Global Private International Law
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Global Private International Law

Adjudication without Frontiers

Edited by Horatia Muir Watt, Lucia Bíziková, Agatha Brandão de Oliveira and Diego P. Fernandez Arroyo

Providing a unique and clearly structured tool, this book presents an authoritative collection of carefully selected global case studies. Some of these are considered global due to their internationally relevant subject matter, whilst others demonstrate the blurring of traditional legal categories in an age of accelerated cross-border movement. The study of the selected cases in their political, cultural, social and economic contexts sheds light on the contemporary transformation of law through its encounter with conflicting forms of normativity and the multiplication of potential fora.
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Chapter 21: Free movement of corporations: Centros Ltd. v. Erhvervs-og Selskabsstyrelsen

Jeremy Heymann and Régis Bismuth

Abstract

One of the challenges European law has had to face in recent years involves the harmonisation of company law. Practised by a significant number of Member States, the ‘real seat theory’ prevented the growth of an internal market for corporate charters analogous to the one which thrives (albeit under the dominance of Delaware) in the United States. According to this theory, company executives do not have the liberty to freely choose a charter – laws governing the constitution and internal management of the corporate entity – other than that of the place of its seat (defined as the centre of corporate decision-making, at least as far as it appears as such to third parties). In practice, this meant that a company with a seat in France cannot choose to incorporate in Germany. Doing so would be seen as invalid in both countries; either for noncompliance to French formal and substantive requirements for incorporation, or for not having its corporate seat in Germany. By contrast, when a country practises the ‘theory of incorporation’, companies are free to create their own rules, or corporate charter, regardless of the place of its seat. Under this system, companies are much more mobile: they may transfer their headquarters from one place to any other practising the same criterion (it takes two to tango!), without having to re-incorporate under that country’s laws. Certain Member States applied the ‘theory of incorporation’ as opposed to the ‘real seat theory.

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