Since the late 1960s, national company laws have become increasingly dominated by European influences. The European Union has enacted legislation in areas as diverse as formation and nullity of companies, capital adequacy and maintenance, mergers and takeovers, companies’ accounts, corporate taxation, insolvency, admission to stock exchange listing, public offers of securities, market manipulation and insider trading. These acts have found their way into national law through implementing legislation adopted by the Member States. The implementing acts provide the detailed rules that are binding upon citizens and align the European objectives with the idiosyncrasies of the national law. Based on the right of establishment enshrined in the Treaty (Arts 49–55 of the Treaty on the Functioning of the European Union ‘TFEU’ (ex Arts 43–48 and 294 EC pre-Lisbon)) and as fleshed out by the case-law of the Court of Justice of the European Union, companies can now be established in all Member States, notwithstanding their real centre of operation. Freedom of establishment comprises the right to establish a company in accordance with the laws of the Member State where the company is to be registered (primary establishment). For example, any entrepreneur in the European Union may form a public or private limited company pursuant to the provisions of the Companies Act 2006 in the United Kingdom. As a consequence of the Treaty provisions and the jurisprudence of the Court of Justice, the company thus formed must be recognised as a separate legal person under English law in all Member States, even if it does not unfold any business activity in the United Kingdom and was formed for the sole purpose of circumventing more stringent requirements in the home Member State of the incorporators. Alternatively, companies may exercise their right of establishment by opening agencies or branches in other Member States or setting up or acquiring a foreign subsidiary (secondary establishment). These transactions must be allowed under the conditions that govern the economic activities of the host State’s own nationals, with the exception of additional disclosure requirements that the opening of a branch entails according to the Eleventh Company Law Directive. The free movement rights can be restricted ‘on grounds of public policy, public security or public health (Art 52(1) TFEU), but the Court of Justice construes these provisions restrictively. Thus, on the one hand, company law is harmonised to a substantial extent, on the other hand, where it is not harmonised, companies can take advantage of the differences in national laws by incorporating in other Member States or setting up branches or subsidiaries there. In addition, the internal market has been promoted significantly through European company law by enabling companies to conduct business activity in other Member States largely pursuant to the same requirements that apply to nationals of those Member States. However, the following discussion will show that European integration in the area of company law has come with its problems. The drive for harmonisation had to deal with diverse legal traditions and regulatory philosophies, and the harmonised material is in some areas disjointed and patchy, leaving scope for conflicting national provisions. Pursuing business in other Member States faces legal uncertainties because the reach and implications of the free movement provisions are still matters that are disputed and, in spite of a number of high profile decisions of the Court of Justice, not settled conclusively. Gore-Browne
Posted on: Fri, 19 Sep 2014 16:34:53 +0000
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