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Alexandre Grizaud, Sara Arif, Andrew Andereck, Margo Steinage

Part 1 Alexandre GRIZAUD

I Introduction
Within the EU, the cross-border transfer of a company seat is still a difficult operation to achieve whereas article 54 of the Treaty on the Functioning of EU expressly provides that EU companies shall be treated in the same way as natural persons who are nationals of Member States according the Treaty provisions on the right of establishment. A cross-border transfer of the registered office and/or of the real seat of a company in the EU depends on Member States companys Private International Law rules as there is no community harmonization on that issue, which establish the connecting factors employed to determine the law governing company law relationships (the lex societatis). It determines also whether a company may be recognized in another Member-State and whether it may transfer its head office or registered office from between two Member States. Of course, rules diverge strongly among member States, concluding in two theories, the incorporation theory and the real seat theory. 1 - Theory of incorporation The incorporation theory states that the law governing the activities of a company is the law of the state where the company has been incorporated. It is possible therefore to choose the law that will regulate the company's statute. The theory was fdeveloped in England during the 18th century, in order to allow English companies overseas to be treated as being under English law. That is to say a company established according to the law of the state of incorporation will also be granted a legal personality, and all the rights and liabilities of a corporate existence, in other states. If the administrative centre or the statute seat of a company were relocated to a state that applied the incorporation theory, this company would be fully recognised there. The main benefit is legal certainty, because the statute seat of a company is easily determinable. It encourages also the mobility of companies operating internationally. 2 Theory of the real seat The real seat theory stipulates that the law of the state where the company actually has its head office or real seat is authoritative. This theory evolved in France and Germany in the nineteenth century, based on the consideration that the law of the state most affected by the company's activities applies. The "real seat" is defined as the place of central control where the fundamental governance decisions are effectively transformed into ongoing managerial acts. Under this theory a company can have only one head office, or seat. According the real seat principle, a relocation of a company's seat to another country leads to the application of the law of the state the company moves to. The company has to comply with the regulations at the new seat. If the limited liability company does not adhere to the national regulations it will not be recognised as a legal body, and would have no limited liability and no legal capacity. A reincorporation under the law of the new seat would be necessary.

II Evolution of the ECJ case-law

The ECJ judgments do not contain a clear statement about the different conflict of laws rules for companies in Europe. The ECJ decisions are based only on arguments relating to the freedom rights provided by the Treaty. The cases fail to deal expressly either with

conflict of laws rules, or with company law as such. Nevertheless, the cases constitute important landmarks on the road towards the free circulation of companies in Europe. 1 Daily mail In Daily Mail the Court expressly considered that the problem of the cross border transfer of registered office or real seat of a company had to be dealt with by legislation or conventions. The case merely concerned the UK Treasurys right to refuse to allow Daily Mail to transfer its tax residence without paying accumulated tax in the UK. The Court concluded that the Treaty did not give the right to a company to transfer its registered office from one Member State to another. From this judgment, it followed that the only way for a company in order to transfer its registered office was to refer to the laws of the Member States of origin and destination to whether it could proceed to an international transfer of registered office without to dissolve as a corporation and is reformed into a new entity. Twenty years after Daily Mail a community legal instrument directly addressing that problem is needed. 2 Uberseering In its judgment the Court declared the possibility of a cross-border transfer of the real seat of a company from a Member State to another, but only from the perspective of the host Member State. The Court held that an host Member State may not forbid such transfer and deny that companys legal personnality and capacity to stay in legal proceedings on the basis of the real seat theory In berseering the ourt gived the right to every company in the EU to be fully recognized and conduct its activity in any other Member State to which its centre of administration and control has been transferred as long as it is recognized in home State as an existing and validly incorporated company. In this case, the Court operate an analysis of the compatibility of the provisions of the host Member State with the Treaty provisions on freedom of establishment. 3 Cartesio In the artesio judgement, the ourt reverses to a controlled daily new approach. Cartesio, a company incorporated under Hungarian law with its company seat in Hungary, wanted to transfer its seat to Italy. The Registration Court dismissed the request because of the fact that Hungarian law does allow a company incorporated in Hungary to transfer its seat to a foreign country and, at the same time, be subject to Hungarian law as its personal statute. The ECJ stated that the disparities in the national laws have not been resolved by the rules applicable to the freedom of establishment, and argued that this issue is yet to be resolved by legislative activities and work on the relevant law. The ECJ ruled that under the current acquis communautaire, Articles 49 TFEU and 54 TFEU are not restraining the legislation of a Member State under which a company is incorporated if, under the law of that Member State, the company is not allowed to transfer its seat to another Member State while not loosing its status as a company governed by the law of the Member State of incorporation. However the ECJ highlighted in its judgment that the Member States shall not prevent companies from transferring their seats, in the case of a company deciding to transfer its seat to another Member State and at the same time transforms itself under the law of the Member State to which it relocates.

