GANADO Advocates recently attended a public consultation session in Malta promoted by the European Commission in the EU Member States. The Commission is again examining the feasibility of introducing a Directive on the cross-border transfers of registered offices of companies as a way of further enhancing freedom of movement and establishment within the whole Community and simplifying business relocation within EU territory, invariably an onerous and difficult process. The purpose of the consultation is to procure more in-depth information on the costs currently faced by companies transferring their registered office abroad and on the benefits that could arise as a result.
This subject had already been addressed by the European Commission in a public consultation in February 2012 on the future of European company law, but due to the complexity of the issues, the Commission did not take a final decision. In addition to the views already garnered from last year’s consultation, the Commission needs to further analyse whether a legislative instrument on the cross-border transfer of registered offices will bring real added value to European companies.
During the session, the Malta Registrar of Companies explained that the 14th Company Law Directive on the cross-border transfer of the registered offices of limited companies had been in existence since at least 2004, but was abandoned, not least due to opposition from countries which ascribed national importance to where the seat of certain leading business organisations was located. While national laws were sometimes a strong hindrance, ‘jurisdiction shopping’ for lower levels of regulation posed its own set of problems.
It was noted during the session that the cross-border transfer of the registered offices of companies is different from the re-domiciliation of companies. Malta already has strong re-domiciliation legislation in place based on the reciprocity of laws and few restrictions existed, save where certain jurisdictions were deemed undesirable for certain reasons. Essentially, re-domiciliation entails the full legal continuance of the same entity, and there is no corporate dissolution. While few countries in the EU permitted re-domiciliation, Malta registered an influx of about 900 re-domiciliations over a few years, with only just about a hundred being continued out.
It is probable that the new Directive will also take into consideration taxation and employee issues. As currently proposed, the Directive will not prejudice the company qua legal entity, its assets or liabilities. In fact, this was similar to what Malta already offers under the re-domiciliation law, and it is not surprising that Malta submitted no replies to an earlier consultation request.
The sum of all this – coupled with legislation enabling cross-border mergers (of which Malta remarkably had 15 cases, while some larger EU countries had less) – ultimately raises in our mind the question whether the proposed Directive will achieve the goals being set for it, or even whether there is today a tangible need or demand for this Directive.