Recently, the Court of Justice of the European Union had a chance to go back over the legitimacy of the constraints imposed by national legal systems to the freedom of establishment of legal persons. The decision of last 25th October, over the case C-106/16, joins numerous others aiming to determine the width the principle of  freedom of establishment (articles 49 and 54 of TFUE) has with regard to companies. More specifically, the Court had to decide whether the tranfer of the company seat, from one EU country to another, has to benefit from the protection of the EU Treaties also for the case in which there is no contemporary movement of the real seat.

In the particular case, the shareholders of a polish company decided to transfer its legal seat from Poland to Luxemburg. The movement was completed through the inscription of the company in the Luxemburg register. However, when the company requested the removal from the polish company register, the competent judicial autority conditioned the removal to the exhibition by the company of the documentation certifying that the company was in liquidation.

The company replied by explaining that the removal request was based on the transfer of the seat and that the company would not cease to exist but it would have continued to exist as a luxemburgish company. Despite that, the registry court refused the removal on the ground that the required documents have not been produced.

For this reason, the company brought an action that, after a first dismissal, ended up before the Polish Supreme Court who deferred the question of determining if the limititations prescribed by Polish Law where against the right of establishment to the European Court of Justice.

It is to be noticed, that, according to settled case-law all measures prohibiting, impeding or making the exercise of freedom of establishment less attractive is to be considered as being against such freedom. Anyway, Member States are allowed to set up limitations but only to the extent that the restrictions are justified by overriding reasons in the public interest and they do not go beyond what necessay to meet their objectives.

In the specific case at hand, although the the polish law provisions requiring the winding up of the company were grounded on the need of both avoiding any abuse of freedom of establishment and affording protection to the company creditors, in the opinion of the European Court of Justice, they did not meet the prescribed principle of proportionality. Therefore, the restrictions to the EU principle were not legittimate.

Most importantly, the decision of the ECJ explains not only that the trasfer of the legal seat from one Member State to another in the aim of determining a change in the applicable law finds protection under the freedom of establishment, but also that there is no abuse of such freedom even where the aforementioned operation is not followed by a change of the company real seat. In conclusion, it is allowed to EU companies to tranfer their legal seat to another Member State also where such transfer has no other purpose that taking advantage from a more favourable National Law.