Court of Justice of the European Communities (including Court of First Instance Decisions)

Provisional text

JUDGMENT OF THE COURT (Third Chamber)

25 April 2024 (*)

(Reference for a preliminary ruling – Articles 49 and 54 TFEU – Freedom of establishment – Company established in a Member State but carrying on its activities in another Member State – Operation and management of the company – National legislation providing for the application of the law of the Member State in which a company carries on its activities – Restriction on freedom of establishment – Justification – Protection of the interests of creditors, minority shareholders and staff – Prevention of abusive practices and artificial arrangements – Proportionality)

In Case C‑276/22,

REQUEST for a preliminary ruling under Article 267 TFEU from the Corte suprema di cassazione (Supreme Court of Cassation, Italy), made by decision of 11 April 2022, received at the Court on 22 April 2022, in the proceedings

Edil Work 2 Srl,

S.T. Srl

v

STE Sàrl,

intervening party:

CM,

THE COURT (Third Chamber),

composed of K. Jürimäe (Rapporteur), President of the Chamber, L. Bay Larsen, Vice-President of the Court, acting as Judge of the Third Chamber, N. Piçarra, N. Jääskinen and M. Gavalec, Judges,

Advocate General: L. Medina,

Registrar: M. Krausenböck, Administrator,

having regard to the written procedure and further to the hearing on 11 July 2023,

after considering the observations submitted on behalf of:

–        Edil Work 2 Srl and S.T. Srl, by R. Vaccarella, avvocato,

–        STE Sàrl, by A. Pontecorvo and P. Sammarco, avvocati,

–        the Italian Government, by G. Palmieri, acting as Agent, and F. Meloncelli, avvocato dello Stato,

–        the European Commission, by G. Braun, L. Malferrari and M. Mataija, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 19 October 2023,

gives the following

Judgment

1        This request for a preliminary ruling concerns the interpretation of Articles 49 and 54 TFEU.

2        The request has been made in proceedings between Edil Work 2 Srl and S.T. Srl, on the one hand, and STE Sàrl, on the other, concerning the lawfulness of the transfer of ownership of the real estate complex known as ‘Castello di Tor Crescenza’ (‘the Castle’) in favour of the first two companies.

 Legal context

 European Union law

3        Under recital 2 of Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions (OJ 2019 L 321, p. 1):

‘Freedom of establishment is one of the fundamental principles of Union law. Under the second paragraph of Article 49 [TFEU], when read in conjunction with Article 54 [TFEU], the freedom of establishment for companies or firms includes, inter alia, the right to form and manage such companies or firms under the conditions laid down, by the legislation of the Member State of establishment. This has been interpreted by the Court of Justice of the European Union as encompassing the right of a company or firm formed in accordance with the legislation of a Member State to convert itself into a company or firm governed by the law of another Member State, provided that the conditions laid down by the legislation of that other Member State are satisfied and, in particular, that the test adopted by the latter Member State to determine the connection of a company or firm with its national legal order is satisfied.’

 Italian law

4        Article 25 of legge n. 218 – Riforma del sistema italiano di diritto internazionale privato (Law No 218 on the reform of the Italian system of private international law) of 31 May 1995 (GURI No 128 of 3 June 1995, p. 1; ‘Law No 218/1995’) provides:

‘1.      Companies, associations, foundations and any other public or private entities, even if not associative in nature, shall be governed by the law of the State in whose territory the corresponding formation procedure was completed. However, Italian law shall apply if the seat of the administration is located in Italy or if the principal object of such entities is located in Italy.

2.      The following, in particular, shall be governed by the law regulating such entities:

(a)      legal form;

(b)      trading name or company name;

(c)      formation, conversion and dissolution;

(d)      capacity;

(e)      creation of company bodies and their powers and operating procedures;

(f)      representation of the entity;

(g)      procedures for acquiring and losing shareholder or member status, and rights and obligations inherent in that status;

(h)      liability for the obligations of the entity;

(i)      consequences of breaches of the law or founding documents.

