New EU regulation concerning the relocation of registered seats

The new amendment to Directive (EU) 2017/1132 for cross-border conversions, mergers and divisions became effective on 1 January 2020 resulting in significant changes to corporate, labour and tax law regulations. The deadline for the national implementation of the Directive is 31 January 2023.

The most significant change is that companies will be able to relocate their registered offices within the EU without having to be dissolved in the original country. A company can now be re-established in a host member state while retaining its legal personality. The Directive fulfils the expectations of the European Court of Justice (explained in its rulings in the Cartesio and VALE cases) to ensure freedom of establishment, one of the fundamental principles of EU law.

In Hungary, the Directive is applicable for limited liability companies and companies limited by shares. In cannot, however, be applied to companies in liquidation where the distribution of assets has already begun and – based on the decision of the other member states – to companies under liquidation proceedings (e.g. insolvency proceedings).

The Directive imposes an obligation on the competent national authorities to scrutinise the legality of cross-border operations before they take effect and to issue a pre-operation certificate that cannot be disputed by a host member state. Throughout the procedure, online administration and the ‘once-only’ principle in information submission should be applied.

In Hungary, a modification of Act no. CXL of 2007 on the Cross-Border Merger of Limited Liability Companies (effective from 23 June 2017) has already introduced a procedure that enables companies from other EU member states to move their registered seats to Hungary. This procedure is a simplified version of a cross-border merger that allows companies from elsewhere in the EU to move their registered seats to Hungary in a process that enables them to merge into an empty company founded in Hungary for the direct purposes of the merger.

The new procedure introduced by the Directive is a step forward in the relocation of registered offices within the EU since there is no need to merge into a company that already exists in another member state. Instead, companies can transform into an existing company form operating under the laws of the host member state while retaining its legal personality.

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Article co-authored by Szabina Marsi.