Free Movement of Companies After the Polbud Case

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 no-compromise 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.