III - EC legislative measures facilitating the cross-border mobility of companies

1 The Societas europea. The main advantage is to transfer the seat everywhere in Europe with cost savings, without losing its legal personality, because for european cie, the transfer of seat is only a change articles of association/incorporation (statuts) and the legal personality insures to the european company the legal continuity. Article 8(1) of the SE Regulation states that an SE is allowed to transfer its registered office, without loosing its personality, to another Member State. Article 7, however, requires that both registered office and head office be located in the same Member State. A Member State may also choose to require both elements to be located at the same address. That is to say it is not possible for an SE to transfer its registered office alone to another Member State while keeping its real head office in another place. In fact there is in the SE Regulation a predominance of the real seat theory. Violations of the requirement of coincidence between registered office and real head office are severly sanctionned. This requirement is subject to a reassessment procedure established for in Article 69 of the SE Regulation. The recent proposal of the Commission for a Council Regulation on the Statute for a European private company (SEP) reveals that the Community legislator may, in the near future, cease to impose the coincidence between the head office and the registered office of an SE in the same Member State. 2 The need of a new directive In Daily Mail the Court econsidered that the problem of the cross-border transfer of registered office or real seat of a company had to be dealt with by legislation or conventions, but twenty years after Daily Mail we are still waiting for a community legal instrument directly addressing that problem. There has been a lot of talk about the projected 14th Company Law directive. Two doctrinal approaches appeared in the debate. a The narrow approach According to the narrow approach, a Member State which applies the real seat principle will be allowed to ask a company wishing to transfer its registered office to its territory to transfer also its real seat. That is to say that a company could relocate its registered office alone when moving to an incorporation Member State. However, it would have to relocate both registered and real seat when moving to a real seat Member State. It involves also that the applicable company law would change with the transfer. b The broad approach According to this approach, irrespective of whether it applies the real seat or the incorporation theory, a Member State would not be permitted to require that the company moving its registered office into that Member-State territory also transfers its real seat there. Companies would have the possibility of relocating only their registered office into the Member State of their choice with a change on the applicable law that would best suit the companys needs. 3 A burning issue and a volcanic activity on the issue The European ommission published in December 2007 an impact assessment on the Directive on the cross-border transfer of registered office. The document evocates possible policy actions, including urges to the commission and an evaluation of the

consequences of not undertaking any regulatory action in this field. However, the Commission, on the behalf of Commissioner McCreevy stopped its work after having weighed the arguments advanced, arguing that there is no need for action at EU level on this issue. However, the Directorate General for the Internal Market and Services launched a broad public online consultation on the cross-border transfers of registered offices of companies in 2013. The purpose of the consultation is to get more in-depth information on the costs currently faced by companies transferring their registered offices abroad and on the range of benefits that could be brought by the EU action on the cross-border transfer of them. The need for and impact of a possible new instrument by taking the responses into account. Moreover, regarding the developments in the case law of the Court, the European Parliament voted a resolution on cross border transfer of company seat within the European Union in February 2012. In the resolution, the Parliament requests the European Commission to work on a proposal for a new directive on cross border transfer of company seat.

Part 2 Sara Arif

Transfer of seat: a French overview
I - First of all, the question to be asked is: what a transfer of seat? What does it means concretely? A transfer of seat is a way by which a company can move, can change its place of business and exploitation. The transfer of seat has to be distinguished from the outsourcing. Indeed, the outsourcing is the move of the material structure of a company whereas a transfer of seat concerns the move of its legal structure. However, a company to be able to move has to be localisable and so have an autonomous legal life. That means that only company with legal personality can change its seat. A legal personality can be defined thanks to three elements: its name, its domicile and its nationality. The issue of transfer of seat is directly linked with the question of the nationality of the company. It is a key point. The nationality of a company can be either define by its real seat (headquarter seat) or by its place of registration. As examples the French law system and the English law system adopt different nationality definitions. The English system called incorporation considers that a company is English if it is registered in England wherever the headquarter seat is located. In France, the article 1837 of the civil code and the article L210-3 of the Code de Commerce stipulate that a company which has its statutory seat in France is French and so has to follow the French legislation. However, under French law if there is discordance between the statutory seat and the real seat, the statutory seat criterion can be set apart in favour of the real seat criterion. (ELF case 31 of January of 2007). A transfer of seat is so a move of a company from a state to another. It designates the mobility of a company place of business. However, this move has as a purpose the continuation of the company social life. The company by transferring its seat wants to remain the same company, which means doesnt to loose its legal personality.