3.      Transfers of the registered office to another State and mergers of entities with registered offices in different States shall have effect only if they are carried out in accordance with the laws of those States.’

5        The second paragraph of Article 2381 of the Codice civile (Italian Civil Code) is worded as follows:

‘If the statutes or the general meeting allow it, the board of directors may delegate its powers to an executive committee made up of some of its members, or to one or more of its members.’

 The dispute in the main proceedings and the question referred for a preliminary ruling

6        The Castle, in the vicinity of Rome (Italy), was the sole asset of Agricola Torcrescenza Srl, a company whose business was the management of that property. In 2004, that company, first, changed its name to STA Srl and, second, transferred its registered office to Luxembourg, where it was converted into a Luxembourg company, STE, while continuing to operate the Castle.

7        In 2010, at an extraordinary general meeting of STE held in Luxembourg, S.B. was appointed as sole director. On that occasion, S.B. appointed F.F., who was neither a shareholder nor a member of the board of directors of STE, as general agent, granting him the power to perform ‘all necessary acts and operations, without exception or exclusion, but in all cases within the scope of the company’s objects’ (‘the conferral of powers at issue’).

8        In 2012, F.F., acting in the name and on behalf of STE, transferred ownership of the Castle to S.T., which subsequently transferred it to Edil Work 2. In 2013, STE brought an action against S.T. and Edil Work 2 before the Tribunale di Roma (District Court, Rome, Italy), seeking annulment of the two transfers of ownership of the Castle, on the ground that the conferral of powers at issue was unlawful under Italian law.

9        The Tribunale di Roma (District Court, Rome) found that the conferral of powers at issue was lawful and dismissed the action. The judgment of that court having been reversed by the Corte d’appello di Roma (Court of Appeal, Rome, Italy), Edil Work 2 and S.T. brought an appeal before the Corte suprema di cassazione (Supreme Court of Cassation, Italy), which is the referring court.

10      The referring court states that it is apparent from Article 25(3) of Law No 218/1995 that Italian law authorises the conversion of Italian companies or firms into foreign companies or firms, by means of the transfer of their registered office to another Member State, provided that the transfer is valid both in the Member State of origin and in the Member State of destination.

11      However, according to the referring court, the question arises whether the incorporation of STE as a Luxembourg company means that the acts of management of that company, which nevertheless maintains its place of business in Italy, must be subject to Luxembourg law.

12      In that regard, that court states, first, that the general criterion for determining the law applicable to the conferral of powers at issue is, for the purposes of Article 25(1) of Law No 218/1995, that of the place where the company was incorporated.

13      In accordance with the second sentence of that provision, Italian law applies to companies whose ‘principal object’ is located in Italy. According to the referring court, in so far as STE’s place of business, namely the Castle, its only asset, is located in Italy, the law applicable to the conferral of powers at issue is Italian law.

14      Moreover, under the second paragraph of Article 2381 of the Italian Civil Code, the board of directors of a limited liability company may delegate its powers only to the members of that board. Thus, the conferral of those powers to a party outside the company is unlawful.

15      The referring court observes, second, that, according to the case-law of the Court, freedom of establishment encompasses the right of a company or firm formed in accordance with the legislation of a Member State to convert itself into a company or firm of another Member State, provided that the conditions laid down by the legislation of that other Member State are satisfied and, in particular, that the connecting factor laid down by that other Member State is satisfied. It follows that the fact that only the registered office, and not the central administration or principal place of business, is transferred does not as such exclude the applicability of the freedom of establishment under Article 49 TFEU.

16      Moreover, according to that provision, freedom of establishment includes not only the right to set up but also the right to ‘manage undertakings’. Management activities should be carried out, in accordance with recital 2 of Directive 2019/2121, under the conditions laid down by the law of the Member State of establishment, which in the present case is the Grand Duchy of Luxembourg.

