Free Movement of Companies After the Polbud Case
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Free Movement of Companies After the Polbud Case Aleksandrs Fillers1,2
© T.M.C. Asser Press 2020
Abstract On the 25th of October 2017, the CJEU rendered a ruling in the Polbud case. The ruling shows that the CJEU is determined to embrace a further liberalization of the free movement of companies in the internal market. The Court’s confidence and nocompromise approach brings with it a number of effects. First of all, the Court has detached the transfer of the registered office from the traditional notion of establishment. The registered office can be relocated by ‘will alone’, irrespective of whether it is justified by the actual conduct of business or the company’s structure. Secondly, the author discusses in detail the fate of the real seat in the light of the Polbud judgment. After the Polbud ruling, the real seat has lost most of its functionality that had already been diminished by the Court’s earlier case law. Now a company incorporated in a real seat jurisdiction can easily ‘contract out’ by performing a cross-border conversion. Hence, the real seat mainly preserves its role as a precondition for incorporation. Finally, the ruling underlines more than ever that the CJEU focuses on the protection of the private interests of companies by allowing them to choose a favourable legal order. Economic interests of the Member States are of lesser importance under the Court’s approach. Keywords Freedom of establishment · Cross-border conversion · Real seat theory · Contractual theory of companies · Cross-border mobility
1 Introduction In the recent Polbud case,1 the Grand Chamber of the Court of Justice of the European Union (CJEU) had an opportunity to continue developing its jurisprudence on the free movement of companies. The case is an important precedent as it modifies 1
CJEU 25 October 2017, C-106/16 Polbud, EU:C:2017:804.
* Aleksandrs Fillers [email protected]; [email protected] 1
Assistant Professor, Riga Graduate School of Law, Riga, Latvia
2
Researcher, Law Faculty, University of Antwerp, Antwerp, Belgium
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A. Fillers
the Vale judgment,2 rendered by the Third Chamber, and opens the doors for the greater movement of companies within the European Union (EU). Currently, it is the decisive judgment that liberalizes the framework for cross-border conversions— a relocation of the registered office—within the EU. Companies have two offices (or seats). The most important of them is the registered office. This is a fictional address found in the official registry and the company’s statutes.3 This fiction serves as a connecting factor for the jurisdiction of the commercial register.4 Thus, normally a commercial register cannot contain an entry for a company having its registered office abroad. This means that the registered office determines the place of incorporation. In turn, the state of incorporation determines the connecting factor with the applicable substantive law in the state of incorporation.5 Usually, states require companies to have their reg
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