Corporate Migration and its Implications for the Protection of Creditors - Recent Developments in the Case Law of the European Court of Justice

Abstract: This thesis addresses the correlation between creditor protection and thecross-border seat transfer of companies in the light of the case law of the European Court of Justice concerning the freedom of establishment of undertakings. After the restrictive outcome of Daily Mail, the judgment of the European Court of Justice in Centros took the legal community by surprise. The following cases of Überseering and Inspire Art intensified the ensuing debate even further. The issues brought up as possible consequences of the free choice of applicable company law included, in particular, concerns regarding the circumvention of national provisions for protecting creditors as well as a potential "race to the bottom". The central theme of this thesis is to which extent the state of creditor protection resulting from these cases was modified by the subsequent cases of SEVIC Systems, Cartesio and VALE. In order to answer this question, the abovementioned cases are analysed with respect to their relevance for the protection of creditors. Subsequently, the current situation of creditor protection based on the case law is assessed, focussing on certain issues, which arose during the previous analysis. Regarding a minimum capital requirement, the result is reached that it may help to increase the degree of protection, but does not provide a cure-all solution. Furthermore, a distinction is drawn between the legislation for creditor protection and the area of responsibility of the creditor. The disclosure obligation imposed on the company in Inspire Art is found to miss the point. In this area, the Eleventh Council Directive provides a certain degree of harmonisation. Concerning the issue of "vanishing" companies as caused by Cartesio, the judgment in VALE could provide a solution, if the Court decides to follow the Advocate General’s opinion. Furthermore, the occurrence of a "race to the bottom" with respect to creditor protection is found to be unlikely. Accordingly, this thesis establishes that the case law of the European Court of Justice regarding corporate migration has various implications for the protection of creditors. Yet, some of them are found to have a lesser effect than anticipated. A higher degree of harmonisation would be desirable, so that consumers and other small creditors are enabled to comprehend the system and to take their decisions consciously.