Right of Establishment and Free Movement of Companies - Essay Example

Name Course Tutor Date Introduction There are existing rights of establishing companies in the world. These rights date back to Roman times when people came up with different associations dealing with business, leisure or charitable measures. A corporation is also a company. This means that an entity has separate legal personalities from people who carry out its activities to people who have rights to its own property. Originally different companies could be established through an act of the state. This can be done through an Act of Parliament. Rights of establishing companies vary from country to country. Different types of countries have different legislation governing the formation of companies. Company law or corporate law is the type of law governing the establishment of companies and corporations around the world. These also include corporations, associations and other partnerships. The law of business organizations mainly derived from England’s common law. This has changed unlike in the ancient times. There are examples of forms of companies. These include corporations, limited companies, unlimited companies, limited partnerships and companies limited by guarantee among others. Many countries have different forms of business entity that is unique to that of other countries. There are countries with equivalents elsewhere. Other types of business organizations like credit unions and cooperatives can be established with parallel purposes. They can also supersede or replace profit maximization that mandated with business organization1. Case Study - U.S.A and Australia Company Law Corporations' organizations in the United States of America are according to laws of a specific state. The corporate law of a specific state’s incorporation mainly governs the company’s internal governance. This happens when corporations’ operations are taking place outside the particular state. Corporate laws of different states differ. In some cases, it is significant from one state to another. Because of these differences, corporate lawyers' consultation is with the efforts of determining the most appropriate or advantageous state in which to establish leading corporations or companies. The federal laws of U.S.A can also be applicable sources of corporate law2. Establishing of many companies in America in the 1970s was for different purposes. These include commercial purposes, religious or educational purposes. Chief Justice Marshall came up with laws of corporations. Chief Justice Wilson Marshall believed that the law stated all rights to do with establishing companies. He reiterated on the importance of inspection of companies and their plans before establishment. Circumscription of actions on the creation of companies was from the beginning. Every company must have a name and it has to be able to perform any legal acts. When establishing companies, there must be an authority above it. The authority will then make their own regulations and to manage their own affairs and interests3. Australian law defines a corporation as any fictitious person that created by charter, legislation or prescription. Australian law recognizes a kind of corporation referred to as corporation sole. There are a few cases of such corporations. There is no inclusion of the corporation sole in the Australian statutory definition of corporation. It is necessary to establish companies only when there are rules governing its establishment. It is also tremendously significant that the legal form of the business is highly suitable for the activities of the company. Establishing a company involves risks as well as liability. The operating forms of any business include cooperative societies, self-governing entities, sole proprietorship and partnerships. Special licenses refer to rights or permits needed during the establishment of a company. They help in demonstration and recognition of the company by authorities. There are operating licenses and work permits that referred to by the use of various names. These names include examinations of journeyman, surveillance, masters’ examination as well as state authorization. Applications of operating permits are always available on websites of all relevant institutions, ministries as well as local governments. For the establishment of some kinds of operations, one needs to request for opinions before moving into it and establishing it. This is because later on, the law can take effect and declare the company as illegal. It can also declare it that its establishing is under illegal rights. Tax rules used in the operation of a business can differ. These also include rules that govern financial statements, accounting as well as the responsibility of the owner and responsibilities of making decisions. This therefore means that anyone who wants to start up a business must report it first to tax authorities. This is a requirement by most country’s laws in the world. When a business or a company becomes bankrupt, then the debtor’s bankruptcy estate majorly takes over all financial obligations and rights as stipulated by the law4. There are government and business responsibilities that must be fulfilled to the society. Corporate law and business law for that matter is a legislation body that dominates the commerce sphere. Companies are units that organize and negotiate businesses with the aim of getting profits. Businesses also have rights to appoint workforces. These workforces perform duties for production and viable management. The