- INTRODUCTION
- THE CORPORATION - ANONYMOS ETERIA (AE)
- Accounting Books and Records
- Audit Requirements
- Compulsory Publication
- Distribution of Profits
- Financial Institutions
- LIMITED LIABILITY COMPANY - ETERIA PERIORISMENIS EFTHYNIS (EPE)
- Accounting Books and Records
- Audit Requirements
- Compulsory Publication
- Distribution of Profits
- BRANCHES - IPOKATASTIMATA
- OFFSHORE OFFICE (LAW 89 COMPANY) - GRAFIO NOMOU 89
- JOINT VENTURE - KINOPRAXIA
- GENERAL PARTNERSHIP - OMORRYTHMOS ETERIA (OE)
- LIMITED PARTNERSHIP - ETERORYTHMOS ETERIA (EE)
- EUROPEAN ECONOMIC INTEREST GROUPING (EEIG)
INTRODUCTION
There are a variety of legal forms under which a foreign enterprise may establish and operate a business in Greece such as forming a local company or partnership, establishing a Greek branch or entering into a joint venture with another enterprise. Foreign enterprises can also establish offshore offices in Greece.
An entity with its registered place of business in Greece is normally considered to be a Greek enterprise despite the fact that all of its members may be foreigners. There are generally very few restrictions as to the participation of foreign individuals or entities in Greek enterprises.
THE CORPORATION - ANONYMOS ETERIA (AE)
Foreign enterprises may choose one of a number of corporate forms when establishing an operation in Greece, of which the Corporation ("AE") is the most favoured. An Anonymos Eteria is a legal entity in which the liability of a shareholder is limited by the amount of his contribution to the share capital. This entity is the equivalent of the French "Societ‚ Anonyme" or the German "AG".
Accounting Books and Records
For Greek tax purposes an accounting period is one of twelve months. However, on the commencement of operations the first accounting period may extend over a period not to exceed 24 months. The accounting year must end on 30 June or 31 December. A foreign controlled AE may have the same year end as its parent company, provided that the parent company has a holding of at least 50% of the AE's capital. Specific permission from the tax authorities is required for this purpose.
Greek company law has been harmonised with the provisions of the First, Second, Third, Fourth, Sixth, Seventh, Eighth, Eleventh and Twelfth EU Directives.
Corporations are required by the Books and Records Code to keep double entry books of account and the accounts and account structure to be used must be that of the Greek General Chart of Accounts or, if the entity is a bank, the Banking Chart of Accounts. Use of these Charts of Accounts is mandatory. Both company law and the Chart of Accounts prescribe the form of presentation of financial statements, which is in line with the EU Fourth Company Law Directive.
Audit Requirements
The annual financial statements of an AE must be audited by two auditors appointed by the shareholders. The auditors must be independent of management. Entities which satisfy two of the following three criteria in two previous consecutive accounting years must be audited by a recognised auditing firm of certified auditors (i.e., a member of the Institute of Certified Auditors "SOE").
The criteria are:
- Total assets exceeding Drs 500 million.
- Turnover exceeding Drs 1 000 million.
- Average number of employees exceeding 50.
KPMG Peat Marwick Kyriacou is a certified firm of auditors and therefore qualifies for appointment as a statutory auditor to any corporation in Greece.
Compulsory Publication
Documents concerning changes to the articles of incorporation and to the members of the Board of Directors must be filed with the Ministry of Trade (AE register kept in the Prefecture of the company's residence) and published in the Government Gazette.
Copies of the financial statements, Directors' Report and the Auditors' Report must also be filed with the Ministry of Trade.
The balance sheet and the profit and loss statement together with the auditors' certificate (required only when the audited company is obliged to be audited by a certified auditor), must be published in selected newspapers and the Government Gazette at least 20 days before the day on which the general meeting of the shareholders is to be held.
Entities listed on the Athens Stock Exchange are obliged to publish in the local press and file with the Ministry of Trade semi-annual financial information in the form of abridged financial statements.
Distribution of Profits
A minimum amount equal to 5% of the annual profits must be transferred to a statutory reserve until it reaches one-third of the share capital. This reserve is not available for distribution, except in the case of liquidation, but can be used to offset a deficit.
A minimum amount equal to 6% of the paid up share capital or 35% of the annual profits, whichever is greater, must be distributed as dividends. Under certain conditions, the dividend distribution can be waived.
Financial Institutions
Enterprises wishing to establish operations in the industries listed below are subject to special requirements. All such enterprises, except banks, insurance and leasing companies must be established as AEs. Banks, insurance and leasing companies may be established either as AEs or branches of their foreign parent. The minimum capital requirements are set at levels higher than those for a regular AE or branch. Depending on the industry, the special requirements include the need to obtain approval/permit from the appropriate authority (e.g. Bank of Greece, Capital Market Committee etc.), the requirement that all shares be registered, the requirement to become listed on the stock exchange within a certain period of time and regular reporting and disclosure requirements to the appropriate supervising authority.
- Banking
- Insurance
- Venture Capital
- Portfolio Investment Holding
- Mutual Fund Management
- Leasing
- Factoring and Forfeiting
LIMITED LIABILITY COMPANY - ETERIA PERIORISMENIS EFTHYNIS (EPE)
The EPE is a hybrid of an Anonymos Eteria and a partnership. An EPE resembles an AE in that it is regarded as a legal entity separate from the partners and it has limited liability. An EPE resembles a partnership in the manner that decisions are made, in particular, the majority of both the number of partners and of the capital are required. Prior to 1992, its profits were subject to income tax in the hands of the partners irrespective of whether there has been an actual distribution or not. Since 1992, the profit of an EPE is taxed in a manner similar to that of an AE. Peculiar to the taxation of the EPE is that a portion of its profits are taxed in the hands of administrator(s) who are also partner(s).
