Seat's Transfer and State of Origin-Imposed Limits to Companies' Mobility

Abstract

This paper addresses the question of whether EC freedom of establishment covers identity-preserving company law changes, which is one of the most debated issues in today's EC company law. This issue is significant because it was not tackled by the recent development of European Court of Justice (ECJ) case law, which concerned only the transfer of the administrative seat from the viewpoint of the country of arrival. ECJ faced the limits placed by the country of departure only in the case Daily Mail, which allows countries of departure to place whatever limits they prefer to the emigration of national companies. Regarding the application of national law, the main idea of this paper is that conflict rules can decide whether a transfer of the administrative seat and/or the registered office should lead to a change of the applicable law; on the contrary, substantive company laws decides on the liquidation of the emigrating company. The issue of the continuity of the legal identity raises the question as to whether EC freedom of establishment allows Member States to liquidate national companies transferring their registered office and/or administrative seat abroad. Despite a common view arguing to the contrary, I suggest that EC freedom of establishment does not allow Member State to wind-up emigrating companies, since, if this were the case, freedom of establishment would be only granted to shareholders as individuals, who should incorporate a new company in the country of arrival, and not to companies. The issue of the continuity of the legal identity is more controversial. EC freedom of establishment as such does not cover company law changes, but Member States have a strong interest in preserving the coincidence of registered office and applicable law. In order to fulfil this goal, Member States cannot liquidate companies transferring the registered office abroad; they can only allow companies transferring their registered office abroad to change company law. Hence we can say that Member States should still allow this if they want to grant the coincidence of registered office and applicable company law, even if the EC freedom of establishment does not cover the change of company law. We should then ask whether or not we really need a Directive allowing identity-preserving company law changes. EC freedom of establishment already forbids the liquidation of emigrating companies, and Member States which want to preserve the coincidence of registered office and applicable law should either adopt the "incorporation doctrine" or allow national companies to change lex societatis. This can only happen if the country of arrival also agrees upon this result. Moreover, it is not clear to what extent company laws of the countries of departure and of the countries of arrival should be applied to the transfer; it seems necessary to find a common solution throughout the EU which is able to protect all relevant interests, primarily the interests of minority shareholders and creditors of the emigrating company, as if the company were transformed into a different "type" of company regulated by the country of arrival. Therefore, even if contemporary EC law does not create obstacles to identity-preserving company law changes, it seems reasonable to recommend the approval of Directive which can resolve these open issues.