law often views a business as a person. This is the reason as to why forming a business or a company requires considerable management lest it crumbles to the ground. Companies have rights to purchase, sell, compensate employees, pay taxes as well as clear any outstanding debts. It also has rights to accept property, dissolve its structure and mortgage property. This is the far in which rights to its establishment goes. These are the only duties instigated by law for functioning. Their structuring is to support either individual or company management5. Business ethics also govern the formation of companies. They dictate the corporation’s implementation of legal practices. This is in capitalizing its resources with the aim of attracting a profit. Businesses therefore have the outright obligation to follow principles that will promote healthy relationships between the employer and the employee. There would also be the promotion of healthy corporation-client relationship and corporation-society relationship. The business then bears the responsibility of delivering outstanding service standards as well as good products that supports the organization6. Procedure for establishing companies There is a general flow of procedures when establishing a company, a branch office or an international corporation. The first procedure is in determining branch office information to be registered. The second one involves examining all the legal affairs of the company undergoing establishing. The third procedure is in establishing a branch office. This is the date of establishing the branch office. The fourth step involves affidavit certification. This is by the embassy or consulate in Japan. The sixth step is in application to the Legal Affairs Bureau. This is for registration of the branch office establishment. It is also for the registration of the company seal with the Legal Affairs Bureau. The seventh step is in acquiring a certificate on registered information. It also involves acquiring the seal registration certification of the company. This is extremely crucial. This happens approximately two weeks after the official application for registration. The eighth step is to open up a bank account under the name of the branch office. The time that is often requires is close to one month after the determination of the branch office information to be registered. If any country’s embassy does not provide notary services, then there is certification by the public notary in the home country of the company7. Registering a subsidiary company is extremely valuable. Establishing subsidiary companies is through registration by a legal affairs bureau. This bureau must belong to any country of location of the subsidiary company. On most occasions, the application and establishment date for will also be the date of establishing the company. This is only if there is keen following all the rules required for establishing companies. After the completion of this, the company can carry out all business operations from the specific date. Some of the documents required for this establishment must be prepares in the designated home country of the foreign company in question. There also has to be a document that certifies the foreign company’s profile as well as the representative authority of the specific foreign company’s representative. The most fundamental requirement for this establishment is also the authenticity of the signature of the representative from the company8. All certificates of establishment are extremely valuable. These certificates include official documents, registration certificates and incorporation articles. All these documents are particularly beneficial. They are crucial in the completion of the procedures for certification of the subsidiary company’s article of incorporation in Japan or any other country involved. The documents might also be needed when requesting any financial institution to take custody of the subsidiary’s capital as well as issue a capital custody certificate. Starting a company requires many pieces of information. All the relevant information is beneficial for the success of any company. One must have at hand the company name and address. One must also have in possession the office details including the full details of the director and the secretary. One must also have share capital and the shareholder details as well as the payment guidelines for employees. Having all this sets one in full readiness to establish a company anywhere in the world9. Establishing a company will not be fully complete until the company's registration is in place. Without any form of registration, a company is not functional. Both these under the law are tremendously pertinent to keep sustaining the company. Registering a company name is crucial. This is because the company will always hold all executive rights to the name. This is exceedingly common in many countries Australia included. Choosing a company name must be a name that is not already registered to a business or to another company. There is a requirement of a special approval for a certain name and letters that the proprietor might want to include. Corporate law covers rules and regulations on establishing companies in the world. Different countries have different laws of establishing companies. Corporate law being a broader part of company law when studies internationally shows differences in countries when it comes to establishing companies. Different countries have different legal structures to be followed when establishing companies. The