Europe: freedom of establishment - restrictions on the transfer of a company's seat

The European Court of Justice has held - in Cartesio Oktató és Szolgáltató bt. (Case C-210/06, 16 December 2008) - that Community law does not preclude a Member State from preventing a company incorporated under its national law from transferring its seat to another Member State whilst retaining its status as a company in the Member State of incorporation. This is an important decision, in which the ECJ also explained (para. 110) that each Member State:

... has the power to define both the connecting factor required of a company if it is to be regarded as incorporated under the law of that Member State and, as such, capable of enjoying the right of establishment, and that required if the company is to be able subsequently to maintain that status. That power includes the possibility for that Member State not to permit a company governed by its law to retain that status if the company intends to reorganise itself in another Member State by moving its seat to the territory of the latter, thereby breaking the connecting factor required under the national law of the Member State of incorporation"

An ECJ press release, in English, is available here. The decision has also been reported here by the ICLR as part of its WLR(D) service (this page will disappear if the decision is published in one of the ICLR's law reports). For further comment see this post on Siemslegal.