17      In those circumstances, the Corte suprema di cassazione (Supreme Court of Cassation) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:

‘Do Articles 49 and 54 [TFEU] preclude a situation where a Member State in which a (limited liability) company was originally incorporated applies to that company the provisions of national law relating to the operation and management of [that] company where the company, having transferred its registered office and reincorporated the company under the laws of the Member State of destination, maintains its principal place of business in the Member State of origin and the management act in question has a decisive effect on the company’s activities?’

 Consideration of the question referred

18      At the outset it should be noted that, according to settled case-law, in the context of the procedure established by Article 267 TFEU providing for cooperation between national courts and the Court of Justice, it is for the latter to provide the national court with an answer which will be of use to it and enable it to determine the case before it. Thus, if necessary, the Court may have to reformulate the question referred to it. To that end, the Court may extract from all the information provided by the national court, in particular from the grounds of the order for reference, the points of EU law which require interpretation in view of the subject matter of the dispute in the main proceedings (judgment of 16 February 2023, Staatssecretaris van Justitie en Veiligheid (Unborn child at the time of the asylum application), C‑745/21, EU:C:2023:113, paragraph 43).

19      In the present case, the referring court asks the Court of Justice whether Articles 49 and 54 TFEU preclude the acts of management of a company in STE’s situation from being governed by Italian law, with reference to the fact that that company was incorporated as a company of one Member State, namely the Italian Republic, and then transferred its registered office and was incorporated under the law of another Member State, namely the Grand Duchy of Luxembourg, while maintaining its principal place of business in the first Member State.

20      It is apparent from the information available to the Court, which it is for the referring court to verify, that no restrictions were imposed at the time of that transfer and the company conversion.

21      Since the transfer of the registered office and the conversion of the Italian company STA into the Luxembourg company STE are not among the circumstances that are relevant for the purpose of answering the question raised by the referring court, it is necessary to reformulate the question referred for a preliminary ruling to the effect that that court asks, in essence, whether Articles 49 and 54 TFEU preclude legislation of a Member State which provides generally for its national law to apply to the acts of management of a company established in another Member State but carrying on the main part of its activities in the first Member State.

22      In that regard, it must be determined, in the first place, whether the situation at issue in the main proceedings is covered by the freedom of establishment.

23      Article 49 TFEU, read in conjunction with Article 54 TFEU, extends the benefit of freedom of establishment to companies or firms formed in accordance with the legislation of a Member State and having their registered office, their central administration or principal place of business within the European Union (judgment 25 October 2017, Polbud – Wykonawstwo, C‑106/16, EU:C:2017:804, paragraph 32).

24      Under the second paragraph of Article 49 TFEU, read in conjunction with Article 54 TFEU, the freedom of establishment for companies or firms covered by the latter article includes, inter alia, the right to set up and manage those companies or firms under the conditions laid down, by the legislation of the Member State where such establishment is effected, for its own companies or firms (judgment of 25 October 2017, Polbud – Wykonawstwo, C‑106/16, EU:C:2017:804, paragraph 33).

25      Furthermore, those companies or firms are entitled to carry on their business in another Member State, the location of their registered office, central administration or principal place of business serves to determine their connection with the legal system of a particular Member State in the same way as does nationality in the case of a natural person (see, to that effect, judgment of 5 November 2002, Überseering, C‑208/00, EU:C:2002:632, paragraph 57).

26      In the absence of harmonisation of EU law, the definition of the connecting factor that determines the national law applicable to a company or firm falls, in accordance with Article 54 TFEU, within the powers of each Member State, that article having placed on the same footing the registered office, the central administration and the principal place of business of a company or firm as such connecting factors (judgment of 25 October 2017, Polbud – Wykonawstwo, C‑106/16, EU:C:2017:804, paragraph 34).

