''Centros Ltd v Erhvervs- og Selskabsstyrelsen'' (1999) is a

European company law European company law is the part of European Union law which concerns the formation, operation and insolvency of companies (or corporations) in the European Union. The EU creates minimum standards for companies throughout the EU, and has its own c ...

case, concerning the right of freedom of establishment.

Facts

Centros Ltd, a

wine Wine is an alcoholic drink made from Fermentation in winemaking, fermented fruit. Yeast in winemaking, Yeast consumes the sugar in the fruit and converts it to ethanol and carbon dioxide, releasing heat in the process. Wine is most often made f ...

import and export business, was registered in the United Kingdom and applied in Denmark, where it traded, to register there. The Danish authority, Erhvervs- og Selskabsstyrelsen, refused on the basis that the company was attempting to circumvent the Danish requirement for companies to pay up a minimum of share capital. In Denmark this was 200,000

Danish kroner The krone (; plural: ''kroner''; currency sign, sign: kr.; ISO 4217, code: DKK) is the official currency of Denmark, Greenland, and the Faroe Islands, introduced on 1 January 1875. Both the ISO code "DKK" and currency sign "kr." are in common ...

, while in the UK the minimum capital requirement was £1. The Danish registry justified its enforcement of the rule as a way to protect creditors and prevent fraudulent insolvency. Centros Ltd argued that it had the right to be recognised in Denmark under the provisions of freedom of establishment in the

EC Treaty The Treaty of Rome, or EEC Treaty (officially the Treaty establishing the European Economic Community), brought about the creation of the European Economic Community (EEC), the best known of the European Communities (EC). The treaty was signe ...

, articles 52, 56 and 58. The Danish court referred the matter to the

European Court of Justice The European Court of Justice (ECJ), officially the Court of Justice (), is the supreme court of the European Union in matters of European Union law. As a part of the Court of Justice of the European Union, it is tasked with interpreting ...

(ECJ).

Judgment

The European Court of Justice held that the Danish authorities' refusal to recognise the company was contrary to articles 52, 56 and 58, and that its rules on minimum capital were not justified by the aim of protecting creditors by anticipating the risks of fraudulent bankruptcy due to the insolvency of companies having inadequate initial capitalisation. The national authorities could adopt less restrictive measures, such as enabling creditors to obtain necessary guarantees, or could adopt measures preventing or penalising fraud, if necessary with the cooperation of another Member State.

Notes

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References

* United Kingdom company case law Court of Justice of the European Union case law Danish case law 1999 in Denmark 1999 in United Kingdom case law European Union company case law

Facts

Judgment

See also

Notes

References