According to some authors the continuation can be achieve through two ways: the transfer of seat and the merger. For some authors these two different operations are interchangeable as they have the same result: the modification of the seat location of a company. But here we are going to focus on the transfer of seat operation and more specifically on the transfer of the statutory seat of a company. The transfer of seat has two legal consequences: the change of the company nationality and the change of the law governing the company. The question of the change of law is the lain issue regarding the transfer of seat validity and interest for companies. The question to be asked is: Does the legal personality of this company survive to the change of law applicable? Or Does the transfer of seat means the cession of the company and the creation of a new one in another state? In the international doctrine this question is resolved by regarding the definition of legal personality adopted. Indeed, if the legal personality is seen as a fiction; this character depends on the law which has given it to you. So by forfeiting that law the company gives up this legal character. But, if the legal personality is seen as a reality, this character exists out of any law consideration and then survives to a change of law. In Europe the two conceptions exist. In the incorporation states the legal personality is given only to companies registered there. So only a transfer of seat of the central management and direction is possible and not a transfer of statutory seat. Indeed, in that case the company is actually dissolved and has to be create again in another state. The French law seems to be silent about this question. The article 1844-3 of the civil code do not precise if the transfer of seat means creation of a new legal person or not. However, examinating the article L222-9, L223-30 and L225-97 of the Code de Commerce, a legal personality survives to a change of nationality. So, a change of status doesnt mean the loss of legal personality. The reality conception seems to be adopted and so is the transfer of seat. The French jurisprudence is mostly silent about this consideration (only old and very specific cases about fraud). Moreover, in the European field the transfer of seat has to be recognized since the Cartesio case by all the member states. However, companies are facing some difficulties to do so. Two main difficulties can be defined. The first issue concerns the law applicable to the transfer of seat procedure. Transfer of seat is made by two different steps: the loss of the originary seat and the acquisition of a new one. They are traduced concretely by the transfer of seat decision and the company status modification. It is clear under international law that the transfer decision has to follow the originary seat procedure whereas statuses are modified under the conditions of the new law governing the company. The second difficulty is linked with that change of status. Indeed, by changing the law applicable, companies have to modify they status. These changes lead most of the time to the transformation of the social form of this company in order to fit into its new legal system. II - Concretely, how does it work in France? The French legislation seems to distinguish two cases: A - When the statutory seat of a company leaves France.

In that case, the transfer decision has to be unanimously voted by the shareholders. According to the article L222-9, L223-30 and L225-97 of the Code de Commerce concerning the Societe en commandite par action, les Societes responsabilit limite and the Societes anonymes, the change of nationality has to be voted unanimously. Concerning the Societe en nom collectif, unanimity is necessary for every change of status and so for the change of nationality. For the Societe en Action simplifie there are no legal texts but it seems that unanimity is also required (as it is an important change of status). There is an exception to that principle of unanimity described in the article L225-97 of the Code de Commerce. It defines that an extraordinary general assembly can change the company nationality when the two countries have signed a specific convention regarding the transfer of seat validity. But, in reality, there is just one case, one convention signed between France and Ethiopia concerning the transfer of seat of the Compagnie de Fer de Djibouti but under this convention the change of nationality has to be adopted unanimously. Another specific French law is regarding the transformation issue. After the unanimity vote of the shareholders deciding to transfer the seat of their company abroad, the company status has to be changed in order to fit into the new legal system in which the company wants to be incorporated. This change of status follows the rules of law defined by the new state. This change of status means transformation of the company. The company doesnt cessed but is transformed, modified, adapted in order to become a new company, adopting the social form defined in the new state. So, a company a French company is transformed under the law of the state it wants to transfer its seat. As an example a Socit en nom collectif which decide to transfer its seat in England will be transformed into what the English law called a partnership (without any legal personality under the English law). There is a French exception to the principle that the change of status is decided by the reception state. Indeed, in the case of a change of status leading to the raise of the shareholders engagement, the French law requires unanimity for such a change. So, a unanimity vote is necessary for both the decision of transfer and for the modification of the status (article 1836 of the Civil Code). B - The reception of a the seat of a foreign company in France

First of all, since the European ourt of Justice atesio ase, the transfer of seat of a company has to be accepted by every member states. So, in France the reception of the seat of a foreign company is valid. However, there are non legal texts defining the process of such a transfer. In 1912, a reponse ministerielle explained that there was no possibility of a transfer of seat without the creation of a new company following the French law. Finally, in 2009 the Chambre Commerciale of the Cour de Cassation admitted that the transfer of seat doesnt meant dissolution but transformation of the company. However, the transformation procedure is not defined under French law. There is only, in 1987, a new reponse ministerielle stating that the normal procedure to create a company under French law ( as immatriculation) has to be follow in order for a foreign company to become a French company. As a conclusion a state in Europe cant deny the change of seat of a company toward its territory. It can only define the procedure and the transformation which are necessary to maintain the legal personality. It is its choice to make this procedure easy or not. This question is so highly political and depends on each state wish. Most of the time it is the issue of taxation which seems to be the more sensitive for states.

