lecture 3 Flashcards
(21 cards)
reasons for having a company
- to organize yourself in a certain way
- to limit your exposure incase things go wrong.
- also something you want to do for financial reasons.
- may also have the idea that by crating a company, you have a certain way of cooperating with others
how has the EU been approaching integration in EU company law?
With mutual recognition, and it also goes into some specific measures which have been adopted at the EU level.
the recognition of companies in the EU
it is left to the Member States at first, because it is something that is intangeable .
So, the MS decide what they see as a company. That’s why the EU also had to intervene, so that a company would be recognized when traveling
forms of companies with names
- private companies, open companies (stock open to the public)
- With public companies, the shares normally are freely transferrable
When can the EU intervene in EU company law?
- The EU doesn’t have an exclusive compentence
- Not a shared competence (art 2.1 TFEU? ➞ but not very clear)
- Most of the time, the EU has to adopt rules to harmonize on the basis of article 6 (b) TFEU
- Means that you have a coordinating competence (harmonize actions of national legislators)
Societas Europa
When talkign about EU company law ➞ we have all national legislation which have their own approach
- public, private, but limited
Societas Europa: not established by MS but by EU law itself. In the press it says that there aren’t a lot of these types of companies. They want to create a new form of a company which is a bit more flexible
Regulatory competition vs harmonization?
Harmonization is good, but it also has its drawbacks. On behalf of the good, the idea was that companies of the EU would be able to expand all across the EU. But at the same time that it takes place, there is a drawback. MS don’t want this free movement, and so companies can choose the lowest level of protection of a MS
➞ this is what happened in the US: ‘Delaware effect’
- The level of protection droped overall.
- This was considered a ‘race to the bottom’ ➞ because companies raced to the place where protection was the weakest. So, all the other states lowered their protection to make it attractive again for the companies.
what is the Brussels effect inspired on?
inspired by the Delaware effect. Trying to set up a high standard to become a symbol. This is what the EU usually tries to do.
Harmonization can therefore be used in both ways. For the ‘race to the bottom’, but it can also be used to improve the standard.
critisism addressed to harmonization
Once you do harmonize, there is less room for legislative innovation ➞ you don’t have a way to change it once you have a different way of thinking
MS competing with one other, this has led to the court of justice to suggest changing some things.
freedom of establishment
art 49 TFEU = a fundamental freedom
it has an impact on what a MS can do (also with domestic legislation)
concept of establishment
conditions
it contains a sereis of conditions, and three main ones
➞ found in Factortame II case
1. Economic activity
2. Fixed establishmed in another MS (cross border element) (to have an establishment, means that you have a shop/factory/etc) ➞ see Gebhard case, infrastructure isn’t always enough to invoke free movement
3. For an indefinite period of time ➞ Gebhard case
Gebhard case
infrastructure and temporary basis
some form of infrastrucutre may not be enough to speak of a fixed establishment in another MS
temporary basis = only when you provde an economic activity for a limited period of time
- nature of activies = must be determined in the light, not only of the duration of the provision of the service, but also of its regularity, periodicity or continuity
when it comes to companies - conditions
art 54 TFEU
charities aren’t covered under the scope
conditions
1. Formed in accordance with the law of a MS
2. (A) having their registered
office, (B) central administration or (C) principal place of business within the EU
➞ the three alternatives of the 2nd condition are equal in rank.
Why is feedom of establishment so important for companies?
Companies are intangible, fiction created by MS law
Companies have two seats from an economic perspective
1. Statutory seat: where the official office is (the registered office is the state of incorporation)
2. Real seat: where the main office is, where the board meets, decisions are made, etc
How does a company move?
➞ 4 types of movement
1. Movement of a company from MS1 to MS2 (no harmonization – fallback on Treaty)
2. Cross-border transfer of seat (real seat moves, registered office stays)
3. Cross-border conversion (registered office moves, real seat stays)
4. Cross-border merger
Movement of a company from MS1 to MS2
How does a company move
no harmonization – fallback on Treaty
- This is about a company from one Member State (MS1) wanting to operate or establish itself in another Member State (MS2).
- Because there’s no full harmonization of company law across the EU, companies often rely on Treaty provisions (Articles 49 and 54 TFEU) to assert their right to move or establish themselves in another MS.
- This can lead to legal uncertainty, as MSs differ in how they recognize foreign companies (real seat vs incorporation theory
Cross-border transfer of seat
How does a company move
real seat moves, registered office stays
- The company remains formally incorporated in MS1, so its registered office (legal seat) doesn’t change.
- However, all actual activities (headquarters, staff, decision-making) gradually shift to MS2.
- This creates a disconnect between the legal seat and the real (economic) seat
Cross-border conversion
how a company moves
registered office moves, real seat stays
- In this case, the company moves its registered office to another Member State (MS2), but its operations and economic activity remain in MS1.
- So, it’s a movement “on paper” — a legal transformation to be governed by MS2 law.
- Often done to benefit from more favorable company laws, e.g., lower requirements or fewer restrictions.
- This is the mirror image of the transfer of seat situation
Cross border merger
How a company moves
Two or more companies from different Member States come together into a single new entity.
- This is harmonized by the Cross-Border Mergers Directive (Directive 2005/56/EC, now part of the Mobility Directive).
Can be done via:
a. Absorption (one company takes over another),
b. Formation of a new company, or
c. Merger by acquisition
Non harmonised forms of cross-borders movements
negative integration
-
Secondary establishment ➞ company formed in Member State 1 (MS1) sets up a branch, agency, or subsidiary in Member State 2 (MS2).
- The original company stays in MS1 — this is called secondary because the original company remains intact.
- Alternatively, the company might buy shares or control another company in MS2 — also part of secondary establishmenty
- Somafer case e.g. -
Cross-border transfer of seats
- This refers to a company wanting to move its real seat or registered office to another Member State.
- But there’s no harmonized EU rule (until recently), so companies rely on ECJ case law and Treaty rights
- Daily Mail & Centros
Centros ruling
whether a company can rely on freedom of establishemetn when it wants to set up a second establishment. Estecially when the primary one doesn’t cary out an economic activity
- Centros: company in UK and wanted to establish in Denmark, but Denmark refused because the shareholders were danish themselves. The court of justice looked into if we were in a cross-border situation at all
- Yes there were danish shareholders, so is it cross-border? According to the Court: yes because the company was in the UK so it COULD trigger the treaty provision
