Transfer of seat within European Union. The latest developments on cross-border conversions, mergers and divisions of companies

Ovidiu Ioan Dumitru

doi:10.2478/picbe-2021-0085

Abstract

Abstract Transfer of seat of companies remains one of the debated issues at European Union level as more and more cross border transactions are taking place and the shareholders try to take advantage of the rights of free movement provided by the treaties. The recent caselaw brought the European Union in a difficult position, having to accept the existing lacks in the treaty’s provisions and come with specific legislation to cover the consequences raised after Polbud case. The caselaw on transfer of seat of companies from one member state to another was not very complex and numerous at the beginning, but became incisive with the development of the internal market and increase of cross-border transactions, becoming more open towards the acceptance of the freedom of establishment in most cases of transfer, forcing the national company law, especially the rules on conflict of law, to encounter a new challenge in the harmonisation of the provisions related to incorporation, functioning, merger/division/conversion or the creation of secondary establishments. This article wants to be an overview on the reaction of the European Union, especially through the latest Directive in the field, Directive on cross-border conversions, mergers and divisions was adopted by the European Parliament and the Council (Directive (EU) 2019/2121), but taking into account the caselaw in the field and trying to project future evolution of the new provisions.

Highlights

The transfer of seat of companies within the Single European Market has been a challenging process in the last period, with many decisions of the Court of Justice of the European Union switching from one to other interpretation of the articles (second paragraph of article 49 and article 54) provided by the Treaty on the Functioning of the European Union, by that opening to new opportunities for companies to increase their growth and compute capabilities, and the Union’s legislative initiatives in the field, coming to embrace the existing dynamism in regard to changing the place of activity from one to another member state (Khan, 2011: 847).The latest act issued by the institutions for the fulfilment of the goals raised by the caselaw in the field of transfer of seat of companies was the Directive 2019/2121 of the European Parliament and of the Council from 27 November 2019 amending the Directive 2017/1132 as regards cross-border conversions, mergers and divisions which came as a reaction os the lateness development of the caselaw, especially the Polbud case (C-106/16).This paper tries to present a short overview of the latest results of this complex process of legislating the transfer of seat, either by the caselaw or the normative acts in the field, firstly by presenting how the Court of Justice of the European Union understood to provide interpretations of the treaty provisions in different contexts and, secondly, by reviewing the main new elements brought by the amending Directive 2019/2121 still to be implemented by the majority of the member states, including the Romania, which plans to have a proposal by September 2022.It is clear that the development of the Single European Market forced a fulfilment of a better and easier transfer of seat of companies from a member state to another as the business es are adapting to the environment, going with the clients and resources and needing to adjust better their own structure for their integration into a bigger, but changeable, market (Dumitru, 2020, 71-73).The member states, on the other hand, had, always, the tendency to overprotect their own markets and business environments, distrusting the foreign companies in insuring a conservation of the national values and standards, especially in the areas referring to the interests of company’s employees, creditors or other stakeholders and, as a consequence, overusing their right to set the requirements for the existence of the companies, provided by art. 54 of TFUE and the caselaw. (Ringe, 2013: 233) PICBE | 918Transfer of seat, accommodation of European provisions with the national rules on company lawThe company is a legal person having as main objective gaining profit for its shareholders and it does that by entering in legal relations with other persons and performing a commercial activity, its legal existence being one of “a creature of the national legal system” (Daily Mail case), the one which delivers its legal status, capacity and administration rules
The latest act issued by the institutions for the fulfilment of the goals raised by the caselaw in the field of transfer of seat of companies was the Directive 2019/2121 of the European Parliament and of the Council from 27 November 2019 amending the Directive 2017/1132 as regards cross-border conversions, mergers and divisions which came as a reaction os the lateness development of the caselaw, especially the Polbud case (C-106/16)
This paper tries to present a short overview of the latest results of this complex process of legislating the transfer of seat, either by the caselaw or the normative acts in the field, firstly by presenting how the Court of Justice of the European Union understood to provide interpretations of the treaty provisions in different contexts and, secondly, by reviewing the main new elements brought by the amending Directive 2019/2121 still to be implemented by the majority of the member states, including the Romania, which plans to have a proposal by September 2022

Summary

Introduction

The transfer of seat of companies within the Single European Market has been a challenging process in the last period, with many decisions of the Court of Justice of the European Union switching from one to other interpretation of the articles (second paragraph of article 49 and article 54) provided by the Treaty on the Functioning of the European Union, by that opening to new opportunities for companies to increase their growth and compute capabilities, and the Union’s legislative initiatives in the field, coming to embrace the existing dynamism in regard to changing the place of activity from one to another member state (Khan, 2011: 847).The latest act issued by the institutions for the fulfilment of the goals raised by the caselaw in the field of transfer of seat of companies was the Directive 2019/2121 of the European Parliament and of the Council from 27 November 2019 amending the Directive 2017/1132 as regards cross-border conversions, mergers and divisions which came as a reaction os the lateness development of the caselaw, especially the Polbud case (C-106/16).This paper tries to present a short overview of the latest results of this complex process of legislating the transfer of seat, either by the caselaw or the normative acts in the field, firstly by presenting how the Court of Justice of the European Union understood to provide interpretations of the treaty provisions in different contexts and, secondly, by reviewing the main new elements brought by the amending Directive 2019/2121 still to be implemented by the majority of the member states, including the Romania, which plans to have a proposal by September 2022.It is clear that the development of the Single European Market forced a fulfilment of a better and easier transfer of seat of companies from a member state to another as the business es are adapting to the environment, going with the clients and resources and needing to adjust better their own structure for their integration into a bigger, but changeable, market (Dumitru, 2020, 71-73).The member states, on the other hand, had, always, the tendency to overprotect their own markets and business environments, distrusting the foreign companies in insuring a conservation of the national values and standards, especially in the areas referring to the interests of company’s employees, creditors or other stakeholders and, as a consequence, overusing their right to set the requirements for the existence of the companies, provided by art. 54 of TFUE and the caselaw. (Ringe, 2013: 233) PICBE | 918Transfer of seat, accommodation of European provisions with the national rules on company lawThe company is a legal person having as main objective gaining profit for its shareholders and it does that by entering in legal relations with other persons and performing a commercial activity, its legal existence being one of “a creature of the national legal system” (Daily Mail case), the one which delivers its legal status, capacity and administration rules.

Results

Conclusion