EP presses for directive on transfer of company seats
By Sophie Mosca | Wednesday 01 February 2012
The European Parliament drives home its point on the question of the cross-border transfer of company seats, in a new report to be put to the vote on 2 February. Rapporteur Evelyn Regner (S&D, Austria) makes recommendations to the Commission on a 14th company law directive on cross-border mobility, “one of the crucial elements in completion of the internal market”
(1). A legislative proposal to this effect was considered for a time but was blocked by the European Commission, in December 2007. The executive argued that the political context was unfavourable and that alternative solutions rendered its proposal obsolete.
MEPs have not relented, however. Following on from the resolutions passed in July 2006 and October 2007, they adopted a report by Klaus-Heiner Lehne (EPP, Germany), in March 2009, and are preparing to approve Regner’s report, which puts greater emphasis on employee participation.
This new resolution mentions in its recitals “the lack of consistency in legislation on transfers and on procedures for transferring the registered office or real head office of an existing company or firm incorporated under national law from one member state to another, within the single market” and the associated risks in terms of employment, as well as the administrative difficulties, the costs generated, the social implications and the lack of legal certainty. It invites the EU executive to come forward with a new legislative proposal based on seven key recommendations.
First, the rapporteur sees the need for clarification of the scope of the directive, which should apply to limited liability companies already formed under the national law of a member state within the meaning of Directive 2005/56/EC, for the purpose of exercise of the right of freedom of establishment. The legislative proposal should provide an appropriate solution to the question of separation between the registered office and the administrative seat of a company, which has been the subject of recurring controversy in EU company law. Some states have adopted laws based on the theory of incorporation and others on ‘real head office’. In the former, a company remains subject to the jurisdiction under which it was formed, but may develop in other states regardless of its activities, without losing its original status; in the latter, there exists an ‘exclusive’ link between the company formed under the jurisdiction of a given state and the establishment of this company in another state, which constitutes its real head office, imposing de facto a ‘merger’ of the registered office and the real head office and winding-up of the company in the state where it was initially registered. The text states that even the EU Court of Justice has called for legislation on this matter to do away with disparities between the requirements imposed by member states. In its Cartesio ruling (Case C-210/06), the ECJ confirms the need for harmonised rules governing the cross-border transfer of company seats (see
Europolitics4229, special issue on company law).
The EP report argues for incorporation, stressing the need to allow companies to transfer their office to another member state without losing their legal personality, but by being converted into a company governed by the law of the host state without having to be wound up. It also details provisions to heighten the transparency of such transfers: publication of a report and a transfer plan submitted first to employees and shareholders and describing the economic, legal and social consequences of the transfer.
Regner also notes that it is the general assembly of shareholders that must approve the transfer proposal in line with legislation applicable to the company in its member state of origin, with the possibility to make completion of the transfer conditional on approval of arrangements for employee participation if the company is managed on the basis of such participation.
The fifth recommendation highlights verification of the legality of the transfer by the member state of origin, which should deliver a certificate to the host state confirming the completion of formalities and of all acts required prior to the transfer. The report also recommends a ban on the cross-border transfer of the seat of any company involved in proceedings for winding-up, liquidation, insolvency or suspension of payments, or other similar proceedings.
The EP report also notes the need “to ensure the coherence of employee participation procedures in connection with the application of European company law directives” and stresses that employees’ participation rights must be preserved through the transfer. Although these rights are in principle governed by the laws of the host member state, such laws should not apply if they do not provide at least the same level of protection as in the state of origin. Furthermore, legislative measures on employees’ rights should be in line with the Community
The Commission is planning a consultation on company law next spring, which will include a chapter on transfers of company seats.(1) The report is available at
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