27      In the present case, it is apparent from the order for reference, first, that STE was incorporated in 2004 as a Luxembourg company, second, that that company has its registered office in Luxembourg and, third, that it carries on the main part of its activities in another Member State, namely the Italian Republic.

28      In the light of the case-law set out in paragraphs 23 to 26 above, it must be held that the situation of that company and, in particular, the acts of management which it adopts in respect of the activities which it carries out in Italy, are covered by the freedom of establishment.

29      In those circumstances, it is necessary to determine, in the second place, whether the legislation of a Member State which provides for its national law to apply to acts of managements of a company established in another Member State, on the ground that that company carries on the main part of its activities in the first Member State, constitutes a restriction on freedom of establishment.

30      All measures which prohibit, impede or render less attractive the exercise of freedom of establishment must be considered to be restrictions on that freedom, within the meaning of Article 49 TFEU (judgments of 5 October 2004, CaixaBank France, C‑442/02, EU:C:2004:586, paragraph 11, and of 25 October 2017, Polbud – Wykonawstwo, C‑106/16, EU:C:2017:804, paragraph 46).

31      It is important to note that legislation of a Member State which provides that companies established in another Member State which carry on the main part of their activities in the first Member State must comply, when performing their acts of management, with the law of the first Member State as well as with any obligations arising under the law of their Member State of establishment could render the management of such companies more difficult, since they might have to comply with the requirements imposed by those two sets of rules.

32      It follows that such a legislation is liable to render less attractive the exercise of the freedom of establishment and therefore constitutes an obstacle to the exercise of the freedom of establishment.

33      In the present case, it is apparent from the order for reference that STE is a Luxembourg company having its registered office in Luxembourg. However, it is also apparent from the order for reference that, as regards its acts of management, the application of the second sentence of Article 25(1) of Law No 218/1995 makes that company subject to Italian law, on the sole ground that it carries on the main part of its activities in Italy.

34      In those circumstances, a company in STE’s situation could be subject, cumulatively, both to Luxembourg law and to Italian law. Such a cumulative application of the law of two Member States may render the management of that company more difficult.

35      It is therefore necessary to analyse, in the third place, whether a restriction on freedom of establishment resulting from legislation such as that at issue in the main proceedings might nevertheless be justified.

36      According to settled case-law, a restriction on freedom of establishment is permissible only if it is justified by overriding reasons in the public interest. It is further necessary that it should be appropriate for ensuring the attainment of the objective in question and not go beyond what is necessary to attain that objective (see, to that effect, judgments of 13 December 2005, Marks & Spencer, C‑446/03, EU:C:2005:763, paragraph 35, and of 25 October 2017, Polbud – Wykonawstwo, C‑106/16, EU:C:2017:804, paragraph 52).

37      In that regard, it should be noted, at the outset, that the referring court does not state the reasons which might justify the restriction on freedom of establishment entailed by the application of the second sentence of Article 25(1) of Law No 218/1995 to the acts of management of a company validly constituted under the law of another Member State and carrying on the main part of its activities in Italy. Nor is such information apparent from the wording of that provision or from that of Article 2381 of the Italian Civil Code.

38      By contrast, it is apparent from the Italian Government’s written pleadings, first, that the restriction on freedom of establishment at issue is justified by the objective of protecting shareholders, creditors, staff and third parties.

39      In that regard, it must be recalled that the Court has recognised that overriding reasons in the public interest include the protection of the interests of creditors, staff and minority shareholders (see, to that effect, judgment of 25 October 2017, Polbud – Wykonawstwo, C‑106/16, EU:C:2017:804, paragraph 54 and the case-law cited).

40      Thus, Articles 49 and 54 TFEU do not preclude, in principle, measures of a Member State which seek to ensure that the interests of the creditors, minority shareholders and staff of a company which has been formed in accordance with the law of another Member State but carries on the main part of its activities on national territory are not improperly affected.