similarity lies in the fact that establishing companies requires almost the same features in the world. One of the case studies in establishing companies was the United States of America and Australia in small explanations. Companies around the world also share a key factor that is management from a board of directors or a group of people elected to guide and steer the company. Section 2 The meaning of ECJ decisions Overview The ECJ is the highest court belonging to the European Union. It is not in any way possible to appeal the decisions made by the national courts to the European Court of Justice. The option of national courts is in referring questions of European law to the ECJ. It is ultimate for the national court to make applications on the resulting interpretation to facts of any given case at hand. Only the courts of final appeal are bound to refer any question of European Union law whenever there is an address. There are treaties that give the ECJ enough power. This court also acts as arbiter often between all European Union’s institutions. The ECJ can also annul the latter’s legal rights. This is possible if it acts outside its powers. The judicial body is currently undergoing immensely strong growth. This is evident by its continually rising budget. Luxembourg courts in the year 2008 had many cases to handle. This is evident in the registered recent data belonging to the ECJ. The staff budget also hit a new high of close 238 million pounds in the year 2009. The staff budget also hit a new high of close 238 million pounds in the year 200910. Types of ECJ cases The Court gives rulings for all the cases that brought before it. There are five main types of cases. Requests for a preliminary ruling National courts in all member states have the responsibility of ensuring precise application of the EU law. There are Courts in other some countries that can interpret EU law in a different manner. In order to prevent the above from happening, there are preliminary ruling procedures. If any national court is in doubt about any form of interpretation or form of validity of any EU law, then it has rights to ask ECJ for clear interpretations. This is a preliminary ruling. Actions for failure to fulfill an obligation The Commission might start the proceedings if it believes that certain member countries are failing to fulfill its rightful obligations under EU law. These proceedings can also be started by other EU countries. In either case, the Court can investigate allegations and then give the final judgment. If a country’s application of the law is differently than required then it has to put things right immediately. If the court finds that a country has not rectified the mistake at hand, then it has rights to issue a fine on the country. If the Court finds out that there was no proper adoption of the law in question, then the court can declare the law to be null and void11. Actions for annulling cases Annulments can be made on any law considered illegal. This is possible once any European country, Council or commission confirms the law as illegal. Annulment actions can be used by individuals who want the Court to cancel particular laws in case the laws directly and adversely affect them as individuals. If the Court finds out that the there was no proper adoption of the law in question it can declare the law to be null and void. Actions for failure to act The Treaty always requires Parliament, the Commission and the Council to make specific decisions under specific circumstances. If they fail to do so, then the member countries as well as other community institutions can lodge complaints within the court in order to have the failure to act to be recorded officially. Individuals and companies also have rights to lodge such kinds of complaints. Individuals and companies also have rights to lodge such kinds of complaints12. Direct actions Anyone or any company that has suffered damage due to community actions can get compensation before the General Court. Making decisions in Court All the cases submitted to the court must undergo processing. This must be in a written stage and an oral stage. The written stage is the first one. All parties involved hand in their written statements to the judge who is responsible for the case. The judge then writes a full summary of the statements. The judge also describes the legal background of the case. The oral stage is the second one. People sometimes refer to the oral stage as the public hearing stage. This takes place in a panel of 3 to 13 judges. It also depends on the complexity of the cases at hand. During the hearing, lawyers coming from both sides, put their cases to all judges as well as the advocate general that have rights to question them. The Advocate General then gives their opinion. After the first opinion, the judges then discuss the case together and then give their judgment in turn. Advocates Generals must give their opinions on the case only if the Court believes that the case in question raises a new point in the law. The Court does not often and necessarily follow opinions given by the advocate-generals. The court judgments are the majority decisions. There is a public reading meant for the public hearings. Sometimes there is a slide show of the hearing's pictures The hearing procedure in a General Court is also similar. The advocate-general cannot give his or her opinions on the case13. European Union law and Uberseering Uberseering BV was a Dutch company. The company had information that there was an acquisition of its shares by Germans. The