In France as an example before the Loi de Finance de 2005 the company which transferred its seat in France was seen as a company which cessed and so had to pay direct taxes according to the article 221 of the Code des Impots. This disposition meant that the transfer of seat was actually not doable for companies or at least not interesting at all. But in the Loi de Finance 2005, an alinea was added to this disposition stipulating the fiscal neutrality and so the end of the immediate taxation. However, this disposition concerns only the transfer of seat in Europe.

Part 3 - Andrew Andereck

In the United States, generally speaking, companies are treated as citizens. Accordingly, an important aspect of United States Company Law is the designation of a companys citizenship. Any company organized under the laws of the United States will be designated a citizen of the United States. In the United States, the citizenship of a company is the same as saying the location of the companys registered seat. In contrast to EU law, it is not possible for a United States corporation to transfer seats through a transfer process. In fact, it is not possible for a company created in the United States to transfer the companys seat to a foreign jurisdiction without fundamentally altering the legal character of the company. For example, there are two strategies that a company might employ in order to transfer its seat to a foreign jurisdiction. The first strategy would be to create a new company in the desired foreign jurisdiction, and then merge the original company into the newly created company. Thus, the original company would cease to exist in its original form and would become part of the new company, taking on the location of the new companys seat. However, in this instance, the original companys legal character has been lost. And, so, though effectively, the original companys seat has been transferred, this transfer is somewhat of an illusion because that original company no longer exists in its true form. The second strategy would be to dissolve the original company, and then create a new company of the same name and characteristics within the jurisdiction of the companys choosing. Again, though the end result would look as if the company had transferred its seat to a new jurisdiction, in reality, legally speaking, the original company would no longer exist. So you can see that it is possible for a United States company to change its registered seat, but it is not possible to transfer it. This is an important distinction to make because when you are talking about using mergers or dissolutions in order to change the registered seat, youll run into a host of legal issues that you may not have otherwise had to consider if a transfer process existed. For example, say you want to dissolve a United States corporation that has subsidiaries in foreign jurisdictions, and some of these jurisdictions happen to be tax havens. In some cases, a company can avoid United States taxation on income from a foreign subsidiary by holding that income as working capital within the foreign subsidiary and not distributing the income to the companys shareholders. However, if that company wants to change the seat of the company, it must first dissolve the company. This will require that the capital held in the foreign subsidiary be distributed, and, thus, will be taxed. Were a transfer of seat process to exist, it is possible that this same company could change the seat of the companys registration without having to alter the flow of capital. Additionally, when dissolving certain types of companies, for example, Limited Liability Companies, there will be administrative fees associated with such an action. Not to mention, the administrative work and legal fees that associated with filing for dissolution and then filing to create a new company. Due to the federalist structure under which the United States government is organized, companies of the United States will not be designated merely as United States companies. Instead, their citizenship will be specifically designated based upon the state from which the company is located. A company will be designated a citizen of both the companys state of incorporation as well as the companys principle place of business. Margo will discuss this distinction and the appropriate legal analysis.

Part 4 - Margo Steinage

I. Nationality and Transfer of Seat in the United States a. Under US law a company is deemed a citizen of any State in which it is i. Incorporated; and ii. Where it has its principal place of business 1. NOTE: this is similar to a corporations Nationality b. To Transfer the corporations seat in the US i. the company must reincorporate-see Andrews presentation or ii. move the principal place of business to a new location. 1. What is principal place of business? a. Hertz Corp. v. Friend, 130 S.Ct. 1181, 1192 (2010). i. US Supreme Court concluded that principal place of business is at the location of the companys nerve center. ii. The nerve center is best read as referring to the place where a corporations officers direct, control, and coordinate the corporations major activities. iii. Courts generally look at the totality of the circumstances. There is no one determining factor. 2. How to move principal place of business? a. Ultimately, under Hertz the company must move officers and major decisions making to the new country or state. Basically you are moving the headquarters. Be sure to make the bulk of the management decisions from this new place of business.