Companies crossing borders within the EU

1
Companies crossing borders within the EU

• Philippe PelléECRF ConferenceUtrecht, 20
  September 2007

2
Corporate mobility, the new frontier?

• Single market without borders
• Free movement of goods
• Free movement of capital
• Free movement of services
• Free movement of persons
• Right of establishment
• companies mobility
• What is the issue? Legal Mobility?

3
Right of establishment

• Legal persons and natural persons
• Article 48 ECT
• Companies or firms formed in accordance with the
  law of a Member State and having their registered
  office, central administration or principal place
  of business within the Community shall be treated
  in the same way as natural persons who are
  nationals of Member States

4
Right of establishment

• Article 43 ECT
• Prohibits restrictions on the freedom of
  establishment of nationals of a Member State in
  the territory of another MS, including the
  setting up of agencies, branches or subsidiaries
  by nationals of any MS established in the
  territory of any MS

5
(No Transcript)
6
Right of establishment Secondary lex

• EU focus from late 60s to late 80s
• Minimum harmonisation of level of protection of
  companys creditors and minority shareholders
  throughout the EC
• In full conformity with Treaty prescription (Art
  44(2)(g) on coordination through EC Directives of
  MS safeguards imposed on companies

7
Company mobility?

• Not high on the EC legislators agenda for years
• A first attempt
• the 1968 Brussels Convention on Mutual
  Recognition of Companies and Legal Entities

8
The European Company (SE)

• SE Regulation and flanking Directive adopted in
  2001
• European flag
• Restructuring and cost-saving tool from
  subsidiaries to branches one single body of
  company law
• A corporate vehicle allowing X-border merger and
  transfer of seat

9
The European Company (SE)

• If so attractive, why so few SE (about 90)?
• Late implementation of the Directive on workers
  participation
• Minimum capital (120.000)
• Public Ltds only
• Painstaking procedure on workers participation
• Exit taxation on the transfer of seat
• Com ex-post evaluation in 2009

10
The X-border merger directive

• More attractive than the SE?
• Well-known national legal forms (UK PLC, Gmbh)
• Tool for the transfer of seat (cf.US)
• Not yet in application (15 Dec. 2007)

11
ECJ Case Law and Right of Establishment

• Centros
• UK registered 1 pound Pllc branching in DK
  (economic activity and head office in DK)
• Purpose of legal construction to circumvent DK K
  requirements Abuse of right of establishment?
• DK refused branch registration
• ECJ DK not entitled to proceed, contrary to the
  Treaty, no abuse of law, other means than K to
  protect third parties

12
Centros ex-post

• Becht, Mayer, Wagner study
• Surge of UK registration of companies with
  activity entirely carried out in another MS
• In 2005, 12000 such companies, i.e 5 times more
  than in 2001(when the ECJ delivered its opinion)
• Centros, green light for shift from high to low
  formation cost jurisdictions regulatory
  competition between MS?

13
(No Transcript)
14
(No Transcript)
15
ECJ Case Law and Right of Establishment

• Überseering, Centros, Inspire Art not about the
  transfer of seat
• The companies were created in one MS to operate
  through a head office located in another MS
• Not about transfer of head office but about
  recognition and acceptance without further
  requirements of the existence of head office of a
  Co legally constituted in another MS

16
ECJ Case Law and Right of Establishment

• Can companies on the basis of the existing case
  law move around in the EU their registered seat
  or head office?
• Daily Mail jurisprudence untouched
• MS are not forbidden to impose restrictions on
  the transfer to another MS of the real seat of a
  Co incorporated under their law (if restrictions
  proportionate and based on public interest)

17
Do we need a 14th CLD or should we leave it to
the Court?

• COM Action Plan 2003 directive on transfer of
  seat, a medium term priority
• 2006 public consultation 80 in favour ie. Good
  for SMEs mobility, need to smooth out transfer
  of registered seat (only possible through
  conversion in a SE or X-border merger)
• Need for legal certainty (ECJ case by case)
• However, no economic evidence. A matter of
  principle essentially

18
Cartesio Case

• Which is the applicable law in the case of a
  company registered and headquartered in a MS
  which wishes to transfer its seat to another MS?
• Whether such a company can transfer its
  registered office under Art 43 and 48 ECT?
• Whether the transfer can be subject to conditions
  and approvals by either the state of
  incorporation or the host MS?

19
State of play re. 14th CL Directive?

• No Commission decision yet as to whether or not
  to go forward with a Directive on the transfer of
  seat.
• Economic evidence scarce
• But European Parliament pushy
• What about sorting out the exit tax issue through
  better cooperation between tax administrations?

20
Thank you for your attention !

21
(No Transcript)
22
Facilitating the cross-border exercise of
shareholders rights

• Objective ensure timely access to complete
  information and enable shareholders to cast an
  informed vote even if they cannot attend the AGM.
• Key elements
• Access to information (minimum notice period,
  minimum content)
• Access to the general meeting (abolition of share
  blocking record date system)
• Vote (simplified means to vote in absence,
  promote active participation, information on
  voting results).
• Proposal for a Directive adopted on 5 January 2006