Corporate Mobility and Company Law

AuthorEilís Ferran
DOIhttp://doi.org/10.1111/1468-2230.12216
Publication Date01 September 2016
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Corporate Mobility and Company Law
Eil´
ıs Ferran
Globalisation has given commercial parties more freedom to choose the company law system
that best suits their private needs. The growing range of techniques to facilitate choice between
systems of company law reshapes the mandatory/enabling debate in countries where corporate
mobility is a relatively new business phenomenon and where the past focus has mostly been on
degrees of flexibility within domestic law. This article examines relocations, both out of and
into the UK, as a source of learning on market preferences with respect to company lawand on
vulnerabilities. It considers the wider policy implications for the development of company law
of more freedom of choice between company law systems. It concludes with a call to explore
the potential for more optionality within company law to counter the rise of choice between
systems of company law.
INTRODUCTION
Globalisation has given commercial parties more freedom to choose the sys-
tem of company law that best suits their private needs and has made where
to incorporate a factor in many strategic decisions about the desired focus of
a business’s future operations. Whilst tax planning is a well-known and often
controversial driver of business decisions by multinational companies regarding
location choices,1tax residency and place of incorporation need not necessarily
go hand in hand since, with appropriate planning, they can be disaggregated (or
unbundled).2The long list of considerations that can lie behind the decision
to incorporate a company in one jurisdiction rather than another thus
extends far beyond taxation matters. Forming a local subsidiary may be a way
for a cross-border business to overcome the lack of trust in foreign companies
among customers and business partners.3Eligibility for admission to trading
on particular exchanges or market segments can be another potential driver
Professor of Company and Securities Law, University of Cambridge. I am grateful to Klaus Hopt,
Marc Moore, James Palmer, Carol Shutkever and Marco Ventoruzzo for comments on early versions
of this work, and to the two anonymous MLR referees for their incisive reviews of the submission.
Errors that remain are my sole responsibility. Unless otherwise stated, all URLs were last accessed
30 May 2016.
1 H. Eidenm¨
uller, A. Engert and L. Hornufe, ‘Where Do Firms Issue Debt? An Empirical Analysis
of Issuer Location and Regulatory Competition in Europe’ (2015) 41 International Review of Law
and Economics 103.
2 To take the UK case, whilst a company incorporated in the UK is UK tax resident (subject
to certain limited exceptions), a company not incorporated in the UK will also be UK tax
resident if it is centrally managed and controlled in the UK: D. Hughes, Corporate Residence
(HaywardsHeath: Bloomsbury Professional, 2013). UK tax residency is subject to the application
of ‘tiebreaker’ provisions in doubletax treaties, which may result in residence being allocated to
a different state: ibid.
3 European Commission, Proposal for a Directiveof the European Parliament and of the Council
on single-member private companies (2014)COM 212, 2.
C2016 The Author.The Moder n Law Review C2016 The Modern Law Review Limited. (2016) 79(5) MLR 813–839
Published by John Wiley& Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
Corporate Mobility and Company Law
of jurisdictional choice,4although, as with tax residency, the incorporation
location does not dictate listing location as they can be different. Public and
private international law may also impinge on corporate structuring decisions,
such as in relation to bilateral investment treaties where standing to claim will
depend on nationality and thus may require the establishment of special pur-
pose corporate vehicles incorporated in appropriate jurisdictions.5Cor porate
location may be deliberately chosen in order to opt into (or to avoid) a par-
ticular accounting framework (notably the International Financial Reporting
Standards) or a dedicated regulatory regime (such as the UK Takeover Code).
Many jurisdictions still lack a straightforward regime for established
companies to move their registered offices across borders6but commercial
practice has developed functional solutions to fill the gap, at least for more
sophisticated actors that can afford to access the technology and, where mov-
ing involves separating the place of incorporation from tax residency and/or the
location of listing, to absorb the ongoing costs of managing compliance with
multiple regimes. Within the EU it is possible to transfer the registered office of
an existing public company through the formation of a European Company7
or through a cross-border merger in accordance with procedures giving effect
to the EU Cross-border Mergers Directive.8The transfer of a registered office
can be achieved by setting up a subsidiary in the destination Member State and
4 For example, third country issuers seeking admission to official listing in the EU face an extra
hurdle in that they must satisfy the listing authority that the absence of home country listing is
not due to a need to protect investors (implemented in the UK by the FCAListing Rules (LR):
LR 6.1.21 and LR 14.2.4). Other examples include: an issuer seeking admission to the London
Stock Exchange’s High Growth Segment must be a trading company incorporated in an EEA
State; and the Hong Kong Stock Exchange requires issuers to be incorporated in an ‘acceptable’
jurisdiction and imposes additional shareholder protection requirements on those that are not.
5 R. Dolzer and C. Schreuer, Principles of International Investment Law (Oxford: OUP, 2nd ed,
2012) 52-54.
6 After consideration of the pros and cons, in December 2007 the European Commission decided
that there was no need for action at the EU level. The Commission conducted a further
consultation exercise on the matter in 2013 but this has not since led to regulatory action.
7 Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute of the European
Company (SE) [2001] OJ L294/1, Art 8. By way of example, in 2011-2012 the UK plc Scotty
Group converted to an SE to move to Austria in order to secure cost savings and to align its legal
and financial structure more logically with its geographic focus. As at end October 2015 there
were over 2400 established SEs in total. The registered office and the head office of an SE must
be in the same Member State: Council Regulation (EC) No 2157/2001, Art 7. The proposed
Directive on single-member private limited companies (COM(2014) 212) would allow for the
transfer of the registered office from one Member State to another through the formation of a
single member private limited liability company (SUP) if it is allowed by the national laws of
both Member States.
8 Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on
cross-border mergers of limited liability companies [2005] OJ L310/1. English cases decided
under the implementing Companies (Cross-Border Mergers) Regulations 2007 (SI 2007/2974)
include: Re Nielsen Holdings plc [2015] EWHC 2966 (Ch) (absorption of Dutch company by
English company); Re International Game Technology Plc [2015] EWHC 717 (Ch) (merger of
Italian parent into English subsidiary); Re Lanber Properties LLP [2014] EWHC 4713 (Ch)
(merger of German companies into English LLP); Re Olympus Ltd [2014] EWHC 1350 (Ch)
(merger of English companies by absorption into German company/SE); Re Honda Motor Europe
Ltd [2014] EWHC 919 (Ch) and Re Honda Motor Europe Ltd [2013] EWHC 2789 (Ch) (mergers
by absorption of Italian and Spanish subsidiaries of English company); Re Sigma TauPharmaceutical
Ltd [2013] EWHC 3279 (Ch) (merger by absorption of Portuguese company by English sister
814 C2016 The Author. The Modern Law Review C2016 The Modern Law Review Limited.
(2016) 79(5) MLR 813–839

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