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About EEIGs

EEIGs are designed to help businesses establish and maintain links with firms in other Member States. For businesses, and smaller firms in particular, other development options - mergers, take-overs, joint ventures - may be too expensive and complicated. The EEIG provides an alternative way to establish links in other Member States without losing individual identity and independence.

The European Union (EU) Regulations (see chapter 4) require and permit Member States to make certain provisions under national law in respect of EEIGs. As a result, there are some differences in the laws of Member States in areas such as legal capacity, the managers and auditing requirements. The information given here only covers EEIGs registered in the UK.

1. What is an EEIG?

The EEIG is a form of association between companies or other legal bodies, firms or individuals from different EU countries who need to operate together across national frontiers. It carries out particular tasks for its member-owners and is quite separate from its owners' businesses. Its aim is to facilitate or develop the economic activities of its members.

An EEIG may be set up in any one of the Member States, and operate in any part of the EU. It can also enter into arrangements with organisations outside the EU, although these organisations cannot themselves become members of an EEIG.

2. What can an EEIG do?

An EEIG's activities must relate to the economic activity of its members but must be ancillary to them. The concept of 'economic activity' can be interpreted very widely. For example, universities and research institutes may participate in an EEIG. The creation of an EEIG between people in the professions (for example, solicitors) is also permitted. However, professional people will need to consider whether or not participation in an EEIG would be contrary to the rules of their profession. The Grouping may not itself practise a profession - as this would replace the activities of the members - but it may provide services for its members which relate to their profession (for example, consultation on legal matters).

Apart from this, and the restrictions set out under question 3, the EEIG can do whatever its members wish.

For example, companies in the UK, Spain and France might form an EEIG to carry out scientific research in an area of common concern; or firms in Portugal and Scotland might use an EEIG to create a joint marketing operation for a new range of products; or lawyers in England, Denmark and Germany could join together to pool information.

3. What can't an EEIG do?

An EEIG cannot:

be formed with the object of making a profit, although it may do so as a consequence of its normal operations;
exercise management control over its members own activities or those of any other undertaking;
hold shares in any of its members;
take investment from the public;
be a member of another EEIG;
employ more than 500 people;
be used to make loans to a company director or any person connected with him or her where that would be restricted or controlled by national law;
be used for the transfer of any property between a company and a director, or any person connected with him or her, except to the extent allowed by national law.

4. What are the advantages of an EEIG?

An EEIG enjoys several advantages including 'legal capacity' - the right to enter into contracts and to sue (or be sued) - and tax transparency (see question 15). Further, members have flexibility regarding the method of financing the Grouping. For example, when smaller firms or non-profit making organisations are involved, their contribution may be in the services and skills they can provide. There is no capital requirement for an EEIG. Members may vary their funding methods, rights and obligations by contract so that the Grouping can develop. And, since an EEIG may not hold shares in its members, nor exercise any management control over them, it works for the members, not vice versa.

5. What are the disadvantages?

The price to pay for the lack of a capital requirement is unlimited joint and several liability of the members. This means that not only is there no limit to the financial liability of any of the members for the activities of the EEIG, but also that each member can individually be held liable for those activities. If no provision were made for this responsibility, third parties might not have the confidence to sign contracts with the EEIG. In addition, whilst an EEIG may, for example, be funded from members' funds, by raising share capital from its members, or by bank loans, it cannot seek funds from the public or buy a share in another EEIG.

6. How is an EEIG structured?

An EEIG is set up in much the same way as a company. It must be formed by at least two members from different Member States, and a manager or managers must be appointed to operate the EEIG on a day-to-day basis.

7. Who may be a member of an EEIG?

The Regulations aim to make membership of an EEIG open to as many people and organisations as possible within the Union. The main requirement is that each member should have been engaged in an economic activity in the EU before becoming a member of the EEIG.

8. Is there a nationality requirement?

An EEIG must have at least two members with their central administrations or principal activities based in different Member States.