company failed to reincorporate under the German law. This company has no legal identity. As a result of this, it could not enforce any contract to develop land against its opponent Nordic construction. Uberseering BV hence argued that this represented a restriction on the company’s right to freedom of establishment. There was prohibition of all this by TEC article 48 and 43. This pushed the German court to refer the case to the ECJ in order for ECJ to answer the questions and to make decisions on the case14. Judgment The ECJ held that TEC articles 48 and 43 precluded the German court denying any form of legal capacities to Uberseering. This is because it was fundamental that all states recognize companies that are fully incorporated abroad. This is regardless of whether all member states had conventions on any mutual recognition of companies under ECJ’s article 293. Despite changes in ownership, Uberseering was a valid company in the Netherlands. At the end, there was no countervailing justification caused by any overriding requirements that related to the general interest not to uphold the right of freedom of establishment. Following this judgment by ECJ, an incorporated company in any EU member state has entitlements to rely on principles governing freedom of establishing companies. As a matter of the German law, this decision signaled the end of the practices where there is no recognition of all legal capacities of foreign incorporated companies. The ECJ mainly held that a company incorporated in a member state can enjoy freedom of establishment rights in another member state. Centros C- 212/ 97 This case dates back to 1997. This case came up after there was the establishment of a company by Two Danes from Denmark. The company was trading in Denmark. The incorporators stated that they had established an entity under Britain’s company law. This is solely in order to avoid any minimum capitalization requirement for all Danish liability companies. Commercial registry belonging to the Danish considered this to be fully unlawful circumvention of Danish minimum capitalization rules. He henceforth refused to register the company’s main branch office in Denmark15. European Law implications Refusal to enter into the transfer of the head office raised the main question for ECJ. The ECJ had tasks to determine whether both Article 43 and Article 48 of the European Council Treaty precludes any member state from imposing outright bans on any company that incorporated under the European Council law. The question also lied on whether or not it was possible to transfer the head office to another state without wounding it in Hungary first. Having the seat transfer to be entered into the Hungarian Company register also created suspicions. The Cartesion case in a way or another is similar to ECJ’s daily mail decision16. This is because it also raises transfer questions abroad to the de facto office. Decision of the court The court did not in any way overrule the Daily Mail decision. The Daily Mail decision allows all member states to restrict any form of transfer of the central administration of a company abroad. On the contrary, ECJ highly reaffirmed its Daily Mail doctrine. It further stated this ‘As community law now stands, Articles 43EC and 48EC are to be interpreted as not precluding legislation of a Member State under which a company incorporated under the law of that Member State whilst retaining its status as a company governed by the law of the member State of incorporation. The court also moreover considers all conditions that govern the abuse of European Council law17. Cartesion C-210/06 Cartesion is a Hungarian limited partnership. There was a rejection of partnership’s application for registration of its seat transfer to Italy. The rejection was by the Hungarian Court of Registration. Cartesion wanted to transfer its head office to Italy. Cartesion yearned to operate the compau from Hungary. This is under Hungary company law. European Law implications Refusal to enter the transfer of its head office raised the main question for ECJ. The ECJ had tasks to determine from this case. One of them was whether both Article 43 and Article 48 of the European Council Treaty preclude any member state from imposing outright bans. This is imposing outright bans  on any company incorporated under the European Council law. The question also lied on whether or not it was possible to transfer the head office to another state without wounding in Hungary first. Having the seat transfer to be entered into the Hungarian Company register also created suspicions. The Cartesion case in a way or another is similar to ECJ’s daily mail decision. This is because it also raises transfer questions abroad to the de facto office18. Decision of the Court The court did not in any way overrule the Daily Mail decision. ECJ highly reaffirmed its Daily Mail doctrine. It further stated this ‘As community law now stands, Articles 43EC and 48EC are to be interpreted as not precluding legislation of a Member State under which a company incorporated under the law of that Member State whilst retaining its status as a company governed by the law of the Member State of incorporation19. The surprising fact was the obiter dictum statement. There are consequences of the obiter dictum. This is because board participation rules are not fully clarified. The obiter dictum applies only when the national law forbids any kind of state to transfer seats. This includes transferring seats to member states. This happens when there is a form of