This form of enterprise may be convenient for small and medium size operations and is similar to the French Sarl or German GmbH.
Accounting Books and Records
The accounting period etc. are the same as that previously described for corporations (AEs).
Audit Requirements
EPEs that do not exceed the limits which apply for an AE to have an audit by a certified auditor are exempt from a statutory audit altogether. EPEs which exceed such limits are subject to an audit by a certified auditor.
Compulsory Publication
The documents concerning changes in the Articles of Incorporation and the administrators must be filed with the local Court of First Instance (EPE Register) and published in the Government Gazette.
Copies of the financial statements, the administrators' report and the auditors' report (where applicable) must also be filed with the local Court of First Instance.
The financial statements of an EPE (with the exception of the notes to the financial statements) and the auditors' report (where applicable) are published in the Government Gazette and in selected newspapers.
Distribution of Profits
A minimum amount equal to 5% of the annual profits must be transferred to a statutory reserve until it reaches one-third of the paid up capital. There are no requirements for a compulsory profit distribution.
The Articles of Incorporation, may provide for the sharing of the profits by the partners to be different from their participation in the capital.
BRANCHES - IPOKATASTIMATA
A Branch may be registered under Law 2190/1920 as a branch of a corporation limited by shares or under Law 3190/1955 (AE), as a branch of a foreign limited liability company (EPE)
The accounting period is the same as that of an AE. Normally, the accounting year of the branch would be the same as that adopted in the country in which the company is incorporated.
Every year, a branch must file a copy of its financial statements and those of its parent with the Ministry of Trade and comply with other publication requirements. Depending on size criteria and on industry (i.e. banking, insurance, etc.) branches are subject to certified audit requirements.
OFFSHORE OFFICE (LAW 89 COMPANY) - GRAFIO NOMOU 89
Foreign entities wishing to establish in Greece but to engage exclusively in commercial activities outside of Greece or to assume supervisory functions of other group entities or other similar functions, may establish an office (offshore branch) in Greece under the provisions of Law 89/1967. Such an office may be used as an administrative centre or as the regional headquarters of the foreign entity. The basic requirements which must be satisfied for registration under Law 89/1967 are:
- The entity registering must be exclusively engaged in activities outside of Greece.
- Because the entity is not permitted to engage in commercial activities locally in Greece, all local operating expenses must be met from remittances in foreign currency which must be converted to drachmae. The permit of establishment specifies the minimum amount of foreign exchange which must be imported and converted to drachmae each year. This minimum cannot be less than the equivalent of US $ 50 000.
- A bank letter of guarantee for US $ 50 000 must be deposited with the Ministry of National Economy.
- The benefits which accrue from registration under Law 89/1967 are essentially the following:
- Exemption from all Greek taxes on income.
- Right to import certain articles for the use of the branch and/or its foreign employees, free of duty.
- Right to maintain bank accounts in foreign currencies.
Similar provisions exist, under Law 378/1968, for ship management companies, but in the case of such companies, the amount of the bank letter of guarantee to be deposited is US$ 5 000.
An offshore office is not required to keep double-entry accounting books but only a receipts and expenses book and a fixed assets register for those fixed assets which have been imported into Greece duty-free.
An offshore office is not subject to any statutory audit requirements or to the compulsory publication of any financial information.
JOINT VENTURE - KINOPRAXIA
Under Greek law, joint ventures ("kinopraxies") are not recognised as separate legal entities. Therefore, each participant of a joint venture is liable for his share of the total debts. For tax purposes, though, a joint venture is treated as a legal entity and a 35% tax is imposed on any profits realised.
Special rules apply to the maintenance of the accounting records etc. of a joint venture. In order to qualify for this "special treatment" under Greek Tax Law there must be a written agreement in existence between the partners to the Joint Venture and a copy of that agreement must be filed with the tax authorities prior to the commencement of operations.
Professionals like lawyers, architects, civil engineers and generally all "free lance" professionals cannot establish a joint venture.
GENERAL PARTNERSHIP - OMORRYTHMOS ETERIA (OE)
A general partnership (Omorrythmos Eteria) is an entity in which the partners are jointly and severally liable for the debts of the partnership.
The articles of association of a partnership need not be signed before a Notary Public and can take the form of a private agreement. However, the articles must be filed with the Court of First Instance of the district in which the partnership has its registered office.
There is no minimum capital requirement. The capital may be contributed in cash or other assets, or in the form of personal services to the firm.
The affairs of the partnership are administered by one or more administrators and the accounting period is the same as that previously described for corporations (AEs).
LIMITED PARTNERSHIP - ETERORYTHMOS ETERIA (EE)
In all respects, a Limited Partnership (Eterorythmos Eteria) is similar to a General Partnership, except that the liability of certain partners is limited to the capital that they have contributed. At least one partner, generally the managing partner, must have unlimited liability. If a limited liability partner is engaged in the management of the partnership he loses his limited liability status.
EUROPEAN ECONOMIC INTEREST GROUPING (EEIG)
In February 1992, Presidential Decree 38/92 implemented EU regulations concerning the European Economic Interest Grouping (EEIG). Accordingly, an EEIG may be registered in Greece. The appointment of a representative is required.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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