Freedom of Establishment; Cross-Border Transfer of a Company Seat

Therefore the issue in question was whether a Hungarian company can refer to Articles 43 and 48 of the EC Treaty granting the freedom of establishment and free movement of persons to support the transfer of its seat.

The ECJ based its judgment on the fact that the legal basis of a company follows the national legal system of the EU Member State under which it is incorporated, operates and then ceases to exist.

The ECJ states that the differences between national laws have not been resolved by the rules applicable to the freedom of establishment; this issue is yet to be resolved by legislative activities and work on the relevant law. Since there are no clear and uniform European laws that apply to the situation in question, the interpretation of the freedom of establishment rests with the national legal systems.

The European Court of Justice therefore ruled that under the current acquis communautaire, Articles 43 EC and 48 EC are to be interpreted as not precluding the legislation of a Member State under which a company is incorporated if, under the law of that Member State, the company may not transfer its seat to another Member State whilst retaining its status as a company governed by the law of the Member State of incorporation.

On the other hand, the ECJ emphasized in its judgment that this case must be distinguished from a situation in which a company decides to transfer its seat to another Member State and simultaneously transforms itself under the law of the Member State to which it relocates. In this event, the Member States shall not prevent companies from transferring their seats.

In this connection, the European Parliament adopted a resolution at its March session calling upon the European Commission to review and assess the impacts of the judgment on the current European legislation and the pending EPC Regulation.