Branches of Companies in the EU: Balancing the Eleventh Company Law Directive, National Company Law and the Right of Establishment

Abstract

This article examines the current regulation of branches of foreign companies in Union law and in the laws of five Member States. First there is an examination of how the Member States regulate when foreign companies can and must register a branch, and it is shown that the lack of a definition of a ‘branch’ makes it very difficult to implement the Directive correctly and without infringing primary EU law. Next the disclosure requirements of the Directive are examined, and it is concluded that the Eleventh Company Law Directive sets fairly clear standards, so that on this point – with few exceptions – national law seems to implement the Directive correctly. The final part of the article focuses of the regulation of selected areas of the substantive regulation of branches, including the regulation of branch management, accounting documents, bookkeeping, capital requirements and branch names. It is shown that in regulating these topics national company law very often restricts the right of establishment, so it is necessary to test whether the national rules can be justified. This is often very difficult to evaluate and consequently it seems that the right of establishment is often infringed. Another consequence of this uncertainty is that national law on these issues often differs between Member States. To overcome these differences and to offer the Member States better guidelines on how to apply EU law, it may be desirable to extend the harmonisation of the law on branches of foreign companies to cover some of these substantive issues.

Keywords: Regulation of branches, branch management, accounting documents, bookkeeping, capital requirements and branch names, right of establishment, Eleventh Company Law Directive, disclosure requirements

JEL Classification: K22