Licker, Seidler & Partner
Lawyers and tax consultants
Introduction to Incorporation
There are internet sites proclaiming that English Limiteds are capable of holding rights.
Regarding the latest changes in the field of jurisprudence this statement is legally confirmed.
The following judgements are related to that topic:
EuGH C-208/00 of November 5th 2002 and BGH VII ZR 370/98 of March 13th 2003
Especially the second one is important for the incorporation of an enterprise in the European Union.
Until now the Registred Office Regulation has been predominant in German Jurisprudence. It is the essence of this regulations that a foreign corporation - for example an English Limted Company - is not capable of holding rights if the head office is relocated. Until now the predominant view has been the so-called "supposition of incorporation treatment of settlement". It said that an outlandish enterprise respectively company - for example an English Limited - does not have any legal capacity if the official location for a company is set up in Germany. In this case an official location for a company is the place where all major decisions go through. The official location for the company is outlandish under the following rules:
Effective from March 30th 2000 the Federal Court of Justice presented the European Court of Justice a jurisdictional downstream for further adaption. It has been requested to check if the german jurisprudence regarding the denial of outlandish branches within the national borders executed until now is still compatible with Community law. Specific attention has been paid to line 43 and 48 of the Contractual European Union Agreements where the right for business establishment within the European Region is ruled.
The European Court of Justice decided with judgement of November 5th 2002 about this question. In the end they decided that it is a violation of the line 43 and 48 of the Contractual European Union Agreements if a company which statuorily have its head office within a member state of the European Union is denied to have legal capacity when relocating the head office to another state of the European Union Community.
They say that establishing a company in one state within the European Union gives them the capacity to hold rights and that right may not be nullified when relocating the head office to another member state of the European Union.
The judgement of the Federal Court of Justice clarifies that an English Limited Company by Shares is to be treated as such even after a relocation from another member state in the European Union to Germany. The previous treatment as an OHG (offene Handelsgesellschaft) - a german company body with unlimited liability - is no longer existent and so the limited liability of the company body of the English Limited is valid. The judgement of the Federal Court of Justice can be looked over here:
(BGH (Federal Court of Justice) VII ZR 370/98, March 13th 2003)
Nevertheless there are enough things that have to be cleared. We think that in most cases the tax-related problems are not seriously concerned while it is a fact that those problems can ruin a company.