The European Court of Justice Recognizes A Member State’s Right To Impede The Transfer of A Company Seat to Another Member State While Maintaining The Lex Societatis of The Original Member State

16 February 2009

European Court of Justice Judgement (Grand Chamber) dated December 16, 2008.

In the much awaited judgement of Cartesio, the European Court of Justice discussed whether, as regards the EU treaty on freedom of establishment in the member states of the European Union as set forth in Articles 43 EC and 48 EC, a member state is authorized to impede the transfer of a company seat for a company incorporated and domiciled therein to another state in the union while maintaining its status as a company subject to the law of the state of incorporation without said impediment being considered a violation of the aforementioned basic EC principle.

The high court determined that, currently, freedom of establishment is not violated when a member state impedes a company incorporated in accordance with their laws to transfer the company seat to another member state while maintaining the applicable law of the original state.

Therefore, in these cases the only way that a company can transfer their company seat to another member state without requiring the winding-up and re-incorporation in accordance with the laws of the new state is, in the high court’s judgement, by adopting the new state’s lex societatis.

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