To be eligible for membership, companies, firms and other legal bodies must:

have been formed according to the law of one of the Member States and have their registered or statutory office (if applicable) within the EU; and
have their central administration (that is, their place of central management and control) within the EU.
Individuals may become members if they carry on any industrial, commercial, craft or agricultural activity or provide professional or other services in the EU.

Organisations from non-EU countries may not become members.

9. What is the role of the members?

The members decide how the EEIG will be run. Normally this will be set out in the formation contract of the EEIG, but there is no requirement that this must be so. There is no requirement for regular meetings or for decisions of the members to be taken only at meetings: all communication may be by fax, telephone or video-conferencing if the members so desire.

Each member has at least one vote. The contract of formation can give more than one vote to certain members (for example, if one member has subscribed a greater share of the capital or expertise), provided that no one member holds a majority of the votes.

The members are free to decide the voting procedures to be set down in the contract of formation except for certain decisions fundamentally affecting the existence and operation of the EEIG, for which unanimous decisions are required. The decisions requiring unanimity are:

alteration of the objects of the grouping;
alteration of the number of votes allotted to each member;
extension to the duration of the grouping;
alteration to members' contributions to the grouping's financing;
alteration to members' obligations, unless otherwise provided by the formation contract;
alteration to the formation contract not covered above, unless otherwise provided by the contract itself; and
transfer of the official address of an EEIG to another Member State.

10. What is the role of the managers?

The members appoint managers who run the EEIG and make normal daily decisions. At least one manager must be appointed. EEIGs registered in the UK may appoint legal persons (for example, a company incorporated under the Companies Act) as managers, provided that an individual is then registered as the manager's representative.

The members determine the limits of the managers' powers. The actions of the managers are binding on the EEIG and the members are jointly liable for those actions. The only limitation that can be applied to the managers by the members in this respect is that of the 'double signature'. This means that the EEIG is only bound by the joint action of two or more managers. If this control device is used it will be effective only if its existence is published in the appropriate Gazette - see question 5 in chapter 3.

11. Does an EEIG have legal personality?

An EEIG registered in the UK is accorded legal personality as a 'body corporate' from the date shown on its certificate of registration.

12. What competition rules apply to EEIGs?

EEIGs are not exempt from EU or domestic competition laws. They are subject to control under Articles 85 and 86 of the Treaty of Rome and to national competition legislation in the same way as any other undertaking.

For more information contact;

Enquiries and Reporting Centre
The Office of Fair Trading,
Fleetbank House,
2- 6 Salisbury Square,

13. How is an EEIG funded?

The members of the EEIG are not required to subscribe any capital. The grouping can be financed by capital invested by the members or by loans or donations from them or others. The contribution of some members may be in the form of the services and skills that they can provide. EEIGs may not seek investment from the public.

14. Are grants available for EEIGs?

There is nothing to stop an EEIG from bidding for EU or Government funds. However, there are no special grants available specifically for EEIGs.

15. What taxation rules apply to EEIGs?

Taxation operates under a system of fiscal transparency; that is to say, any profits, losses or gains are shared between the members according to their shares. These are then taxed in the hands of the members according to the relevant national law in the normal way. The provisions for taxation of EEIGs in the UK are given in the Finance Act 1990, Schedule 11 .

16 How do they work?

For the purposes of taxation, a grouping is regarded as acting as the agent of its members: its activities are those of its members acting jointly, and each member is regarded as having a share of the property, rights, liabilities and profits of the EEIG. The portion of profits, losses or gains going to each member is determined by the formation contract where this is stated. If the contract says nothing the members are apportioned equal shares. The shares of property, rights and liabilities are determined in the same way.

Returns, accounts and information are given by the EEIG acting through its managers. The members of the grouping are jointly and severally liable for any acts or omissions relating to the taxation provisions.

The concept of tax transparency does not extend to other taxes such as VAT and stamp duty. An EEIG will have to register for VAT purposes if it makes taxable supplies in excess of the registration limits, in the same way as any other person.

17. What are the accounting requirements?

The EEIG is not subject to any accounting or auditing requirements, and therefore does not have to file an annual return with Companies House. It is, however, required to make a return to HM Revenue & Customs (HMRC).