Tuesday 9 May 2017

Europe: freedom of establishment and cross-border conversions

Advocate-General Kokott delivered her opinion last Thursday in Polbud-Wykonawstwo sp. z o.o., in liquidation (Case C-106/16). The provisional text of the opinion is available here.

The case concerned a Polish private limited company that wanted to transfer its legal seat to Luxembourg. The mechanism for doing so under Polish law required the company to be removed from the Polish commercial register, the process for which also demanded that the company was wound-up.  Did this requirement for winding-up undermine freedom of establishment under the Treaty on the Functioning of the European Union?  Yes, according to the Advocate-General; to quote directly from her opinion:
"In the case where a company incorporated under the law of one Member State has actually established itself, or intends to establish itself, in another Member State for the purpose of carrying on genuine economic activity there, and converts itself into a company governed by the law of the latter Member State, the application of national legislation under which the removal of that company from the commercial register of the Member State of origin is subject to the condition that that company must first be wound up after having been liquidated restricts the freedom of establishment".

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