The “IKE” Private Company in Greece: A New and Flexible Type of Company

 In the recent years, there has been a great development of Private Companies (Ιδιωτική Κεφαλαιουχική Εταιρεία «ΙΚΕ»), also known as “companies of one euro”. These companies were introduced by virtue of Greek law n. 4072/2012 as amended by law n. 4155/2013.

Due to the minimum cost required for their establishment and simplified operation, they are designed to meet needs of SMEs by establishing a more flexible and simple corporate type of company.

The main features of the IKE company that make it a popular choice for those who wish to establish a company in Greece are the following:

How is the Company Established?

IKE companies can be established with a private document by one or more persons through the “One-Stop Shop” of the General Electronic Commercial Registry (GEMI). The establishment of the IKE with a notarial act is necessary only in the case that this is required by law or in the case that a partner of the company contributes immobile property to it. If the folder with the submitted documentation is complete, the IKE can be established on the same day.

The IKE Company must also acquire a corporate website within one month of its establishment. All modifications of the Statute (i.e. corporate changes, change of address, purpose, etc) are done exclusively through the GEMI or corporate website, without the presence of a notary public and the obligation to publish in the Government Gazette. The duration of the IKE company -if not defined in the Statute- is for a twelve year period.

What capital is needed?

One of the main advantages of the IKE during these times of financial crisis and inability to locate sources of funding, is that the only capital needed for the establishment of the company is the sum amount of one (1) euro. In this way, the party wishing to participate in a business initiative could seek other ways to contribute to it, besides the means of capital payment.

Where can the company seat be located?

IKE is headquartered at the place referred to in its Statute, but is not obligated to have its registered office in Greece. Furthermore, it is possible for the IKE to have its seat of administration in Greece and develop its financial activity (real seat) in another country.

Who can be an administrator of the company?

IKE’s administrator can only be a natural person who does not necessarily have to be a partner of the company.

What can be the purpose of the company?

IKE can have a business purpose like those of other companies but it can also have a non-commercial purpose.

What can be the company name?

The company name of the IKE could be either an objective one, which means it can be formed according to the purpose of the business, or a subjective one, based on the name of one or more of the partners, or a combination of the above. It could also be fictional. Regardless of the company name, the law requires the mention that it is a “Private Company” so that those those who deal with the company are aware of its formation and type.

What is the extent of liability of the partners?

The IKE company is only liable with its assets for its corporate obligations, with the exclusion of the case where liability has been undertaken by the partner with guarantee contributions. This limited liability, demonstrates the advantages of the IKE company as compared to other corporate forms. More specifically, it presents a flexibility compared with other Greek company partnerships (OE-EE), where there is a partner responsible in an unlimited way (even with his own property) for the debts of the company.

What are the necessary contributions from the partners?

The contributions of the partners of IKE can be of three kinds: (a) capital contributions in cash or goods, (b) non-capital contributions which are services that are to rendered. These services must be specified in the Statute and executed for a definite or indefinite period. The value of the contributions undertaken either at the moment of the establishment of the company or at a later moment are also specified in the Statute, (c) guarantee contributions, which consist in undertaking liability against the company creditors for the company debts, up to the amount which is specified in the Statute. The value of any guarantee contribution should be specified in the Statute and cannot extend beyond 75% of the liability undertaken by the partners against creditors of the company.

The diversity of how contributions are paid is one of the main innovations of IKE and introduces an exception to the present obligation that exists with other corporate forms of Greek companies where contributions can only be made in cash and in assets.

The IKE Company shares. How are the shares transferred?

 According to the law, all kinds of contributions are divided into shares of the same nominal value. However, only one type of contribution can correspond to each shareholder. The partners can choose a company that consists of capital contributions or a company with predominant personal contributions, such as employment contributions and undertaking responsibility for the debts of the company. In any case, in an IKE there must be at least one shareholding which represents the capital contribution.

The transfer of shares can take place throughout the founders lifetime or by an act of last will. However, a partner with non- capital contributions and/ or guarantees, may not transfer these shares unless they are first purchased by the shareholder. It should also be pointed out that prior to the transfer of shares, it is required to submit to the relevant tax office a declaration for tax at the rate of 20% for profit made by the transferor.

What is the current taxation of the company?

The income of the IKE is taxed at the source at the rate of a 26% tax. Profit of the IKE is then subject to a withholding tax of ten percent (10%). By means of this withholding tax all tax obligations are fulfilled for this income derived from the IKE. The tax withheld is attributed to the relevant tax office with a declaration that is submitted within the next month from the month of the withholding.