assigned to a Board of Directors, whose scope of action is determined primarily by the company’s articles of association and is controlled by the General Assembly of the Shareholders. Supplementary, binding shareholders’ agreements can enter into force setting out in detail the business plans to be implemented by the Board. The main advantage of a Societe Anonyme is that liability is strictly limited to the company’ s assets – shareholders have no liability. Finally, close monitoring by an accountant of the corporate accountants is essential.
Law 4072/2012 introduced to the Greek business reality the type of Private Limited Company, which resembles the English limited company, as a means to prevent the widespread choice of Societe Anonyme as a legal form for partnerships of limited capital and turnover. Although it is a capital company, its establishment does not require a minimum capital. Furthermore, it can have a single shareholder and one or more Directors. In the context of facilitating the process, it is legally possible to use a standard statute. In case this option is not selected, there is a legal obligation for a notarized statute. Finally, it is worth mentioning that it can be set up in a 1 day if required documentation is in place but it could take more if shareholders are foreign legal entities.
Establishing a branch – Greek company Law 4635/2019
To begin with, the decision on whether to establish a company or a branch greatly depends on the objectives and aspirations of the mother company which will ultimately decide what best serve its interests, based on its financial and legal status. A key factor to consider is that a company – regardless of its type- maintains financial and legal independence from the mother company as opposed to the branch which is wholly dependent on the latter.
Regarding the establishment of a branch, it initially requires establishment approval from the local authorities, namely the Business Registry. Supporting documentation has to be submitted. Indicatively: the decision of a foreign company to establish a branch in Greece specifying the purpose, location and name of the branch and the legal representative; the Memorandum of association / Statutes of the foreign company, as applicable at the time of the application; Power of Attorney appointing a proxy and procedural representative of the company in Greece, which may be the same person; Certificate of Good Standing from the relevant authority of the country of the foreign company that it has not been dissolved or its operation license has not been revoked etc.
The authority responsible for the approval of the branch decides, according to the documents submitted, which Greek corporate type is equal with the form of the foreign company and provides licenses respectively, either in the form of a Limited Liability Company or a S.A.
The branch is managed by the legal representative that is appointed by the foreign company. The legal representative represents and act in the name of the foreign company in Greece.
Finally, regarding the tax status of the branches, it should be noted that they are taxed for their business profits according to the Greek Revenue Tax Code. Taxed profits are then transferred to the mother company without further withholding taxes. The branch of a foreign company does not distribute dividends.