ECJ jurisprudence on the transfer of de facto company head offices

Daily Mail was a tax-law case. Daily Mail plc wanted to move its de facto head office (tax residence) to the Netherlands because of the more favourable tax regime there, while at the same time it planned to remain a company subject to UK company law. The UK Treasury Department refused permission for the transfer of seat, which is necessary under UK law.

Two Danes established Centros Ltd under UK company law. The company was trade only in Denmark, however. The incorporators clearly stated that they had established the entity under UK company law solely to avoid the minimum capitalisation requirement for Danish limited liability companies. The Danish commercial registry considered this to be an unlawful circumvention of the Danish minimum capitalisation rules and so refused to register the company’s branch office in Denmark .

The ECJ went further in the Überseering case. All the directors of Überseering BV, a limited liability company organised under Dutch law, were resident in Germany. As a consequence, in accordance with current thinking on company seats, the German courts decided that, owing to the location of the company’s principal office, German corporate laws apply to the company. The Dutch corporate entity was therefore dismissed from court proceedings in Germany.

A Dutchman established the company Inspire Art Ltd under the laws of England and Wales and requested the registration of the company’s Dutch branch office at the commercial registry in the Netherlands. The registry took the position that specific Dutch rules for foreign entities registered in the Netherlands were to apply to the company. As a consequence, Inspire Art Ltd would have been required, inter alia, to use a company name indicating its foreign origin, and comply with the minimum capitalisation rules for Dutch limited liability companies.

Cadbury Schweppes is another tax law case. The Cadbury Schweppes group had established two subsidiaries in Ireland solely in order that profits related to the internal financing activities of the Cadbury Schweppes group might benefit from the more favourable tax regime there. In the view of the national court, the subsidiaries were incorporated in Ireland in order not to fall within the application of certain UK tax provisions on exchange transactions. After the national tax authorities demanded the corporation tax, Cadbury Schweppes appealed. In the end the relevant UK court referred the case to the ECJ to clarify the EC law implications.

Cartesio is a Hungarian limited partnership whose application for registration of the transfer of its seat to Italy was rejected by the Hungarian Court of Registration. Cartesio intended only to transfer its de facto head office to Italy, while continuing to operate under Hungarian company law.