FREEDOM OF ESTABLISHMENT COVERS THE TRANSFER OF REGISTERED OFFICE WITHIN THE EU

According to a recent decision of the European Court of Justice, it is possible to transfer the registered office of a company from a Member State to another Member State, for the purposes of its conversion, when there is no change in the location of the real head office of that company. With this decision, the Court reaffirmed that in case a company formed in accordance with the legislation of one Member State converts itself into a company under the law of another Member State, it falls within the scope of freedom of establishment, provided that the conditions required by the legislation of that other Member State are satisfied, and, in particular, that the ‘test’ adopted by the latter State to determine the connection of a company to its national legal order is satisfied. Accordingly, the decision to transfer only the registered office (i.e. when the transfer does not affect the real head office) cannot, in itself, mean that such a transfer does not fall within the scope of freedom of establishment. As a general rule, the right of establishment is protected by the EU by prohibiting the restrictions on the freedom of establishment.

Elaborating the above mentioned restrictions that are prohibited, the Court also ruled in this decision (Case C-106/16 Polbud – Wykonawstwo sp. z o.o.) that the transfer of the registered office of a company incorporated under the law of one Member State to the territory of another Member State, for the purposes of its conversion into a company incorporated under the law of the latter Member State, cannot be subject to the mandatory liquidation of the original company. The Court stated that a national legislation, which imposes a general obligation to implement a liquidation procedure in this regard, is disproportionate and goes beyond what is necessary. In the given case a Polish company, whose registered office was transferred to Luxembourg and was no longer named ‘Polbud’ but became ‘Consoil Geotechnik’ without the loss of its legal personality, requested its removal from the Polish commercial register. This was denied by the registry court since Polbud failed to comply with the requirements of the liquidation procedure, thus, the imposition on that company were comparable to those required to bring its legal existence to an end. Therefore, the Court stated that such national legislation is liable to impede, if not prevent, the cross-border conversion of a company.