transfer. This form of transfer is only applicable under Articles 43 and 48. Inspire Art C- 167/06 A Dutchman established a company known as Inspire Art Ltd. This was under the laws of Wales and England. The man then requested the company’s registration’s Dutch branch office in Netherlands. The registry then took the position that specific Dutch rules for foreign entities registered in Netherlands were to apply to the company. As a consequence, Inspire Art Ltd requirements would be usage of the company name that indicates that it has foreign origin. The company complied with all the minimum capitalization rules. These rules apply to all Dutch limited liability companies. The European Court of justice continued with its tendency to decide in favor of freedom of establishment rules. This is by holding rules that submit pseudo-foreign companies to the company law of the host state. These were inadmissible. It then laid down that a foreign company is to be accorded with enough respect. This is enough respect as a prominent legal entity that has rights to be party to legal proceedings. A foreign company must also be respected since it is subject to company law of its own state of incorporation. Any adjustment to a company law of the host state is not compatible with the European law20. Catesio C-219/06 There are decisions made by the European Court of Justice on various cases. This is the final case in this essay. The ECJ held it without any applicable European Union legislation. The issue was whether the company formed in a different state could be transferred to another state. This is without the company losing its legal personality. This was the key question of national law. Article 43EC gave rise to the question of whether there was a restriction of the company’s right of establishing. The question that arose looked into the possibilities of establishment. It also questioned whether the company had rights to that freedom. There is also a barrier to prohibition of conversion under TEC under article 43. This is unless it is evident that the restriction is in the public interest. Any company can wish to change its seat without changing the national law. This can happen only within the discretion of the national law which is in question21. There are decisions that ECJ made concerning the case. All member state have the power to prevent specific companies from transferring their seats to their country. On the other hand, the establishment freedom enables any company to move to another member state. This is possible by converting itself into a company form governed by the State law. This way, the company will not be wound up. The company will also not enter into liquidation during its conversion process. This is mainly if the law of the host member state permits so. Bibliography GERNER-BEUERLE. (2010). International & Comparative Law Quarterly. THE MYSTERIES OF FREEDOM OF ESTABLISHMENT AFTER CARTESIO , 303-323. This is a law quarterly. It looks into the Cartesian case and how ECJ handled the case. It also looks into how ECJ makes their decisions on different cases that relate with establishing companies. Hagenmeyer, M. (2011). European Food & Feed Law Review. ECJ Decision ignores EU Law in Honey/Pollen Case , 291-299. This review looks into the different decisions that ECJ has on different cases. Other cases being talked about include the cases that required answers in this essay. It also looks into the different functions of ECJ and its structure. Korom, V. (2009). European Company & Financial Law Review. Freedom of Establishment for Companies: the European Court of Justice confirms and refines its Daily Mail Decision in the Cartesio Case C-210/06 , 125-161. This review looks into the laws that entail establishing companies. It defines corporate law and all aspects at play around it. It also describes all the laws that deal with establishing companies in different countries. Sabel, C. F. (2010). European Law Journal. Constitutionalising an Overlapping Consensus: The ECJ and the Emergence of a Coordinate Constitutional Order , 511-550. This journal talks about European laws and constitutional laws that are in play in court. It also looks into the work of the Advocate General and the importance of the decisions made by the advocate general in some cases handled in the ECJ. Szydło, M. (2010). European Company & Financial Law Review. The right of companies to cross-border conversion under the TFEU Rules on Freedom of Establishment , 414-443. This review looks into rights of companies to be able to cross any border and have full rights to operate fully as a company. It also addresses the freedom of establishing companies. Valk, O. (2010). Utrecht Law Review. C-210/06 Cartesio Increasing corporate mobility through outbound establishment , 151-167. This review discusses the Inspire Art case and compares it with the Cartesio case. Walker, L. (2011). Journal of Private International Law. SHIFTING THE BALANCE ACHIEVED BY THE ABDUCTION CONVENTION: THE CONTRASTING APPROACHES OF THE EUROPEAN COURT OF HUMAN RIGHTS AND THE EUROPEAN COURT OF JUSTICE , 231-249. This journal looks into the approaches used by the ECJ when making decisions on different cases. It also looks into companies’ rights and the different forms of companies. Wisniewski, A. W. (2009). European Business Organization Law Review. Companies' Freedom of Establishment after the ECJ Cartesio Judgment , 595-625. After Cartesio and other cases decisions, this review was written to summarize on the cases and the results on establishing companies. Read More