Historically, Luxembourg alternative investment funds (AIF(s)) have been subject to the ongoing supervision of the CSSF. While these Luxembourg fund vehicles have proven very successful and ...10 February 2017
International transfer of a registered seat: encouraging corporate mobility
Nowadays, legal counsels are frequently involved in assisting their clients in transferring the registered seats of companies from abroad to Luxembourg. This is largely due to Luxembourg offering a stable political, legal and economic system and the fact that it is located in the heart of Europe. Despite the fact that the legal effect of a relocation has not been harmonised at the European and international levels, there has been a growing trend towards corporate mobility.
Transfer of registered seat, nationality and mobility
A company incorporated in Luxembourg can transfer its effective centre of management abroad without affecting its legal identity, subject to the approval of its shareholders in general meeting. As a result, the company loses its Luxembourg nationality and must comply with the laws of its new host country. Equally, a foreign company may move its effective centre of management to Luxembourg, in which case it must comply with the laws of Luxembourg.
In order to determine the nationality of a company and the laws which apply to it, it is necessary to identify where its effective seat is located. It is here where two different theories/models intersect: the centre of management seat model ("théorie du siège effectif") and the country of incorporation model as the place of incorporation as determined in the articles of association ("théorie de l'incorporation"). According to the centre of management seat model, a company is subject to the laws of the State where its effective centre of management are located, irrespective of its country of incorporation. Luxembourg applies this theory, as do Belgium, Germany, France and Spain. According to the country of incorporation model, the company is subject to the laws of the State where it was incorporated irrespective of the place where it is effectively managed. Its nationality is consequently determined by the country in which the company was originally incorporated. It retains the nationality of this country throughout its life, even if it transfers the centre of its management to another country. This model is used in England, the Netherlands and Delaware as well as elsewhere.
In practice, the parallel application of these two concepts often raises difficulties. By way of example, if a company was incorporated in the Netherlands and transfers its registered seat to Luxembourg, from the perspective of Dutch law, the company will still be considered a Dutch Company, whereas from the perspective of Luxembourg law, it will be considered as a Luxembourg company. Consequently, the company will have dual nationality and must comply with both Luxembourg and Dutch law: It will have two registered seats (in the Netherlands and Luxembourg) and it will have to file its annual accounts with both the Luxembourg and Dutch authorities.
Choosing the centre of management seat model can facilitate corporate mobility. Indeed, once it has been transferred, the company can renounce the laws and rules which are applied by its country of origin in favour of those of its new host country. This helps to regularise the economic realities and avoids potential fraud regarding the law.
Towards the adoption of a single concept for determining the nationality of a company?
As far as can be seen from case law, Community law does not favour either of the models/theories. However, it does penalise countries whose legislation impedes a company's freedom to establish itself within the EU. EU countries, therefore, find themselves forced to adapt their national laws in order to facilitate corporate mobility. Accordingly, EU countries which apply the country of incorporation model have had to start considering amending their practices and/or legislation in order to facilitate the transfer of a registered seat to another country and subsequent change of nationality (without any change to legal identity). This is the route followed by the Netherlands where a new practice has come into effect. From now on, it is possible for a Dutch company to effect a total change of nationality without altering its legal identity (a technique known as of “transborder conversion”). To this end, the experts in the Netherlands use the Cartesio ruling as justification. A government bill is under discussion in the Netherlands which would amend the Dutch civil code in order to allow companies to change their nationality. The migration of a company from the Netherlands to a foreign country would become possible by either transferring its effective centre of management to a foreign country (in which case, it will still remain subject to Dutch law) or by effecting a total change of nationality (in which case, it will only be subject to the law of the new host country).
The Luxembourg law of 10 August 1915, as amended by the law of 10 August 2016, retains the centre of management seat model. However, this law has relaxed the requirement for the unanimous approval of its shareholders for the change in nationality. Now, the voting rules which currently apply to a change in the articles of association will apply to a change in nationality. A minority shareholder, therefore, can no longer block a decision on the international transfer of the registered seat of the company in order to prevent the mobility of the company and its business. This change is part of the more flexible framework the Luxembourg legislator aims to create in order to encourage corporate mobility.
 Article 159 of the Law of 1915 provides that “any company of which the effective centre of management are located in the Grand-Duchy, is subject to Luxembourg law, even if the articles of incorporation were established in a foreign country".
 place of incorporation.
 Article 2 of the Law of 1915 stipulates that "the address for service of any trading company is located at the registered office of the effective centre of management of the company".
 Place of incorporation set out in the articles of incorporation.
 European Union.
 Case C-210/06, EUCJ Ruling of 16 December 2008.
 Amendment of Book 2 of the Dutch Civil Code in relation to the implementation of rules for cross border conversion of capital companies (Wijziging van Boek 2 van het Burgerlijk Wetboek in verband met de invoering van een regeling voor grensoverschrijdende omzetting van kapitaalvennootschappen).[currently being checked by HL Amsterdam]
The European market abuse regime changes with take effect from July this year.27 June 2016