Overseas Chambers of Peter Harris

Maison de la Boucterie
Rue de la Boucterie
Saint Saviour
Jersey, JE2 7ZW

British structures in Europe post Brexit: will the unresolved civilian siège social/siège réel debate now start to bite the unsuspecting common law corporate ?

January 10th 2018

The preoccupation with the political issues of Brexit in Parliament is one thing, the visibility of the lack of any constructive Parliamentary debate upon the legal consequences for British entities transacting with the Continent has been lost in the fog, on their side of the Channel.

British withdrawal will mean the loss of current standards of recognition for the United Kingdom, and other British companies transacting with in Europe, whether passively or actively.

The issue here is that a corporate recognition in Europe is granted under the right of establsihment on the grounds of corporate natioonality, which is itself determined by the location of ts registered office, under article 54 TFEU:

"Companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Union shall, for the purposes of this Chapter, be treated in the same way as natural persons who are nationals of Member States.

'Companies or firms' means companies or firms constituted under civil or commercial law, including cooperative societies, and other legal persons governed by public or private law, save for those which are non-profit-making."

The fragility pf this general definition is clear, if the registered office is outside the EU, then a priori so is the Company, but there is a duality of jurisdiction involved.

Is a non EU corporate whose central administration orprincipal place of business wiythin the EU still an EU corporate entitled to freeedom of establishment?  If so under what law will it be governed, that of its "alien" registered office or more likely that by refernce to which it has its reputed EU nationality?  That is a deliberate opening to a discussion of both arguements then in play.

Taken from a wider perspective than article 54 TFEU rights and obligations, that will mean that it will be possible for a court of an EU Member State to apply its own principles of corporate recognition if called upon by an administration, or by a litigant.

That could mean that the very status of a British company could be fundamentally reappraised and re-interpreted according to the domestic recognition standards of the Court or administration in question.  Shareholder rights and responsibilities and directors rights, responsibilities and  prerogatives could in fact be totally recast into a foreign entity.  Artile 54 may not provide any negative protection against such reassessment of the Law governing a British company post-Brexit within the EU,

Take the French example of article 1837 Code civil, which is of universal application, not just to commercial companies. Also the Centros case decided by the CJEU.  The Centros protection will not apply per se to a United Kingdom corporate after Brexit, particularly given the adminsitration and prinpal place of business tests for EU, not "British" nationality.

The fundamental being of a company and the laws governing it has been a continuing source of legal discussion in Europe.  That it has been quenched as between EU Member Staes by the Treaties is no more than a panacea.

Is a company, and its constitutive organs,  governed by the laws of the place where it is actually managed and administered on a day to day basis: the siège réel test? Or only by reference to its registered office address, the siège social test?

In some continental jurisdictions, litigants can in fact put themselves in a position of choosing between these two: France permits this, and that facility has been used on several occasions by the French tax administration to totally recast the British limited company as a French one, with a fundamental change in managerial responsibilities up to unlimited personal liability.

Beware if  a British company being translated as an Sarl: its directors have just become assimilated to  gérants, and if members with unlimited personal liability in some areas.

Protection against such juridical and administrative aggression has been provided by EU Membership. That protection will lapse post-Brexit.

See the  Resources page for more indications as to answers.

Are you ready? If not ask yourself the question, will my company structure be recognised as such post-Brexit, particularly if I am running it from a keyboard from a Member State?