Prospects for European Company Law After the Judgment of the European Court of Justice in Centros Ltd

Abstract

The ruling of the European Court of Justice in C-212/97 Centros Ltd v. Erhvervs- og Selskabsstyrelsen suggests that the right of establishment enshrined in Article 43 (ex Article 52) of the EC Treaty includes the right to incorporate a company in the EC Member State with the most favourable company laws. The case provides a platform for arguing that choice of place of incorporation within the European Union is at the absolute discretion of business operators, after which point branches may be set up in any other Member State. Even if all activities are conducted in the Member State where the branch is situated, rather than in the Member State of incorporation, no abuse of Article 43 will arise, and the Member State in which the branch is located may be in no position to impede the establishment of a business which has utilised the vehicle of a foreign company.