41      However, in accordance with the case-law cited in paragraph 36 above, the restriction at issue in the main proceedings must be appropriate for ensuring the attainment of the objective of protecting creditors, minority shareholders and staff and must not go beyond what is necessary to attain that objective.

42      If the second sentence of Article 25(1) of Law No 218/1995 were to be interpreted as meaning that any act of management of a company validly constituted under the law of another Member State but carrying on the main part of its activities in Italy is to be subject to Italian legislation, it would not be possible to ascertain whether, in a specific case, there is a risk that the interests of creditors, minority shareholders or staff would be adversely affected. It is important to point out that such a risk may depend, inter alia, on the type of measure adopted and vary according to the shareholder composition of the company in question. Furthermore, the legislation of the Member State in which the company in question was incorporated may have taken account of the aforementioned interests, a circumstance which cannot be taken into account if the Italian legislation applies automatically.

43      In those circumstances, national legislation such as that at issue in the main proceedings goes beyond what is necessary to attain the objective of protecting the interests referred to in paragraph 39 above.

44      Second, the Italian Government submits that the national legislation at issue in the main proceedings is intended to combat abusive practices by preventing conduct consisting in the creation of wholly artificial arrangements which do not reflect economic reality.

45      In that regard, it must be borne in mind that, indeed, it is open to the Member States to adopt any appropriate measure for preventing or penalising fraud (see, to that effect, judgments of 9 March 1999, Centros, C‑212/97, EU:C:1999:126, paragraph 38, and of 25 October 2017, Polbud – Wykonawstwo, C‑106/16, EU:C:2017:804, paragraph 61).

46      Moreover, the fight against tax avoidance and fraud may justify a restriction on the freedom of establishment provided for under Article 49 TFEU provided that the specific objective of such a restriction is to prevent conduct involving the creation of wholly artificial arrangements which do not reflect economic reality, with a view to escaping the tax normally due on the profits generated by activities carried out on national territory (see, to that effect, judgments of 12 September 2006, Cadbury Schweppes and Cadbury Schweppes Overseas, C‑196/04, EU:C:2006:544, paragraph 55, and of 20 January 2021, Lexel, C‑484/19, EU:C:2021:34, paragraph 49).

47      However, the Court has held, first, that the fact that either the registered office or real head office of a company was established in accordance with the legislation of a Member State for the purpose of enjoying the benefit of more favourable legislation does not, in itself, constitute abuse (see, to that effect, judgments of 9 March 1999, Centros, C‑212/97, EU:C:1999:126, paragraph 27, and of 25 October 2017, Polbud – Wykonawstwo, C‑106/16, EU:C:2017:804, paragraph 40).

48      Second, the mere fact that a company, while having its registered office in a Member State, carries on the main part of its activities in another Member State, cannot be the basis for a general presumption of fraud and cannot justify a measure that adversely affects the exercise of a fundamental freedom guaranteed by the Treaty (see, by analogy, judgment of 25 October 2017, Polbud – Wykonawstwo, C‑106/16, EU:C:2017:804, paragraph 63).

49      In the present case, if the legislation at issue in the main proceedings were to be interpreted as requiring Italian law to apply systematically to any act of management of a company established in another Member State but carrying on the main part of its activities in Italy, it would amount to introducing a presumption that the conduct of that company constitutes abuse. Such legislation, in the light of the findings in paragraphs 47 and 48 above, would be disproportionate (see, by analogy, judgment of 25 October 2017, Polbud – Wykonawstwo, C‑106/16, EU:C:2017:804, paragraph 64).

50      In those circumstances, the answer to the question referred is that Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which provides generally for its national law to apply to the acts of management of a company established in another Member State but carrying on the main part of its activities in the first Member State.

 Costs

51      Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Third Chamber) hereby rules:

Articles 49 and 54 TFEU

must be interpreted as precluding legislation of a Member State which provides generally for its national law to apply to the acts of management of a company established in another Member State but carrying on the main part of its activities in the first Member State.

[Signatures]

*      Language of the case: Italian.

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