Abstract
The creation of a single market with no internal borders where free mobility is guaranteed is one of the main goals of the European Union. Accordingly, along with certain fundamental freedoms, Treaty on the Functioning of the European Union (TFEU) provides the right of establishment for nationals as well as companies in a territory of another Member State. Accordingly, a decentralized nature of multinational enterprises (MNEs) involves various cross-border operations. The aim of this paper is to explore to what extent these transnational objectives of MNEs can be achieved under the freedom of establishment principle of EU law and incorporation theories of Member States. Firstly, it analyzes different scenarios of company mobility such as transfer of registered office or real seat and transnational mergers. Secondly, it examines the freedom of companies to choose legal forms of their cross-border establishment. Finally, it evaluates the most recent judgment in Polbud case in the light of decisions made in previous cases.
Highlights
Freedom of establishment concerning corporate mobility is embodied in Articles 49
To restrictions on the setting-up of agencies, branches or subsidiaries by nationals...’ 1 while Article 54 provides that lawfully incorporated companies in a Member State shall be treated in the same way as nationals of unlike natural persons who gain their nationality by default at birth, companies must comply with relevant national laws so as to acquire their legal identity and qualify for crossborder establishment rights[3]
Despite particular uncertainties and incoherencies of EU case law on the freedom of establishment and incorporation theories, it extended the scope of the freedom of establishment principle to a great extent, thereby enabling multinational enterprises (MNEs) to realize various crossborder objectives
Summary
Freedom of establishment concerning corporate mobility is embodied in Articles 49 States (nine Members) following the real seat theory require the existence of central administration while those (six Members) following the incorporation theory require the presence of registered office.[6] when companies are involved in cross-border operations, these two conflicting theories may result in disputes with regard to the status of companies and applicable laws, thereby causing restrictions on free movement rights In such cases, the burden of reconciling conflicting interests falls on the European Court of Justice (ECJ), which is supposed to decide the scope of freedom of establishment and define the “restrictions” made on it by national regulations. The ECJ held that since the incorporation of a company in a State ‘whose rules of company law seem the least restrictive and to set up branches in other Member States’ is considered to be inherent right in the TFEU, the action of Centros Ltd could not be an abuse of law.[48] This judgment extended the scope of freedom of establishment, it severely restricted the competence of States over overseas corporations especially those following the real seat theory.
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